Filed Pursuant to Rule 424(b)(3)
Registration No. 333-99147
INCREASED OFFER BY UNION OIL COMPANY OF CALIFORNIA
TO EXCHANGE
0.74 OF A SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
UNOCAL CORPORATION
FOR
EACH OUTSTANDING SHARE OF COMMON STOCK
OF
PURE RESOURCES, INC.
THIS OFFER, AND YOUR RIGHT TO WITHDRAW SHARES OF PURE COMMON STOCK YOU TENDER
INTO THIS OFFER, WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
OCTOBER 29, 2002, UNLESS WE EXTEND THIS OFFER.
We are offering to exchange 0.74 of a share of Unocal Corporation, or
Unocal, common stock (including the associated preferred stock purchase rights)
for each outstanding share of Pure Resources, Inc., or Pure, common stock, on
the terms and conditions contained in this prospectus and in the related letter
of transmittal.
This prospectus amends and supersedes information included in the
prospectus originally filed with the Securities and Exchange Commission on
September 4, 2002, as amended. Stockholders who wish to tender should follow the
instructions included in this prospectus and the accompanying letter of
transmittal.
Union Oil Company of California, or Union Oil, is a wholly owned subsidiary
of Unocal, and we currently own approximately 65% of the outstanding shares of
Pure common stock. This offer is conditioned on the tender of a sufficient
number of the outstanding shares such that, giving effect to the offer, we own
at least 90% of the outstanding shares of Pure common stock. Our obligation to
exchange shares of Unocal common stock for shares of Pure common stock is also
subject to other conditions described in this prospectus under "The
Offer -- Conditions of the Offer" beginning on page 43. We do not intend to have
a subsequent offering period.
A special committee of Pure's independent directors has determined that
this offer is fair to and in the best interests of Pure stockholders, other than
Union Oil and its affiliates, and it recommends that you tender your Pure shares
into the offer.
If we successfully complete this offer, we will own more than 90% of the
outstanding common stock of Pure, and we would then effect a "short form" merger
of one of our wholly owned subsidiaries with Pure. Under Delaware law, this
short form merger would be effected without the approval of Pure's board of
directors or the remaining holders of Pure's common stock. We will effect the
merger as soon as practicable after we complete this offer, unless we are
prevented from doing so by a court or other legal requirement. Each share of
Pure common stock that we do not own or acquire in this offer would be converted
in the merger into the right to receive 0.74 of a share of Unocal common stock
(including the associated preferred stock purchase rights), unless the holder of
the shares of Pure common stock properly perfects appraisal rights under
Delaware law. After we complete the merger, Pure will be our wholly owned
subsidiary.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF ISSUES THAT YOU
SHOULD CONSIDER IN DETERMINING WHETHER TO TENDER YOUR SHARES INTO THIS OFFER.
Unocal's common stock is listed on the New York Stock Exchange and trades
under the symbol "UCL." Pure's common stock is listed on the New York Stock
Exchange and trades under the symbol "PRS."
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE UNOCAL COMMON STOCK TO BE ISSUED
IN THIS OFFER AND THE SUBSEQUENT MERGER OR DETERMINED IF THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
---------------------
The date of this prospectus is October 29, 2002.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE OFFER....................... iv
SUMMARY..................................................... 1
Introduction.............................................. 1
Information about Unocal and Pure......................... 1
The Offer................................................. 2
Selected Historical Financial Data of Unocal and Pure..... 5
Unaudited Comparative Per Share Data...................... 6
Comparative Per Share Market Data......................... 8
Unocal Dividend Policy.................................... 8
RISK FACTORS................................................ 9
Risks Related to the Offer and the Subsequent Merger...... 9
Risks Related to Our Business............................. 10
FORWARD-LOOKING INFORMATION................................. 17
BACKGROUND AND REASONS FOR THE OFFER AND SUBSEQUENT
MERGER.................................................... 18
Period Prior to the Formation of Pure..................... 18
The Initial Formation of Pure............................. 18
Key Factors Motivating the Offer.......................... 19
Financial Impact of the Offer on Unocal................... 22
Prior Discussions Relating to Potential Extraordinary
Transactions........................................... 22
The Unocal Board's Decision to Commence the Offer......... 23
ADDITIONAL FACTORS FOR CONSIDERATION BY PURE STOCKHOLDERS... 28
FINANCIAL FORECASTS......................................... 29
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION............................................... 31
Unocal.................................................... 31
Pure...................................................... 32
THE OFFER................................................... 33
Exchange of Shares of Pure Common Stock................... 33
Timing of the Offer....................................... 34
Extension, Termination and Amendment...................... 34
Delivery of Unocal Common Stock........................... 34
Cash Instead of Fractional Shares of Unocal Common
Stock.................................................. 35
Procedure for Tendering Shares............................ 35
Withdrawal Rights......................................... 36
Effect of a Tender of Shares.............................. 37
Material U.S. Federal Income Tax Consequences............. 37
Purpose of the Offer; The Merger.......................... 39
Appraisal Rights.......................................... 41
Notification of Merger's Effective Time................ 41
Electing Appraisal Rights.............................. 41
Only Record Holders May Demand Appraisal Rights........ 41
Court Petition Must Be Filed........................... 42
Appraisal Proceeding by Delaware Court................. 42
i
PAGE
----
Effect of Appraisal Demand on Voting and Right to
Dividends; Tax Consequences........................... 42
Loss, Waiver or Withdrawal of Appraisal Rights......... 42
Dismissal of Appraisal Proceeding...................... 43
Conditions of the Offer................................... 43
Minimum Condition...................................... 43
Registration Statement Effectiveness Condition......... 43
Listing Condition...................................... 43
Additional Conditions.................................. 43
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.............. 47
U.S. Approvals............................................ 47
Non-U.S. Approvals........................................ 47
State Takeover Laws....................................... 47
Stockholder Litigation.................................... 47
CERTAIN EFFECTS OF THE OFFER................................ 48
Effects on the Market..................................... 48
Exchange Act Registration................................. 48
Financing of the Offer.................................... 48
Conduct of Pure if the Offer is Not Completed............. 48
Relationships With Pure................................... 48
Accounting Treatment...................................... 51
Fees and Expenses......................................... 51
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND SUBSEQUENT
MERGER.................................................... 52
COMPARISON OF RIGHTS OF HOLDERS OF PURE COMMON STOCK AND
HOLDERS OF UNOCAL COMMON STOCK............................ 56
WHERE YOU CAN FIND MORE INFORMATION......................... 62
LEGAL MATTERS............................................... 64
EXPERTS..................................................... 64
MISCELLANEOUS............................................... 64
ANNEXES
ANNEX A -- Information Concerning the Directors and
Executive Officers of Unocal and Union Oil....... A-1
ANNEX B -- Interests of Unocal and the Directors, Executive
Officers and Affiliates of Unocal in Shares of
Pure............................................. B-1
ANNEX C -- Section 262 of General Corporation Law of the
State of Delaware................................ C-1
ii
As permitted under the rules of the SEC, this prospectus incorporates
important business and financial information about Unocal and Pure that is
contained in documents filed with the SEC but that is not included in or
delivered with this prospectus. You may obtain copies of these documents,
without charge, from the website maintained by the SEC at www.sec.gov, as well
as other sources. See "Where You Can Find More Information" beginning on page
62.
You may also obtain copies of these documents, without charge, upon written
or oral request to our information agent, D.F. King & Co., Inc., collect at
(212) 269-5550 or toll-free at (800) 769-6414, or from our Dealer Manager for
this offer, Merrill Lynch & Co., collect at (609) 274-3066 or toll-free at (866)
276-1462. To obtain timely delivery of copies of these documents, you should
request them no later than five business days prior to the expiration of this
offer. Unless this offer is extended, the latest you should request copies of
these documents is Tuesday, October 22, 2002.
Except as otherwise specifically noted, "we," "our," "us" and similar words
in this prospectus refer to Union Oil Company of California, or "Union Oil,"
and/or Unocal Corporation, or "Unocal." In addition, we refer to Pure Resources,
Inc. as "Pure." All references to shares of Unocal common stock also refer to
the associated preferred stock purchase rights.
In "Questions and Answers About the Offer" below and in the "Summary"
beginning on page 1, we highlight selected information from this prospectus but
we have not included all of the information that may be important to you. To
better understand the offer and the subsequent merger and for a more complete
description of their legal terms, you should read carefully this entire
prospectus, including the annexes, as well as the documents we have incorporated
by reference into this prospectus. See "Where You Can Find More Information"
beginning on page 62.
iii
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q. WHY ARE WE MAKING THE OFFER?
A. We currently own 32,709,067 outstanding shares of Pure's common stock,
representing approximately 65% of all of the outstanding shares of Pure's
common stock. We are making the offer for the purpose of acquiring all of
the remaining outstanding shares of Pure's common stock, in order to combine
Pure with Unocal.
Q. WHAT WILL I RECEIVE IN EXCHANGE FOR THE SHARES OF PURE COMMON STOCK THAT I
TENDER INTO THE OFFER?
A. If we successfully complete the offer, you will receive 0.74 of a share of
Unocal common stock in exchange for each share of Pure common stock that you
validly tender into the offer. We will not issue fractional shares of Unocal
common stock. Instead, any Pure stockholder entitled to receive a fractional
share of Unocal common stock will receive cash in an amount equal to the
fraction, multiplied by the closing price of a share of Unocal common stock
on the New York Stock Exchange on the last trading day before the time that
the offer expires. See "The Offer -- Cash Instead of Fractional Shares of
Unocal Common Stock" on page 35.
Q. HOW HAVE YOU REVISED THE OFFER?
A. On September 5, 2002 we commenced the offer at an exchange ratio of 0.6527
shares of Unocal for each share of Pure. On October 3, 2002 we increased the
exchange ratio to 0.70. On October 9, 2002 we entered into an agreement with
members of Pure's senior management. Pursuant to this agreement, they agreed
to surrender, for no additional consideration, all of their put rights
relating to their shares of Pure common stock, including shares that would
be issued upon the exercise of Pure stock options, in exchange for our
agreement to increase the exchange ratio to 0.74 for all stockholders. The
exchange ratio of 0.74 represents our highest and best offer and we will not
further increase the consideration paid to Pure stockholders.
Q. WHAT ARE THE POTENTIAL BENEFITS OF THIS OFFER TO PURE STOCKHOLDERS?
A. We believe that this offer should be attractive to Pure stockholders for the
reasons described elsewhere in this prospectus as well as for the following
reasons:
- based on the closing price of Unocal common stock on October 28, 2002,
the last day prior to the date of this prospectus, the value of the
consideration we are offering for each Pure share was $21.02,
representing a premium of 20% over $17.52, the last closing price for
Pure common stock before we announced the exchange offer. The closing
price for Pure common stock on October 28, 2002 was $20.85;
- if we successfully complete the offer, you will hold shares in a
larger combined company:
- which we believe will have greater access to capital to pursue
strategic growth opportunities than would Pure on a stand-alone
basis; and
- which we believe will have a more liquid market for its shares than
Pure on a stand-alone basis;
- as a result of your exchange of shares of Pure common stock for shares
of Unocal common stock, you will become entitled to receive dividends
from Unocal, which we expect to continue to pay at our current annual
rate of $0.80 per share. See "Comparative Per Share Market Price and
Dividend Information -- Unocal -- Unocal Dividend Policy" on page 31.
Pure does not currently pay a dividend with respect to its shares and
has stated that it plans to retain all future earnings for the
development of its business; and
- you will have the opportunity to continue to participate in Pure's
growth through your ownership of shares of Unocal common stock.
Moreover, we expect that Unocal will be better positioned than Pure on
a stand-alone basis to develop and exploit Pure's assets.
iv
Q. WHAT ARE SOME OF THE OTHER FACTORS I SHOULD CONSIDER IN DECIDING WHETHER TO
TENDER MY SHARES OF PURE COMMON STOCK?
A. In addition to the factors described elsewhere in this prospectus, you
should consider the following:
- the exchange ratio reflects a value per share of Pure common stock of
approximately $21.48 per share of Pure common stock, based on the
closing price of Unocal common stock on October 8, 2002, the last
trading day prior to our announcement of the increase to 0.74 of the
exchange ratio for our offer. This value is above the closing price of
Pure common stock on May 26, 2000, immediately after its formation, of
$14.75 and below the highest trading price at which shares of Pure
common stock have traded, $25.30, which was reached on June 5, 2001.
You should obtain current market quotations for both Pure common stock
and Unocal common stock as you consider the offer; and
- as a stockholder of Unocal, your interest in the performance and
prospects of Pure will be only indirect and in proportion to your
share ownership in Unocal. You therefore may not realize the same
financial benefits of any future appreciation in the value of Pure
that you may realize if the offer and merger were not completed and
you were to remain a Pure stockholder.
We describe various factors Pure stockholders should consider in deciding
whether to tender their shares under "Risk Factors" beginning on page 9 and
"Additional Factors for Consideration by Pure Stockholders" beginning on
page 28.
Q. IF I DECIDE NOT TO TENDER, HOW WILL THIS AFFECT THE OFFER AND MY SHARES OF
PURE COMMON STOCK?
A. We will not acquire any shares of Pure common stock in the offer unless Pure
stockholders (other than Unocal and its subsidiaries) have tendered into the
offer, and not withdrawn, as of the expiration of the offer, a sufficient
number of shares such that we would hold following the offer at least 90% of
the outstanding Pure common stock. As of September 4, 2002, according to
information received from Pure, there were 50,553,786 shares of Pure common
stock outstanding. Accordingly, for us to acquire any shares of Pure common
stock, stockholders of Pure (other than Unocal and its subsidiaries) must
have tendered into the offer, and not have withdrawn, as of the expiration
of the offer, at least 12,789,341 shares of common stock. Your failure to
tender your shares of Pure common stock will reduce the likelihood that we
will receive tenders of a sufficient number of shares of common stock to be
able to complete the offer.
If you do not tender your shares of Pure common stock and we nonetheless
successfully complete the offer, as permitted under Delaware law, we would
then effect a "short form" merger with Pure without the approval of Pure's
board of directors or the remaining holders of Pure's common stock. We will
effect such a merger as soon as practicable after we complete the offer
unless we are prevented from doing so by a court or other legal requirement.
Each share of Pure common stock that we do not own or acquire in the offer
would be converted in the merger into the right to receive 0.74 of a share
of Unocal common stock, and cash instead of fractional shares, unless you
properly perfect your appraisal rights under Delaware law. See "The
Offer -- Purpose of the Offer; The Merger" beginning on page 39 and "The
Offer -- Appraisal Rights" beginning on page 41.
If we do not successfully complete the offer, your shares of Pure common
stock will remain outstanding and we expect that Pure will remain a majority
owned subsidiary of Unocal. See "Certain Effects of the Offer -- Conduct of
Pure if the Offer is Not Completed" beginning on page 48.
Q. HOW LONG WILL IT TAKE TO COMPLETE THE OFFER AND THE SUBSEQUENT "SHORT FORM"
MERGER?
A. We hope to complete the offer promptly after its expiration at midnight, New
York City time, on Tuesday, October 29, 2002. However, we may extend the
offer if the conditions to the offer have not been satisfied as of the
offer's scheduled expiration or if we are required to extend the offer
pursuant to the SEC's tender offer rules. We will complete the merger as
soon as practicable after the successful completion of the offer, unless a
court or other legal requirement prevents us from doing so.
v
Q. HAS THE PURE BOARD FORMED A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS TO
EVALUATE UNOCAL'S OFFER?
A. Yes. Pure has formed a special committee consisting of directors Herbert C.
Williamson, III and Keith A. Covington to evaluate our offer.
Q. HAS PURE'S BOARD OF DIRECTORS MADE A RECOMMENDATION CONCERNING THE OFFER?
A. Yes. On October 9, 2002, on behalf of the Pure Board of Directors, the
special committee announced that it determined the revised exchange ratio of
0.74 to be fair to and in the best interests of Pure stockholders other than
Union Oil and its affiliates and recommended that Pure stockholders tender
their Pure shares into the offer. In evaluating this offer, as revised, you
should be aware that five of eight members of the Pure board are Unocal
designees. For additional information on interests that Pure's board members
and executive officers may have in the offer and subsequent merger, see
"Interests of Certain Persons in the Offer and Subsequent Merger" beginning
on page 52.
Q. HAS UNOCAL NEGOTIATED, OR SOUGHT THE APPROVAL OF, THE TERMS OF THIS OFFER OR
THE MERGER WITH PURE?
A. In connection with the offer commenced on September 5, 2002 at an exchange
ratio of 0.6527, our representatives and representatives of Pure held a
number of meetings to discuss that offer after it was commenced. On October
3, 2002 we announced that we would be increasing the exchange ratio to 0.70
and would further increase the exchange ratio to 0.74 if we were able to
reach satisfactory agreements with Pure management to surrender their put
rights. We did not request that Pure, its board of directors or the special
committee approve the terms of the revised exchange ratio of 0.70 or our
proposal to further increase the exchange ratio to 0.74, either before or
after this announcement. Following our announcement we had a number of
discussions with the special committee and we negotiated the agreement to
tender with Pure's senior management, who in turn had said that they would
not enter into the agreement to tender unless the special committee would
recommend that the exchange ratio of 0.74 was fair to and in the best
interest of Pure stockholders (other than Unocal and its subsidiaries) and
that Pure stockholders tender their shares into the offer. On October 9,
2002 we announced that we had entered into the agreements to tender with
Pure management, would increase the exchange ratio to 0.74 and that the
special committee would recommend that Pure stockholders tender their shares
into the offer. See "Background and Reasons for the Offer and Subsequent
Merger" beginning on page 18 for more information on these matters.
Q. WHAT PERCENTAGE OF UNOCAL COMMON STOCK WILL CURRENT PURE STOCKHOLDERS OWN
AFTER THE SUCCESSFUL COMPLETION OF THE OFFER AND SUBSEQUENT MERGER?
A. We anticipate that the completion of the offer and subsequent merger will
result in the exchange of the outstanding shares of Pure's common stock that
we do not currently own into approximately 5.1% of the shares of Unocal
common stock outstanding at the conclusion of the transactions, without
regard to stock options, and 6.7% on a fully diluted basis. In general, this
assumes that:
- up to approximately 13,205,092 shares of Unocal common stock would be
issued in the offer and the subsequent merger (or, if all Pure
deferred compensation accounts for members of its board of directors
are settled and if all Pure stock options vest and are exercised, up
to a maximum of approximately 17,572,473 shares of Unocal common stock
would be issued);
- 244,664,331 shares of Unocal common stock are outstanding before
giving effect to the completion of the offer and the subsequent
merger; and
- no Pure stockholders exercise appraisal rights.
The holders of Unocal common stock are entitled to one vote for each share
they hold. The former stockholders of Pure, who would receive Unocal common
stock will, therefore, hold approximately 5.1% of the outstanding voting
power of Unocal immediately following the offer and the subsequent merger,
without regard to stock options, and 6.7% of the voting power on a fully
diluted basis.
vi
Q. HAVE ANY LAWSUITS BEEN FILED IN CONNECTION WITH THE OFFER?
A. Yes. In connection with the offer and subsequent merger, individual
stockholders of Pure have filed complaints in the Delaware Court of Chancery
purporting to commence class action lawsuits against Unocal, Union Oil, Pure
and each of the individual directors of Pure. In addition, a separate action
was filed in California Superior Court for the County of Los Angeles,
Central District. In general, the complaints allege, among other things: (1)
breaches of fiduciary duty by Unocal, Pure and the members of Pure's board
in connection with the offer and the subsequent merger; (2) that the
consideration Unocal is offering is inadequate; and (3) that Unocal is
acting to further its own interests at the expense of the holders of Pure's
common stock. Among other remedies, the complaints seek to enjoin the offer
and subsequent merger or, alternatively, damages in an unspecified amount
and rescission in the event the merger occurs. Furthermore, on September 3,
2002 a separate purported class action was filed in the Delaware Court of
Chancery styled as Cardinal Capital Management, LLC v. Amerman, et al. (C.A.
No. 19876) against the same defendants as in the other actions, as well as
the directors of Unocal. This complaint alleges that the Unocal offer is
inadequate, coercive and otherwise contrary to law. The plaintiff in the
Cardinal Capital case requested and was granted a hearing on its motion for
a preliminary injunction against the Unocal offer, and expedited discovery
in connection therewith. The Court held a hearing on the Cardinal Capital
motion on September 27, 2002. On October 1, 2002 the Court issued a
preliminary injunction preventing Unocal and Union Oil from completing the
offer. The injunction relates to the structure of the minimum tender
condition and to certain disclosure matters. As a result of disclosures
contained in this prospectus and in the Schedule 14D-9, as amended, filed by
Pure, the requirements contained in the injunction have been fulfilled and
accordingly the injunction does not prevent Union Oil from completing the
revised offer. See "Certain Legal Matters and Regulatory
Approvals -- Stockholder Litigation" beginning on page 47 for a more
detailed discussion of these lawsuits.
Q. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
A. The offer is conditioned upon, among other things, satisfaction of the
minimum tender condition. In particular, there must be validly tendered, and
not properly withdrawn prior to the expiration of the offer, at least
12,789,341 shares (as of the date of this prospectus) such that, giving
effect to the offer, we own at least 90% of the total number of outstanding
shares of Pure common stock (or 45,498,408 shares, as of the date of this
prospectus). We will not waive this minimum tender condition. In addition,
the following conditions must also be met:
- the registration statement, of which this prospectus is a part, having
been declared effective by the SEC;
- the shares of Unocal common stock to be issued in the offer and the
subsequent merger having been approved for listing on the New York
Stock Exchange;
- the absence of any event that would be expected to have an adverse
effect on Pure such that, regardless of the circumstances, in our good
faith judgment, it would be inadvisable to proceed with the offer;
- the absence of any development occurring after October 17, 2002 in the
Pure stockholder litigation, described under "Certain Legal Matters
and Regulatory Approvals -- Stockholder Litigation," that is adverse
to the defendants in that litigation;
- the absence of legal impediments to the offer or the subsequent
merger.
These conditions and other conditions to the offer are discussed in this
prospectus under "The Offer -- Conditions of the Offer" beginning on page
43.
Q. WILL I BE TAXED ON THE UNOCAL COMMON STOCK THAT I RECEIVE?
A. The offer and the merger are intended to qualify as a reorganization for
United States federal income tax purposes under which you would generally
not recognize gain or loss upon the receipt of shares of Unocal common stock
in exchange for your shares of Pure common stock, other than any gain or
loss recognized
vii
on the receipt of cash instead of fractional shares. However, there is no
condition to the offer relating to the tax-free treatment of the offer and
the merger. See "The Offer -- Material U.S. Federal Income Tax Consequences"
beginning on page 37. The tax consequences to you will depend on the facts
and circumstances of your own situation. Please consult your tax advisor for
a full understanding of the tax consequences to you.
Q. ARE UNOCAL'S BUSINESS, PROSPECTS AND FINANCIAL CONDITION RELEVANT TO MY
DECISION TO TENDER MY SHARES IN THE OFFER?
A. Yes. Shares of Pure common stock accepted in the offer will be exchanged for
shares of Unocal common stock and therefore you should consider Unocal's
business, prospects and financial condition before you decide whether to
tender your shares in the offer. In considering our business, prospects and
financial condition, you should review the documents incorporated by
reference in this prospectus because they contain detailed business,
financial and other information about us. See "Where You Can Find More
Information" beginning on page 62.
Q. IF I HAVE ALREADY TENDERED MY PURE SHARES DO I NEED TO DO ANYTHING TO TENDER
INTO THE REVISED OFFER?
A. No. Pure shares validly tendered in connection with our offer commenced on
September 5, 2002 or in connection with our revised offer as amended on
October 3, 2002 and not properly withdrawn will automatically be considered
tendered into this revised offer.
Q. WHOM CAN I CALL WITH QUESTIONS ABOUT THE OFFER?
A. You can contact our information agent or our Dealer Manager for the offer:
D.F. KING & CO., INC.
Banks and Brokerage Firms, Please Call Collect:
(212) 269-5550
Stockholders Please Call Toll-Free:
(800) 769-6414
or
MERRILL LYNCH & CO.
Banks and Brokerage Firms, Please Call Collect:
(609) 274-3066
Stockholders Please Call Toll-Free:
(866) 276-1462
viii
SUMMARY
INTRODUCTION
We are proposing to acquire all of the outstanding shares of Pure's common
stock that we do not already own. We currently own 32,709,067 shares of Pure
common stock, representing approximately 65% of the outstanding shares of Pure's
common stock.
We are offering to exchange 0.74 of a share of Unocal common stock for each
outstanding share of Pure's common stock, upon the terms and conditions set
forth in this prospectus and the related letter of transmittal. The exchange
ratio of 0.74 represents our highest and best offer and we will not further
increase the consideration to be paid to Pure stockholders. We will not acquire
any shares of Pure in the offer unless Pure stockholders (other than Unocal and
its subsidiaries) have validly tendered and not properly withdrawn prior to the
expiration of the offer a number of shares of Pure's common stock such that,
giving effect to the offer, we own at least 90% of the total number of
outstanding shares of Pure. We will not waive this minimum tender condition. As
of September 4, 2002, there were 50,553,786 shares of Pure common stock
outstanding. Accordingly, for us to acquire any shares of Pure common stock,
stockholders of Pure must, based on this information as to Pure's outstanding
shares, have tendered into the offer, and not withdrawn, as of the expiration of
the offer, at least 12,789,341 shares of Pure common stock. These share numbers
would change as a result of changes in Pure's share capitalization, such as
through the exercise of outstanding stock options. There are also other
conditions to the offer that are described under "The Offer -- Conditions of the
Offer" beginning on page 43.
If we successfully complete the offer, we would then own at least 90% of
the outstanding shares of Pure's common stock and be permitted under Delaware
law to effect a "short form" merger of one of our wholly owned subsidiaries with
Pure without the approval of Pure's board or remaining stockholders. We will
effect a "short form" merger of one of our wholly owned subsidiaries with Pure
as soon as practicable after we complete the offer unless we are prevented from
doing so by a court or other legal requirement. Each outstanding share of Pure
common stock we do not own or acquire in the offer would be converted in the
merger into the right to receive 0.74 of a share of Unocal common stock and cash
instead of fractional shares, the same consideration per share of Pure common
stock you would have received if you had tendered your shares into the offer,
unless you properly perfect your appraisal rights under Delaware law. See "The
Offer -- Purpose of the Offer; The Merger" beginning on page 39 and "The
Offer -- Appraisal Rights" beginning on page 41. After completion of the merger,
Pure will be a wholly owned subsidiary of Unocal.
INFORMATION ABOUT UNOCAL AND PURE
UNOCAL CORPORATION
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245
(310) 726-7600
Unocal is one of the world's largest independent natural gas and crude oil
exploration and production companies. The company's oil and gas activities are
principally in North America, Asia, Latin America, and the North Sea.
PURE RESOURCES, INC.
500 West Illinois
Midland, Texas 79701
(915) 498-8600
Pure is an independent exploration and production company that develops and
produces oil and natural gas in the Permian Basin, the San Juan Basin, the Gulf
Coast and the Gulf of Mexico. The company also owns an undivided interest under
approximately 6 million gross fee mineral acres throughout the Southern Gulf
Coast region of the U.S. Pure was formed in May 2000 through the combination of
Titan Exploration, Inc. and the Permian Basin business unit of Unocal
Corporation.
