AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 2001
REGISTRATION NOS. 333-68694 AND 333-
AMENDMENT NO. 2
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in Its Governing Instrument)
DELAWARE 1311 73-1567067 (State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Organization) Classification Code Number) Identification Number) |
AND
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DEVON HOLDCO CORPORATION
(Exact Name of Registrant as Specified in Its Governing Instrument)
DELAWARE 1311 73-1620718 (State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Organization) Classification Code Number) Identification Number) |
20 NORTH BROADWAY, SUITE 1500
OKLAHOMA CITY, OKLAHOMA 73102-8260
(405) 235-3611
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Each
Registrant's Principal Executive Offices)
J. LARRY NICHOLS
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DEVON ENERGY CORPORATION
20 NORTH BROADWAY, SUITE 1500
OKLAHOMA CITY, OKLAHOMA 73102-8260
(405) 235-3611
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to
SCOTT J. DAVIS DUKE R. LIGON C. MICHAEL HARRINGTON JAMES T. LIDBURY SENIOR VICE PRESIDENT VINSON & ELKINS L.L.P. MAYER, BROWN & PLATT AND GENERAL COUNSEL 2300 FIRST CITY TOWER 190 SOUTH LASALLE STREET DEVON ENERGY CORPORATION 1001 FANNIN CHICAGO, ILLINOIS 60603-3441 20 NORTH BROADWAY, SUITE 1500 HOUSTON, TEXAS 77002-6760 (312) 782-0600 OKLAHOMA CITY, OKLAHOMA 73102-8260 (713) 758-2148 (405) 235-3611 |
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE ----------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.10 per share, of Devon Energy Corporation............ 31,762,199 shares(1) -- -- -- ----------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.10 per share, of 31,762,199 shares(3) -- -- -- Devon Holdco Corporation(2)............ 134,120,478 shares(4) Not applicable $4,885,338,411(5) $1,221,335 ----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- |
(1)Consists of up to 31,762,199 shares of Devon Energy Corporation common stock that may be issued in the merger described herein upon the conversion of (a) 49,911,612 shares of Mitchell Energy & Development Corp. common stock outstanding on August 10, 2001 and (b) up to 2,136,588 shares of Mitchell Energy & Development Corp. common stock that may be issued pursuant to outstanding options between August 10, 2001 and the effective time of the merger. Includes Devon Energy Corporation's preferred stock purchase rights that, prior to the occurrence of certain events, will not be exercisable or evidenced separately from Devon Energy Corporation common stock. A registration fee of $352,627 with respect to such shares was paid by Devon Energy Corporation in connection with the original filing of the registration statement (Registration No. 333-68694) on August 30, 2001.
(2)Includes Devon Holdco Corporation preferred stock purchase rights, which will be issued pursuant to a shareholder rights agreement to be adopted by Devon Holdco Corporation's board of directors prior to the consummation of the alternate mergers described herein (if such alternate mergers are consummated). The preferred stock purchase rights will not be exercisable or evidenced separately from Devon Holdco Corporation common stock prior to the occurrence of certain events.
(3)Consists of up to 31,762,199 shares of Devon Holdco Corporation common stock
that may be issued in the alternate merger described herein involving
Mitchell Energy & Development Corp. upon the conversion of (a) 49,911,612
shares of Mitchell Energy & Development Corp. common stock outstanding on
August 10, 2001 and (b) up to 2,136,588 shares of Mitchell Energy &
Development Corp. common stock that may be issued pursuant to outstanding
options between August 10, 2001 and the effective time of such alternate
merger. No additional fee is paid with respect to such shares as there will
be no consideration received with respect to the issuance of such shares in
addition to the consideration that would be received as described in footnote
1. In the transaction described in this registration statement, holders of
Mitchell Energy & Development Corp. common stock will receive either (but not
both) Devon Energy Corporation common stock (described in footnote 1) or
Devon Holdco Corporation common stock (described in this footnote 3),
depending on the final structure of the transaction.