1
THE OFFER
EXCHANGE OF SHARES OF PURE COMMON STOCK
Upon the terms and subject to the conditions of the offer, promptly after
the expiration of the offer we will accept shares of Pure common stock which are
validly tendered and not properly withdrawn in exchange for shares of Unocal
common stock. We are offering to exchange 0.74 of a share of Unocal common stock
for each outstanding share of Pure's common stock. The exchange ratio of 0.74
represents our highest and best offer and we will not further increase the
consideration to be paid to Pure stockholders.
TIMING OF THE OFFER
We commenced the offer on September 5, 2002, the date of the distribution
of the prospectus distributed with the original offer. As a result of the
increase in the exchange ratio to 0.74, this revised offer is scheduled to
expire at midnight, New York City time, on Tuesday, October 29, 2002, unless we
extend the period of the offer. All references to the expiration of the offer
mean the time of expiration, as extended. For more information, see the
discussion under "-- Extension, Termination and Amendment" below.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right, in our sole discretion, to extend, on one
or more occasions, the period of time during which the offer remains open, and
we can do so by giving oral or written notice of extension to Mellon Investor
Services, LLC, the depositary and exchange agent for the offer. If we decide to
extend the offer, we will make an announcement to that effect no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration. We are not giving any assurance that we will exercise our
right to extend the offer. During any extension, all shares of Pure common stock
previously tendered and not withdrawn will remain deposited with the exchange
agent and depositary, subject to your right to withdraw your shares of Pure
common stock as described under "The Offer -- Withdrawal Rights" beginning on
page 36. We do not intend to have a subsequent offering period.
We reserve the right, in our sole discretion, to delay, on one or more
occasions, our acceptance for exchange of shares of Pure common stock pursuant
to our offer. We also reserve the right to terminate our offer and not accept
for exchange any shares of Pure common stock, upon the failure of any of the
conditions of the offer to be satisfied or, where permissible, waived, or
otherwise to amend the offer in any respect (except as described below), by
giving oral or written notice of delay, termination or amendment to the exchange
agent and depositary and by making a public announcement.
We will follow any extension, delay, termination or amendment, as promptly
as practicable, with a public announcement. Subject to applicable law, including
Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, which require that any material change in the
information published, sent or given to the stockholders in connection with the
offer be promptly sent to stockholders in a manner reasonably designed to inform
stockholders of the change, and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any public announcement other than by making
a release to the Dow Jones News Service.
DELIVERY OF UNOCAL COMMON STOCK
We will accept for exchange shares of Pure common stock validly tendered
and not properly withdrawn promptly after the expiration of the offer and will
exchange Unocal common stock and cash instead of fractional shares for the
tendered shares of Pure's common stock as soon as practicable afterwards. In all
cases, exchange of shares of Pure common stock tendered and accepted for
exchange pursuant to the offer will be made only if the exchange agent and
depositary timely receives (1) certificates for those shares of Pure
2
common stock, or a timely confirmation of a book-entry transfer of those shares
of Pure common stock in the exchange agent and depositary's account at The
Depository Trust Company, or DTC, and a properly completed and duly executed
letter of transmittal, or a manually signed copy, and any other required
documents; or (2) a timely confirmation of a book-entry transfer of those shares
of Pure common stock in the exchange agent and depositary's account at DTC,
together with an "agent's message" as described below under "-- Procedure for
Tendering Shares."
WITHDRAWAL RIGHTS
You may withdraw any shares of Pure common stock you previously tendered
into the offer at any time before the expiration of the offer. After the
expiration of the offer, tenders are irrevocable. However, if we have not
accepted tendered shares for exchange by November 4, 2002, you may withdraw
tendered shares at any time thereafter prior to their acceptance for exchange.
See "The Offer -- Withdrawal Rights" beginning on page 36.
CASH INSTEAD OF FRACTIONAL SHARES OF UNOCAL COMMON STOCK
We will not issue any fraction of a share of Unocal common stock pursuant
to the offer or the merger. Instead, each tendering stockholder who would
otherwise be entitled to a fraction of a share of Unocal common stock, after
combining all fractional shares to which the stockholder would otherwise be
entitled, will receive cash in an amount equal to the product obtained by
multiplying (1) the fraction of a share of Unocal common stock to which the
holder would otherwise be entitled by (2) the closing price of Unocal common
stock as reported on the New York Stock Exchange on the last trading day before
the time that the offer expires.
PROCEDURE FOR TENDERING SHARES
For you to validly tender shares of Pure common stock into our offer, you
must do one of the following:
- Deliver certificates for your shares, a properly completed and duly
executed letter of transmittal or a copy thereof that has been manually
signed, along with any other required documents, to the exchange agent
and depositary at one of its addresses set forth on the back cover of
this prospectus prior to the expiration of the offer;
- Arrange for a book-entry transfer of your shares to be made to the
exchange agent and depositary's account at DTC and receipt by the
exchange agent and depositary of a confirmation of this transfer prior to
the expiration of the offer, and the delivery of a properly completed and
duly executed letter of transmittal or a copy thereof that has been
manually signed, and any other required documents to the exchange agent
and depositary at one of its addresses set forth on the back cover of
this prospectus prior to the expiration of the offer; or
- Arrange for a book-entry transfer of your shares to the exchange agent
and depositary's account at DTC and receipt by the exchange agent and
depositary of confirmation of this transfer, including an "agent's
message," prior to the expiration of the offer.
These deliveries and arrangements must be made before the expiration of the
offer. Pure shares validly tendered and not properly withdrawn in connection
with our offer commenced on September 5, 2002 or our revised offer as amended on
October 3, 2002 will automatically be considered tendered into this revised
offer. TENDERS BY NOTICE OF GUARANTEED DELIVERY WILL NOT BE ACCEPTED.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The offer and the merger are intended to qualify as a reorganization for
United States federal income tax purposes under which you would generally not
recognize gain or loss upon the receipt of shares of Unocal
3
common stock in exchange for your shares of Pure common stock, other than any
gain or loss recognized on the receipt of cash instead of fractional shares.
However, there is no condition to the offer relating to the tax-free treatment
of the offer and the merger. See "The Offer -- Material U.S. Federal Income Tax
Consequences" beginning on page 37. The tax consequences to you will depend on
the facts and circumstances of your own situation. Please consult your tax
adviser for a full understanding of the tax consequences to you.
REGULATORY APPROVALS
We are not aware of any license or regulatory permit material to the
business of Pure and its subsidiaries, on a consolidated basis, that may be
materially adversely affected by our acquisition of Pure's common stock, or any
filing or approval that would be required for our acquisition of Pure's common
stock. We intend to make all required filings under the Securities Act of 1933,
as amended (or the Securities Act) and the Exchange Act. We are unaware of any
requirement for the filing of information with, or the obtaining of the approval
of, governmental authorities in any non-U.S. jurisdiction that is applicable to
the offer or the merger.
APPRAISAL RIGHTS
Under Delaware law, you will not have any appraisal rights in connection
with the offer. However, appraisal rights are available in connection with the
subsequent "short form" merger. For a detailed discussion of these appraisal
rights, see "The Offer -- Appraisal Rights" beginning on page 41.
ACCOUNTING TREATMENT
Our acquisition of the common stock will be accounted for under the
purchase method of accounting in accordance with generally accepted accounting
principles in the United States. See "Certain Effects of the Offer -- Accounting
Treatment" on page 51.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF PURE AND STOCKHOLDERS OF UNOCAL
If we successfully complete the offer, holders of Pure's common stock will
become Unocal stockholders, and their rights as stockholders will be governed by
Unocal's restated certificate of incorporation and by-laws. There are
differences between the certificates of incorporation and by-laws of Pure and
Unocal. Since Pure and Unocal are both Delaware corporations, the rights of Pure
stockholders will continue to be governed by Delaware law after the completion
of the offer and the subsequent merger. For a summary of material differences
between the rights of holders of Pure common stock and holders of Unocal common
stock, see "Comparison of Rights of Holders of Pure's Common Stock and Holders
of Unocal's Common Stock" beginning on page 56.
4
SELECTED HISTORICAL FINANCIAL DATA OF UNOCAL AND PURE
We are providing the following selected financial information to assist you
in analyzing the financial aspects of the offer and the subsequent merger. We
derived the unaudited financial information presented for Unocal and for Pure as
of, and for the six-month periods ended, June 30, 2001 and 2002 from Unocal's
and Pure's respective Quarterly Reports on Form 10-Q for the quarterly period
ended June 30, 2001 and 2002, respectively. We derived the financial information
presented for Unocal and for Pure as of, and for each of the five years for the
period ended December 31, 2001 from Unocal's and Pure's respective Annual
Reports on Form 10-K for each of those years. Pure's Selected Historical
Consolidated Financial Data for the years ended December 31, 1997, 1998 and 1999
and the five-month period ending May 31, 2000 (which is included in the period
ending December 31, 2000) relate solely to Unocal's Permian Basin Business Unit.
You should read the financial information with respect to Unocal and Pure
in conjunction with the historical consolidated financial statements and related
notes contained in the annual, quarterly and other reports filed by Unocal and
Pure with the SEC, which we have incorporated by reference into this prospectus.
See "Where You Can Find More Information" beginning on page 62.
UNOCAL SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------- ------- ------- ------- ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED INCOME STATEMENT DATA:
Sales and operating revenues....... $ 2,373 $ 3,890 $ 6,664 $ 8,941 $5,842 $4,627 $5,342
Earnings from continuing operations
before minority interests,
interest expense and income
taxes............................ 368 1,024 1,284 1,446 449 445 880
Net earnings....................... 136 542 615 760 137 130 581
Earnings available for common
shares........................... 136 542 615 760 137 130 581
Basic earnings per common share.... $ 0.55 $ 2.23 $ 2.52 $ 3.13 $ 0.57 $ 0.54 $ 2.34
Diluted earnings per common
share............................ $ 0.55 $ 2.17 $ 2.50 $ 3.08 $ 0.56 $ 0.54 $ 2.31
Cash dividends per common share.... $ 0.40 $ 0.40 $ 0.80 $ 0.80 $ 0.80 $ 0.80 $ 0.80
CONSOLIDATED BALANCE SHEET DATA:
Total assets....................... 10,793 10,718 10,425 10,010 8,967 7,952 7,530
Short-term debt (including current
maturities)...................... 8 189 9 114 1 -- 1
Long-term debt..................... 3,111 2,770 2,897 2,392 2,853 2,558 2,169
Company obligated preferred
securities....................... 522 522 522 522 522 522 522
Common shareholders' equity........ 3,210 3,155 3,124 2,719 2,184 2,202 2,314
PURE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------- ------- ------- ------- ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED INCOME STATEMENT DATA:
Sales and operating revenues....... $ 200 $ 257 $ 484 $ 283 $ 114 $ 107 $ 138
Earnings from continuing operations
before minority interests,
interest expense and income
taxes............................ 18 100 144 120 26 7 33
Net income......................... 1 59 81 83 18 5 22
5
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------- ------- ------- ------- ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Earnings available for common
shares........................... 1 59 81 83 18 5 22
Basic earnings per common share.... $ 0.03 $ 1.18 $ 1.62 $ 1.93 $ 0.54 $ 0.15 $ 0.68
Diluted earnings per common
share............................ $ 0.03 $ 1.15 $ 1.59 $ 1.90 $ 0.54 $ 0.15 $ 0.68
Cash dividends per common share.... $ -- $ -- $ -- $ -- $ -- $ -- $ --
CONSOLIDATED BALANCE SHEET DATA:
Total assets....................... 1,413 1,409 1,435 719 295 311 308
Short-term debt (including current
maturities)...................... -- -- -- -- -- -- --
Long-term debt..................... 571 535 587 68 -- -- --
Company obligated preferred
securities....................... -- -- -- -- -- -- --
Common shareholders' equity and
owner's net investment........... 465 463 488 378 203 224 224
UNAUDITED COMPARATIVE PER SHARE DATA
In the following table we present historical per share data for Unocal and
Pure, combined pro forma per share data for Unocal and equivalent pro forma per
share data for Pure, as of and for the six months ended June 30, 2002 and as of
and for the year ended December 31, 2001. We present the pro forma per share
data for comparative purposes only. The data does not purport to be indicative
of (1) the results of operations or financial position which would have been
achieved if the offer and the subsequent merger had been completed at the
beginning of the period or as of the date indicated, or (2) the results of
operations or financial position which may be achieved in the future. The pro
forma per share data does not reflect any payment that may be required to be
made in connection with the exercise of appraisal rights by Pure stockholders
under Delaware law in connection with the subsequent merger.
COMBINED UNOCAL PURE EQUIVALENT
PRO FORMA PER PRO FORMA
UNOCAL HISTORICAL SHARE PURE HISTORICAL PER SHARE
PER SHARE DATA DATA(1)(2)(3) PER SHARE DATA DATA(1)
----------------- --------------- ------------------- ---------------
FOR THE SIX MONTHS ENDED JUNE 30, 2002
---------------------------------------------------------------------------
Earnings from continuing
operations per share of common
stock:
Basic.......................... $ 0.55 $ 0.57 $0.01 $ 0.42
Diluted........................ $ 0.55 $ 0.56 $0.01 $ 0.41
Cash dividends per share of
common stock................... $ 0.40 $ 0.40 -- $ 0.30
Book value per share of common
stock(4)....................... $13.12 $14.01 $9.23 $10.37
FOR THE YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------------------
Earnings from continuing
operations per share of common
stock:
Basic......................... $ 2.45 $ 2.43 $1.60 $ 1.80
Diluted....................... $ 2.43 $ 2.40 $1.57 $ 1.78
Cash dividends per share of
common stock.................. $ 0.80 $ 0.80 -- $ 0.59
Book value per share of common
stock(5)...................... $12.80 $13.69 $9.73 $10.13
6
---------------
(1) The unaudited pro forma combined earnings from continuing operations per
share and book value per share of common stock are based on Pure
stockholders receiving 0.74 of a share of Unocal common stock for each share
of Pure common stock. The Pure equivalent unaudited pro forma per share data
are calculated by multiplying the unaudited pro forma combined per share
data by 0.74.
(2) Reflects the historical operations of Unocal and Pure adjusted to reflect
the impact of purchase accounting by Unocal and the issuance of Unocal
common stock.
(3) Based on the price of Unocal common stock as of October 10, 2002 and offer
consideration of 0.74 of a share of Unocal common stock for each outstanding
share of Pure common stock, we have estimated a purchase price of
approximately $381 million. For purposes of the calculation of pro forma
combined earnings from continuing operations per share, we have performed a
preliminary allocation of this purchase price and estimated the effect of
the elimination of unnecessary functions and activities and additional
depletion, depreciation and amortization of properties. Of the $381 million
total consideration, approximately $144 million is estimated to be allocated
to minority interests; approximately $100 million is estimated to be
allocated to the minority interests' share of oil and gas properties; and
approximately $54 million is estimated to be recorded as goodwill, which
will not be subject to amortization. A deferred tax liability of $37 million
is being recorded and is related to the purchase price allocated to the
minority interests' share of oil and gas properties. We have eliminated the
liability estimated to be approximately $120 million related to the Pure
officers' right to require Pure to purchase its common shares currently held
or subsequently obtained by the exercise of any options held by an officer
at a calculated "net asset value" per share (which are sometimes referred to
as the put rights). For purposes of this prospectus, we have assumed, based
on the Agreement to Tender described under "Interests of Certain Persons in
the Offer and Subsequent Merger," that the put rights will not be exercised.
Accordingly, no charge to pro forma earnings has been included in connection
with the put rights. The purchase price and associated allocation is
estimated based on the facts and circumstances as of the date of this
prospectus. Upon completion of the offer and merger, we will perform a more
detailed purchase price allocation.
We have also included within pro forma combined earnings from continuing
operations per share a charge to adjust the amortization of estimated
compensation of approximately $13 million after-tax for the year ended
December 31, 2001, as a result of the accelerated vesting of officer stock
options. These options are subject to variable accounting treatment, and as
a result are remeasured for changes in Pure's stock price. For the six
months ended June 30, 2002, we have estimated a decrease to compensation
expense of approximately $5 million after-tax.
Pro forma combined earnings from continuing operations per share excludes an
estimated nonrecurring compensation charge of approximately $7 million
after-tax related to employee stock options which may be assumed by us.
(4) Historical book value per share of common stock at June 30, 2002 is computed
by dividing stockholders' equity by the number of shares of common stock
outstanding as of June 30, 2002 of 244.7 million and of 50.3 million for
Unocal and Pure, respectively. Pro forma book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
common stock outstanding as of June 30, 2002.
(5) Historical book value per share of common stock at December 31, 2001 is
computed by dividing stockholders' equity by the number of shares of common
stock outstanding as of December 31, 2001 of 244.0 million and of 50.2
million for Unocal and Pure, respectively. Pro forma book value per share is
computed by dividing pro forma stockholders' equity by the pro forma number
of shares of common stock outstanding as of December 31, 2001.
7
COMPARATIVE PER SHARE MARKET DATA
In the following table we present:
- the prices per share of Unocal's common stock and Pure's common stock as
reported in the consolidated transaction reporting system, as of the
close of trading on October 8, 2002, the day prior to the public
announcement of the revised (0.74) exchange ratio of our offer,
- the equivalent price per share of Pure's common stock, based on the
exchange ratio.
UNOCAL PURE PURE
HISTORICAL HISTORICAL EQUIVALENT(1)
---------- ---------- -------------
As of closing on October 8, 2002
Price per share of common stock................... $29.03 $21.18 $21.48
---------------
(1) We calculated the Pure equivalent data by multiplying the applicable Unocal
closing price by the exchange ratio in the offer and the subsequent merger
of 0.74 of a share of Unocal common stock for each share of Pure's common
stock.
The market prices of shares of Unocal common stock and Pure common stock
are subject to fluctuation. The actual value of the shares of Unocal common
stock you receive in the offer will likely differ from the values illustrated.
You are urged to obtain current market quotations. See "Comparative Per Share
Market Price and Dividend Information" beginning on page 31.
UNOCAL DIVIDEND POLICY
The holders of shares of Unocal common stock receive dividends if and when
declared by our board of directors out of legally available funds. We currently
pay dividends at an annual rate of $0.80 per share. We expect to continue to pay
quarterly dividends at this annual rate on a basis consistent with our past
practice following completion of the offer and the subsequent merger. However,
our board's declaration and payment of dividends will depend upon business
conditions, operating results and our board of directors' consideration of other
relevant factors. On July 26, 2002, Unocal declared a regular quarterly dividend
of $0.20 per share payable on November 8, 2002 to holders of record of Unocal
common stock on October 10, 2002. No assurance can be given that we will
continue to pay dividends on our common stock at the current annual rate in the
future. See "Comparative Per Share Market Price and Dividend
Information -- Unocal -- Unocal Dividend Policy" on page 31.
PURE SHARES HELD BY UNOCAL DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES
Union Oil owns approximately 65% of the outstanding shares of Pure common
stock. The directors and executive officers of Unocal and Union Oil, in the
aggregate, own a de minimis number of the outstanding shares of Pure common
stock. For more details see "Interests of Unocal and the Directors, Executive
Officers and Affiliates of Unocal, in Shares of Pure" on Annex B of this
prospectus.
8
RISK FACTORS
In deciding whether to tender your shares pursuant to the offer, you should
read carefully this prospectus and the documents which we incorporate by
reference into this prospectus. You should also carefully consider the following
factors:
RISKS RELATED TO THE OFFER AND THE SUBSEQUENT MERGER
THE NUMBER OF SHARES OF UNOCAL COMMON STOCK THAT YOU WILL RECEIVE IN THE OFFER
AND THE SUBSEQUENT MERGER WILL BE BASED UPON A FIXED EXCHANGE RATIO. THE VALUE
OF THE SHARES OF UNOCAL COMMON STOCK AT THE TIME YOU RECEIVE THEM COULD BE LESS
THAN AT THE TIME YOU TENDER YOUR SHARES OF PURE COMMON STOCK.
In the offer and the subsequent merger, each share of Pure common stock
will be exchanged for 0.74 of a share of Unocal common stock. This is a fixed
exchange ratio. We will not adjust the exchange ratio as a result of any change
in the market price of Unocal common stock between the date of this prospectus
and the date you receive shares of Unocal common stock in exchange for shares of
Pure common stock. The market price of the Unocal common stock will likely be
different on the date you receive shares of Unocal common stock than it is today
because of changes in the business, operations or prospects of Unocal, market
reactions to our offer, general market and economic conditions and other
factors. You are urged to obtain current market quotations for Unocal common
stock and Pure common stock. See "Comparative Per Share Market Price and
Dividend Information" beginning on page 31.
THE TRADING PRICE OF UNOCAL'S COMMON STOCK MAY BE AFFECTED BY FACTORS IN
ADDITION TO THOSE FACTORS AFFECTING THE PRICE OF PURE'S COMMON STOCK. THE PRICE
OF UNOCAL'S COMMON STOCK COULD DECLINE FOLLOWING THE OFFER.
If we successfully complete the offer and any subsequent merger, holders of
Pure's common stock will become holders of Unocal's common stock. Although we
currently own approximately 65% of Pure's outstanding shares of common stock, we
also own and operate other businesses. Accordingly, our results of operations
and business, as well as the trading price of our common stock, may be affected
by factors in addition to those affecting Pure's results of operations and
business and the price of Pure's common stock. The price of Unocal's common
stock may decrease after we accept shares of Pure common stock for exchange in
the offer and complete the subsequent merger. See "Unocal Forecasts" on page 30.
THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF PURE HAVE POTENTIAL CONFLICTS
OF INTERESTS WITH RESPECT TO THE OFFER.
You should be aware that there exist conflicts of interest among members of
the Pure board. Not only does Unocal own approximately 65% of the outstanding
Pure common stock, but five of the eight members of the Pure board are nominees
of Unocal. Unocal's nominees include two of its current officers, one of whom is
also a director of Unocal, and two of its former officers. For additional
information on the interests that Pure's board members and executive officers
may have in the offer and subsequent merger, see "Interests of Certain Persons
in the Offer and Subsequent Merger" beginning on page 52.
THE OFFER AND MERGER MAY NOT QUALIFY AS A TAX-FREE REORGANIZATION FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES.
The offer and the merger are intended to qualify as a "reorganization" for
United States federal income tax purposes under which you would generally not
recognize gain or loss upon the receipt of shares of Unocal common stock in
exchange for your shares of Pure common stock, other than any gain or loss
recognized on the receipt of cash instead of fractional shares. If the offer and
merger are consummated but fail to be treated as a "reorganization" for United
States federal income tax purposes, however, the offer and merger will be
taxable to you. Reorganization treatment depends on numerous factors, including
factors beyond our control. For example, the offer and merger could fail to be
treated as a "reorganization" if the put rights held by executives of Pure
requiring Pure to purchase the executives' shares in Pure for cash are exercised
and any funds are provided directly or indirectly by Unocal or Union Oil for
that purpose. Although we have an
9
agreement with the holders of these put rights that provides generally that they
will not exercise the put rights, there are circumstances, including
circumstances involving unexpected delays in completing the short form merger,
under which the put rights could be exercised. If the merger does not qualify as
a reorganization, you would generally be taxable on any gain you realize upon
the receipt of shares of Unocal common stock in exchange for your shares of Pure
common stock in the offer or the merger. The offer does not include a condition
relating to the tax-free treatment of the offer and the merger.
WE MAY NOT BE ABLE TO EFFECT THE "SHORT FORM" MERGER.
We will promptly complete a "short form" merger following the completion of
the offer unless we are prevented from doing so by a court or other legal
requirement. However, if we successfully complete the offer but are not able to
complete promptly the "short form" merger, shares of Pure's common stock not
tendered into the offer would remain outstanding until we are able to effect
such a merger, if ever. In these circumstances, the liquidity of and market for
those remaining publicly held shares of Pure common stock could be adversely
affected. Pure's common stock is currently listed on the New York Stock
Exchange. Depending upon the number of shares of Pure common stock purchased in
the offer, Pure's common stock may no longer meet the requirements for continued
listing and may be delisted from the New York Stock Exchange. It is possible
that Pure's common stock would continue to trade in the over-the-counter market
and that price quotations would be reported by other sources. The extent of the
public market for Pure's common stock and the availability of these quotations
would depend, however, upon the number of holders of Pure's common stock
remaining at that time, the interests in maintaining a market in Pure's common
stock on the part of securities firms, the possible termination of registration
of Pure's common stock under the Exchange Act, as described below, and other
factors.
In addition, Pure's registration under the Exchange Act could be terminated
upon application of Pure to the SEC if the shares are no longer listed on a
securities exchange and there are fewer than 300 holders of record of the Pure
common stock. The termination of the registration of Pure's common stock under
the Exchange Act would substantially reduce the information required to be
furnished by Pure to its stockholders and to the SEC. It would also make certain
of the provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement in
connection with stockholders' meetings, the related requirement of an annual
report to stockholders, and the requirements of SEC Rule 13e-3 with respect to
going private transactions, no longer applicable.
Shares of Pure's common stock are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System. This has
the effect of allowing brokers to extend credit on shares of Pure's common stock
as collateral. Depending on factors similar to those described above regarding
listing and market quotations, it is possible that Pure's common stock would no
longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations. If registration of Pure's common stock under the
Exchange Act is terminated, Pure's common stock would no longer be "margin
securities."
RISKS RELATED TO OUR BUSINESS
Our business activities are subject to hazards and risks. The following is
a summary of the material risks relating to our business activities. Before
tendering your shares of Pure common stock in the offer, you should carefully
consider the material risks described below, as well as the other information
contained in this prospectus and the documents incorporated by reference in this
prospectus under the caption "Where You Can Find More Information". If any of
the events described below occur, our business, financial condition and/or
results of operations could be materially harmed, and you could lose part or all
of your investment.
OUR PROFITABILITY IS HIGHLY DEPENDENT ON THE PRICES OF CRUDE OIL, NATURAL GAS
AND NATURAL GAS LIQUIDS, WHICH HAVE HISTORICALLY BEEN VERY VOLATILE.
Our revenues, profitability, cash flow and future rate of growth are highly
dependent on the prices of crude oil, natural gas and natural gas liquids, which
are affected by numerous factors beyond our control. Oil and gas liquids and gas
prices historically have been very volatile. For example, our lower 48 U.S. gas
prices
10
declined significantly in 2001 from the very high levels reached in the second
half of 2000 and early 2001. A significant downward trend in commodity prices,
comparable to the commodity prices experienced in 1998, would have a material
adverse effect on our revenues, profitability and cash flow and could result in
a reduction in the carrying value of our oil and gas properties and the amounts
of our proved oil and gas reserves.
OUR HEDGING AND SPECULATING ACTIVITIES MAY PREVENT US FROM BENEFITING FROM PRICE
INCREASES AND MAY EXPOSE US TO OTHER RISKS.
To the extent that we engage in hedging activities to endeavor to protect
ourselves from price volatility, we may be prevented from realizing the benefits
of price increases above the levels of the hedges. In addition, we engage in
speculative trading in hydrocarbon commodities and derivative instruments in
connection with our risk management activities, which subjects us to additional
risk.
OUR DRILLING ACTIVITIES MAY NOT BE PRODUCTIVE.
Drilling for oil and gas involves numerous risks, including the risk that
we will not encounter commercially productive oil or gas reservoirs. The costs
of drilling, completing and operating wells are often uncertain and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including:
- Unexpected drilling conditions;
- Pressure or irregularities in formations;
- Equipment failures or accidents;
- Fires, explosions, blow-outs and surface cratering;
- Marine risks such as capsizing, collisions and hurricanes;
- Adverse weather conditions; and
- Shortages or delays in the delivery of equipment.
Our future drilling activities may not be successful and, if unsuccessful,
this failure could have an adverse effect on our future results of operations
and financial condition. While all drilling, whether developmental or
exploratory, involves these risks, exploratory drilling involves greater risks
of dry holes or failure to find commercial quantities of hydrocarbons. Because
of the percentage of our capital budget devoted to higher risk exploratory
projects, it is likely that we will continue to experience significant
exploration and dry hole expenses.
As part of our strategy, we explore for oil and gas offshore, sometimes in
deep water and/or at deep drilling depths, where operations are more difficult
and costly than on land or than at shallower depths and in shallower waters.
Deepwater operations may require a significant amount of time between a
discovery and the time that we can produce and market the oil or gas, increasing
both the financial and operational risk involved with these activities.
OPERATING RISKS
Our business is subject to all of the operating risks normally associated
with the exploration for and production of oil and gas, including blowouts,
cratering and fire, any of which could result in damage to, or destruction of,
oil and gas wells or formations or production facilities and other property and
injury to persons. As protection against financial loss resulting from these
operating hazards, we maintain insurance coverage, including certain physical
damage, comprehensive general liability and worker's compensation insurance.
However, we are not fully insured against all risks in our business. The
occurrence of a significant event against which we are not fully insured could
have a material adverse effect on our results of operations and possibly on our
financial position.
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DEVELOPMENT RISKS
We are involved in several large development projects, principally
offshore. Key factors that may affect the timing and outcome of such projects
include: project approvals by joint venture partners; timely issuance of permits
and licenses by governmental agencies; manufacturing and delivery schedules of
critical equipment, such as offshore platforms, and commercial arrangements for
pipelines and related equipment to transport and market hydrocarbons. Delays and
differences between estimated and actual timing of critical events may affect
the completion of and commencement of production from projects.
OUR OIL AND GAS RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN.
Estimates of reserves by necessity are projections based on engineering
data, the projection of future rates of production and the timing of future
expenditures. We base the estimates of our proved oil and gas reserves and
projected future net revenues on reserve reports we prepare. The process of
estimating oil and gas reserves requires substantial judgment on the part of the
petroleum engineers, resulting in imprecise determinations, particularly with
respect to new discoveries. Different reserve engineers may make different
estimates of reserve quantities and revenues attributable to those reserves
based on the same data. Future performance that deviates significantly from
reserve reports could have a material adverse effect on our business and
prospects, as well as on the amounts and carrying values of such reserves.
Fluctuations in the prices of oil and natural gas have the effect of
significantly altering reserve estimates, because the economic projections
inherent in the estimates may reduce or increase the quantities of recoverable
reserves. We may not realize the prices our reserve estimates reflect or produce
the estimated volumes during the periods those estimates reflect. Actual future
production, oil and natural gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable oil and natural
gas reserves most likely will vary from our estimates.
Any downward revision in our estimated quantities of reserves or of the
carrying values of our reserves could have adverse consequences on our financial
results, such as increased depreciation, depletion and amortization charges
and/or impairment charges, which would reduce earnings and stockholders' equity.
IF WE FAIL TO FIND OR ACQUIRE ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent we conduct successful exploration
and development activities or, through engineering studies, identify additional
productive zones or secondary recovery reserves, and/or acquire additional
properties containing proved reserves, our proved reserves will decline
materially as oil and gas is produced. Future oil and gas production is,
therefore, highly dependent on our level of success in finding or acquiring
additional reserves.
OUR GROWTH DEPENDS SIGNIFICANTLY ON OUR ABILITY TO ACQUIRE OIL AND GAS
PROPERTIES ON A PROFITABLE BASIS.
Acquisitions of producing oil and gas properties have been a key element of
maintaining and growing our reserves and production in recent years,
particularly in North America. The success of any acquisition will depend on a
number of factors, including the ability to estimate accurately the recoverable
volumes of reserves, rates of future production and future net revenues
attainable from reserves and to assess future abandonment and possible future
environmental liabilities.
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and actual future production rates and associated
costs and potential liabilities with respect to acquired properties. Actual
results may vary substantially from those assumed in the estimates.
DOMESTIC GOVERNMENTAL RISKS
Our domestic operations have been, and at times in the future may be,
affected by political developments and by federal, state and local laws and
regulations such as restrictions on production, changes in taxes,
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royalties and other amounts payable to governments or governmental agencies,
price controls and environmental protection regulations.
GLOBAL POLITICAL AND ECONOMIC DEVELOPMENTS MAY IMPACT OPERATIONS.
Political and economic factors in international markets may have a material
adverse effect on our operations. On an equivalent-barrel basis, approximately
one-half of our oil and gas production in 2001 was outside the United States,
and approximately two-thirds of our proved oil and gas reserves at December 31,
2001, were located outside of the United States. All of our geothermal
operations and reserves are located outside the United States.
There are many risks associated with operations in international markets,
including changes in foreign governmental policies relating to crude oil,
natural gas liquids, natural gas, and geothermal steam pricing and taxation,
other political, economic or diplomatic developments, changing political
conditions and international monetary fluctuations. These risks include:
- Political and economic instability or war;
- The possibility that a foreign government may seize our property with or
without compensation;
- Confiscatory taxation;
- A foreign government attempting to renegotiate or revoke existing
contractual arrangements;
- Fluctuating currency values and currency controls; and
- Constrained natural gas markets dependent on demand in a single or
limited geographical area.
Actions of the United States government through tax and other legislation,
executive order and commercial restrictions can adversely affect our operating
profitability overseas, as well as in the U.S. The United States government can
prevent or restrict us from doing business in foreign countries. These
restrictions and those of foreign governments have in the past limited our
ability to operate in or gain access to opportunities in various countries.
Various agencies of the United States and other governments have from time to
time imposed restrictions on our ability to operate in or gain attractive
opportunities in various countries. Actions by both the United States and host
governments have affected operations significantly in the past and will continue
to do so in the future.
THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY IS VERY COMPETITIVE, AND
MANY OF OUR EXPLORATION AND PRODUCTION COMPETITORS HAVE GREATER FINANCIAL AND/OR
OTHER RESOURCES THAN WE DO.
Strong competition exists in all sectors of the oil and gas exploration and
production industry and, in particular, in the exploration and development of
new reserves. We compete with major integrated and other independent oil and gas
companies for the acquisition of oil and gas leases and other properties, for
the equipment and labor required to develop and operate those properties and the
marketing of oil and natural gas production. Many of our competitors have
financial and other resources substantially greater than those available to us.
As a consequence, we may be at a competitive disadvantage in bidding for
drilling rights. In addition, many of our larger competitors may have a
competitive advantage when responding to factors that affect the demand for oil
and natural gas production, such as changes in worldwide prices and levels of
production, the cost and availability of alternative fuels and the application
of government regulations. We also compete in attracting and retaining
personnel, including geologists, geophysicists, engineers and other specialists.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION HAVE RESULTED IN AND COULD CONTINUE TO
RESULT IN INCREASED OPERATING COSTS AND CAPITAL REQUIREMENTS.
Our operations are subject to numerous laws and regulations relating to the
protection of the environment. We have incurred, and will continue to incur,
substantial operating, maintenance, remediation and capital expenditures as a
result of these laws and regulations. Our compliance with amended, new or more
stringent requirements, stricter interpretations of existing requirements or the
future discovery of contamination may require us to make material expenditures
or subject us to liabilities beyond what we currently
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anticipate. In addition, any failure by us to comply with existing or future
laws could result in civil or criminal fines and other enforcement action
against us.
Our past and present operations and those of companies we have acquired
expose us to civil claims by third parties for alleged liability resulting from
contamination of the environment or personal injuries caused by releases of
hazardous substances.
For example:
- We are investigating or remediating contamination at a large number of
formerly and currently owned and/or operated sites and have recently
announced additional charges relating to some of these sites; and
- We have been identified as a potentially responsible party at several
Superfund and other multi-party sites where we or our predecessors are
alleged to have disposed of wastes in the past.
Environmental laws are subject to frequent change and many of them have
become more stringent. In some cases, they can impose liability for the entire
cost of cleanup on any responsible party without regard to negligence or fault
and impose liability on us for the conduct of others or conditions others have
caused, or for our acts that complied with all applicable requirements when we
performed them.
It is not possible for us to estimate reliably the amount and timing of all
future expenditures related to environmental and legal matters and other
contingencies because:
- Some sites are in the early stages of investigation, and other sites may
be identified in the future;
- Cleanup requirements are difficult to predict at sites where remedial
investigations have not been completed or final decisions have not been
made regarding cleanup requirements, technologies or other factors that
bear on cleanup costs;
- Environmental laws frequently impose joint and several liability on all
potentially responsible parties, and it can be difficult to determine the
number and financial condition of other potentially responsible parties
and their share of responsibility for cleanup costs;
- Environmental laws and regulations are continually changing, and court
proceedings are inherently uncertain; and
- Some legal matters are in the early stages of investigation or proceeding
or their outcomes otherwise may be difficult to predict, and other legal
matters may be identified in the future.
Although our management believes that it has established appropriate
reserves for cleanup costs, due to these uncertainties we could be required to
provide significant additional reserves in the future, which would adversely
affect our results of operations and possibly our financial position.
More detailed information with respect to the matters discussed above is
set forth under the caption "Environmental Regulations" in our 2001 Annual
Report on Form 10-K, as amended, which is incorporated into this prospectus by
reference. We recently announced that our Unocal Indonesia Company subsidiary
has mobilized resources to address a thin hydrocarbon sheen near a deepwater
well site off the coast of East Kalimantan in Indonesia. We also announced that
we anticipate our third quarter 2002 reported net earnings will include a
provision of approximately $35 million pretax ($22 million after tax), or 9
cents per share (diluted), for additional reserves for environmental
remediation. Substantially all of the anticipated provision, which results from
our regular quarterly review of remediation obligations, relates to closed
Unocal facilities sites previously sold with retained responsibilities. Most of
the $35 million was included in Unocal's reported June 30, 2002 estimate of
possible additional remediation costs.
OUR DEBT LEVEL MAY LIMIT OUR FINANCIAL FLEXIBILITY.
As of June 30, 2002, our balance sheet, which fully consolidates the debt
of Pure, showed that we had approximately $3.12 billion of total debt
outstanding. In addition, Unocal Capital Trust, or Trust, a consolidated finance
subsidiary, has $522 million of convertible preferred securities outstanding,
which
14
represent beneficial interests in a like amount of subordinated debt issued to
the Trust by Unocal. We may also incur additional debt in the future, including
in connection with acquisitions, recapitalizations and refinancings. The level
of our debt could have several important effects on our future operations,
including, among others:
- A significant portion of our cash flow from operations will be applied to
the payment of principal and interest on the debt and will not be
available for other purposes;
- Credit rating agencies have changed, and may continue to change, their
ratings of our debt and other obligations as a result of changes in our
debt level, financial condition, earnings and cash flow, which in turn
impact the costs, terms and conditions and availability of financing;
- Covenants contained in our existing and future debt arrangements will
require us to meet financial tests that may affect our flexibility in
planning for and reacting to changes in our business, including possible
acquisition opportunities;
- Our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be
limited or burdened by increased costs or more restrictive covenants;
- We may be at a competitive disadvantage to similar companies that have
less debt; and
- Our vulnerability to adverse economic and industry conditions may
increase.
A CHANGE OF CONTROL OF UNOCAL COULD RESULT IN THE ACCELERATION OF OUR
OUTSTANDING BANK BORROWINGS AND TRIGGER VARIOUS CHANGE-OF-CONTROL PROVISIONS
INCLUDED IN EMPLOYEE AND DIRECTOR PLANS AND AGREEMENTS.
Two of our bank credit facilities, under which we can borrow an aggregate
of up to $1,000,000,000, provide for the termination of their loan commitments
and require the prepayment of all outstanding borrowings under the facilities in
the event that (1) any person or group becomes the beneficial owner of more than
30 percent of our then outstanding voting stock other than in a transaction
having the approval of our board of directors, at least a majority of which are
continuing directors, or (2) if continuing directors shall cease to constitute
at least a majority of the board. If this situation were to occur, we would
likely be required to refinance the outstanding indebtedness under these credit
facilities. There can be no assurance that we would be able to refinance this
indebtedness or, if a refinancing were to occur, that the refinancing would be
on terms favorable to us.
Under various employee and director plans and agreements, in the event of a
change in control, restricted stock would become unrestricted, unvested options
and phantom units would vest, performance shares, performance bonus awards and
incentive compensation would be paid out, and directors' units would be paid out
if the director has so elected. We have also entered into employment agreements
and other agreements with certain of our employees containing change-of-control
provisions.
We have adopted an enhanced severance program for approximately 2,800 U.S.
payroll employees not represented by collective bargaining agreements and a
limited number of international employees in the event they lose their jobs
through a change of control.
UNOCAL MAY ISSUE PREFERRED STOCK, THE TERMS OF WHICH COULD ADVERSELY AFFECT THE
VOTING POWER OR VALUE OF ITS COMMON STOCK.
Unocal's Restated Certificate of Incorporation, which is filed as Exhibit
3.1 to our 2001 Annual Report on Form 10-K, as amended, authorizes it to issue,
upon approval of our board of directors, but without the approval of our
stockholders, one or more series of preferred stock having such preferences,
powers and relative, participating, optional and other rights, including
preferences over our common stock respecting dividends and distributions, as our
board of directors generally may determine. The terms of one or more series of
preferred stock could adversely impact the voting power or value of Unocal's
common stock. For example, we might grant holders of preferred stock the right
to elect some number of our directors in all events or on the happening of
specified events or the right to veto specified transactions. Similarly, the
repurchase or
15
redemption rights or liquidation preferences Unocal might assign to holders of
preferred stock could affect the residual value of the common stock.
PROVISIONS IN UNOCAL'S CORPORATE DOCUMENTS AND DELAWARE LAW COULD DELAY OR
PREVENT A CHANGE OF CONTROL OF UNOCAL, EVEN IF THAT CHANGE WOULD BE BENEFICIAL
TO ITS STOCKHOLDERS.
The existence of some provisions in Unocal's corporate documents and
Delaware law could delay or prevent a change of control of Unocal, even if that
change would be beneficial to our stockholders. Unocal's Restated Certificate of
Incorporation and Bylaws, which are filed as Exhibits 3.1 and 3.2 to our 2001
Annual Report on Form 10-K, as amended, contain provisions that may make
acquiring control of Unocal difficult, including:
- Provisions relating to the classification, nomination and removal of
directors;
- A provision prohibiting stockholder action by written consent;
- A provision that allows only our board of directors to call a special
meeting of our stockholders;
- Provisions regulating the ability of our stockholders to bring matters
for action before annual meetings of our stockholders; and
- The authorization given to our board of directors to issue and set the
terms of preferred stock.
In addition, Unocal has also adopted a stockholder rights plan, which would
cause extreme dilution to any person or group that attempts to acquire a
significant interest in Unocal without advance approval of our board of
directors, while a provision of the Delaware General Corporation Law would
impose some restrictions on mergers and other business combinations between
Unocal and any holder of 15 percent or more of our outstanding common stock.
UNOCAL MAY REDUCE OR CEASE TO PAY DIVIDENDS ON ITS COMMON STOCK.
We can provide no assurance that Unocal will continue to pay dividends at
its current rate or at all. The amount of cash dividends, if any, to be paid in
the future will depend upon their declaration by Unocal's board of directors and
upon Unocal's financial condition, results of operations, cash flow, the level
of our capital and exploration expenditures, our future business prospects and
other related matters that Unocal's board of directors deems relevant.
In addition, under the terms of the outstanding preferred securities of
Unocal Capital Trust and the Unocal subordinated debt securities held by the
Trust, in which the trust preferred securities represent beneficial interests,
Unocal has the right under certain circumstances to suspend the payment to the
Trust of interest on the debt securities, in which event the Trust has the right
to suspend the payment of distributions on the trust preferred securities. In
this situation, Unocal would be prohibited from paying dividends on the common
stock.
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FORWARD-LOOKING INFORMATION
Some of the statements contained or incorporated by reference in this
prospectus discuss our plans and strategies for our business or make other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, that address activities, events or developments that we
intend, expect, project, believe or anticipate will or may occur in the future
are forward-looking statements. The words "believes," "anticipates,"
"estimates," "expects," "plans," "intends" and similar expressions are intended
to identify these forward-looking statements, but are not the exclusive means of
identifying them. These statements are based on assumptions and assessments made
by our management in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors our
management believes to be appropriate. These forward-looking statements are
subject to a number of risks and uncertainties, some of which our management has
not yet identified. Any such forward-looking statements are not guarantees of
future performances and actual results, developments and business decisions may
differ from those envisaged by such forward-looking statements as the result of
various important factors, certain of which but not all of which are discussed
at pages 59-61 of our 2001 Annual Report on Form 10-K, as amended and in other
documents incorporated by reference in this prospectus.
The factors described in the documents we have incorporated by reference
and in the "Risk Factors" section of this prospectus are not necessarily all of
the important factors that could cause actual results, performance or
achievements to differ materially from those expressed in, or implied by, our
forward-looking statements. Other unknown or unpredictable factors also could
have material adverse effects on our future results, performance or
achievements. Accordingly, our actual results may differ from those expressed
in, or implied by, our forward-looking statements. We undertake no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or circumstances or otherwise.
Notwithstanding any statement in this prospectus or in any press release
Unocal has filed herewith or incorporated herein by reference, we acknowledge
that the safe harbor for forward-looking statements under Section 27A of the
Securities Act and Section 21E of the Exchange Act and added by the Private
Securities Litigation Reform Act of 1995, does not apply to forward-looking
statements made in connection with a tender offer.
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BACKGROUND AND REASONS FOR THE OFFER AND SUBSEQUENT MERGER
The following discussion presents background information concerning the
offer and merger and describes our reasons for undertaking the proposed
transaction at the present time. Please see "Additional Factors for
Consideration by Pure Stockholders" beginning on page 28 for further information
relating to the proposed transaction.
PERIOD PRIOR TO THE FORMATION OF PURE
Toward the end of the 1990's, we began to recognize that our assets and
operations in west Texas and the Permian Basin were non-core to our overall
business for several reasons, including:
- the relatively small concentration of our assets and the facts that they
were primarily oil producing rather than natural gas assets, and had a
relatively high cost structure;
- our strong focus on the offshore Gulf of Mexico;
- the management attention required to operate these assets, given their
limited size, scope and profitability; and
- the low net operating margin and profitability of the assets, given the
commodity price environment at the time.
By 1999, we considered disposing of these assets in a negotiated cash sale.
Only a few buyers expressed interest. In our view, a cash sale at that time
would have resulted in an unacceptably low sales price that would have
represented less than full value. In addition, management believed that Unocal's
west Texas and Permian Basin assets held upside potential that would not be
captured in proceeds from an outright sale. Given these considerations, we
sought alternatives to an outright cash sale of the assets.
Among the alternatives we considered was combining our assets with those of
a firm that had lower operating costs and which was more focused on the Permian
and San Juan Basins. Unocal would take an equity interest in the combined entity
and ensure that the new entity's management had the skills to successfully
operate the new combination of assets in the Permian and San Juan Basins.
Merging our Permian Basin business unit with a small, publicly traded
independent, Titan Exploration, Inc. or Titan, offered us many of the benefits
we sought through a cash sale. In a combined entity, we believed that Titan's
management would be able to develop and exploit new opportunities and that their
business development acumen and efficient field operations would allow for more
growth than we could expect on our own. By taking a majority interest in the
combined business, we would benefit from any incremental earnings and
appreciation in the value of the assets. In addition, the new business
combination achieved a number of other practical objectives including, among
others:
- enhancing stockholder value for us by partnering with a seasoned
management team and disciplined workforce that was well positioned to
take advantage of consolidation and emerging opportunities in the Permian
and San Juan Basins;
- increasing financing flexibility with respect to the new entity's
operations by allowing the new entity to directly access markets for
capital rather than rely on Unocal's competitive internal capital
allocation process;
- enhancing strategic focus and increasing the speed at which the new
entity could respond to emerging opportunities and to changes in the
marketplace; and
- providing more targeted incentives to the new entity's management and
employees.
THE INITIAL FORMATION OF PURE
On December 13, 1999, Titan and Union Oil entered into an agreement to
merge Titan and the Permian Basin business unit of Union Oil into a new company,
Pure Resources, Inc. Prior to the merger, Titan's business was focused on oil
and gas exploration and production in the Permian Basin of west Texas and
18
southeastern New Mexico, the Brenham Dome area of south central Texas and the
central Gulf Coast region of Texas. Titan's common stock was publicly traded and
quoted on the NASDAQ prior to its agreement to merge and continued to be traded
and quoted on the NASDAQ through the time of the merger.
On May 24, 2000, the Titan stockholders approved the proposed combination
and on May 25, 2000, Union Oil and Titan closed the merger. The merger was
treated as a business combination for accounting purposes, with Titan treated as
the party acquired by Pure. The transaction was intended to qualify as tax free
for U.S. federal income tax purposes. Pure's common stock began trading on the
New York Stock Exchange under the symbol "PRS" on May 26, 2000.
Immediately following completion of the merger, Pure had approximately 50
million shares of common stock outstanding. Union Oil held approximately 65.4%
(32.7 million shares) of the originally issued shares of Pure common stock. The
remaining 34.6% (17.3 million shares) was held by the previous holders of Titan
common stock.
KEY FACTORS MOTIVATING THE OFFER
Since the formation of Pure in 2000, a number of developments and
opportunities have led to our decision to undertake the offer at the present
time. Some of the key factors are as follows:
- changes in the outlook for natural gas prices and general economic
conditions;
- the potential to optimize our combined investment portfolio (including
the identification of potential core business opportunities relating to
the acquired assets);
- the potential to realize synergies, cost savings and risk diversification
opportunities;
- the opportunity to implement operational improvements; and
- the opportunity to minimize potential conflicts of interest.
Changes in Natural Gas Price Outlook and General Economic Conditions
As compared to 1999, we believe it is reasonable to expect sustained higher
natural gas prices in North America over the next several years. As a result,
further exposure to assets that are sensitive to natural gas prices can be a
significant benefit to Unocal.
Stronger natural gas prices in North America make the deep and technically
challenging natural gas opportunities in Pure's portfolio more attractive to us.
These opportunities require not only greater capital than Pure may be able to
access on its own but also sophisticated drilling and completion technology.
Separately, given our larger reserve base and financial strength, we
believe that we will have greater access to the debt and equity financings that
will likely be necessary to fund the current and future opportunities in Pure's
portfolio. With tightened credit markets, it may become difficult for a company
the size of Pure to obtain financing on terms that would enable it to
successfully bid for new natural gas and oil producing assets as they come on
the market. In addition, we believe that in light of the continued volatility in
the oil and gas markets, Pure's current limited access to capital could hamper
its ability to take full advantage of other business opportunities.
Opportunities For Portfolio Optimization
A successful offer and subsequent merger would give us greater control over
Pure's balance sheet and operating cash flow. Unocal could deploy cash flow from
the Pure assets to continue the development of certain Pure initiatives while
re-directing excess cash flow to the best opportunities in its worldwide energy
project portfolio.
A number of Pure assets are likely to become a core part of our global
portfolio. These might include the significant deeper gas assets, mainly in the
Permian Basin, which complement our overall North American natural gas strategy
and our strong existing positions in the Gulf region, Canada and Alaska.
Development of
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these assets could allow us to increase our reserves-to-production ratio with
respect to our North American operations. In addition, there are Pure assets
that we would look to divest. These would likely be assets that could be deemed
core to a company of Pure's size, but would not be core to Unocal. The higher
and more stable natural gas price environment that we are experiencing suggests
that divestitures over the near term will allow us to realize a full and fair
value for those assets. As a global company, Unocal's knowledge of and access to
project opportunities world-wide enables us to re-deploy capital raised through
asset dispositions on attractive terms.
Our ability to control Pure's balance sheet and operating cash flow
following the merger would be compromised if, prior to our acquisition of the
balance of the outstanding Pure common stock, Pure were to sell an interest in
its assets or cash flows through a "securitization" or "royalty trust"
transaction designed to generate immediate cash proceeds to Pure. Such a
transaction has been under consideration by the Pure board of directors and we
and our representatives on the board of Pure have expressed reservations about
such a transaction on a number of grounds, including our belief that it would
provide significant and disproportionate benefits to the holders of put rights
while the benefits to Pure's stockholders, if any, are uncertain. Although there
is no assurance that the Pure board of directors would authorize such a
transaction or that such a transaction, if authorized, could be successfully
completed, Unocal believes that such a transaction, if completed, would have the
effect of making the opportunity to acquire the publicly owned shares of Pure
less attractive.
Potential for Synergies, Cost Savings and Risk Diversification
We believe that there would be opportunities to reduce Pure's pretax costs
by approximately $30 million a year, by eliminating unnecessary functions and
activities. We anticipate that these significant cost savings could be achieved
through the following steps:
- eliminating redundant offices and overhead, administration and other
costs relating to each entity's status as a public company;
- combining Pure's Permian and San Juan assets with our existing portfolio
into a single U.S. onshore business unit;
- consolidating Pure's oil and gas marketing efforts under Unocal Midstream
and Trade operations;
- lowering exploration and geological and geophysical expenses; and
- transitioning Pure's Gulf of Mexico operations to our Gulf Region U.S.
business unit, which is focused on the Gulf of Mexico shelf, eliminating
redundant overhead, data acquisition costs and prospect generation
activities.
Separately, because of Pure's geographic concentration, any regional
economic or natural events that increase costs, reduce availability of equipment
or supplies, reduce demand or limit production, may impact Pure
disproportionately as compared to Unocal as a whole. The combined business would
be significantly more geographically diversified and less adversely affected by
negative events in the region in which Pure now operates.
Operational Improvements
We see opportunities to integrate the operational strengths of both Pure
and Unocal to improve overall performance. Pure has developed a cost discipline
in its field operations and we intend to retain this and other positive
attributes of the Pure operations and business development culture. At the same
time, Unocal has developed innovative, low-cost drilling and completion
technologies in the Gulf of Mexico, Indonesia and Thailand. We plan to apply
these technologies to selected Pure assets, including some of the complex and
difficult deep drilling opportunities in the Permian Basin. Our goal is to
achieve cost reductions and efficiencies in drilling operations comparable to
those we have achieved in other areas of the world.
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Minimizing Potential Conflicts of Interest
We believe that among the benefits of the proposed transaction with Pure is
the elimination of the potential for conflicts of interest between Unocal and
Pure. Consequently, time and resources can be focused on the combined business
and fully exploiting under-utilized assets as opposed to inter-company
competition and general corporate governance concerns.
In connection with Pure's initial formation, Union Oil and Pure entered
into a Business Opportunities Agreement in order to minimize the potential for
conflicts of interest between the companies and to permit us to continue to
conduct our business without interference from or claims by Pure. See "Certain
Effects of the Offer -- Relationships with Pure -- Business Opportunities
Agreement" beginning on page 49.
As part of that agreement, Pure agreed that it has no interest or
expectation to participate in business opportunities developed by Union Oil in
accordance with standards set forth in the Business Opportunities Agreement.
Pure also agreed that, without the consent of Union Oil, it will not enter any
business outside its traditional oil and gas exploration, development and
production activities. Further, Pure agreed that it will not pursue any business
opportunities that are outside of certain defined geographic areas (referred to
as the Designated Areas), that were originally bounded by the outermost
perimeter that surrounded Titan's assets and the assets of Union Oil's Permian
Basin business unit. Unocal expected that, as a result of these arrangements,
Union Oil would pursue opportunities that would largely be distinct from those
undertaken by Pure.