(4)Consists of up to 134,120,478 shares of Devon Holdco Corporation common stock that may be issued in the alternate merger described herein involving Devon Energy Corporation upon the conversion of (a) 125,983,553 shares of Devon Energy Corporation common stock outstanding on August 10, 2001, (b) up to 6,008,677 shares of Devon Energy Corporation common stock that may be issued pursuant to outstanding options and stock awards between August 10, 2001 and the effective time of such alternate merger and (c) up to 2,128,248 shares of Devon Energy Corporation common stock that may be issued upon exchange of outstanding exchangeable shares of Northstar Energy Corporation between August 10, 2001 and the effective time of such alternate merger.
(5)Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933 based on the product of $36.425 (the average of the high and low prices of Devon Energy Corporation common stock on October 24, 2001 on the American Stock Exchange composite tape) and 134,120,478 (the number of shares of Devon Energy Corporation common stock outstanding, plus the number of shares reserved for issuance upon the exercise of outstanding options and stock awards or upon exchange of outstanding exchangeable shares of Northstar Energy Corporation).
(MITCHELL ENERGY LOGO) (DEVON ENERGY LOGO)
PROPOSED MERGER -- YOUR VOTE IS VERY IMPORTANT
Dear Stockholders:
On August 13, 2001, Devon Energy Corporation agreed to acquire Mitchell Energy & Development Corp. by merging Mitchell into a wholly owned subsidiary of Devon. In the merger, each Mitchell stockholder, other than those exercising dissenters' rights, will receive $31.00 in cash and 0.585 of a share of Devon common stock for each share of Mitchell common stock that the stockholder owns. We expect that Mitchell stockholders will recognize gain for U.S. federal income tax purposes as a result of the merger to the extent of the cash received but otherwise will not recognize gain or loss for such purposes.
Mitchell and Devon amended their merger agreement on October 5, 2001 to provide that, if the merger would not qualify for the desired tax treatment, they will use an alternate structure to complete the transaction that has been designed to ensure that the transaction will be taxable only to the extent that Mitchell shareholders receive cash, but otherwise will be tax-free. In this alternate structure, both Mitchell and Devon would become subsidiaries of a newly created holding company that would change its name to Devon Energy Corporation. The alternate structure would only be used if the transaction otherwise could not be consummated because the merger would not qualify for the desired tax treatment.
The merger agreement requires the approval of Mitchell and Devon stockholders. A vote to approve the merger agreement is a vote in favor of both the merger and the alternate structure. Devon and Mitchell have each scheduled special meetings of their stockholders on , 2001, to vote on the approval of the merger agreement. Regardless of the number of shares that you own or whether you plan to attend a meeting, it is important that your shares be represented and voted. Voting instructions are inside.
MITCHELL'S BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS THAT IT CONTEMPLATES ARE ADVISABLE AND IN THE BEST INTERESTS OF MITCHELL AND ITS STOCKHOLDERS. ACCORDINGLY, MITCHELL'S BOARD OF DIRECTORS RECOMMENDS THAT MITCHELL STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
SIMILARLY, DEVON'S BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS THAT IT CONTEMPLATES ARE ADVISABLE AND IN THE BEST INTERESTS OF DEVON AND ITS STOCKHOLDERS. ACCORDINGLY, DEVON'S BOARD OF DIRECTORS RECOMMENDS THAT DEVON STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
This document provides you with detailed information about the proposed transaction. We encourage you to read the entire document carefully.
Mitchell's common stock is traded on the New York Stock Exchange under the symbol "MND."
Devon's common stock is traded on the American Stock Exchange under the symbol "DVN." In addition, a class of exchangeable shares issued by Devon's subsidiary, Northstar Energy Corporation, is traded on The Toronto Stock Exchange under the symbol "NSX." The Northstar exchangeable shares are exchangeable at any time, on a one-for-one basis, for Devon common stock. Holders of Devon common stock and Northstar exchangeable shares will vote as a single class at the Devon meeting.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS DOCUMENT FOR A DISCUSSION
OF RISKS RELEVANT TO THE MERGER.