In practice, the expansion of Pure's business has led to some conflicts
between Pure and Unocal. On four occasions Pure has requested that Union Oil
waive or amend the Business Opportunities Agreement. In each case we granted
limited waivers of our rights in order to allow Pure to pursue certain
acquisitions and investments. These acquisitions and investments involved some
assets located outside the Designated Areas.
Currently, Pure is contractually prohibited by the Business Opportunities
Agreement from conducting business outside of the continental United States and
beyond designated areas in the offshore Gulf of Mexico region of the United
States related to programs and partnerships Pure acquired in transactions after
its formation. Further, subject to limited exceptions, Pure is prohibited from
conducting business without our consent in the designated offshore areas if the
opportunity relates to a prospect with gross unrisked reserve target potential
of less than 20 billion cubic feet of natural gas.
On September 2, 2002, in accordance with a limited waiver we granted Pure
on May 9, 2001, we exercised our right to notify Pure that the limited waiver we
granted Pure to invest in and operate certain prospects in the offshore area of
the Gulf of Mexico will terminate on March 31, 2003. The termination of the
limited waiver will not require Pure to divest assets which it now owns in the
offshore area of the Gulf of Mexico.
The restrictions on Pure's ability to expand, develop and explore a number
of offshore assets it acquired since its formation may limit Pure's ability to
realize fully the value of a portion of those acquired assets. However, the
expansion of Pure's business outside the Designated Area agreed to at the time
of Pure's formation has given rise to, and is expected in the future to
increasingly give rise to, actual and potential conflicts of interest between
Unocal and Pure, and involve areas which are of growing importance to Unocal.
The consummation of the proposed transaction would eliminate these actual and
potential conflicts and the potential limitation on development of Pure's
business set forth in the Business Opportunities Agreement as modified to date.
If conflicts of interest between Pure and Unocal were to develop as
described above, there would be increased risk of claims for breach of fiduciary
duty against the officers of Unocal who serve as directors of Pure. An
additional benefit of the merger to Unocal would be the elimination of the
possibility of claims as to future activities being made against these Unocal
officers or that they could be found liable for damages for breach of fiduciary
duty. By virtue of its obligation to indemnify its officers who serve as
directors of Pure at Unocal's request, Unocal would be responsible for defending
and indemnifying such officers against any such claims or liabilities.
21
In addition to the foregoing, we believe that a benefit of the proposed
transaction is the mitigation of potential conflicts of interests between senior
management employees and Pure's stockholders. Under employment and severance
agreements with Pure, various senior management employees of Pure have a right
to require Pure to purchase all or a portion of their shares of Pure common
stock that were either (1) received in the merger of Pure and Titan in exchange
for Titan stock held by them on December 31, 1999 or (2) purchased through stock
option exercises. The price at which Pure will be required to purchase the
applicable shares of Pure common stock pursuant to the put rights will be the
"per share net asset value" as calculated under the employment and severance
agreements rather than the share price of Pure common stock at the time that put
rights are exercised. Conflicts of interests between Pure's stockholders and
Pure's senior management may arise because of the divergent economic incentives
resulting from the put rights. When we announced our original offer on August
20, 2002, according to the most recent information provided by Pure which was
then publicly available, the "per share net asset value" was $20.86 as of June
30, 2002. Based on our 0.6527 exchange ratio and a $34.09 per share price of
Unocal on August 20, 2002, the trading value we were offering exceeded this per
share net asset value. On September 18, 2002, in Pure's Schedule 14D-9 filed in
response to our offer Pure revised its estimate of the per share net asset value
to a range of $24.95 to $26.72 as of September 16, 2002. We have not
independently verified the accuracy of Pure's calculation as disclosed in its
Schedule 14D-9. Under their terms, the put rights would be triggered if we
complete the offer as contemplated in this prospectus. However, on October 9,
2002 we entered into an agreement with all of the members of Pure's senior
management who hold put rights in which they agreed, for no additional
consideration, not to exercise their put rights relating to their shares of Pure
common stock including shares that would be issued upon exercise of their Pure
stock options and to tender all their Pure shares in the offer and we agreed to
increase the exchange ratio to 0.74. See "Interests Of Certain Persons In The
Offer and Subsequent Merger" beginning on page 52 for a more detailed discussion
of the put rights.
FINANCIAL IMPACT OF THE OFFER ON UNOCAL
The consummation of the offer and merger would not have a significant
impact on our financial condition. As part of the offer and merger Unocal would
issue up to approximately 13,205,092 shares of common stock (or, if all Pure
deferred compensation accounts for members of its board of directors are settled
and if all Pure stock options vest and are exercised, up to a maximum of
17,572,473 shares of Unocal common stock would be issued). The acquisition of
Pure is expected to be essentially neutral to Unocal's earnings per share other
than any applicable non-recurring charges that may be required upon completion
of the proposed transaction. We expect a slight improvement in Unocal's
debt-to-total capitalization ratio. Furthermore, we anticipate the acquisition
would increase access to available annual cash flow by approximately $200
million, which could be reinvested in Unocal's worldwide portfolio or used for
debt reduction.
Prior to and following the consummation of the offer and merger, Unocal
intends to focus its efforts on improving its net operating margins. Unocal
believes that our production and reserve growth should not be at the expense of
net operating margins. In contrast to Pure's approach, which has focused on
building production and reserves, Unocal would focus on increasing earnings
attributable to the acquired assets. Accordingly, we intend to pursue the
attractive growth opportunities that Pure has developed or identified, with a
concurrent focus on maintaining or increasing earnings margins.
PRIOR DISCUSSIONS RELATING TO POTENTIAL EXTRAORDINARY TRANSACTIONS
From time to time prior to the announcement of our offer on August 20,
2002, conversations occurred between representatives of Unocal and Jack D.
Hightower, Pure's Chairman, President and Chief Executive Officer, concerning
the possibility of Unocal making an offer to acquire the equity interest in Pure
that it did not already own. All of these conversations were preliminary in
nature, and at no time were any agreements reached. During the period from June
to September 2001, preliminary discussions were held which also included a due
diligence investigation of Pure by Unocal. The discussions and diligence
investigation were halted following the events of September 11, 2001. From time
to time thereafter, Mr. Hightower contacted Unocal management personnel to
discuss the possibility of such an acquisition; however, these discussions did
not progress. Unocal's decision to proceed with the offer and to announce it on
August 20, 2002 was made without the participation of Pure's board of directors
or its management. Prior to the announcement of the
22
offer, Unocal did not make any proposals to Pure or its management regarding
Unocal's acquisition of the minority interest in Pure.
THE UNOCAL BOARD'S DECISION TO COMMENCE THE OFFER
After considering the factors described above, our board of directors
determined at a telephonic meeting held on August 20, 2002, that it was in the
best interests of Unocal and its stockholders to proceed with the offer and
merger. Following this meeting we announced that we would be making the offer at
an exchange ratio of 0.6527 of a share of Unocal common stock for each share of
Pure's common stock owned by stockholders other than Union Oil and its
affiliates.
In making this decision, our board believed that greater value could be
achieved for both Unocal and Pure stockholders by combining Unocal's financial
strength, management experience and business strategy with Pure's attractive
assets and operations. In the board's judgment, with our larger asset base,
earnings potential and cash flow, the combined company would have more efficient
access to capital and improved operations to execute its strategic plans.
Accordingly, we believe that both Unocal stockholders and Pure stockholders who
receive shares of Unocal common stock in this transaction would benefit from our
successful execution of these strategies and that we can realize greater
stockholder value as a combined company. See "Additional Factors for
Consideration by Pure Stockholders" beginning on page 28 for additional matters
for your consideration.
After the August 20 board meeting, Terry G. Dallas, Unocal's Executive Vice
President and Chief Financial Officer, delivered a letter to the Pure board
outlining the offer. Simultaneously, we issued a press release disclosing to the
public the offer and its material terms. The following is the text of Mr.
Dallas's letter to the Pure board:
August 20, 2002
The Board of Directors
Pure Resources, Inc.
500 West Illinois
Midland, Texas 79701
Gentlemen:
It has become clear to us that the best interests of our respective
stockholders will be served by Unocal's acquisition of the shares of Pure
Resources that we do not already own. We believe that a full combination of our
businesses will yield significant efficiencies and, by fully integrating Pure
into the Union Oil family of operations, will provide Pure stockholders with the
ability to share in a greater scope of opportunities than are available to them
as Pure stockholders. In addition, the transaction will provide Pure
stockholders with a currency that has substantially greater liquidity than Pure
has been able to provide.
Unocal recognizes that a strong and stable on-shore, North America
production base will facilitate the execution of its North American gas
strategy. The skills and technology required to maximize the benefits to be
realized from that strategy are now divided between Union Oil and Pure. Sound
business strategy calls for bringing those assets together, under one
management, so that they may be deployed to their highest and best use. For
those reasons, we are not interested in selling our shares in Pure. Moreover, if
the two companies are combined, important cost savings should be realized and
potential conflicts of interest will be avoided.
Consequently, our Board of Directors has authorized us to make an exchange
offer pursuant to which the stockholders of Pure (other than Union Oil) will be
offered 0.6527 shares of common stock of Unocal for each outstanding share of
Pure common stock they own in a transaction designed to be tax-free. Based on
the $34.09 closing price of Unocal's shares on August 20, 2002, our offer
provides a value of approximately $22.25 per share of Pure common stock and a
27% premium to the closing price of Pure common stock on that date.
23
Unocal's offer is being made directly to Pure's stockholders. We believe
that it will be favorably received by them due to the substantial premium to
Pure's market price, the attractiveness of Unocal stock and the opportunity for
greater liquidity. Pure stockholders, through their ownership of Unocal common
stock, will continue to participate in Pure's business and will also participate
in the other attractive opportunities that Unocal has in its inventory.
Our offer will be conditioned on the tender of a sufficient number of
shares of Pure common stock such that, after the offer is completed, we will own
at least 90% of the outstanding shares of Pure common stock and other customary
conditions. Another of our conditions will be that Pure will not enter into any
transactions which are outside the ordinary course of business. Assuming that
the conditions to the offer are satisfied and that the offer is completed, we
will then effect a "short form" merger of Pure with a subsidiary of Unocal as
soon as practicable thereafter. In this merger, the remaining Pure public
stockholders will receive the same consideration as in the exchange offer,
except for those stockholders who choose to exercise their appraisal rights.
We intend to file our offering materials with the Securities and Exchange
Commission and commence our exchange offer on or about September 5, 2002. Unocal
is not seeking, and as the offer is being made directly to Pure's stockholders,
Delaware law does not require approval of the offer from Pure's Board of
Directors. We, however, encourage you to consult with your outside counsel as to
the obligations of Pure's Board of Directors under the U.S. tender offer rules
to advise the stockholders of your recommendation with respect to our offer.
Also, enclosed is a copy of the press release that we are issuing in connection
with the offer.
Sincerely,
/s/ TERRY G. DALLAS
--------------------------------------
Terry G. Dallas
Executive Vice President and Chief
Financial Officer
On August 26, Pure announced that it engaged Credit Suisse First Boston
Corporation and Petrie Parkman & Co., Inc. as financial advisors and Baker Botts
L.L.P. as legal counsel, to assist a special committee of its board of directors
in performing its duties to the holders of Pure's common stock in connection
with our offer.
According to Pure's Schedule 14D-9, as amended, on September 3, 2002, the
special committee's legal advisors submitted to Thompson & Knight, outside
counsel to Pure, proposed resolutions of Pure's board that would expand the
special committee's authority. In particular, the special committee sought
resolutions that would empower the special committee to exercise all lawfully
delegable powers and authority of Pure's board of directors with respect to the
exchange offer and to take any and all actions and to do or cause to be done any
or all things that may appear to the special committee to be necessary or
advisable with respect to the exchange offer and any other offer to acquire
Pure's common stock not currently owned by Unocal.
The proposed resolutions would have provided the special committee with
authority to, among other things:
- negotiate third-party offers for Pure;
- pursue the sale of Pure;
- effect changes in Pure's capitalization, whether through the adoption of
a poison pill or otherwise;
- effect structural changes in Pure or its business; and
- pursue the mineral and royalty interest monetization transaction that was
then being considered by the Pure board of directors.
24
We commenced the original offer on September 5, 2002. Also on September 5,
2002, we filed Amendment No. 1 to the registration statement, of which this
prospectus is a part, with the SEC for purposes of revising selected historical
consolidated financial data.
According to Pure's Schedule 14D-9, as amended, during the morning of
September 10, 2002, Mr. Hightower called a telephonic meeting of Pure's board
for later in the morning to discuss the special committee's September 3rd
request for more expansive resolutions as to its authority. A copy of the
proposed resolutions was disseminated to each Pure board member. Prior to
receiving notice of the meeting, none of Messrs. Chessum, Laughbaum, Ling or
Maxwell had received a copy of the proposed resolutions. Each of Pure's board
members, other than Messrs. Ling and Maxwell, participated in a telephone call
to discuss the proposed resolutions. Due to a lack of proper notice and the
absence of Messrs. Ling and Maxwell, a formal meeting of the Pure board of
directors could not be held; instead, the members of the Pure board of directors
discussed the proposed resolutions with the understanding that no formal action
could be taken. During the telephone call, Mr. Chessum strenuously objected to
the broad scope of the resolutions proposed by the special committee's legal
advisors. Prior to ending the call, the participants agreed that Pure should
call another board meeting for the following day in order to further discuss the
resolutions.
On September 10, 2002, Pure's financial advisors met with Merrill Lynch &
Co., our financial advisor. During the meeting, the special committee's
financial advisors conveyed to Merrill Lynch the special committee's request
that we increase the exchange ratio from 0.6527 to 0.787. In addition, Merrill
Lynch communicated that we were interested in conducting additional due
diligence on Pure in Houston on September 12 and 13, 2002. After the meeting,
Mr. Williamson, a Pure director and member of its special committee, called Mr.
Dallas to discuss the offer and to inform him of the special committee's
proposal that Unocal increase the exchange ratio to 0.787.
Later on September 10, 2002, representatives of Wachtell, Lipton, Rosen &
Katz, Unocal's outside counsel, spoke with representatives of Baker Botts, the
special committee's outside counsel, about changes to the proposed resolutions
that would narrow the special committee's authority from what had been presented
to the Pure board earlier that day. After discussion, the proposed resolutions
were revised to narrow their scope. Subject to the exceptions discussed below,
the revised resolutions empowered the special committee to exercise all lawfully
delegable powers and authority of Pure's board of directors with respect to our
exchange offer and to take any and all actions and to do or cause to be done any
or all things that may appear to the special committee to be necessary or
advisable with respect to our exchange offer and any other offer to acquire
Pure's common stock not currently owned by Unocal.
The revised resolutions denied the special committee the power to:
- pursue the sale of Pure;
- effect changes in its capitalization, whether through the adoption of a
poison pill or otherwise;
- effect structural changes in Pure or its business; or
- pursue the mineral and royalty interest monetization transaction.
On September 11, 2002, Pure's board of directors held a telephonic meeting
to discuss the special committee's revised request for an expansion of its
authority. A member of Unocal's law department attended the meeting at the
invitation of Mr. Chessum. After discussion, Pure's board of directors adopted
the revised resolutions negotiated between Unocal's counsel and the special
committee's counsel.
On September 11, 2002, a representative of Credit Suisse First Boston
called Douglas M. Miller, Unocal's Vice President of Corporate Development, to
discuss the offer.
Representatives from Credit Suisse First Boston, Petrie Parkman, Pure,
Merrill Lynch and Unocal met in Houston on September 12 and 13, 2002 to allow
Unocal and its representatives to conduct additional due diligence. After the
meetings concluded, representatives of Unocal asked the special committee and
its advisors to attend meetings in Los Angeles, California on Monday, September
16, 2002.
25
On September 16, 2002, we and Merrill Lynch met with the special committee
and its financial advisors to discuss the business and prospects of both Pure
and Unocal, matters raised by the special committee's financial advisors in
their meeting with Merrill Lynch on September 10, 2002 and the terms of the
offer. At the meeting, we and Merrill Lynch and the special committee and its
financial advisors exchanged their views on the valuations of Pure and Unocal.
These discussions did not result in any change to the terms of the offer.
On September 18, 2002 Pure filed a Schedule 14D-9 with the SEC, which
stated the special committee's recommendation that Pure stockholders reject the
offer as the special committee viewed the offer as inadequate and not in the
best interests of Pure and its stockholders, other than Union Oil and its
affiliates.
On September 20, 2002, Messrs. Dallas and Hightower had a telephone
conversation during which they discussed the exchange ratio of the offer and Mr.
Hightower expressed his view that the offer was inadequate.
On September 23, 2002, Unocal filed Amendment No. 2 to the Registration
Statement and the Schedule TO with the SEC.
On September 26, 2002, Mr. Hightower and Mr. Charles R. Williamson,
Unocal's Chairman of the Board and Chief Executive Officer, spoke by telephone,
during which they discussed the exchange ratio of the offer and Mr. Hightower
reiterated his view that the offer was inadequate.
On September 30, 2002, Mr. Charles R. Williamson and Mr. Herbert C.
Williamson, III had a telephone conversation, during which they discussed the
exchange ratio of the offer and Mr. Herbert Williamson reiterated his view that
the offer was inadequate.
On October 1, 2002, the Unocal Board of Directors held a regularly
scheduled meeting during which the Board authorized management to increase the
exchange ratio to 0.70 and to communicate to Pure's senior management that
Unocal would be willing to further increase the exchange ratio to 0.74 in the
event satisfactory agreements were to be reached with all of the holders of the
put rights by which the members of Pure's senior management would agree to
surrender, for no additional consideration, their put rights relating to their
shares of Pure common stock and their Pure stock options. The Board further
authorized Unocal management to communicate to the special committee and to
Pure's senior management that 0.70 represented the highest exchange ratio that
Unocal would offer in a transaction not involving a surrender of the put rights
and that 0.74 represented the highest exchange ratio that Unocal would offer in
a transaction involving satisfactory agreements with management regarding the
surrender of the put rights.
On October 1, 2002, after the meeting of the Unocal Board of Directors, Mr.
Hightower and Mr. Charles R. Williamson spoke by telephone on several occasions
during which Mr. Williamson discussed with Mr. Hightower the Unocal board's
decision to increase the exchange ratio to 0.70, Unocal's willingness to further
increase the exchange ratio to 0.74 in the event satisfactory agreements were to
be reached with the holders of the put rights by which all of the members of
Pure's senior management would agree to surrender, for no additional
consideration, their put rights relating to their shares of Pure common stock
and their Pure stock options and a decision by the Unocal Board that these
exchange ratios would not be further increased. Mr. Miller spoke by telephone
with Mr. Herbert Williamson and Mr. Covington and discussed the Unocal board's
decision.
In the morning of October 2, 2002, Unocal announced the increase in its
exchange ratio to 0.70 and the other matters discussed in the preceding
paragraph. Discussions between Mr. Hightower and representatives of Unocal
continued on October 2, 2002.
On October 4, 2002, Unocal received a letter from the special committee
urging Unocal to use its best efforts to reach agreement with Pure's officers
with respect to the surrender of their put rights.
Between October 4, 2002 and October 8, 2002 counsel for Unocal, counsel for
Pure and members of Pure's senior management conducted negotiations with respect
to a draft agreement among Unocal, Union Oil and the individual officers of Pure
providing for the officers' agreement to tender their Pure shares into the offer
and to relinquish their put rights for no additional consideration, and Unocal
and Union Oil's agreement to increase the exchange ratio to 0.74. Unocal
periodically updated the special committee on the status of these negotiations.
In the course of these negotiations, Unocal agreed that it would make the 90%
minimum
26
tender condition a non-waivable condition of the offer. During the course of the
negotiations, Pure's senior management said that their willingness to enter into
the agreement was subject to the special committee reaching the conclusion that
the proposed exchange ratio of 0.74 was fair to and in the best interests of
Pure's stockholders other than Union Oil and its affiliates, and recommended
that Pure stockholders tender their shares into the offer.
During the evening of October 8, a form of agreement among Unocal, Union
Oil and the Pure officers was reached that was acceptable to all of the parties,
and the special committee was so informed. Early in the morning on October 9,
Unocal was informed that the special committee had concluded that the exchange
offer, with an exchange ratio of 0.74, was fair to and in the best interests of
Pure's stockholders, other than Union Oil and its affiliates, and would
recommend that Pure stockholders tender their shares into the offer as so
amended. Shortly thereafter, Unocal, Union Oil and each of the officers of Pure
who hold put rights entered into the Agreement to Tender dated as of October 9,
2002. See "Interests of Certain Persons -- Agreement to Tender."
Prior to the opening of trading on October 9, 2002, Unocal issued a press
release announcing the agreement with Pure management and the increase in the
exchange ratio to 0.74. Concurrently, the special committee issued a press
release announcing its recommendation of the amended offer.
27
ADDITIONAL FACTORS FOR CONSIDERATION BY PURE STOCKHOLDERS
In deciding whether or not to tender your shares of Pure common stock, you
should consider the factors set forth under "Risk Factors" beginning on page 9
and the other factors set forth in this prospectus. While we believe the offer
should be attractive to you as a Pure stockholder, you should also consider the
following matters:
- As a stockholder of Unocal, your interest in the performance and
prospects of Pure would only be indirect and in proportion to your share
ownership in Unocal. You therefore may not realize the same financial
benefits of future appreciation in the value of Pure, if any, that you
may realize if the offer and the merger were not completed and you remain
a Pure stockholder.
- As a stockholder in Unocal, your investment will be exposed to
international, political and non-U.S. sovereign risks and events that are
likely to have little or no effect on Pure.
- An investment in a company of Pure's size may be associated with greater
risk and a greater potential for gain than an investment in a much larger
company like Unocal.
- As this offer has been made directly to Pure stockholders by means of an
offer, Unocal controls the conditions, timing and price of the offer, and
has reserved the right to unilaterally modify any of the terms of the
offer, subject to the terms of the Agreement to Tender described under
"Interest of Certain Persons in the Offer and Subsequent Merger."
- The exchange ratio reflects a value per share of Pure common stock above
the closing price of Pure common stock on May 26, 2000, immediately after
its formation, of $14.75 and below the highest trading price at which
shares of Pure common stock have traded, $25.30, which was reached on
June 5, 2001.
In addition to the foregoing, we are aware that on or about August 21,
2002, individual stockholders of Pure filed complaints in the Delaware Court of
Chancery purporting to commence class action lawsuits against Unocal, Union Oil,
Pure and each of the individual directors of Pure. On or about August 30, 2002,
a separate action was filed in California Superior Court for the County of Los
Angeles, Central District. In general, the complaints allege, among other
things: (1) breaches of fiduciary duty by Unocal, Pure and the members of Pure's
board in connection with the offer and the subsequent merger; (2) that the
consideration Unocal is offering is inadequate; and (3) that Unocal is acting to
further its own interests at the expense of the holders of Pure's common stock.
Among other remedies, the complaints seek to enjoin the offer and subsequent
merger or, alternatively, damages in an unspecified amount and rescission in the
event the merger occurs. In addition, on September 3, 2002 a separate purported
class action was filed in the Delaware Court of Chancery styled as Cardinal
Capital Management, LLC v. Amerman, et al (C.A. No. 19876) against the same
defendants as in the other actions, as well as the directors of Unocal. This
complaint alleges that the Unocal offer is inadequate, coercive and otherwise
contrary to law. On September 5, 2002, plaintiff in the Cardinal Capital case
requested and was granted a hearing on its motion for a preliminary injunction
against the Unocal offer, and expedited discovery in connection therewith. The
Court held a hearing on the Cardinal Capital motion on September 27, 2002. On
October 1, 2002, the Court issued a preliminary injunction-preventing Unocal and
Union Oil from completing the offer. The injunction relates to the structure of
the minimum condition in the offer and to certain disclosure matters, and
required Unocal and Pure to make certain additional disclosures to permit Union
Oil to complete the offer. As a result of disclosures contained in this
prospectus and in the Schedule 14D-9, as amended, filed by Pure, the
requirements contained in the injunction have been fulfilled and accordingly the
injunction does not prevent Union Oil from completing the revised offer. See
"Certain Legal Matters and Regulatory Approvals -- Stockholder Litigation"
beginning on page 47 for a more detailed discussion of these lawsuits.
28
FINANCIAL FORECASTS
PURE FORECASTS
It is our understanding that Pure does not as a matter of course make
public any projections as to future performance, earnings or net asset value,
and the projections set forth below are included in this prospectus only because
this information was obtained by Unocal in connection with its existing
stockholdings in Pure. To Unocal's knowledge, the projections were not prepared
with a view to public disclosure or compliance with the published guidelines of
the SEC or the guidelines established by the American Institute of Certified
Public Accountants regarding projections or forecasts. It is Unocal's belief
that the projections do not purport to present operations or financial condition
in accordance with accounting principles generally accepted in the U.S. Pure's
independent accountants have not examined, compiled or otherwise applied
procedures to the financial forecasts presented herein and, accordingly, do not
express an opinion or any other form of assurance with respect to the financial
forecasts. It is Unocal's belief that Pure's internal financial forecasts (upon
which the projections provided to Unocal were based) are, in general, prepared
solely for internal use and capital budgeting and other management decisions and
are subjective in many respects and thus susceptible to interpretations and
periodic revision based on actual experience and business developments. It is
also Unocal's belief that the projections also reflect numerous assumptions made
by management of Pure with respect to industry performance, general business,
economic, market and financial conditions and other matters, including prices of
oil and gas and success of exploration and production activities, all of which
are difficult to predict, many of which are beyond Pure's control, and none of
which are subject to approval by Unocal. Accordingly, there can be no assurance
that the assumptions made in preparing the projections will prove accurate. It
is expected that there will be differences between actual and projected results,
and actual results may be materially greater or less than those contained in the
projections. The inclusion of the projections herein should not be regarded as
an indication that any of Unocal or Pure or their respective affiliates or
representatives considered or consider the projections to be a reliable
prediction of future events, and the projections should not be relied upon as
such.
The projections, which do not reflect the proposed transaction, were
furnished to Union Oil on May 15, 2002 and anticipate results for the years
ending December 31, 2002 and 2003. The projected total revenues for each of
those years is $458.1 million and $535.4 million, respectively. The projected
total operating income (earnings before net interest expense, other
income/expense and income taxes) for each of those years is $88.4 million and
$136.8 million, respectively. The projected net income for each of those years
is $40.1 million and $64.4 million, respectively. Further, the projected net
income per share on a primary basis for each of those years is $0.80 and $1.28,
respectively. On a fully diluted basis, the projected net income per share is
$0.78 and $1.24, respectively.
Additional revised projections were furnished to Unocal on August 2, 2002
describing Pure's anticipated results for the year ending December 31, 2002. The
projected total revenues for that period are $413.9 million. The projected
operating income (earnings before net interest expense, other income/expense and
income taxes) for that period is $50.4 million. The projected net income for
that period is $12.3 million. Further, the projected net income per share on a
primary basis is $0.25 and a fully diluted basis is $0.24.
On September 27, 2002, Pure filed an amended Schedule 14D-9 disclosing
revised projections for the years ending December 31, 2002 and 2003. According
to Pure, the total revenues for the years ended December 31, 2002 and 2003 are
projected to be $435.8 million and $588.5 million, respectively; the total
operating income (earnings before net interest expense, other income/expense and
income taxes) for the years ended December 31, 2002 and 2003 is projected to be
$67.9 million and $136.5 million, respectively; the total net income for the
years ended December 31, 2002 and 2003 is projected to be $27.7 million and
$67.2 million, respectively; and the net income per share on a primary basis for
the years ended December 31, 2002 and 2003 is projected to be $0.55 and $1.33,
respectively, on a primary basis and $0.54 and $1.29, respectively, on a fully
diluted basis.
Neither Unocal nor any of its affiliates or representatives has made or
makes any representation to any person regarding the ultimate performance of
Pure or Unocal compared to the information contained in the
29
projections, and to Unocal's knowledge, none of them intends to update or
otherwise revise the projections to reflect circumstances existing after the
date when made or to reflect the occurrence of future events even in the event
that any or all of the assumptions underlying the projections are shown to be in
error.
UNOCAL FORECASTS
In early September 2002, we estimated that our third quarter earnings would
likely be in the upper end of the range of $0.45-$0.55 per share. Lower dry hole
expense, driven by the successful appraisal at our K2 well in the Green Canyon
area of the Gulf of Mexico, and higher prices were expected to more than make up
for slightly lower production than previously expected in the quarter. Our third
quarter production, which we previously estimated to be in a range of between
480 and 490 mboe/d (thousands of barrels of oil equivalent per day) is now
expected to range from 470-480 mboe/d. Lower production levels in the third
quarter were the result of a shutdown of the Platong production platform in the
Gulf of Thailand, significant unexpected pipeline curtailments reducing Pure's
onshore gas deliverability, lower Alaska gas deliveries to the Agrium fertilizer
plant, lower entitlements in Indonesia due to higher oil prices and the deferral
of several Gulf Region workover programs.
Given this new range for the third quarter, we now expect that yearly
production will average between 480 and 490 mboe/d versus a previously announced
range of between 490 and 500 mboe/d. Future factors which will affect the actual
yearly production average include overall gas demand in Thailand, continuing
curtailments of Pure's gas production, sales of natural gas to Agrium, Indonesia
Production Sharing Contract net entitlements as they relate to oil prices, and
the mix of exploration versus development capital in the Gulf of Mexico. We
recently announced that we anticipate our third quarter 2002 reported net
earnings will include a provision of approximately $35 million pretax ($22
million after tax), or 9 cents per share (diluted), for additional reserves for
environmental remediation. Substantially all of the anticipated provision, which
results from our regular quarterly review of remediation obligations, relates to
closed Unocal facilities and sites previously sold with retained
responsibilities. Most of the $35 million was included in Unocal's reported June
30, 2002 estimate of possible additional remediation costs. This provision was
not considered in our earlier estimate of third quarter 2002 reported net
earnings in the upper end of the $0.45-$0.55 per share (diluted) range, included
in our Current Report on Form 8-K dated September 4, 2002. In a Current Report
on Form 8-K dated October 24, 2002, Unocal announced third quarter 2002 net
earnings per share (diluted) of $.41, and anticipated net earnings per share
(diluted) for all of 2002 of $1.46 to $1.56. For important information regarding
the foregoing forward looking statements, please see "Forward-Looking
Information" beginning on page 17.
30
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
UNOCAL
Unocal's common stock is listed on the New York Stock Exchange under the
symbol "UCL." In the following table we present the high and low sales prices
per share of Unocal common stock, as reported in the consolidated transaction
reporting system, for the quarterly periods presented below. We also present the
quarterly dividends paid during the applicable periods.
UNOCAL COMMON STOCK
--------------------------
HIGH LOW DIVIDEND
------ ------ --------
2000:
First Quarter............................................ $35.31 $25.00 $0.20
Second Quarter........................................... 39.00 28.06 0.20
Third Quarter............................................ 38.19 28.25 0.20
Fourth Quarter........................................... 40.13 32.50 0.20
2001:
First Quarter............................................ 39.94 32.31 0.20
Second Quarter........................................... 40.00 32.26 0.20
Third Quarter............................................ 37.36 29.72 0.20
Fourth Quarter........................................... 36.15 29.51 0.20
2002:
First Quarter............................................ 39.24 33.09 0.20
Second Quarter........................................... 39.70 35.25 0.20
Third Quarter............................................ 36.92 29.15 0.20
Fourth Quarter (through October 28, 2002)................ 32.09 27.82 --
The closing sale price for the shares of Unocal's common stock on October
8, 2002, the last full trading date prior to Unocal's announcement of the
increased exchange ratio for its offer, was $29.03. You are urged to obtain
current market quotations.
As of August 31, 2002, there were approximately 244,664,331 shares of
Unocal common stock outstanding and approximately 22,224 holders of record of
Unocal's common stock.
Unocal Dividend Policy. The holders of shares of Unocal common stock
receive dividends if and when declared by our board of directors out of legally
available funds. We currently pay dividends at an annual rate of $0.80 per
share. We expect to continue to pay quarterly dividends at this annual rate on a
basis consistent with our past practice following completion of the offer and
the subsequent merger. However, our board's declaration and payment of dividends
will depend upon business conditions, operating results and our board of
directors' consideration of other relevant factors. No assurance can be given
that we will continue to pay dividends on our common stock at the current annual
rate in the future.
On July 26, 2002, Unocal declared a regular quarterly dividend of $0.20 per
share payable on November 8, 2002 to holders of record of Unocal common stock on
October 10, 2002.
31
PURE
Pure's common stock is listed on the New York Stock Exchange under the
symbol "PRS." The following table sets forth the high and low sales prices per
share of Pure's common stock, as reported in the consolidated transaction
reporting system, for the quarterly periods beginning with the first day shares
of Pure common stock were traded on the New York Stock Exchange. Pure has not
paid dividends since its formation.
PURE COMMON
STOCK
---------------
HIGH LOW
------ ------
2000:
Second Quarter (commencing May 26, 2000).................. $20.94 $13.88
Third Quarter............................................. 21.19 14.88
Fourth Quarter............................................ 21.19 16.19
2001:
First Quarter............................................. 22.50 18.13
Second Quarter............................................ 25.30 17.60
Third Quarter............................................. 20.55 15.00
Fourth Quarter............................................ 20.50 15.04
2002:
First Quarter............................................. 23.00 19.37
Second Quarter............................................ 23.95 19.50
Third Quarter............................................. 23.85 16.90
Fourth Quarter (through October 28, 2002)................. 23.08 20.56
The closing sale price for the shares of Pure's common stock on October 8,
2002, the last full trading date prior to the Unocal's announcement of the
increased exchange ratio for its offer, was $21.18. You are urged to obtain
current market quotations.
As of September 4, 2002, there were 50,553,786 shares of Pure common stock
outstanding. Based on information received by us from Pure, there were 340
holders of record of Pure's common stock as of September 4, 2002.
32
THE OFFER
We are proposing to acquire all of the outstanding shares of Pure's common
stock that we do not already own. We currently own 32,709,067 shares of Pure
common stock, representing approximately 65% of the outstanding shares of Pure's
common stock.
EXCHANGE OF SHARES OF PURE COMMON STOCK
We are offering to exchange 0.74 of a share of Unocal common stock for each
outstanding share of Pure's common stock, upon the terms and conditions set
forth in this prospectus and the related letter of transmittal. The exchange
ratio of 0.74 represents our highest and best offer and we will not further
increase the consideration paid to Pure stockholders. We will not acquire any
shares of Pure in the offer unless Pure stockholders (other than Unocal and its
subsidiaries) have validly tendered and not properly withdrawn prior to the
expiration of the offer a number of shares of Pure common stock such that,
giving effect to the offer, we own at least 90% of the total number of
outstanding shares of Pure. We will not waive this minimum condition. As of
September 4, 2002, there were 50,553,786 shares of Pure common stock
outstanding. Accordingly, for us to acquire any shares of Pure common stock,
stockholders of Pure must, based on this information as to Pure's outstanding
shares, have tendered into the offer, and not withdrawn, as of the expiration of
the offer, at least 12,789,341 shares of Pure common stock. These share numbers
would change as a result of changes in Pure's share capitalization, such as
through the exercise of outstanding stock options. There are also other
conditions to the offer that are described under "The Offer -- Conditions of the
Offer" beginning on page 43.
If we successfully complete the offer in accordance with its terms, we
would then own at least 90% of the outstanding shares of Pure's common stock and
be permitted under Delaware law to effect a "short form" merger of one of our
wholly owned subsidiaries with Pure without the approval of Pure's board or
remaining stockholders. We will effect a "short form" merger of one of our
wholly owned subsidiaries with Pure as soon as practicable after we complete the
offer unless we are prevented from doing so by a court or other legal
requirement. Each outstanding share of Pure common stock we do not own or
acquire in the offer would be converted in the merger into the right to receive
0.74 of a share of Unocal common stock and cash instead of fractional shares,
the same consideration per share of Pure common stock you would have received if
you had tendered your shares into the offer, unless you properly perfect your
appraisal rights under Delaware law. See "The Offer -- Purpose of the Offer; The
Merger" beginning on page 39 and "The Offer -- Appraisal Rights" beginning on
page 41. After completion of the merger, Pure will be a wholly owned subsidiary
of Unocal.
When we refer to the expiration of the offer we mean midnight, New York
City time, on Tuesday, October 29, 2002, unless we extend the period of time for
which the offer is open, in which case the offer will expire, and references to
the expiration of the offer will mean, the latest time and date on which the
offer is open.
You will not receive any fractional shares of Unocal common stock in the
offer or the merger. Instead of any fractional share, tendering stockholders
will receive cash equal to the product of that fractional share, after combining
all fractional shares to which you would otherwise be entitled, and the closing
price of Unocal common stock as reported on the New York Stock Exchange on the
last trading day before the time that the offer expires.
If you are the record owner of your shares and you tender your shares
directly to the exchange agent and depositary, you will not be obligated to pay
any charges or expenses of the exchange agent and depositary or any brokerage
commissions. If you own your shares through a broker or other nominee, and your
broker or nominee tenders the shares on your behalf, your broker or nominee may
charge you a fee for doing so. You should consult your broker or nominee to
determine whether any charges will apply.
Except as otherwise provided in Instruction 6 of the letter of transmittal,
Union Oil will pay all stock transfer taxes with respect to the transfer of any
shares of Pure common stock pursuant to the offer. If, however, the
consideration for any shares of Pure common stock acquired in the offer is to be
paid to a person other than the registered holder or holders, the amount of any
stock transfer taxes (whether imposed on the
33
registered holder or holders, such other person or otherwise) payable on account
of the transfer to such other person must be paid by the person tendering the
shares of Pure common stock unless evidence satisfactory to Union Oil of the
payment of such taxes, or exemption therefrom, is submitted.
TIMING OF THE OFFER
We commenced the offer on September 5, 2002, the date of distribution of
the prospectus distributed with the original offer. As a result of our
increasing the exchange ratio to 0.74, this revised offer is scheduled to expire
at midnight, New York City time, on Tuesday, October 29, 2002, unless we extend
the period of the offer. All references to the expiration of the offer mean the
time of expiration, as extended. For more information, see the discussion under
"-- Extension, Termination and Amendment" immediately below.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right, in our sole discretion, to extend, on one
or more occasions the period of time during which the offer remains open, and we
can do so by giving oral or written notice of extension to the exchange agent
and depositary. If we decide to extend our offer, we will make an announcement
to that effect no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration. We are not making any assurances
that we will exercise our right to extend our offer. During any extension, all
shares of Pure common stock previously tendered and not properly withdrawn will
remain deposited with the exchange agent and depositary, subject to your right
to withdraw your shares of Pure common stock as described below under
"-- Withdrawal Rights" beginning on page 36.
Subject to the SEC's applicable rules and regulations, we reserve the
right, in our sole discretion, to delay, on one or more occasions, our
acceptance for exchange of shares of Pure common stock pursuant to our offer. We
also reserve the right to terminate our offer and not accept for exchange any
shares of Pure common stock, upon the failure of any of the conditions of the
offer to be satisfied or, where permissible, waived, or otherwise to amend the
offer in any respect (except as described below), by giving oral or written
notice of delay, termination or amendment to the exchange agent and depositary
and by making a public announcement.
We will follow any extension, delay, termination or amendment, as promptly
as practicable, with a public announcement. Subject to applicable law, including
Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any
material change in the information published, sent or given to the stockholders
in connection with the offer be promptly sent to stockholders in a manner
reasonably designed to inform stockholders of the change, and without limiting
the manner in which we may choose to make any public announcement, we assume no
obligation to publish, advertise or otherwise communicate any public
announcement other than by making a release to the Dow Jones News Service.
We expressly reserve the right to modify, on one or more occasions, the
terms and conditions of the offer, except that we will not modify or waive the
registration statement effectiveness condition and the listing condition, and
any waiver of the minimum tender condition will not reduce the quantity of the
shares necessary to satisfy such condition to less than a majority of the shares
of Pure common stock held by stockholders other than Unocal, Union Oil or the
directors and executive officers of Unocal, Union Oil or Pure.
If we make a material change in the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer to the extent required under the Exchange Act.
DELIVERY OF UNOCAL COMMON STOCK
Upon the terms and subject to the conditions of the offer, including, if
the offer is extended or amended, the terms and conditions of the extension or
amendment, we will accept for exchange shares of Pure common stock validly
tendered and not properly withdrawn promptly after the expiration of the offer
and will exchange Unocal common stock and cash instead of fractional shares for
the tendered shares of Pure's common stock as soon as practicable afterwards. In
all cases, exchange of shares of Pure common stock tendered and accepted for
exchange pursuant to the offer will be made only if the exchange agent and
depositary timely receives (1) certificates for those shares of Pure common
stock, or a timely confirmation of a book-entry transfer of
34
those shares of Pure common stock in the exchange agent's and depositary account
at The Depository Trust Company, or DTC, and a properly completed and duly
executed letter of transmittal or a duly executed copy thereof, and any other
required documents; or (2) a timely confirmation of a book-entry transfer of
those shares of Pure common stock in the exchange agent and depositary's account
at DTC, together with an "agent's message" as described below under
"-- Procedure for Tendering Shares" beginning on page 35.
For purposes of the offer, we will be deemed to have accepted for exchange
shares of Pure common stock validly tendered and not properly withdrawn when, as
and if we notify the exchange agent and depositary of our acceptance of the
tender of those shares of Pure common stock pursuant to the offer. The exchange
agent and depositary will deliver shares of Unocal common stock in exchange for
shares of Pure common stock pursuant to the offer and cash instead of a fraction
of a share of Unocal common stock as soon as practicable after receipt of our
notice. The exchange agent and depositary will act as agent for tendering Pure
stockholders for the purpose of receiving Unocal common stock and cash to be
paid instead of a fraction of a share of Unocal common stock and transmitting
the stock and cash to you. You will not receive any interest on any cash that we
pay you, even if there is a delay in making the exchange.
If we do not accept shares of Pure common stock for exchange pursuant to
the offer or if certificates are submitted for more shares of Pure common stock
than are tendered into the offer, we will return certificates for these
unexchanged shares of Pure common stock without expense to the tendering
stockholder. If we do not accept shares of Pure common stock for exchange
pursuant to the offer, shares of Pure common stock tendered by book-entry
transfer into the exchange agent and depositary's account at DTC pursuant to the
procedures set forth below under "-- Procedure for Tendering Shares," will be
credited to the account maintained with DTC from which those shares were
originally transferred, as soon as practicable following expiration or
termination of the offer.
CASH INSTEAD OF FRACTIONAL SHARES OF UNOCAL COMMON STOCK
We will not issue any fraction of a share of Unocal common stock pursuant
to the offer or the merger. Instead, each tendering stockholder who would
otherwise be entitled to a fraction of a share of Unocal common stock, after
combining all fractional shares to which the stockholder would otherwise be
entitled, will receive cash in an amount equal to the product obtained by
multiplying (1) the fraction of a share of Unocal common stock to which the
holder would otherwise be entitled by (2) the closing price of Unocal common
stock as reported on the New York Stock Exchange on the last trading day before
the time that the offer expires.
PROCEDURE FOR TENDERING SHARES
For you to validly tender shares of Pure common stock into our offer, you
must do one of the following:
- Deliver certificates for your shares, a properly completed and duly
executed letter of transmittal or a duly executed copy thereof, along
with any other required documents, to the exchange agent and depositary
at one of its addresses set forth on the back cover of this prospectus
prior to the expiration of the offer;
- Arrange for a book-entry transfer of your shares to be made to the
exchange agent and depositary's account at DTC and receipt by the
exchange agent and depositary of a confirmation of this transfer prior to
the expiration of the offer, and the delivery of a properly completed and
duly executed letter of transmittal or a duly executed copy thereof, and
any other required documents to the exchange agent at one of its
addresses set forth on the back cover of this prospectus prior to the
expiration of the offer; or
- Arrange for a book-entry transfer of your shares to the exchange agent
and depositary's account at DTC and receipt by the exchange agent and
depositary of confirmation of this transfer, including an "agent's
message," prior to the expiration of the offer.
These deliveries and arrangements must be made before the expiration of the
offer. Pure shares validly tendered in connection with our offer commenced on
September 5, 2002 at an exchange ratio of 0.6527 or as amended on October 3,
2002 to increase the exchange ratio to 0.70 and not properly withdrawn are
considered
35
tendered into this revised offer at an exchange ratio of 0.74. TENDERS BY NOTICE
OF GUARANTEED DELIVERY WILL NOT BE ACCEPTED.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and depositary and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the participant in DTC tendering the shares of Pure common
stock which are the subject of the book-entry confirmation, that the participant
has received and agrees to be bound by the terms of the letter of transmittal
and that we may enforce that agreement against the participant.
The exchange agent and depositary have established an account with respect
to the shares of Pure common stock at DTC for purposes of the offer and any
financial institution that is a participant in DTC may make book-entry delivery
of the shares of Pure common stock by causing DTC to transfer these shares of
Pure common stock into the exchange agent and depositary's account in accordance
with DTC's procedure for the transfer. For a tender made by transfer of shares
of Pure common stock through book-entry delivery at DTC to be valid, the
exchange agent and depositary must receive a book-entry confirmation of transfer
and either a duly executed letter of transmittal or a duly executed copy
thereof, along with any other required documents at one of its addresses set
forth on the back cover of this prospectus by the expiration date of the offer,
or an agent's message as part of the book-entry confirmation.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which shares of Pure common stock are tendered
either by a registered holder of shares of Pure common stock who has not
completed the box entitled "Special Delivery Instructions" on the letter of
transmittal or for the account of an eligible institution. By "eligible
institution," we mean a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of a recognized Medallion
Program approved by the Securities Transfer Association Inc., including the
Securities Transfer Agent's Medallion Program (STAMP), the Stock Exchange
Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature
Program (MSP) or any other "eligible guarantor institution," as that term is
defined in Rule 17Ad-15 under the Exchange Act.
If the certificates for shares of Pure common stock are registered in the
name of a person other than the person who signs the letter of transmittal, the
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates, with the signature(s) on the certificates or
stock powers guaranteed in the manner described above.
The method of delivery of certificates representing shares of Pure common
stock and all other required documents, including delivery through DTC, is at
your option and risk, and the delivery will be deemed made only when actually
received by the exchange agent and depositary. If delivery is by mail, we
recommend registered mail with return receipt requested, properly insured. In
all cases, you should allow sufficient time to ensure timely delivery.
WITHDRAWAL RIGHTS
You may withdraw shares of Pure common stock that you tender pursuant to
the offer at any time before the expiration of the offer. After the expiration
of the offer, tenders are irrevocable. However, if we have not accepted tendered
shares for exchange by November 4, 2002, you may withdraw tendered shares at any
time thereafter prior to their acceptance for exchange.
For your withdrawal to be effective, the exchange agent and depositary must
receive from you a written or facsimile transmission notice of withdrawal at one
of its addresses set forth on the back cover of this prospectus, and your notice
must include your name, address, social security number, the certificate
number(s) and the number of shares of Pure common stock to be withdrawn as well
as the name of the registered holder, if it is different from that of the person
who tendered those shares of Pure common stock. If shares of Pure common stock
have been tendered pursuant to the procedures for book-entry tender discussed
above under "-- Procedure for Tendering Shares," any notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawn shares of Pure common stock and must
36
otherwise comply with DTC's procedures. If certificates have been delivered or
otherwise identified to the exchange agent and depositary, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the shares of Pure common stock withdrawn must also be furnished to
the exchange agent and depositary, as stated above, prior to the physical
release of the certificates. We will decide all questions as to the form and
validity (including time of receipt) of any notice of withdrawal, in our sole
discretion, and our decision will be final and binding.
An eligible institution must guarantee all signatures on the notice of
withdrawal unless the shares of Pure common stock have been tendered for the
account of an eligible institution.
None of Unocal, Union Oil, the exchange agent and depositary, the Dealer
Manager, the information agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or will incur any liability for failure to give any notification. Any shares of
Pure common stock that you properly withdraw will be deemed not to have been
validly tendered for purposes of the offer. However, you may retender withdrawn
shares of Pure common stock by following one of the procedures discussed under
"-- Procedure for Tendering Shares" beginning on page 35 at any time before the
expiration of the offer.
EFFECT OF A TENDER OF SHARES
By executing a letter of transmittal, you will agree and acknowledge that
our acceptance for exchange of shares of Pure common stock you tender in the
offer will, without any further action, revoke any prior powers of attorney and
proxies that you may have granted in respect of those shares and you will not
grant any subsequent proxies and, if any are granted, they will not be deemed
effective. We reserve the right to require that, in order for shares of Pure
common stock to be validly tendered, we must be able to exercise full voting,
consent and other rights with respect to those shares of Pure common stock
immediately upon our acceptance of those shares of Pure common stock for
exchange.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of shares
of Pure common stock, in our sole discretion, and our determination will be
final and binding. We reserve the absolute right to reject any and all tenders
of shares of Pure common stock that we determine are not in proper form or the
acceptance of or exchange for which may, in the opinion of our counsel, be
unlawful. No tender of shares of Pure common stock will be deemed to have been
validly made until all defects and irregularities in tenders of those shares
have been cured or waived. None of Unocal, Union Oil, the exchange agent and
depositary, the Dealer Manager, the information agent, nor any other person will
be under any duty to give notification of any defects or irregularities in the
tender of any shares of Pure common stock or will incur any liability for
failure to give any such notification. Our interpretation of the terms and
conditions of our offer, including the letter of transmittal and instructions,
will be final and binding.
The tender of shares of Pure common stock pursuant to any of the procedures
described above will constitute a binding agreement between you and us upon the
terms and subject to the conditions of the offer.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following description summarizes the material United States federal
income tax consequences for Pure stockholders of the offer and the subsequent
merger. It is based upon the Internal Revenue Code of 1986, as amended (which we
refer to as the Code), regulations under the Code, and court and administrative
rulings and decisions in effect on the date of this prospectus, all of which are
subject to change, possibly retroactively. Any change could affect the
continuing validity of the tax consequences described in this prospectus. We
have not requested and will not request an advance ruling from the Internal
Revenue Service as to the tax consequences of the offer and the subsequent
merger. This description is not binding on the Internal Revenue Service, and
there can be no assurance that the Internal Revenue Service will not disagree
with or challenge any of the conclusions described below.
37
The description applies only to Pure stockholders who are U.S. persons. For
purposes of this description, the term "U.S. person" means:
- an individual who is a U.S. citizen or a U.S. resident alien;
- a corporation created or organized under the laws of the United States or
any State;
- a trust where (a) a U.S. court is able to exercise primary supervision
over the administration of the trust and (b) one or more U.S. persons
have the authority to control all substantial decisions of the trust; or
- an estate that is subject to U.S. tax on its worldwide income from all
sources.
Our description is not a comprehensive description of all the tax
consequences that may be relevant to you. It applies only to Pure stockholders
who hold their shares of Pure common stock as a capital asset. No attempt has
been made to address all United States federal income tax consequences that may
be relevant to a particular Pure stockholder in light of the stockholder's
individual circumstances or to Pure stockholders who are subject to special
treatment under the United States federal income tax laws, such as:
- banks, insurance companies and financial institutions;
- tax-exempt organizations;
- mutual funds;
- persons that have a functional currency other than the U.S. dollar;
- investors in pass-through entities;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- dealers in securities or foreign currencies;
- Pure stockholders who received their shares of Pure common stock through
the exercise of options, or otherwise as compensation or through a
tax-qualified retirement plan or who are entitled to require Pure to
purchase their shares of Pure common stock pursuant to an agreement with
Pure;
- holders of options granted by Pure;
- Pure stockholders who are not U.S. persons; and
- Pure stockholders who hold shares of Pure common stock as part of a
hedge, straddle, constructive sale or conversion transaction.
This description does not address any tax consequences arising under the
laws of any state, locality or foreign jurisdiction, and it does not address any
federal tax consequences other than federal income tax consequences. It does not
address the tax consequences of any transaction other than the offer and the
merger. Accordingly, each Pure stockholder is strongly urged to consult with a
tax advisor to determine the particular federal, state, local or foreign income
or other tax consequences of the offer and merger to the stockholder.
We intend the exchange of shares of Pure common stock for Unocal common
stock in the offer and merger to constitute a "reorganization" within the
meaning of Section 368(a) of the Code. Reorganization treatment depends on
numerous factors, however, including factors beyond our control. For example,
the offer and merger could fail to be treated as a reorganization if certain put
rights held by executives of Pure requiring Pure to purchase the executives'
shares in Pure for cash are exercised and any funds are provided directly or
indirectly by Unocal or Union Oil for that purpose. Although we have an
agreement with the holders of the put rights that provides generally that they
will not exercise these rights, there are circumstances, including circumstances
involving unexpected delays in completing the short form merger after the offer
is completed, under which the put rights could be exercised. Although Unocal
intends to use, in its judgment, reasonable efforts in seeking to cause the
offer and merger to constitute a reorganization, no assurance can be given that
the offer and merger will constitute a reorganization, and there is no condition
to the offer relating to the tax-
38
free treatment of the offer and the merger. Assuming that the offer and merger
qualify as a reorganization, then, in general:
- Pure stockholders will not recognize any gain or loss on the exchange of
shares of Pure common stock for Unocal common stock in the offer and the
subsequent merger, except with respect to cash, if any, they receive
instead of fractional shares of Unocal common stock;
- the aggregate tax basis to a Pure stockholder of the Unocal common stock
received in exchange for shares of Pure common stock pursuant to the
offer or the subsequent merger will equal the Pure stockholder's
aggregate tax basis in the shares of Pure common stock surrendered,
decreased by the amount of any tax basis allocable to any fractional
share interest in Unocal common stock for which cash is received;
- the holding period of a Pure stockholder for the Unocal common stock
received pursuant to the offer or the subsequent merger will include the
holding period of the shares of Pure common stock surrendered in
exchange; and
- a Pure stockholder who receives cash instead of a fractional share of
Unocal common stock pursuant to the offer or the subsequent merger will
recognize gain or loss on the exchange in an amount equal to the
difference between the amount of cash received and the basis of the
shares of Pure common stock allocable to the fractional share. The gain
or loss generally will constitute capital gain or loss. The deductibility
of capital losses is subject to limitations for both individuals and
corporations.
A Pure stockholder who receives cash for all its shares of Pure common
stock pursuant to the exercise of appraisal rights generally will recognize gain
or loss equal to the difference between the tax basis of the shares of Pure
common stock surrendered and the amount of cash received, except that any cash
received that is or is deemed to be interest for federal income tax purposes
will be taxed as ordinary income. A stockholder receiving cash pursuant to the
exercise of appraisal rights may be required to recognize gain or loss in the
year the merger closes, irrespective of whether the stockholder actually
receives payment for its shares of Pure common stock in that year.