George P. Mitchell J. Larry Nichols Chairman and Chief Executive Officer Chairman, President and Chief Executive Officer MITCHELL ENERGY & DEVELOPMENT CORP. DEVON ENERGY CORPORATION |
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This document is dated , 2001, and was first mailed to stockholders on or about , 2001.
This document incorporates by reference important business and financial information about both Devon and Mitchell that is not included in or delivered with this document. See "Additional Information -- Where You Can Find More Information."
You can obtain any of the documents incorporated by reference into this document through Devon or Mitchell, as the case may be, or from the Securities and Exchange Commission's website at http://www.sec.gov. Documents incorporated by reference are available from Devon and Mitchell without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into this document. You may obtain documents incorporated by reference into this document by requesting them in writing or by telephone from the appropriate company as follows:
Mitchell Energy & Development Corp. Devon Energy Corporation 2001 Timberloch Place -- P.O. Box 4000 20 North Broadway, Suite 1500 Attention: Investor Relations Attention: Investor Relations The Woodlands, Texas 77387-4000 Oklahoma City, Oklahoma 73102-8260 Telephone: (713) 377-6625 Telephone: (405) 552-4570 |
IF YOU WOULD LIKE TO REQUEST DOCUMENTS INCORPORATED BY REFERENCE, PLEASE DO SO BY , 2001, TO RECEIVE THEM BEFORE THE MEETING. PLEASE BE SURE TO INCLUDE YOUR COMPLETE NAME AND ADDRESS IN YOUR REQUEST. IF YOU REQUEST ANY DOCUMENTS, WE WILL MAIL THEM TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
All information in this document concerning Devon and Devon Holdco Corporation has been furnished by Devon. All information in this document concerning Mitchell has been furnished by Mitchell, except as otherwise noted. Devon has represented to Mitchell, and Mitchell has represented to Devon, that the information furnished by and concerning it is true and complete.
For an explanation of oil and gas terms used in this document, see the section titled "Commonly Used Oil and Gas Terms."
All references to "U.S.$," "$" or "dollars" in this document are references to United States dollars unless stated as "C$," "Canadian $" or "Canadian dollars," which are references to Canadian dollars.
(MITCHELL ENERGY LOGO) MITCHELL ENERGY & (DEVON ENERGY LOGO) DEVELOPMENT CORP. |
PROPOSED MERGER -- YOUR VOTE IS VERY IMPORTANT
Dear Stockholders:
On August 13, 2001, Devon Energy Corporation agreed to acquire Mitchell Energy & Development Corp. by merging Mitchell into a wholly owned subsidiary of Devon. In the merger, each Mitchell stockholder, other than those exercising dissenters' rights, will receive $31.00 in cash and 0.585 of a share of Devon common stock for each share of Mitchell common stock that the stockholder owns. We expect that Mitchell stockholders will recognize gain for U.S. federal income tax purposes as a result of the merger to the extent of the cash received but otherwise will not recognize gain or loss for such purposes.
Mitchell and Devon amended their merger agreement on October 5, 2001 to provide that, if the merger would not qualify for the desired tax treatment, they will use an alternate structure to complete the transaction that has been designed to ensure that the transaction will be taxable only to the extent that Mitchell shareholders receive cash, but otherwise will be tax-free. In this alternate structure, both Mitchell and Devon would become subsidiaries of a newly created holding company that would change its name to Devon Energy Corporation. The alternate structure would only be used if the transaction otherwise could not be consummated because the merger would not qualify for the desired tax treatment.
The merger agreement requires the approval of Mitchell and Devon stockholders. A vote to approve the merger agreement is a vote in favor of both the merger and the alternate structure. Devon and Mitchell have each scheduled special meetings of their stockholders on , 2001, to vote on the approval of the merger agreement. Regardless of the number of shares that you own or whether you plan to attend a meeting, it is important that your shares be represented and voted. Voting instructions are inside.