If the exchange of shares of Pure common stock for Unocal common stock in
the offer and merger does not qualify as a "reorganization" within the meaning
of Section 368(a) of the Code, then a Pure stockholder who receives shares of
Unocal common stock in exchange for the Pure stockholder's shares will generally
be taxable on any gain realized on the exchange. Such gain would generally equal
the excess, if any, of the fair market value of the Unocal common stock received
for a share of Pure common stock over the Pure stockholder's tax basis in the
share of Pure common stock surrendered. Pure stockholders who have a tax basis
in a share of Pure common stock that exceeds the fair market value of the Unocal
common stock received in exchange for such share of Pure common stock should
consult with their tax advisors regarding the deductibility of any loss realized
on the exchange.
Tax matters are very complicated, and the tax consequences of the offer and
the subsequent merger to each Pure stockholder will depend on the facts of that
stockholder's particular situation. You are urged to consult your own tax
advisors regarding the specific tax consequences of the offer and the subsequent
merger, including tax return reporting requirements, the applicability of
federal, state, local and foreign tax laws and the effect of any proposed
changes in the tax laws.
PURPOSE OF THE OFFER; THE MERGER
We are proposing to acquire all of the outstanding shares of Pure's common
stock that we do not own. We currently own 32,709,067 shares of Pure's common
stock which represent approximately 65% of the outstanding shares. We are
offering to exchange 0.74 of a share of Unocal common stock for each outstanding
share of Pure's common stock which is validly tendered and not properly
withdrawn prior to the expiration of the offer, upon the terms and conditions
set forth in this prospectus and the related letter of transmittal. We will not
acquire any shares of Pure in the offer unless Pure stockholders (other than
Unocal and its subsidiaries) have tendered into this offer, and not withdrawn,
as of the expiration of the offer, a number of shares of Pure's common stock
such that, giving effect to the offer, we own at least 90% of the total number
of
39
outstanding shares of Pure. We will not waive this minimum tender condition. As
of September 4, 2002, there were 50,553,786 shares of common stock outstanding.
Accordingly, for us to acquire any shares of Pure common stock, Pure
stockholders, other than Unocal or its subsidiaries must, in order for us to
satisfy the 90% minimum tender condition, have tendered into the offer, and not
withdrawn, as of the expiration of the offer, at least 12,789,341 shares of
common stock. There are also other conditions to the offer that are described
under "-- Conditions of the Offer" beginning on page 43.
Upon successful completion of the offer, we would own more than 90% of the
outstanding shares of Pure's common stock, and we would be permitted under
Delaware law to effect a "short form" merger of one of our wholly owned
subsidiaries with Pure without the approval of Pure's board or remaining
stockholders. In that case, we will effect a "short form" merger of one of our
wholly owned subsidiaries with Pure as soon as practicable after we complete the
offer unless we are prevented from doing so by a court or other legal
requirement. Each outstanding share which we do not own or acquire in the offer
would be converted in the merger into the right to receive 0.74 of a share of
Unocal common stock and cash instead of fractional shares. Accordingly, if you
do not tender your shares and we effect the "short form" merger, you will
receive the same consideration per share of Pure common stock you would have
received if you had tendered your shares into the offer, unless you properly
perfect your appraisal rights under Delaware law. See "-- Purpose of the Offer;
The Merger" beginning on page 39 and "-- Appraisal Rights" beginning on page 41.
After completion of the merger, Pure will be a wholly owned subsidiary of
Unocal.
If we successfully complete the offer but are not able to complete promptly
the "short form" merger, Pure's common stock not tendered into the offer would
remain outstanding until we are able to effect such a merger, if ever. In these
circumstances, the liquidity of and market for those remaining publicly held
shares of Pure common stock, and the rights of the holders of those shares,
could be adversely affected. Pure's common stock is currently listed on the New
York Stock Exchange. Depending upon the number of shares of Pure common stock
purchased in the offer, Pure's common stock may no longer meet the requirements
for continued listing and may be delisted from the New York Stock Exchange. It
is possible that Pure's common stock would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for Pure's common stock and the
availability of these quotations would depend, however, upon the number of
holders of Pure's common stock remaining at that time, the interests in
maintaining a market in Pure's common stock on the part of securities firms, the
possible termination of registration of Pure's common stock under the Exchange
Act, as described below, and other factors.
Pure's common stock is currently registered under the Exchange Act. This
registration may be terminated upon application of Pure to the SEC if the shares
are no longer listed on a securities exchange and there are fewer than 300
holders of record of the Pure common stock. Based on information received by us
from Pure, there were 340 holders of record of Pure's common stock as of
September 4, 2002. The termination of the registration of Pure's common stock
under the Exchange Act would substantially reduce the information required to be
furnished by Pure to its stockholders and to the SEC. It would also make certain
of the provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement in
connection with stockholders' meetings, the related requirement of an annual
report to stockholders, and the requirements of SEC Rule 13e-3 with respect to
going private transactions, no longer applicable.
Shares of Pure common stock are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System. This has
the effect of allowing brokers to extend credit on shares of Pure's common stock
as collateral. Depending on factors similar to those described above regarding
listing and market quotations, it is possible that Pure's common stock would no
longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations. If registration of Pure's common stock under the
Exchange Act is terminated, shares of Pure's common stock would no longer be
"margin securities."
40
APPRAISAL RIGHTS
Under Delaware law, Pure stockholders do not have appraisal rights in
connection with the offer. If the offer is successfully completed, holders of
Pure common stock who (a) do not tender their shares into the offer and hold
common stock at the effective time of the subsequent short form merger and (b)
who do not wish to accept the consideration provided for in that merger and (c)
comply with the procedures provided for in Section 262 of the Delaware General
Corporation Law, or the DGCL, will be entitled to have their shares of Pure
common stock appraised by the Delaware Court of Chancery and to receive a
payment in cash of the "fair value" of those shares as determined by the court.
The following summarizes provisions of Section 262 of the DGCL regarding
appraisal rights that would be applicable in connection with the subsequent
merger, which will be effected as a merger of a wholly owned subsidiary of
Unocal with Pure. This discussion is qualified in its entirety by reference to
Section 262 of the DGCL. A copy of Section 262 is attached to this document as
Annex C. If you fail to take any action required by Delaware law, your rights to
an appraisal in connection with the merger will be waived or terminated.
NOTIFICATION OF MERGER'S EFFECTIVE TIME
Within 10 days after the effective time, Pure will send notice of the
effective time of the merger and the availability of appraisal rights to each
holder of its common stock.
ELECTING APPRAISAL RIGHTS
To exercise appraisal rights, the record holder of Pure's common stock
must, within 20 days after the date Pure mails the notice referred to in the
prior paragraph, deliver a written demand for appraisal to Pure. This demand
must reasonably inform Pure of the identity of the holder of record and that the
stockholder demands appraisal of his, her or its shares of Pure common stock.
A demand for appraisal must be delivered to: Corporate Secretary, Pure
Resources, Inc., 500 West Illinois, Midland, TX 79701.
ONLY RECORD HOLDERS MAY DEMAND APPRAISAL RIGHTS
Only a record holder of Pure's common stock is entitled to demand appraisal
rights. The demand must be executed by or for the record holder, fully and
correctly, as the holder's name appears on the holder's stock certificates.
- If shares of Pure's common stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, the demand should
be executed in that capacity.
- If shares of Pure's common stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all owners.
- An authorized agent, including one of two or more joint owners, may
execute the demand for appraisal for a holder of record. The agent must
identify the owner or owners of record and expressly disclose the fact
that, in executing the demand, the agent is acting as agent for the owner
or owners of record.
- A holder of record, such as a broker, who holds Pure's common stock as
nominee for a beneficial owner, may exercise a holder's right of
appraisal with respect to Pure's common stock held for all or less than
all of those beneficial owners' interest. In that case, the written
demand should set forth the number of shares of Pure's common stock
covered by the demand. If no number of shares is expressly mentioned, the
demand will be presumed to cover all of Pure's common stock standing in
the name of the record holder. Pure stockholders who hold their shares in
brokerage accounts or through any other nominee and wish to exercise
appraisal rights should consult their brokers or other nominees to
determine the procedures they must follow in order for their brokers and
other nominees to exercise appraisal rights in respect of their shares of
Pure common stock.
41
COURT PETITION MUST BE FILED
Within 120 days after the effective time of the merger, Pure or any
stockholder who has satisfied the foregoing conditions may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
Pure's common stock. Neither Unocal nor Pure will have any obligation to file
such a petition. Stockholders seeking to exercise appraisal rights should
initiate all necessary action to perfect their rights within the time periods
prescribed by Delaware law.
Within 120 days after the effective time of the merger, any stockholder who
has complied with the requirements under Section 262 of the DGCL for exercise of
appraisal of rights may make a written request to receive from Pure a statement
of the total number of shares of Pure's common stock with respect to which
demands for appraisal have been received and the total number of holders of
these shares. Pure will be required to mail these statements within ten days
after it receives a written request.
APPRAISAL PROCEEDING BY DELAWARE COURT
If a petition for an appraisal is timely filed, after a hearing on the
petition, the Delaware Court of Chancery will determine which of the
stockholders are entitled to appraisal rights. The court will appraise the
shares of common stock owned by the stockholders and determine their fair value.
In determining fair value, the court may consider a number of factors including
market values of Pure's stock, asset values and other generally accepted
valuation considerations, but will exclude any element of value arising from the
accomplishment or expectation of the merger. The court will also determine the
amount of interest, if any, to be paid upon the value of the common stock to the
stockholders entitled to appraisal.
The value determined by the court for Pure's common stock could be more
than, less than, or the same as the merger consideration, but the form of the
consideration payable as a result of the appraisal proceeding would be cash. The
court may determine the costs of the appraisal proceeding and allocate them to
the parties as the court determines to be equitable under the circumstances. The
court may also order that all or a portion of any stockholder's expenses
incurred in connection with an appraisal proceeding, including reasonable
attorneys' fees and expenses and reasonable fees and expenses of experts
utilized in the appraisal proceeding, be charged, on a pro rata basis, against
the value of all of Pure's common stock entitled to appraisal.
EFFECT OF APPRAISAL DEMAND ON VOTING AND RIGHT TO DIVIDENDS; TAX CONSEQUENCES
Any stockholder who has duly demanded an appraisal in compliance with
Delaware law will not, after the effective time of the merger, be entitled to
vote the shares subject to the demand for any purpose. The shares subject to the
demand will not be entitled to dividends or other distributions, other than
those payable or deemed to be payable to stockholders of record as of a date
prior to the effective time. We describe above under "Material U.S. Federal
Income Tax Consequences," beginning on page 37, the tax consequences to a Pure
stockholder who receives cash for his or her shares of Pure common stock
pursuant to the exercise of appraisal rights.
LOSS, WAIVER OR WITHDRAWAL OF APPRAISAL RIGHTS
Holders of Pure's common stock will lose the right to appraisal if no
petition for appraisal is filed within 120 days after the effective time of the
merger. A stockholder will also lose the right to an appraisal by delivering to
Pure a written withdrawal of the stockholder's demand for an appraisal. Any
attempt to withdraw that is made more than 60 days after the effective time of
the merger requires Pure's written approval. If appraisal rights are not
perfected or a demand for appraisal rights is timely withdrawn, a stockholder
will be entitled to receive the consideration otherwise payable pursuant to the
merger, without interest. The number of shares of Unocal common stock, and cash
instead of a fraction of a share of Unocal common stock, delivered to such
stockholder will be based on the same exchange ratio utilized in the merger,
regardless of the market price of shares of Unocal's common stock at the time of
delivery.
42
DISMISSAL OF APPRAISAL PROCEEDING
If an appraisal proceeding is timely instituted, this proceeding may not be
dismissed as to any stockholder who has perfected a right of appraisal without
the approval of the court.
CONDITIONS OF THE OFFER
The offer is subject to a number of conditions, which we describe below.
Notwithstanding any other provision of the offer, we will not be required to
accept for exchange or exchange any shares, may postpone the acceptance for
exchange or exchange of tendered shares, and may, in our sole discretion,
terminate or amend the offer as to any shares not then exchanged if any of these
conditions are not satisfied or, where permissible, waived before or as of the
expiration of the offer. If any of these conditions is not satisfied or, where
permissible, waived before or as of the scheduled expiration of the offer, we
may choose to extend the expiration of the offer or terminate the offer.
MINIMUM CONDITION
There must be validly tendered and not properly withdrawn prior to the
expiration of the offer a number of shares of Pure's common stock such that,
giving effect to the offer, we own at least 90% of the total number of
outstanding shares of Pure common stock. We will not waive this minimum tender
condition. As of September 4, 2002, there were 50,553,786 shares outstanding.
Accordingly, for us to acquire any shares of Pure common stock, stockholders of
Pure must have tendered into the offer, and not have withdrawn, as of the
expiration of the offer, at least 12,789,341 shares.
REGISTRATION STATEMENT EFFECTIVENESS CONDITION
The registration statement on Form S-4 of which this prospectus is a part
must have become effective under the Securities Act and not be the subject of
any stop order or proceedings seeking a stop order.
LISTING CONDITION
The Unocal common stock issuable in the offer and the subsequent merger
must have been approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
ADDITIONAL CONDITIONS
In addition, we will not be required to accept shares of Pure for exchange
or exchange any shares, may postpone the acceptance for exchange or exchange of
any shares and may choose to extend the expiration of the offer or to terminate
the offer if any of the following occurs and is continuing and in our good faith
judgment, regardless of the circumstances, it would be inadvisable for us to
proceed with the offer or to accept Pure shares for exchange, or to exchange
shares:
- there shall be threatened, instituted or pending any action, proceeding
or application by or before any court, government or governmental
authority or other regulatory or administrative agency or commission,
domestic or foreign (other than the Pure stockholder litigation described
under "Certain Legal Matters and Regulatory Approvals -- Stockholder
Litigation" beginning on page 47),
- which challenges the acquisition by us of the shares of Pure common
stock, seeks to restrain, delay or prohibit the consummation of the
offer or the transactions contemplated by the offer or any subsequent
merger or seeks to obtain any material damages or otherwise directly or
indirectly relates to the transactions contemplated by the offer or
subsequent merger,
- which seeks to prohibit or impose material limitations on our or
Unocal's acquisition, ownership or operation of all or any portion of
Unocal's or Pure's business or assets (including the business or assets
of their respective affiliates and subsidiaries) or of the shares of
Pure common stock (including, without limitation, the right to vote the
shares purchased by us, on an equal basis with all other shares, on all
matters presented to the stockholders of Pure), or seeks to compel us or
Unocal
43
to dispose of or hold separate all or any portion of our or Pure's business or
assets (including the business or assets of their respective affiliates and
subsidiaries) as a result of the transactions contemplated by the offer or any
subsequent merger,
- which may reasonably be expected to adversely affect Pure, Unocal or us,
or any of our respective affiliates or subsidiaries (which we refer to
as an Adverse Effect), or result in a diminution in the value of the
shares of Pure or Unocal or the benefits expected to be derived by
Unocal or us as a result of the transactions contemplated by the offer
or any subsequent merger (which we refer to as a Diminution in Value);
or
- which seeks to impose any condition to the offer unacceptable to Unocal
or us; or
- there shall have occurred after October 17, 2002 any development in the
Pure stockholder litigation, described under "Certain Legal Matters and
Regulatory Approvals -- Stockholder Litigation" beginning on page 47,
that is adverse to the defendants in that litigation;
- any statute, including without limitation, any state anti-takeover
statute, rule, regulation or order or injunction shall be sought,
proposed, enacted, promulgated, entered, enforced or deemed or become
applicable or asserted to be applicable to the offer or any subsequent
merger or the transactions contemplated by the offer or subsequent merger
that may, directly or indirectly, reasonably be expected to result in any
of the consequences referred to in the 1st through 4th sub-bullets of the
initial bullet paragraph under "Additional Conditions", including any
determination or assertion by any governmental authority that a filing
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (or the HSR Act), is required; or
- any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened that has had or
may reasonably be expected to have a materially adverse effect on the
business, properties, assets, liabilities, capitalization, stockholders'
equity, financial condition, operations, results of operations or
prospects of Pure or any of its subsidiaries, or Unocal or we shall have
become aware of any fact that has had or may reasonably be expected to
have an Adverse Effect or results or may reasonably be expected to result
in a Diminution in Value; or
- there shall have occurred:
- any general suspension of, or limitation on times or prices for, trading
in securities (including, but not limited to, Pure's common stock or
Unocal's common stock) on any national securities exchange or in the
over-the-counter market,
- a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States,
- the outbreak or escalation of a war, terrorist activities, armed
hostilities or other international or national calamity directly or
indirectly involving the United States,
- any limitation (whether or not mandatory) by any governmental authority
on, or any other event which might affect the extension of, credit by
banks or other lending institutions,
- a suspension of or limitation (whether or not mandatory) on the currency
exchange markets or the imposition of, or material changes in, any
currency or exchange control laws in the United States, or
- in the case of any of the foregoing existing at the time of the
commencement of the offer, a material acceleration or worsening thereof;
or
- Pure or any subsidiary of Pure shall have:
- issued, distributed, pledged, sold or authorized, or proposed the
issuance of or sale, distribution or pledge to any person of (A) any
shares of its capital stock (other than sales or issuances pursuant to
employee stock options outstanding on June 30, 2002 in accordance with
the then-existing terms thereof) of any class (including, without
limitation, the shares of Pure common stock) or securities convertible
into or exchangeable for any such shares of capital stock, or any
rights, warrants or
44
options to acquire any such shares or convertible securities or any
other securities of Pure, (B) any other securities in respect of,
instead of or in substitution for shares outstanding on August 2, 2002,
or (C) any debt securities or any securities convertible into or
exchangeable for debt securities or any rights, warrants or options
entitling the holder thereof to purchase or otherwise acquire any debt
securities,
- purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire any outstanding shares of its capital stock or other
securities, except in accordance with the terms of contractual
arrangements in effect on September 4, 2002 and disclosed in Pure's
filings with the SEC prior to that date,
- proposed, recommended, authorized, declared, issued or paid any dividend
or distribution on any shares of its capital stock or any other
security, whether payable in cash, securities or other property,
- altered or proposed to alter any material term of any outstanding
security,
- incurred, agreed to incur or announced its intention to incur any
additional debt, except any borrowings under existing credit agreements,
as in effect on June 30, 2002, in the ordinary course of business
consistent with past practice;
- authorized, recommended, proposed or publicly announced its intent to
enter into any merger, consolidation, liquidation, dissolution, business
combination, recapitalization, acquisition or disposition of securities;
or any acquisition or sale, conveyance, transfer or other disposition of
assets (other than in the ordinary course of business); any material
change in its capitalization or business operations, any release or
relinquishment of any material contractual or other rights or any
comparable event, or taken any action to implement any such transaction
previously authorized, recommended, proposed or publicly announced; or
- entered into any other agreement or otherwise effected any other
arrangement with any other party or with its officers or other employees
of Pure that might, individually or in the aggregate, have an Adverse
Effect or result in a Diminution in Value; or
- Pure or any of its subsidiaries shall have amended or proposed or
authorized any amendment to its certificate of incorporation or by-laws
or similar organizational documents or we shall have learned that Pure or
any of its subsidiaries shall have proposed, adopted or recommended any
such amendment which has not previously been publicly disclosed by Pure
and also set forth in filings with the SEC; or
- a tender or exchange offer for some or all of the shares of Pure common
stock shall have been commenced or publicly proposed to be made by
another person (including Pure or its subsidiaries) other than the
mini-tender offer commenced by TRC Capital and announced by Pure on
September 4, 2002, or it shall have been publicly disclosed or we shall
have learned that:
- any person (including Pure or its subsidiaries), entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire more than five percent of the shares of Pure common
stock, or shall have been granted any option or right, conditional or
otherwise, to acquire more than five percent of the Pure shares, other
than acquisitions for bona fide arbitrage purposes and other than
acquisitions by persons or groups who have publicly disclosed in a
Schedule 13D or 13G (or amendments thereto on file with the SEC) such
ownership on or prior to September 4, 2002;
- any such person, entity or group who has publicly disclosed any such
ownership of more than five percent of the shares of Pure common stock
prior to such date shall have acquired or proposed to acquire additional
Pure shares constituting more than one percent of the total shares
outstanding, or shall have been granted any option or right to acquire
more than one percent of the Pure shares;
- any new group was, or is, formed which beneficially owns more than five
percent of the outstanding shares of Pure common stock;
45
- any person, entity or group shall have entered into a definitive
agreement or an agreement in principle or made a proposal with respect
to a tender offer or exchange offer for some portion or all of the
shares of Pure common stock or a merger, consolidation or other business
combination or recapitalization or sale, conveyance, transfer or other
disposition of assets (other than in the ordinary course of business)
with or involving Pure or any of its affiliates or subsidiaries; or
- any person shall have filed a Notification and Report Form under the HSR
Act or made a public announcement reflecting an intent to acquire Pure
or assets or securities of Pure; or
- Pure and we shall have reached an agreement or understanding that the
offer be terminated or amended or we (or one of our affiliates) shall
have entered into a definitive agreement or an agreement in principle to
acquire Pure by merger or similar business combination, or purchase of
shares or assets of Pure; or
- any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened in the general
economic, financial, currency exchange or market conditions in the United
States or abroad that has had or may reasonably be expected to have an
Adverse Effect or results or may reasonably be expected to result in a
Diminution in Value; or
- Pure or any of its subsidiaries shall have transferred into trust, escrow
or similar arrangement any amounts required to fund any existing benefit,
employment or severance agreements with any of its officers or other
employees or shall have entered into or otherwise effected with its
officers or any other employees any additional benefit, employment,
severance or similar agreements, arrangements or plans or entered into or
amended any agreements, arrangements or plans so as to provide for
increased benefits to such officer or officers or employee or employees
as a result of or in connection with the transactions contemplated by the
offer or any subsequent merger.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances (including any action or inaction on our part)
giving rise to any such conditions or may be waived by us in whole or in part at
any time and from time to time in our sole discretion prior to the expiration of
the offer. The determination as to whether any condition has occurred will be in
our judgment and will be final and binding on all parties. Any failure by us at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
46
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
U.S. APPROVALS
Except as we have described in this prospectus, we are not aware of any
license or regulatory permit required in the U.S. and material to the business
of Pure and its subsidiaries, on a consolidated basis, that may be materially
adversely affected by our acquisition of Pure's common stock, or any filing or
approval required in the U.S. that would be required for our acquisition of
Pure's common stock. We intend to make all required filings under the Securities
Act and the Exchange Act.
NON-U.S. APPROVALS
We are unaware of any requirement for the filing of information with, or
the obtaining of the approval of, governmental authorities in any non-U.S.
jurisdiction that is applicable to the offer or the merger.
STATE TAKEOVER LAWS
A number of states have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which have substantial assets, stockholders, principal executive
offices or principal places of business in those states. We have not attempted
to comply with any state takeover statutes in connection with the offer, since
we do not believe that any of these apply. However, we reserve the right to
challenge the validity or applicability of any state law allegedly applicable to
the offer, and nothing in this prospectus nor any action taken in connection
herewith is intended as a waiver of that right. If one or more takeover statutes
apply to the offer and are not found to be invalid, we may be required to file
documents with, or receive approvals from, relevant state authorities and we may
also be unable to accept for exchange shares tendered into the offer or may
delay the offer. See "The Offer -- Conditions of the Offer" beginning on page
42.
STOCKHOLDER LITIGATION
On or about August 21, 2002, individual stockholders of Pure filed
complaints in the Delaware Court of Chancery purporting to commence class action
lawsuits against Unocal, Union Oil, Pure and each of the individual directors of
Pure. The complaints were styled as Crescente v. Pure Resources, Inc., et al
(C.A. No. 19854), Brown v. Pure Resources, Inc., et al (C.A. No. 19855), Summit
Trading Group, LLC v. Hightower, et al (C.A. No. 19856), Metera v. Pure
Resources, Inc, et al (C.A. No. 19857) and Bistritzky v. Hightower, et al (C.A.
No. 19859). On or about August 30, 2002, a separate action was filed in
California Superior Court for the County of Los Angeles, Central District styled
as Holland v. Pure Resources, Inc., et al (BC 280478). In general, the
complaints allege, among other things: (1) breaches of fiduciary duty by Unocal,
Pure and the members of Pure's board in connection with the offer and the
subsequent merger; (2) that the consideration Unocal is offering is inadequate;
and (3) that Unocal is acting to further its own interests at the expense of the
holders of Pure's common stock. Among other remedies, the complaints seek to
enjoin the offer and subsequent merger or, alternatively, damages in an
unspecified amount and rescission in the event the merger occurs. On September
3, 2002 a separate purported class action was filed in the Delaware Court of
Chancery styled as Cardinal Capital Management, LLC v. Amerman, et al (C.A. No.
19876) against the same defendants as in the other actions, as well as the
directors of Unocal. This complaint alleges that the Unocal offer is inadequate,
coercive and otherwise contrary to law. On September 5, 2002, plaintiff in the
Cardinal Capital case requested and was granted a hearing on its motion for a
preliminary injunction against the Unocal offer, and expedited discovery in
connection therewith. The Court held a hearing on the Cardinal Capital motion on
September 27, 2002. On October 1, 2002 the Court issued a preliminary injunction
preventing Unocal and Union Oil from completing the offer. The injunction
relates to the structure of the minimum condition in the offer and to certain
disclosure matters. As a result of disclosures contained in this prospectus and
in the Schedule 14D-9, as amended, filed by Pure, the requirements contained in
the injunction have been fulfilled and accordingly the injunction does not
prevent Union Oil from completing the revised offer. On October 10, 2002, the
Delaware Supreme Court refused the plaintiff's petition for an appeal of the
October 1, 2002 decision of the Court of Chancery.
47
CERTAIN EFFECTS OF THE OFFER
EFFECTS ON THE MARKET
If we successfully complete the offer, we intend to cause the delisting of
Pure's common stock from the New York Stock Exchange following completion of the
subsequent merger.
EXCHANGE ACT REGISTRATION
The shares of Pure's common stock are currently registered under the
Exchange Act. If we successfully complete the offer, following completion of the
subsequent merger, we will request that the New York Stock Exchange file a Form
25 with the SEC terminating registration of the shares of Pure common stock
under the Exchange Act.
FINANCING OF THE OFFER
The shares of Unocal common stock to be issued in the offer and the
subsequent merger will come from Unocal's authorized but unissued shares.
Unocal's fees and expenses in connection with the offer will be paid from
Unocal's available capital resources.
CONDUCT OF PURE IF THE OFFER IS NOT COMPLETED
If the offer is not completed because the minimum condition or another
condition is not satisfied or, if permissible, waived, we expect that Pure will
continue to be a majority-owned subsidiary of Unocal and operate its business as
presently operated, subject to market and industry conditions and the terms of
the agreements and other documents described below under "-- Relationships With
Pure." We have no intention to dispose of or entertain offers to acquire our
shares of Pure common stock.
RELATIONSHIPS WITH PURE
In considering whether to tender your shares in the offer, you should be
aware of various existing agreements and ongoing and prior arrangements and
transactions between Unocal and/or Union Oil and Pure, as described below. This
description is qualified in its entirety by reference to the specific provisions
of the documents described below that have been filed with the SEC, which we
incorporate by reference into this prospectus. Copies of those documents have
been filed with the SEC. You should also review "Interests of Certain Persons in
the Offer and Subsequent Merger" beginning on page 52 for a description of
arrangements between Unocal and Pure and between Pure and directors and
executive officers of Pure.
Non-Dilution Agreement
As described above, on December 13, 1999, Titan and Union Oil entered into
an agreement to merge Titan and the Permian Basin business unit of Union Oil,
and on May 25, 2000 that merger was completed, thereby creating Pure as the
combined business. Simultaneously with the execution of the merger agreement,
Pure and Union Oil entered into a non-dilution agreement (which we sometimes
refer to as the Non-Dilution Agreement). Under the terms of the Non-Dilution
Agreement, Union Oil has rights to maintain its percentage ownership of Pure in
the event of future issuances of equity by Pure, in a variety of circumstances.
If Pure issues capital stock, other than common stock issued under
board-approved incentive plans, for cash or credit, Union Oil will have the
right to purchase or subscribe for the number or amount of such capital stock
equal to its ownership percentage of Pure, at the same price at which the
capital stock is being issued. Pure must provide Union Oil with notice of an
issuance subject to this preemptive right at least 10 days prior to the issuance
and, if Union Oil elects to exercise the right, it must do so in such a way as
not to delay pricing and closing of the issuance. Under the terms of the
Non-Dilution Agreement, the preemptive right given by Pure with respect to any
issuance will terminate if unexercised within 10 days after receipt of the
notice of the issuance of the capital stock.
If Pure issues any capital stock in exchange for property other than cash
or credit, Union Oil will have the right to purchase from Pure the additional
number of shares of capital stock necessary to enable Union Oil to maintain its
ownership percentage in Pure. Pure is obligated to give Union Oil written notice
of the issuance no later than 20 days prior to such issuance, and Union Oil has
30 days from the date of the issuance to elect
48
to exercise its rights by giving written notice to Pure. The cash price per
share to be paid by Union Oil for the additional shares of capital stock will be
the market trading price per share of Pure common stock at the time of the
issuance or, in the case of other capital stock, as determined in good faith by
the Pure board of directors.
Shares of Pure common stock issued to Union Oil under the Non-Dilution
Agreement are entitled to the benefits of a registration rights agreement (which
we sometimes refer to as the Registration Rights Agreement) entered into by the
parties and which is described below. Pure also has agreed that if shares are
issued on account of the Non-Dilution Agreement, Pure will cause those shares to
be listed for trading or quotation on any securities exchanges or quotation
systems on which the securities of that class are then listed for trading or
quotation.
Registration Rights Agreement
The Registration Rights Agreement provides that at any time and from time
to time after September 22, 2000, but no more than one time in a 12-month
period, Union Oil has the right to require Pure to effect a Securities Act
registration of all or a portion of the Pure common stock owned by Union Oil. If
Union Oil demands registration of less than all of the Pure Resources shares it
owns, the portion to be registered must be at least either (a) 4,300,000 shares,
as adjusted for any stock dividends, splits or other similar event, or (b)
shares having an estimated aggregate offering price to the public of at least
$50 million, whichever is lower. The Registration Rights Agreement also provides
Union Oil with piggyback registration rights, which give Union Oil the right to
include shares of Pure common stock it holds in registrations initiated by Pure
or by any other holder of Pure common stock.
Among other things, the Registration Rights Agreement provides for
customary indemnities by Pure in favor of persons including shares in a
registration covered by the Registration Rights Agreement, and by such persons
in favor of Pure, with respect to information to be included in the relevant
registration statement. Pure will bear the reasonable costs of registering and
offering for sale any Pure common stock offered in a registration covered by the
Registration Rights Agreement, including costs and expenses of Union Oil's
counsel not to exceed $50,000 per registration. Under the terms of the
agreement, Union Oil is obligated to pay all applicable underwriting discounts
and commissions.
Business Opportunities Agreement
Simultaneously with the execution of the 1999 merger agreement, Union Oil,
Pure Resources and Titan entered into the Business Opportunities Agreement
pursuant to which Pure agreed that, except with the consent of Union Oil (which
it may withhold in its sole discretion), Pure and its subsidiaries will not
engage in any business other than the E&P Business, which generally refers to
the oil and gas exploration, exploitation, development and production business
(but which does not include the oilfield service business). In that connection,
Pure agreed that it would not pursue any business opportunity that involves any
direct or indirect ownership interest in any properties located outside of the
so-called Designated Area that includes all of Kansas, New Mexico and Oklahoma,
portions of southern and southeastern Colorado and western Arkansas and onshore
Texas, except for areas of east Texas. In the Business Opportunities Agreement,
Pure agreed that it has no interest or expectancy in any business opportunity
that does not consist exclusively of the E&P Business within the designated
areas that were originally bounded by the outer most perimeter that surrounded
Titan's assets and the assets of Union Oil's Permian Basin business unit. The
provisions described in this paragraph will terminate when Union Oil no longer
owns at least 35% of the ordinary voting power for the election of Pure
directors.
Pure also agreed in the Business Opportunities Agreement that, as long as
their actions do not conflict with specified standards of conduct (which we
summarize below), Union Oil, its affiliates, its board designees under a
stockholders voting agreement (described below) and companies in which Union Oil
has an interest, which participate with Union Oil or of which a board designee
is a director, officer or employee are not restricted by the relationship
between Union Oil and Pure or otherwise from engaging in any business even
though it is in competition with the business or activities of Pure or its
subsidiaries. The Business Opportunities Agreement does not restrict Union Oil's
business activities, including within the designated areas.
49
The parties also have agreed in the Business Opportunities Agreement that,
as long as the activities of Union Oil, its affiliates or board designees or
other related companies are conducted in accordance with the specified
standards:
- Union Oil, its affiliates or board designees or other related companies
will not have to offer Pure Resources or any of its subsidiaries any
business opportunity;
- Pure Resources will have no interest or expectancy in any business
opportunity pursued by Union Oil, its affiliates and board designees and
related companies; and
- Pure Resources has waived any claim that any business opportunity pursued
by Union Oil, its affiliates or board designees or any related company
constitutes a corporate opportunity of Pure Resources or any of its
subsidiaries that should have been presented to Pure.
The standards specified in the Business Opportunities Agreement generally
provide that Union Oil, its affiliates and board designees and related companies
must conduct their businesses through the use of their own personnel and assets
and not with the use of any personnel or assets of Pure. The Business
Opportunities Agreement will not allow a board designee of Union Oil to usurp a
corporate opportunity solely for his or her personal benefit, as opposed to
pursuing, for the benefit of Union Oil, an affiliate of Union Oil or any related
company, an opportunity in accordance with the specified standards.
As a result of the terms of the Business Opportunities Agreement, on four
occasions Pure requested that Union Oil waive or amend the agreement and, in
each case, we granted limited waivers of our rights in order to allow Pure to
pursue acquisitions and investments. While these acquisitions and investments
primarily involve assets within the Designated Areas, they also included assets
located outside of the Designated Areas.
Pure is contractually prohibited by the Business Opportunities Agreement
from conducting business outside of the continental United States and designated
areas in the offshore Gulf of Mexico region of the United States (those
designated areas relate to programs and partnerships Pure acquired in
transactions after its formation). Further, subject to limited exceptions, Pure
is prohibited from conducting business without our consent in the designated
offshore areas if the opportunity relates to a prospect with gross unrisked
reserve target potential of less than 20 billion cubic feet of natural gas.
On September 2, 2002, in accordance with a limited waiver we granted to
Pure on May 9, 2001, we exercised our right to notify Pure that the limited
waiver that we previously granted, which permitted Pure to invest in and operate
prospects in the offshore area of the Gulf of Mexico, will terminate on March
31, 2003. The termination of the limited waiver will not require Pure to divest
assets which it now owns in the offshore area of the Gulf of Mexico.
Unocal's Right to Nominate Pure Directors
In connection with the transactions contemplated by the 1999 merger
agreement, Pure, Union Oil and Jack D. Hightower (Pure's President, Chief
Executive Officer and Chairman of its board of directors) entered into a
stockholders voting agreement, which was subsequently amended and restated as of
April 10, 2000 (which we sometimes refer to as the Voting Agreement) and which
became effective upon the closing of the merger.
Under the Voting Agreement, Union Oil and Mr. Hightower have agreed to vote
their shares of Pure capital stock to cause two persons designated by Mr.
Hightower, and up to six persons designated by Union Oil, to be elected to
Pure's board of directors. Specifically, Mr. Hightower has agreed to vote his
shares to elect to the Pure board (a) five designees of Union Oil, if Union Oil
owns greater than 50% of Pure common stock; (b) four designees of Union Oil, if
Union Oil owns greater than 35% but not more than 50% of Pure common stock; or
(c) two designees of Union Oil, if Union Oil owns greater than 10% but not more
than 35%. In addition, Union Oil and Mr. Hightower agreed that, if necessary to
satisfy an independent director requirement of the New York Stock Exchange or
other exchange on which the Pure common stock is traded, Union Oil and Mr.
Hightower will cooperate to select an additional director who satisfies such
requirements, failing which Union Oil will have the right to designate such
director subject to Mr. Hightower's approval, which may not be unreasonably
withheld.
50
Furthermore, Union Oil has the right to approve the nomination of the
directors designated by Mr. Hightower, other than Mr. Hightower himself, which
approval may not be unreasonably withheld. The Voting Agreement further provides
that no more than two of the persons designated by Union Oil may be affiliates
of Union Oil. In the event that Union Oil is entitled to designate three or more
persons under the agreement, one of the Union Oil affiliates designated must be
approved by Mr. Hightower, and any non-Union Oil affiliate designated must be
approved by Mr. Hightower. In each case, Mr. Hightower's approval may not be
unreasonably withheld.
The Voting Agreement terminates if Union Oil and its affiliates
beneficially own less than 10% of the outstanding Pure common stock or if Mr.
Hightower ceases to be the Chief Executive Officer of Pure.
Mr. Hightower's current designees to the Pure board are Mr. Hightower and
George G. Staley. Darrell D. Chessum, Graydon H. Laughbaum, Jr., Timothy H.
Ling, H D Maxwell and Herbert C. Williamson, III are the current designees of
Union Oil. The current nominee mutually agreed upon by Mr. Hightower and Union
Oil is Keith A. Covington.
ACCOUNTING TREATMENT
Our acquisition of Pure's common stock will be accounted for under the
purchase method of accounting in accordance with accounting principles generally
accepted in the U.S. Accordingly, the cost to acquire Pure's common stock in
excess of approximately 35% of the carrying value of Pure's assets and
liabilities will be allocated on a pro rata basis to Pure's assets and
liabilities based on their fair values, with any excess being allocated to
goodwill. A final determination of the asset lives and required purchase
accounting adjustments, including the allocation of the purchase price to the
assets and liabilities of Pure based on their respective fair values, has not
yet been made.
FEES AND EXPENSES
Merrill Lynch & Co. is acting as our financial advisor and Dealer Manager
in connection with the proposed acquisition of Pure's common stock. We will pay
Merrill Lynch a customary fee for these services. We also have agreed to
reimburse Merrill Lynch for its expenses, including reasonable counsel fees and
expenses, and to indemnify it against certain liabilities and expenses,
including certain liabilities under the U.S. federal securities laws.
We have retained D.F. King & Co., Inc. as information agent in connection
with the offer. The information agent may contact holders of Pure common stock
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward material relating to
the offer to beneficial owners of Pure common stock. We will pay the information
agent customary fees for these services in addition to reimbursing the
information agent for its reasonable out-of-pocket expenses. We have agreed to
indemnify the information agent against certain liabilities and expenses in
connection with the offer, including certain liabilities under the U.S. federal
securities laws.
In addition, we have retained Mellon Investor Services LLC as the
depositary and exchange agent with respect to the offer. We will pay the
depositary and exchange agent reasonable and customary fees for its services in
connection with the offer, will reimburse the depositary and exchange agent for
its reasonable out-of-pocket expenses and will indemnify the depositary and
exchange agent against certain liabilities and expenses in connection with the
performance of its services.
We will reimburse brokers, dealers, commercial banks and trust companies
and other nominees, upon request, for customary clerical and mailing expenses
incurred by them in forwarding offering materials to their customers.
51
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND SUBSEQUENT MERGER
Some members of the management of Pure and some members of the Pure board
of directors, including those who are also officers of Pure, have interests in
the proposed transaction that may be different from, or in addition to, the
interests of the other stockholders of Pure generally. The information set forth
herein is based on the publicly-filed documents of Pure that were available
immediately preceding the date of this prospectus.
Employment Agreement. Pure has entered into an employment agreement with
Jack D. Hightower with a term of three years, with a provision for automatic
extensions of the term so that the term at all times is no less than two years.
Mr. Hightower's agreement provides that upon Mr. Hightower's resignation
for "good reason" or upon termination of Mr. Hightower's employment by Pure for
reasons other than death, disability or "cause," Mr. Hightower will be entitled
to the following severance benefits:
- within 30 days of termination of employment, and subject to the execution
by Mr. Hightower of a release of certain claims against Pure, a cash
payment of three times the sum of Mr. Hightower's base salary and the
average annual bonus paid to Mr. Hightower during the immediately
preceding three years (but in no event less than $240,000);
- continued participation in Pure's benefit and incentive plans (including
retirement, insurance, vacation, sick leave, disability and other benefit
programs) for the remainder of his employment term;
- full vesting of all his equity awards; and
- Pure or any successor to Pure will take all such action as may be
necessary or appropriate to amend any outstanding option to purchase
Pure's common stock held by Mr. Hightower to provide that the options
will not terminate as a result of or in connection with Mr. Hightower's
termination of employment with Pure or any successor to Pure, but will
remain exercisable for the entire term of the option.
"Good reason" under Mr. Hightower's agreement includes, among other things,
the acquisition by Union Oil of 85% or more of either the outstanding common
stock or voting securities of Pure. Accordingly, consummation of the offer would
constitute "good reason" for Mr. Hightower. Based on information disclosed in
Pure's Schedule 14D-9, filed on September 18, 2002, if the offer is completed as
contemplated in this prospectus and Mr. Hightower chooses to exercise his right
to resign for good reason as a result, the approximate amount of the cash
severance payment payable to Mr. Hightower would be $3,645,000.
Mr. Hightower's employment agreement also includes rights that enable him
to require Pure to acquire his shares at a contractually-determined formula, as
discussed below.
Officer Severance and Put Right Agreements. Each of nine current executive
officers of Pure other than Mr. Hightower is a party to a Severance and Put
Right Agreement dated August 1, 2000, August 31, 2000 or September 14, 2000
(depending on the agreement), with Pure. In addition, on May 16, 2002, Pure
entered into a Severance Agreement with an additional officer that does not
contain a put right. In the following discussion, the employees referred to in
the previous sentences are referred to collectively as the "covered employees"
and Messrs. Hightower, Staley, White, Dupriest and Colwell are referred to
collectively as the "Pure named executive officers."
Under the agreements, upon a covered employee's resignation for "good
reason" or upon termination of a covered employee's employment by Pure for
reasons other than "cause," the covered employee will be entitled to the
following benefits:
- within 30 days of termination of employment, and subject to the execution
by the covered employee of a release of claims against Pure, a cash
payment of one or two times (depending on the covered employee) the sum
of the covered employee's base salary and the higher of (A) the covered
employee's annual bonus for the year immediately preceding the date of
termination or (B) the average annual bonus paid to the covered employee
over the three calendar years immediately preceding the date of
termination;
52
- continuation of life insurance and disability benefits at the same cost
as for active officers of Pure for the lesser of 18 months or until the
covered employee obtains other employment;
- reimbursement for premiums under COBRA;
- full vesting of all of the covered employee's equity awards; and
- Pure or any successor to Pure will take all such action as may be
necessary or appropriate to amend any option to purchase Pure's common
stock held by the covered employee to provide that the options will not
terminate as a result of or in connection with the covered employee's
termination of employment with Pure or any successor to Pure, but will
remain exercisable for the entire term of the option.
All but one of the agreements also contain a right that enables the covered
employee to require Pure to repurchase his Pure shares, as described more fully
below in the section "Management Rights to Require Pure to Purchase Stock."
"Good reason" includes, among other things, the acquisition by Union Oil of
85% or more of either the outstanding common stock or voting securities of Pure.
Accordingly, consummation of the offer would constitute "good reason" for each
of the covered employees. Based on information disclosed in Pure's Schedule
14D-9 filed on September 18, 2002, if the offer is completed as contemplated in
this prospectus and if each of the Pure named executive officers other than Mr.
Hightower chooses to exercise his right to terminate for good reason as a
result, the approximate amount of the cash severance payment payable to each of
the Pure named executive officers other than Mr. Hightower would be: $996,000 to
Mr. Staley, $397,000 to Mr. White, $307,000 to Mr. Dupriest and $306,000 to Mr.
Colwell. The aggregate amounts payable to the covered employees other than the
Pure named executive officers under such circumstances would be approximately
$1,481,000, based on information disclosed in Pure's Schedule 14D-9 filed on
September 18, 2002.
Employee Stock Options. Upon consummation of the merger, except as
provided in the following sentence, (1) Unocal will be obligated to assume the
stock option plans of Pure and the stock options granted thereunder, (2) each
outstanding and unexercised option to purchase a share of Pure common stock
issued under Pure's employee stock option plans will be converted into an option
to purchase 0.74 of a share of Unocal common stock at an exercise price equal to
the exercise price immediately prior to the merger divided by 0.74 and (3) in
other respects, including vesting schedules, each assumed option will have the
same terms and conditions that were applicable to the Pure stock options. With
respect to Pure's 1999 Incentive Plan, if a Fundamental Change (as defined in
the 1999 Incentive Plan) occurs, (1) any portion of an outstanding and
unexercised stock option that has not then vested will become vested immediately
prior to such Fundamental Change and (2) either (a) Unocal will assume such
stock options or (b) Pure may provide the participants, in lieu of assumption of
the options, with 30 days' notice prior to the Fundamental Change to enable them
to exercise their options and upon consummation of the Fundamental Change, all
options under the 1999 Incentive Plan will terminate without any additional
consideration. Under the terms of the 1999 Incentive Plan, a Fundamental Change
would occur if pursuant to the merger individuals who were directors of Pure as
of immediately prior to the merger cease to constitute at least 40% of the board
of directors of Pure. Assuming that the Pure named executive officers exercise
no options prior to consummation of the merger, and the merger results in a
Fundamental Change under the 1999 Incentive Plan, the total number of vested
options that would be held by each of the Pure named executive officers would be
approximately: 2,063,076 for Mr. Hightower, 332,672 for Mr. Staley, 314,397 for
Mr. White, 245,711 for Mr. Dupriest and 217,798 for Mr. Colwell, based on
information disclosed in Pure's Schedule 14D-9 filed on September 18, 2002. The
number of vested options that would be held by the covered employees and Mr.
Hightower in the event that the merger results in a Fundamental Change under the
1999 Incentive Plan would be approximately 4,143,918 in the aggregate, based
upon options outstanding on September 4, 2002, as reported by Pure in its
Schedule 14D-9 filed on September 18, 2002.
Management Rights to Require Pure to Purchase Stock. Mr. Hightower is a
party to an employment agreement, and each of the covered employees (other than
the individual identified as having a Severance Agreement only) is a party to a
severance and put right agreement, which grants each such employee a right
53
that will permit each such employee to require Pure, at any time during the 90
days after the occurrence of any of the triggering events specified in the
agreements, to purchase all or a portion of their shares of Pure common stock
that were either (1) received in the merger of Pure with Titan in exchange for
Titan stock held by them on December 1, 1999 or (2) purchased through stock
option exercises. In the absence of the Agreement to Tender described below,
this right would be triggered if we complete the offer as contemplated in this
prospectus.
The price at which Pure would be required to purchase the applicable shares
of Pure common stock pursuant to the put rights would be a "per share net asset
value," which generally means (1) 110% of the net equity value, as defined in
the agreements, in the "proved reserves" of Pure, minus (2) the funded debt of
Pure. Such per share net asset value would be measured as of the date upon which
Mr. Hightower or any other covered employee gives notice to Pure of his election
to exercise the put.
When we announced our original offer on August 20, 2002, according to the
most recent information provided by Pure which was then publicly available, the
"per share net asset value" was $20.86 as of June 30, 2002. Based on our 0.6527
exchange ratio and a $34.09 per share price of Unocal on August 20, 2002, the
trading value that we were offering exceeded this per share net asset value. On
September 18, 2002, in Pure's Schedule 14D-9 filed in response to our offer Pure
revised its estimate of the per share net asset value to a range of $24.95 to
$26.72 as of September 16, 2002. We have not independently verified the accuracy
of Pure's calculation as disclosed in its Schedule 14D-9.
Agreement to Tender. In connection with increasing the exchange ratio in
the offer to 0.74, Unocal and Union Oil and the ten officers of Pure who hold
put rights entered into an Agreement to Tender, dated as of October 9, 2002.
Pursuant to the agreement, the officers agreed to tender all of their
outstanding Pure shares into the offer and to relinquish, without payment of
additional consideration, the put rights that cover a total of 2,796,959
currently outstanding shares and an additional 4,100,584 Pure shares that are
reserved for issuance upon exercise of Pure stock options. The 2,796,959
currently outstanding Pure shares that are subject to the agreement represent
approximately 5.5% of Pure's outstanding shares. In exchange Unocal agreed to
increase the exchange ratio for all stockholders to 0.74 and to not waive the
minimum tender condition of 90%. All parties have agreed to use their reasonable
best efforts to complete the merger as soon as practicable after the successful
completion of the offer.
The officers have agreed that until the agreement terminates in accordance
with its terms they will not:
- transfer (which includes any sale, assignment, gift, pledge,
hypothecation or other disposition), or consent to any transfer of, their
Pure shares, or create or permit to exist any pledge, lien, security
interest, mortgage, trust, charge, claim, equity, right of first refusal,
limitation on disposition, adverse claim of ownership or use or
encumbrance of any kind on their Pure shares, subject to limited
exceptions for transfers to persons who agree to tender those shares,
- enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of their Pure shares or any
interest in those shares,
- grant any proxy, power-of-attorney or other authorization in or with
respect to their Pure shares,
- deposit their Pure shares into a voting trust or enter into a voting
agreement or arrangement with respect to their Pure shares, or
- take any other action that would in any way restrict, limit or interfere
with the performance of their obligations under the agreement or the
transactions contemplated in the agreement or by the offer or the
subsequent merger.
The Agreement would terminate and be of no further force and effect:
- upon the written mutual consent of the parties,
- if the offer (including any amendments) expires or terminates without
Unocal accepting any Pure shares for exchange,
54
- if the offer (including any amendment) has not been completed prior to
January 10, 2003; however, this date is extended one day for each day the
offer cannot be completed because of the action of any court,
- if the merger has not been completed prior to the earlier of:
- 80 days after Unocal acquires shares in the offer, and
- February 15, 2003,
- with respect to an individual officer, upon the termination, prior to the
merger, of that officer's employment by Pure without Cause (as defined in
the relevant employment related agreement) unless such termination is
ordered by any of the officers who is a party to the agreement, without
Unocal's consent, and
- with respect to an individual officer, 80 days after the death of that
officer, assuming that the merger has not been completed on or before
such 80th day.
If the agreement terminates before Unocal has completed the offer, the
officer's put rights are restored. If the agreement terminates after Unocal has
completed the offer and before the merger because Unocal is unable to complete
the merger in the time allotted, the officer's put rights with respect to that
officer's stock options are restored. If the agreement terminates with respect
to an individual officer due to that officer's death or termination of
employment under the circumstances described above after Unocal has completed
the offer and before the merger, then the officer's put rights with respect to
that officer's stock options are restored.
Pure 401(k) Plan and Pure Matching Plan. Under the Pure 401(k) Plan and
the Matching Plan, all amounts credited to the discretionary matching account
and the employer contribution account of each of the covered employees and Mr.
Hightower will fully vest if a Fundamental Change occurs.
Composition of Pure's Board of Directors. Under the Voting Agreement
between Pure, Union Oil and Mr. Hightower, five of the eight members of the Pure
board of directors have been nominated by Union Oil, two of the directors have
been nominated by Mr. Hightower, including himself, and the eighth director has
been mutually agreed to by Union Oil and Mr. Hightower. Union Oil's nominees
include Messrs. Ling and Chessum, who are currently officers (and, in the case
of Mr. Ling, a member of the board of directors) of Unocal. Two additional
nominees of Union Oil, Messrs. Laughbaum and Maxwell, are former officers of
Unocal. Both of Mr. Hightower's nominees, including himself, are officers of
Pure.
55
COMPARISON OF RIGHTS OF HOLDERS OF PURE COMMON STOCK AND
HOLDERS OF UNOCAL COMMON STOCK
Because Pure and Unocal are both organized under the laws of the State of
Delaware, the differences in the rights of a Pure stockholder and the rights of
a Unocal stockholder arise from differences in the organizational documents of
Pure and Unocal, rather than from differences of law. The following summary
highlights material differences between the current rights of holders of
Unocal's common stock and holders of Pure's common stock. This summary is not a
complete discussion of the certificates of incorporation and by-laws of Unocal
and Pure or the stockholders' rights plan of Unocal and is qualified in its
entirety by reference to the specific provisions of these documents, which we
incorporate by reference into this prospectus. Copies of each company's
certificate of incorporation and by-laws and Unocal's stockholders' rights plan
have been filed with the SEC. See "Where You Can Find More Information"
beginning on page 62.
CAPITAL STOCK
PURE UNOCAL
AUTHORIZED STOCK
Pure's certificate of incorporation Unocal's certificate of incorporation
authorizes Pure to issue 210,000,000 shares authorizes Unocal to issue 850,000,000
of capital stock consisting of 200,000,000 shares consisting of 750,000,000 shares of
shares of common stock, and 10,000,000 common stock and 100,000,000 shares of
shares of preferred stock. preferred stock.
Pure's board of directors has the authority Unocal's board of directors has the
to issue one or more series of preferred authority to issue one or more series of
stock, having terms designated by Pure's preferred stock, having terms designated by
board. Unocal's board.
As of September 4, 2002, there were As of August 31, 2002, there were
50,553,786 shares of common stock and no 244,664,331 shares of common stock and no
shares of preferred stock outstanding. shares of preferred stock outstanding. A
Pure's common stock is listed on the New subsidiary trust of Unocal which holds
York Stock Exchange. Unocal debentures has issued mandatorily
redeemable convertible preferred securities.
Unocal's common stock is listed on the New
York Stock Exchange.
VOTING RIGHTS
Each share of Pure's common stock entitles Each share of Unocal's common stock entitles
its holder to one vote on all matters on its holder to one vote on all matters on
which stockholders are entitled to vote. which stockholders are entitled to vote.
CONVERSION RIGHTS
Pure's common stock is not subject to any Unocal common stock is not subject to any
conversion rights. conversion rights.