DEVON'S BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS THAT IT CONTEMPLATES ARE ADVISABLE AND IN THE BEST INTERESTS OF DEVON AND ITS STOCKHOLDERS. ACCORDINGLY, DEVON'S BOARD OF DIRECTORS RECOMMENDS THAT DEVON STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
SIMILARLY, MITCHELL'S BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS THAT IT CONTEMPLATES ARE ADVISABLE AND IN THE BEST INTERESTS OF MITCHELL AND ITS STOCKHOLDERS. ACCORDINGLY, MITCHELL'S BOARD OF DIRECTORS RECOMMENDS THAT MITCHELL STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
This document provides you with detailed information about the proposed transaction. We encourage you to read the entire document carefully.
Devon's common stock is traded on the American Stock Exchange under the symbol "DVN." In addition, a class of exchangeable shares issued by Devon's subsidiary, Northstar Energy Corporation, is traded on The Toronto Stock Exchange under the symbol "NSX." The Northstar exchangeable shares are exchangeable at any time, on a one-for-one basis, for Devon common stock. Holders of Devon common stock and Northstar exchangeable shares will vote as a single class at the Devon meeting.
Mitchell's common stock is traded on the New York Stock Exchange under the symbol "MND."
SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS DOCUMENT FOR A DISCUSSION
OF RISKS RELEVANT TO THE MERGER.
J. Larry Nichols George P. Mitchell Chairman, President and Chief Executive Chairman and Chief Executive Officer Officer DEVON ENERGY CORPORATION MITCHELL ENERGY & DEVELOPMENT CORP. |
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This document is dated , 2001, and was first mailed to stockholders on or about , 2001.
This document incorporates by reference important business and financial information about both Devon and Mitchell that is not included in or delivered with this document. See "Additional Information -- Where You Can Find More Information."
You can obtain any of the documents incorporated by reference into this document through Devon or Mitchell, as the case may be, or from the Securities and Exchange Commission's website at http://www.sec.gov. Documents incorporated by reference are available from Devon and Mitchell without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into this document. You may obtain documents incorporated by reference into this document by requesting them in writing or by telephone from the appropriate company as follows:
Devon Energy Corporation Mitchell Energy & Development Corp. 20 North Broadway, Suite 1500 2001 Timberloch Place -- P.O. Box 4000 Attention: Investor Relations Attention: Investor Relations Oklahoma City, Oklahoma 73102-8260 The Woodlands, Texas 77387-4000 Telephone: (405) 552-4570 Telephone: (713) 377-6625 |
IF YOU WOULD LIKE TO REQUEST DOCUMENTS INCORPORATED BY REFERENCE, PLEASE DO SO BY , 2001, TO RECEIVE THEM BEFORE THE MEETING. PLEASE BE SURE TO INCLUDE YOUR COMPLETE NAME AND ADDRESS IN YOUR REQUEST. IF YOU REQUEST ANY DOCUMENTS, WE WILL MAIL THEM TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
All information in this document concerning Devon and Devon Holdco Corporation has been furnished by Devon. All information in this document concerning Mitchell has been furnished by Mitchell, except as otherwise noted. Devon has represented to Mitchell, and Mitchell has represented to Devon, that the information furnished by and concerning it is true and complete.
For an explanation of oil and gas terms used in this document, see the section titled "Commonly Used Oil and Gas Terms."
All references to "U.S.$," "$" or "dollars" in this document are references to United States dollars unless stated as "C$," "Canadian $" or "Canadian dollars," which are references to Canadian dollars.
MITCHELL ENERGY & DEVELOPMENT CORP.
2001 TIMBERLOCH PLACE -- P.O. BOX 4000
THE WOODLANDS, TEXAS 77387-4000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2001
To Mitchell Energy & Development Corp. Stockholders:
We will hold a special meeting of stockholders of Mitchell Energy & Development Corp. for the following purposes:
- To consider and vote on the approval of the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. and
- To transact other business as may properly be presented at the meeting or any adjournments of the meeting.
The date, time and place of the meeting are as follows:
, 2001
a.m., local time
MND Learning Center
2002 Timberloch Place
The Woodlands, Texas
Only stockholders of record at the close of business on , 2001, are entitled to notice of and to vote at the meeting and any adjournments of the meeting. Mitchell will keep at its offices in The Woodlands, Texas, a list of stockholders entitled to vote at the meeting available for inspection for any purpose relevant to the meeting during normal business hours for the 10 days before the meeting.
YOUR PROXY IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE. IT REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
THOMAS P. BATTLE
Secretary
The Woodlands, Texas
, 2001
DEVON ENERGY CORPORATION
20 NORTH BROADWAY, SUITE 1500
OKLAHOMA CITY, OKLAHOMA 73102-8260
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2001
To Devon Energy Corporation Stockholders:
We will hold a special meeting of stockholders of Devon Energy Corporation for the following purposes:
- To consider and vote on the approval and adoption of the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. and the transactions that it contemplates; and
- To transact other business as may properly be presented at the meeting or any adjournments of the meeting.
The date, time and place of the meeting are as follows:
, 2001
a.m., local time
Renaissance Oklahoma City Hotel
Ten North Broadway
Oklahoma City, Oklahoma
Only stockholders of record at the close of business on , 2001, are entitled to notice of and to vote at the meeting and any adjournments of the meeting. Devon will keep at its offices in Oklahoma City, Oklahoma, a list of stockholders entitled to vote at the meeting available for inspection for any purpose relevant to the meeting during normal business hours for the 10 days before the meeting.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE IN ANY ONE OF THE FOLLOWING WAYS:
- USE THE TOLL-FREE TELEPHONE NUMBER SHOWN ON THE PROXY CARD;
- USE THE INTERNET WEBSITE SHOWN ON THE PROXY CARD; OR
- MARK, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE. IT REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
JANICE A. DOBBS
Corporate Secretary
Oklahoma City, Oklahoma
, 2001
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
Q: Why am I receiving these materials?
A: Devon and Mitchell have agreed to combine their businesses by merging Mitchell into a wholly owned subsidiary of Devon or, if that merger would not achieve the desired tax treatment described in this document, by using an alternate structure in which both Mitchell and Devon would become subsidiaries of a newly created holding company. The transaction cannot be completed without the approval of the stockholders of both Devon and Mitchell.
Q: What will happen to Mitchell as a result of the merger?
A: Mitchell will merge with and into a Devon subsidiary, and the Devon subsidiary will be the surviving company of the merger and a wholly owned subsidiary of Devon.
Q: What will Mitchell stockholders receive in the merger?
A: Each Mitchell stockholder, other than those exercising dissenters' rights, will receive $31.00 in cash and 0.585 of a share of Devon common stock for each share of Mitchell common stock that the stockholder owns at the effective time of the merger. Instead of issuing fractional shares, Devon will pay cash, without interest, for any fractional shares based on the average closing price for a share of Devon common stock on the American Stock Exchange on the five trading days immediately prior to the last business day before the date of the merger.
Q: What is the purpose of the alternate structure of the transaction described in this document?
A: The alternate structure eliminates the risk that Devon's stock price would prevent the issuance of tax opinions, the receipt of which are a condition to the transaction. One of the conditions to the merger is that Devon and Mitchell each must receive a satisfactory tax opinion from its own legal counsel regarding the U.S. federal income tax treatment of the merger. A decline in Devon's stock price could make it impossible for Devon or Mitchell to obtain those tax opinions under the original structure. Under those circumstances, the transaction would be completed using the alternate structure. The alternate structure ensures that the transaction can be completed even if tax opinions are unavailable under the original structure and that the transaction will be taxable to the extent that Mitchell stockholders receive cash for their shares of Mitchell common stock, but will otherwise be tax-free.
Q: Should stockholders send in their stock certificates now?
A: No. After the transaction is completed, stockholders will receive written instructions for exchanging their stock certificates. Please do not send in your stock certificates with your proxy.