NOTICE OF STOCKHOLDER PROPOSALS
Pure's by-laws provide that any Pure Unocal's by-laws provide that any
stockholder may propose legally proper stockholder who is entitled to vote at an
business to be voted on by Pure stockholders annual stockholders' meeting and who intends
at the annual meeting, but only if the to bring a matter before the meeting must
stockholder delivers notice of the proposal deliver written notice of his or her intent
in writing to Pure's secretary. The to do so to Unocal's secretary. For an
secretary must receive the notice not less annual meeting, the secretary must receive
than 60 days nor more than 120 days prior to the notice no later than 90 days prior to
the meeting. the meeting, unless there has been an
amendment to the by-
56
PURE UNOCAL
laws since the last annual meeting changing
The notice must include: the date of the annual meeting, in which
case the notice must be delivered no later
- the name and address of the proposing than 90 days prior to the meeting or the
stockholder as they appear in Pure's stock tenth day following the date of public
ownership records; disclosure of the meeting date. See the
subsection entitled "Nomination of
- the class and number of shares of Pure Directors" below for more information.
that are beneficially owned, directly or
indirectly, by the stockholder presenting In any case, the business must be a proper
the proposed business; and matter for stockholder action and the notice
must include:
- a clear and concise statement of the
proposal and the stockholder's reasons for - a brief description of each matter desired
supporting it. to be brought before the meeting;
Pure's by-laws contain no express provisions - the name and address of the proposing
for stockholders to present business at stockholder (if the stockholder is a
special meetings. As described below holders holder of record, they must be as in
of a majority of the outstanding Pure common Unocal's stock ownership records);
stock may call a special meeting. The
business transacted at any special meeting - the class and number of shares of Unocal
is limited to the items listed in the notice that are beneficially owned by the
of the meeting. stockholder presenting the proposed
business (and if the stockholder is not a
holder of record, proof of beneficial
ownership);
- a description of any material interest of
the proponent in the business being brought;
and
- a statement as to whether the proponent
intends to deliver a proxy statement and a
form of proxy.
57
BOARD OF DIRECTORS
PURE UNOCAL
NUMBER OF DIRECTORS
The Pure by-laws provide that the number of The Unocal by-laws provide that the number
Pure directors shall be fixed by resolution of directors shall be 10 and the Unocal
of a majority of the entire board of certificate of incorporation provides that
directors. Pure's board of directors is any by-law amendment increasing or reducing
currently composed of eight members. the authorized number of directors must be
adopted by the affirmative vote of not less
than 75% of the directors. Unocal's board of
directors is currently composed of nine
members with one vacancy.
CLASSIFIED BOARD
All of Pure's directors are in one class and Unocal's certificate of incorporation and
elected annually. by-laws provide that Unocal's board of
directors is to be divided into three
classes, with the classes having an equal or
near equal number of directors and the
directors of each class entitled to serve
for three-year terms.
Unocal's board of directors currently has
three outstanding classes, two composed of
three members and one composed of four
members.
REMOVAL OF DIRECTORS
The Pure by-laws provide that a director may Neither the Unocal by-laws or certificate of
be removed, with or without cause, by the incorporation contains any express
holders of a majority of shares entitled to provisions with respect to the removal of
vote at an election of directors, except directors, however Delaware law provides
that if less than the entire board is to be that directors of a corporation with a
removed, no director may be removed without classified board may only be removed for
cause if the votes cast against that cause.
director's removal would be sufficient to
elect such director if then cumulatively
voted at an election of the entire board.
FILLING OF BOARD VACANCIES
The Pure by-laws provide that any vacancy The by-laws of Unocal provide that any
occurring on the board of directors and any vacancy occurring on the board of directors
newly created directorship may be filled by may be filled by a majority of the remaining
the affirmative vote of the majority of the directors or by a sole remaining director,
board or by the stockholders at an annual or each such director to hold office until a
special meeting. successor is elected at an annual or special
meeting of the stockholders.
NOMINATION OF DIRECTORS
Pure's by-laws provide that any Pure Unocal's by-laws provide that a Unocal
stockholder of record may nominate persons stockholder entitled to vote for the
for election as directors at an annual election of directors at a meeting called
meeting or a special meeting at which for that purpose may nominate one or more
directors are to be elected, but only if the persons for the election, but only if the
stockholder is entitled to vote at the stockholder delivers written notice of his
meeting and delivers notice of his or her or her intent to make the nomination to
58
PURE UNOCAL
nomination to Pure's Secretary. In the case Unocal's secretary. The timing requirements
of an annual meeting the notice must be for receiving the notice are similar as for
delivered no later than 90 days in advance receiving notice of stockholder proposals
of the meeting, and in the case of a special described above. The notice must include:
meeting, must be delivered no later than the
close of business on the seventh day after - such information concerning each nominee
the notice of the special meeting. In either as would be required under SEC rules to be
case, the notice must include: included in a proxy statement soliciting
proxies for the election of the nominee as
- the name and address of the stockholder a director; and
making the nomination as they appear in
Pure's stock ownership records; - a signed consent of each nominee to serve
as a Unocal director if elected.
- a representation that the stockholder is a
holder of record of stock and entitled to In addition, if the number of directors to
vote at the meeting and intends to appear be elected to the board of directors is
in person or by proxy at the meeting to increased and there is no public
nominate the person or persons specified announcement naming all of the nominees for
in the notice; director or specifying the size of the
increased board of directors at least 100
- a description of all arrangements or days prior to the annual meeting, a
understandings between the stockholder and stockholder's notice will be deemed to be
each nominee and any other person or timely received, but only with respect to
persons (together with the name of such the nominees for any new positions created
person or persons) pursuant to which the by such increase, if it is delivered the
nomination or nominations are to be made; tenth day following the date of public
disclosure of the meeting date.
- other information concerning the nominee
that would be required to be disclosed in For a special meeting, nominations of
solicitations of proxies for election of persons to be elected to the board of
directors in an election contest under the directors by or at the direction of the
SEC proxy rules; and board of directors or a nominating
stockholder must be made by notice to the
- the nominee's written consent to serve as secretary no later than the close of
a Pure director, if elected. business on the later of the 90th day prior
to such special meeting or the tenth day
following the date of public disclosure of
the meeting date.
STOCKHOLDERS VOTING AGREEMENT
Under the Voting Agreement between Pure, Unocal has no Voting Agreement or similar
Union Oil and Jack D. Hightower (Pure's arrangement.
President, Chief Executive Officer and
Chairman of its board of Directors), Union
Oil and Mr. Hightower have agreed to vote
their shares of Pure capital stock to cause
two persons designated by Mr. Hightower, and
up to six persons designated by Union Oil,
to be elected to Pure's board of directors.
See "Certain Effects of the
Offer -- Relationships with Pure" beginning
on page 48 for more details.
59
OTHER MATTERS
PURE UNOCAL
CALLING SPECIAL MEETINGS OF STOCKHOLDERS
The Pure by-laws provide that special The Unocal certificate of incorporation
meetings of the Pure stockholders may be provides that a special meeting of
called by Pure's chairman, a majority of the stockholders can be called at any time by
entire board of directors, or holders of a the board, or by a majority of the board, or
majority of the votes entitled to be cast by by a committee of the board duly designated
the stockholders entitled to vote at such a by the board as provided in a resolution of
meeting. the board.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Pure's certificate of incorporation provides The Unocal restated certificate of
that stockholders may take action by written incorporation provides that no action of
consent without a meeting of stockholders stockholders may be taken by written consent
only if such consents are signed by the without a meeting.
holders of records of all the outstanding
shares of capital stock of Pure entitled to
vote on the action.
BUSINESS COMBINATIONS
Pure has elected not to be governed by Section 203 of the Delaware General
Section 203 of the Delaware General Corporation Law (relating to Business
Corporation Law (relating to Business Combinations with Interested Stockholders)
Combinations with Interested Stockholders). applies to Unocal. In addition, Unocal's
restated certificate of incorporation
requires the affirmative vote of not less
than 75% of the outstanding shares of
Unocal's common stock to approve any of the
following:
- mergers or consolidations with a "related
corporation";
- a sale or exchange with a related person
of Unocal's assets representing 10% or more
of the book value or fair market value of
the total assets of Unocal and its
subsidiaries taken as a whole; or
- the issuance or delivery of Unocal stock
or other Unocal securities in exchange for
any properties or assets of or securities
issued by a related person.
For this purpose, a "related person" means
any person or company that owns 10% or more
of the voting power of Unocal's outstanding
voting stock.
This 75% voting requirement does not apply
if either:
- the transaction was approved by 75% of the
directors prior to the related person
acquiring
60
PURE UNOCAL
ownership of more than 10% of the total
voting power of Unocal's outstanding
voting stock; or
- any transaction between Unocal and any
company in which Unocal owns more than 50%
or more of the voting stock.
STOCKHOLDERS' RIGHTS PLAN
Pure has not adopted a stockholders' rights Unocal has adopted a stockholders' rights
plan. plan under which its stockholders have been
granted one preferred stock purchase right
for each share of common stock held.
The purchase rights are not exercisable
initially. However, ten business days after
Unocal announces that a person has acquired
beneficial ownership of 15% (this percentage
may be reduced to 10% by the board of
directors), or 25% in the case of qualified
institutional investors (as defined), or
more of Unocal's common stock (the tenth
business day after this announcement is
referred to as the "flip-in-date"), each
purchase right, other than the purchase
rights beneficially owned by the acquiring
person, will become exercisable and entitle
its holder to purchase from Unocal that
number of shares of Unocal's common stock
having a market value equal to twice the
$180 exercise price of the right. Rights
beneficially owned by the acquiring person
become void.
In addition, Unocal's board of directors
may, at its option, at any time after a
flip-in-date and before the time the
acquiring person becomes the owner of more
than 50% of the outstanding shares of
Unocal's common stock, elect to exchange all
of the outstanding purchase rights, other
than those rights beneficially owned by the
acquiring company or its affiliates, for
shares of common stock at an exchange ratio
of one share of common stock per purchase
right.
Unocal's board of directors may at any time
before a flip-in-date redeem the rights in
whole, but not in part, at a price of $0.001
per right.
The purchase rights may cause substantial
dilution to a person or group that attempts
to acquire a substantial number of shares of
Unocal's common stock without approval of
Unocal's board of directors. The rights will
not interfere with any merger or other
business combination with a third
61
PURE UNOCAL
party approved by Unocal's board of
directors, because the board may, at any
time prior to a flip-in date, redeem the
rights as described above or amend the
rights agreement to render it inapplicable
to a specific transaction.
AMENDMENT OF ORGANIZATIONAL DOCUMENTS
CERTIFICATE OF INCORPORATION
The provisions in Pure's certificate of The provisions in Unocal's restated
incorporation regarding stockholder voting, certificate of incorporation regarding the
the number of directors, director powers, amendment of by-laws, classified board,
actions by stockholders without a meeting, business combinations, actions by
and amending the certificate of stockholders without a meeting, call of
incorporation, may not be amended without special meetings, and amending the restated
the affirmative vote of at least 80% of all certificate of incorporation, may not be
outstanding shares. Otherwise, amendments to amended without the affirmative vote of at
Pure's certificate of incorporation are least 75% of all outstanding shares.
governed by Delaware law. Delaware law Otherwise, amendments to Unocal's restated
generally provides that, to amend a certificate of incorporation are governed by
corporation's certificate of incorporation, Delaware law. Delaware law generally
the corporation's board of directors must provides that, to amend a corporation's
adopt a resolution setting forth the certificate of incorporation, the
proposed amendment and declaring its corporation's board of directors must adopt
advisability. The amendment then requires a resolution setting forth the proposed
the affirmative vote of a majority of all amendment and declaring its advisability.
outstanding shares. The amendment then requires the affirmative
vote of a majority of all outstanding
shares.
BY-LAWS
Amendments to Pure's by-laws may be made by Unocal's by-laws may be amended by a vote of
a majority of the entire board of directors 75% of the outstanding stock entitled to
and by Pure's stockholders. vote or by the board of directors. However,
the provisions in the by-laws regarding an
increase or decrease to the number of
directors requires a resolution adopted by
75% of the directors.
WHERE YOU CAN FIND MORE INFORMATION
Unocal and Pure file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that Unocal and Pure file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms.
Unocal and Pure's SEC filings are also available to the public from
commercial retrieval services and at the website maintained by the SEC at
www.sec.gov. Reports, proxy statements and other information are also available
for inspection at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
We filed a registration statement on Form S-4 to register with the SEC the
Unocal common stock we will issue pursuant to the offer and the subsequent
merger. This prospectus is a part of that registration statement. As allowed by
SEC rules, this prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement. We
also filed with the SEC a tender offer statement on Schedule TO pursuant to Rule
14d-3 under the Exchange Act in connection with our offer. You may obtain
62
copies of the Form S-4 and the Schedule TO (and any amendments to those
documents) in the manner described above.
On September 18, 2002, Pure filed with the SEC a
solicitation/recommendation statement on Schedule 14D-9 regarding the original
offer commenced on September 5, 2002, and on October 15, 2002 filed an amendment
regarding the revisions to the offer. You may obtain a copy of the Schedule
14D-9 (and any amendments to that document) in the manner described above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus
or in a later filed document incorporated by reference in this prospectus. This
prospectus incorporates by reference the documents set forth below that Unocal
and Pure have previously filed with the SEC. These documents contain important
information about Unocal and Pure.
UNOCAL SEC FILINGS (FILE NO. 1-8483)
Annual Report on Form 10-K, as amended For the fiscal year ended December 31, 2001.
Quarterly Reports on Form 10-Q, as amended For the fiscal quarters ended March 31 and
June 30, 2002.
Current Reports on Form 8-K Filed on January 24, 2002, January 31, 2002,
March 28, 2002, April 8, 2002, April 25,
2002, June 25, 2002, July 30, 2002, August 2,
2002, August 13, 2002, August 22, 2002,
September 18, 2002, September 20, 2002,
September 25, 2002, September 27, 2002 (as
amended on October 11, 2002), October 2,
2002, October 9, 2002, and October 25, 2002,
respectively.
The description of Unocal's common stock in Filed on September 28, 1998, July 31, 2002,
our prospectus dated September 25, 1998 filed January 6, 2000, March 28, 2002, August 2,
on Form 424(B)(5) together with the 2002, respectively.
description of our associated preferred stock
purchase rights included in our Registration
Statement on Form S-3/A and Current Reports
on Form 8-K dated January 5, 2002, March 27,
2002 and August 2, 2002.
PURE SEC FILINGS (FILE NO. 1-15899)
Annual Report on Form 10-K, as amended For the fiscal year ended December 31, 2001.
Quarterly Reports on Form 10-Q For the fiscal quarters ended March 31 and
June 30, 2002.
The description of Pure's common stock in the Filed on May 22, 2000.
Pure Registration Statement on Form 8-A
Current Reports on Form 8-K Filed on September 5, 2002, September 13,
2002, and October 22, 2002, respectively.
All documents filed by Unocal and Pure pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act with the SEC from the date of this prospectus to
the date that shares of Pure common stock are accepted for exchange pursuant to
our offer and the period for perfecting appraisal rights in connection with the
subsequent merger is concluded (or the date that our offer is terminated) are
also deemed to be incorporated by reference into this prospectus.
63
All information contained in, or incorporated by reference into, this
prospectus relating to Unocal was provided by Unocal. While Unocal has included
in this offer information concerning Pure known to Unocal, based primarily on
filings by Pure with the SEC, due to the nature of Unocal's affiliation with
Pure Unocal has not had complete, unrestricted access to Pure's books and
records. Therefore, there may be material information concerning Pure that is
not available to Unocal. Unocal has no knowledge that would indicate that
statements relating to Pure contained or incorporated by reference in this offer
to exchange are inaccurate or incomplete.
Documents incorporated by reference are available from us without charge
upon written or oral request of Pure stockholders to the information agent for
the proposed transaction, D.F. King & Co., Inc., 77 Water Street, New York, NY
10005, collect at (212) 269-5550 or toll-free at (800) 769-6414. Exhibits to
these documents will only be furnished if they are specifically incorporated by
reference in this document. If you request any incorporated documents from us,
we will mail them to you by first class mail, or another equally prompt means,
within one business day after we receive your request.
LEGAL MATTERS
Legal matters in connection with the issuance and sale of the securities
offered hereby will be passed upon by Morris, Nichols, Arsht & Tunnell of
Wilmington, Delaware.
EXPERTS
The consolidated financial statements of Unocal Corporation incorporated in
this Prospectus by reference to Unocal's Annual Report on Form 10-K, as amended,
for the year ended December 31, 2001 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated statements of operations, of cash flows, and of changes in
stockholders' equity and owner's net investment of Pure Resources, Inc. and its
subsidiaries, formerly referred to as Union Oil's Permian Basin business unit,
for the year ended December 31, 1999 incorporated in this prospectus by
reference to Pure's Annual Report on Form 10-K, as amended, for the year ended
December 31, 2001 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Pure Resources, Inc. as of
December 31, 2001 and 2000, and for the years then ended, have been incorporated
by reference herein in reliance upon the report of KPMG LLP, independent
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report covering the
December 31, 2001 financial statements refers to a change in accounting for
derivative instruments and hedging activities.
MISCELLANEOUS
The offer is being made solely by this prospectus and the related letter of
transmittal and is being made to holders of all outstanding shares of Pure's
common stock. We are not aware of any jurisdiction where the making of the offer
is prohibited by any administrative or judicial action pursuant to any valid
state statute. If we become aware of any valid state statute prohibiting the
making of the offer or the acceptance of shares pursuant thereto, we will make a
good faith effort to comply with any such state statute. If, after making a good
faith effort, we cannot comply with that state statute, the offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
shares in that state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
offer shall be deemed to be made on our behalf by one or more registered brokers
or dealers licensed under the laws of that jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Unocal or Union Oil not contained in this prospectus
or in the letter of transmittal, and if given or made, such information or
representation must not be relied upon as having been authorized.
64
ANNEX A
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF UNOCAL AND UNION OIL
The following table sets forth, to the best of our knowledge, for each
executive officer and director of Unocal and each executive officer and director
of Union Oil, his or her name, business or residence address, principal
occupation or employment at the present time and during the last five years, and
the name of any corporation or other organization in which such employment is
conducted or was conducted. Except as otherwise indicated, to the best of our
knowledge, all of the persons listed below are citizens of the United States of
America. During the past five years, to the best of our knowledge, none of the
executive officers or directors of Unocal nor any of the executive officers or
directors of Union Oil have been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which the person 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 these laws. Unless otherwise
indicated, the principal business address of each director and executive officer
is 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245.
PRESENT OCCUPATION OR EMPLOYMENT,
NAME, TITLE AND CITIZENSHIP FIVE-YEAR EMPLOYMENT HISTORY AND ADDRESS
--------------------------- ----------------------------------------
John W. Amerman........................... Mr. Amerman has been a director since 1991. Mr. Amerman
Director of Unocal served as the Chairman and Chief Executive Officer of
Mattel, Inc. from 1987 through 1996. He continued to
serve as Chairman through October 1997 and stepped down
as director of Mattel in 1998. Mr. Amerman is also a
director of Aegis Group plc. Mr. Amerman's principal
business address is: 2101 Rosecrans Avenue, Suite 6280,
El Segundo, CA 90246
John W. Creighton, Jr. ................... Mr. Creighton has been a director since 1995. Mr.
Director of Unocal Creighton was Chairman and Chief Executive Officer of
UAL Corporation (United Airlines) from November, 2001 to
September, 2002. Mr. Creighton was Chairman of the Board
of Unocal from January 2001 through October 2001. He was
Weyerhaeuser Company's President and Chief Executive
Officer from 1991 through 1997 and a director of that
company from 1988 through 1998. Mr. Creighton's
principal business address is c/o UAL Corporation, P.O.
Box 66100, Chicago, IL 60666.
James W. Crownover........................ Mr. Crownover has been a director since 1998. He was a
Director of Unocal director from 1982 to 1998 of McKinsey & Company, Inc.,
and Managing Director of Southwest Practice of McKinsey
from 1984 to 1994. Mr. Crownover serves as a director of
Great Lakes Chemical Corporation, Weingarten Realty
Investors, and Xpedior Inc. Mr. Crownover's principal
business address is: 2 Houston Center, Suite 3675,
Houston, Texas 77010.
A-1
PRESENT OCCUPATION OR EMPLOYMENT,
NAME, TITLE AND CITIZENSHIP FIVE-YEAR EMPLOYMENT HISTORY AND ADDRESS
--------------------------- ----------------------------------------
Frank C. Herringer........................ Mr. Herringer has been a director since 1989. Mr.
Director of Unocal Herringer has been Chairman of Transamerica Corporation
since 1996, and a director since 1986. He also served as
Transamerica's President from 1986 and its Chief
Executive Officer from 1991 until the company was
acquired by AEGON N.V. in 1999. He served as Chairman of
the Board of Directors of the combined AEGON --
Transamerica operations, and he was a member of the
Executive Board of AEGON N.V. with responsibilities for
activities in Asia and for the non-insurance operations
of Transamerica, until May 2000. He is also a director
of AT&T Corp., Charles Schwab Corporation, and
Mirapoint, Inc. Mr. Herringer's principal business
address is: c/o Transamerica Corporation, 600 Montgomery
Street, 16th Floor, San Francisco, CA 94111.
Timothy H. Ling........................... Mr. Ling has been a director of Unocal since 2000 and of
Director, President and Chief Operating Union Oil since 1999. Mr. Ling has been President and
Officer of Unocal and Union Oil Chief Operating Officer of Unocal and Union Oil since
January 1, 2001. He was Executive Vice President, North
American Energy Operations of Unocal and Union Oil from
March 1999 through December 2000 and Chief Financial
Officer from October 1997 to June 2000. He was a partner
of McKinsey & Company, Inc., from 1994 to October 1997.
Mr. Ling is also a director of Pure and Maxis
Communications Bhd.
Dr. Donald B. Rice........................ Dr. Rice has been a director since 1998. Dr. Rice has
Director of Unocal been Chairman of Agensys, Inc. since February, 2002, and
President and Chief Executive Officer since 1996. From
1993 until 1996, Dr. Rice was President and Chief
Operating Officer and a director of Teledyne, Inc. He is
also a director of Wells Fargo & Company, Vulcan
Materials Company, Amgen Inc., and Scios Inc., where he
also serves as Chairman of the Board. Dr. Rice's
principal business address is: c/o Agensys, Inc., 1545
17th Street, Santa Monica, CA 90404.
Kevin W. Sharer........................... Mr. Sharer has been a director since 1997. Mr. Sharer
Director of Unocal became Chairman of the Board of Amgen, Inc. in January,
2001. He has been Amgen's Chief Executive Officer and
President since May 2000. Mr. Sharer was Amgen's
President and Chief Operating Officer from 1992 to 2000.
He has been a director of Amgen since 1992. Mr. Sharer
is also a director of Minnesota Mining and Manufacturing
Company. Mr. Sharer's principal business address is: c/o
Amgen Inc., One Amgen Center, Thousand Oaks, CA
91320-1789.
Dr. Marina v.N. Whitman................... Dr. Whitman has been a director since 1993. Dr. Whitman
Director of Unocal has been a Professor at the University of Michigan since
1992. She is also a director of Alcoa, Inc., Procter &
Gamble Company, J.P. Morgan Chase & Co., and
Intelliseek. Dr. Whitman also serves as a member,
director, or trustee of several educational and
professional organizations. Dr. Whitman's principal
business address is: c/o School of Public Policy,
University of Michigan, 411 Lorch Hall, Ann Arbor, MI
48109-1220.
A-2
PRESENT OCCUPATION OR EMPLOYMENT,
NAME, TITLE AND CITIZENSHIP FIVE-YEAR EMPLOYMENT HISTORY AND ADDRESS
--------------------------- ----------------------------------------
Charles R. Williamson..................... Mr. Williamson has been a director of Unocal since 2000
Chairman of the Board and Chief and of Union Oil since 1999. Mr. Williamson has been
Executive Officer of Unocal and Union Chairman of the Board of Unocal since November, 2001 and
Oil of Union Oil since January, 2001. He has been Chief
Executive Officer of Unocal and Union Oil since January
1, 2001. He was Executive Vice President, International
Energy Operations of Unocal and Union Oil, from March
1999 through December 2000. He served as Group Vice
President, Asia Operations of Unocal and Union Oil, in
1998 and 1999, having previously served as Group Vice
President, International Operations since 1996.
Terry G. Dallas........................... Mr. Dallas has been Executive Vice President of Unocal
Executive Vice President and Chief and Union Oil since February 6, 2001. He joined Unocal
Financial Officer of Unocal and Union and Union Oil in June 2000 as Chief Financial Officer.
Oil Prior to this he was Senior Vice President and Treasurer
of Atlantic Richfield Company (Arco), where he worked
for 21 years. He also held a variety of financial
assignments at Arco in planning, business analysis,
project evaluation and mergers and acquisitions.
Dennis P.R. Codon......................... Mr. Codon has been Senior Vice President of Unocal and
Senior Vice President, Chief Legal Union Oil since August 2000 and Chief Legal Officer and
Officer and General Counsel of Unocal General Counsel since 1992. He was a Vice President of
and Union Oil Unocal and Union Oil from 1992 to 2000. He also served
as Corporate Secretary of Unocal and Union Oil from 1990
to 1996.
Joe D. Cecil.............................. Mr. Cecil has been Vice President and Comptroller of
Vice President and Comptroller of Unocal Unocal and Union Oil since December 1997. From March
and Union Oil 1997 to December 1997, he was Comptroller of
International Operations of Unocal and Union Oil. He was
Comptroller of the 76 Products Company from 1995 until
the sale of the West Coast refining, marketing and
transportation assets in March 1997.
Douglas M. Miller......................... Mr. Miller has been Vice President, Corporate
Vice President, Corporate Development of Development of Unocal and Union Oil since January 2000.
Unocal and Union Oil From 1998 until 2000 he was General Manager, Planning
and Development, International Energy Operations of
Unocal and Union Oil. From 1996 to 1998, he was Resident
Manager, Philippine Geothermal, Inc.
A-3
ANNEX B
INTERESTS OF UNOCAL AND THE DIRECTORS,
EXECUTIVE OFFICERS AND AFFILIATES OF UNOCAL IN SHARES OF PURE
The following table sets forth the interests by Unocal and Union Oil and
their respective directors and, to the best of our knowledge, executive officers
in the shares of Pure, as of September 4, 2002. Unless otherwise indicated,
neither Unocal nor Union Oil has and, to the best of our knowledge, none of the
directors or executive officers of Unocal or Union Oil has bought or sold any
shares of Pure within the past 60 days.
NUMBER OF SHARES
OF COMMON STOCK
NAME BENEFICIALLY OWNED
---- ------------------
Union Oil................................................... 32,709,067*
Timothy H. Ling............................................. 1
Douglas M. Miller........................................... 1
---------------
* Does not include 3,181,266 shares of Pure common stock beneficially owned by
Jack D. Hightower, with respect to which Unocal and Union Oil may be deemed to
share voting control by virtue of the Voting Agreement.
B-1
ANNEX C
SECTION 262 OF GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, then either a constituent corporation
before the effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall
C-2
be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
C-3
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-4
THE EXCHANGE AGENT AND DEPOSITARY FOR THE OFFER IS:
MELLON INVESTOR SERVICES, LLC
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND DELIVERY:
Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC
PO Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop -- Reorg. New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept.
Attn: Reorganization Dept.
Questions and requests for assistance may be directed to the information
agent or Dealer Manager at the addresses and telephone numbers listed below.
Additional copies of this prospectus, the letter of transmittal and other tender
offer materials may be obtained from the information agent or Dealer Manager as
set forth below, and will be furnished promptly at our expense. You may also
contact your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
BANKS AND BROKERAGE FIRMS, PLEASE CALL COLLECT:
(212) 269-5550
STOCKHOLDERS PLEASE CALL TOLL-FREE:
(800) 769-6414
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
BANKS AND BROKERAGE FIRMS, PLEASE CALL COLLECT:
(609) 274-3066
STOCKHOLDERS PLEASE CALL TOLL-FREE:
(866) 276-1462