Q: When do you expect the transaction to be completed?
A: We are working to complete the transaction as soon as possible. A number of conditions must be satisfied before we can complete the transaction, including approval of the stockholders of both Devon and Mitchell. Although we cannot be sure when all of the conditions to the transaction will be satisfied, we hope to complete the transaction in the fourth quarter of 2001.
Q: What do I need to do now?
A: You should carefully read this document. Then, if you choose to vote by proxy, you should do so as soon as possible by completing, signing and mailing your proxy card. Devon stockholders can also vote by proxy by either (1) using the toll-free telephone number listed on their proxy cards and following the recorded instructions or (2) going to the Internet website listed on their proxy cards and following the instructions provided.
Q: If I am planning on attending a meeting in person, should I still grant my proxy?
A: Yes. Whether or not you plan to attend a meeting, you should grant your proxy as described above. Your shares will not be voted if you neither attend a meeting and vote in person nor grant your proxy. This would have the same effect as a vote against approval of the merger agreement. Assuming a quorum is present, the failure of a Devon stockholder to vote in person or by proxy will not affect the outcome of the Devon vote with respect to the issuance of Devon common stock in the merger but will have the same effect as a vote against approval of the alternate merger structure.
Q: Can I change my vote after I have granted my proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the meeting by following the procedures set forth in this document under "The Special Meetings -- Voting Procedures -- Revocation."
Q: If my shares are held in "street name" by my broker, will my broker vote my shares for me?
A: No. Your broker will NOT vote your shares unless you tell the broker how to vote. To do so, you should follow the directions that your broker provides you.
Q: Am I entitled to dissenters' rights of appraisal?
A: Yes, but only if you are a Mitchell stockholder and you comply with the procedures described in this document under "The Merger -- Dissenters' Rights of Appraisal." Devon common stockholders are not entitled to dissenters' rights of appraisal in connection with the transaction.
Q: Whom do I call if I have further questions about voting, the meetings or the transaction?
A: Mitchell stockholders may call Mitchell's Investor Relations at (713) 377-6625.
Devon stockholders may call Devon's Investor Relations at (405) 552-4570.
TABLE OF CONTENTS
PAGE ---- SUMMARY..................................................... 1 The Companies............................................. 1 The Special Meetings...................................... 1 What Mitchell Stockholders Will Receive in the Merger..... 2 U.S. Federal Income Tax Consequences...................... 3 The Alternate Structure................................... 3 Directors and Senior Management of the Combined Company Following the Transaction.............................. 3 Market Prices of Devon and Mitchell Common Stock on Important Dates........................................ 3 Our Recommendations to Stockholders....................... 4 Mitchell's Reasons for the Merger......................... 4 Devon's Reasons for the Merger............................ 4 Interests of Mitchell's Executive Officers and Directors in the Transaction..................................... 4 Opinions of Financial Advisors............................ 5 The Merger Agreement...................................... 6 Agreements among Devon, George P. Mitchell and Cynthia Woods Mitchell......................................... 7 Comparative Rights of Mitchell and Devon Stockholders..... 7 Devon's Acquisition of Anderson........................... 7 Other Information......................................... 8 Selected Historical Financial Data of Devon............... 9 Selected Historical Financial Data of Mitchell............ 10 Selected Unaudited Pro Forma Combined Condensed Financial and Other Data......................................... 11 RISK FACTORS................................................ 15 We may not be able to integrate the operations of Devon, Mitchell and Anderson successfully..................... 15 The value of consideration to Mitchell stockholders in the transaction will decrease if the market value of Devon common stock decreases................................. 15 We expect to incur significant costs in connection with the merger and in connection with Devon's acquisition of Anderson............................................ 15 Mitchell's significant investment in the Barnett Shale in North Texas may not generate the benefits expected by Devon.................................................. 15 The combined company may not realize the accretion to various financial measurements that Devon expects to result from the merger and Devon's acquisition of Anderson............................................... 16 The combined company will have significant assets located in North Texas, which could heighten its exposure to regulatory and environmental issues.................... 16 The combined company's debt level may limit its financial flexibility............................................ 16 The combined company may not achieve the benefits that Devon expects from Anderson's properties located in Canada's Northern Frontier area if a sufficient gas pipeline is not built to serve that area............... 17 Devon's offshore operations are exposed to the risk of tropical weather disturbances.......................... 17 Devon is subject to uncertainties of foreign operations... 18 Devon is subject to federal acreage limitations and, as a result, may be required to reduce its acreage in Wyoming................................................ 18 Devon may incur a tax liability as a result of its 1999 merger with PennzEnergy................................ 18 Reported natural gas, oil and plant NGL reserve data and future net revenue estimates are uncertain............. 19 Product prices are volatile, and low prices can adversely impact results......................................... 19 Devon has, and Devon Holdco will have, charter and other provisions that may make it difficult for shareholders to replace incumbent directors and implement management changes................................................ 19 Devon may not succeed at divesting assets or may fail to do so on favorable terms............................... 20 |
PAGE ---- THE COMPANIES............................................... 21 Mitchell Energy & Development Corp........................ 21 Devon Energy Corporation.................................. 21 Anderson Exploration Ltd. ................................ 22 PROPERTIES OF THE COMBINED COMPANY.......................... 23 Primary Operating Areas................................... 24 Developed and Undeveloped Acreage......................... 28 COMPARATIVE PER SHARE DATA.................................. 29 MARKET PRICES AND DIVIDEND INFORMATION...................... 31 THE SPECIAL MEETINGS........................................ 33 Time, Place and Date...................................... 33 Purposes.................................................. 33 Quorum.................................................... 33 Record Date............................................... 33 Shares Entitled to Vote................................... 33 Recommendations of the Board of Directors................. 34 Votes Required............................................ 34 Shares Outstanding........................................ 35 Voting Procedures......................................... 35 Solicitation of Proxies................................... 37 Shares Held in Street Name................................ 38 Auditors.................................................. 38 THE MERGER.................................................. 39 Background of the Merger.................................. 39 Recommendation of Mitchell's Board of Directors and Reasons for the Merger................................. 42 Recommendation of Devon's Board of Directors and Reasons for the Merger......................................... 44 Opinions of Financial Advisors............................ 46 Interests of Mitchell's Executive Officers and Directors in the Transaction..................................... 67 Devon's Financing of the Merger........................... 69 Dissenters' Rights of Appraisal........................... 70 Regulatory Requirements................................... 72 THE MERGER AGREEMENT........................................ 73 Structure of the Merger................................... 73 When the Merger Becomes Effective......................... 73 Conversion of Stock, Stock Options and Other Awards....... 73 Exchange of Shares; Fractional Shares..................... 74 Conditions to the Merger.................................. 76 Representations and Warranties............................ 76 Covenants and Other Agreements............................ 78 Termination............................................... 82 Termination Fees and Expenses............................. 82 Amendment; Extension and Waiver........................... 83 The Alternate Structure................................... 83 AGREEMENTS AMONG DEVON, GEORGE P. MITCHELL AND CYNTHIA WOODS MITCHELL.................................................. 87 Principal Shareholders Agreement Containing a Voting Agreement and an Irrevocable Proxy..................... 87 Investor Rights Agreement................................. 88 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY.... 89 Directors................................................. 89 Executive Officers........................................ 91 |
PAGE ---- MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.................. 93 Tax Treatment of the Companies, Mitchell Stockholders and Devon Stockholders..................................... 93 Treatment of Cash Received by Mitchell Stockholders if the Merger is Consummated.................................. 94 Treatment of Cash Received by Mitchell Stockholders if the Alternate Structure Mergers are Consummated............ 95 Exercise of Dissenters' Rights of Appraisal by Mitchell Stockholders........................................... 95 Backup Withholding; Information Reporting................. 95 OWNERSHIP OF MITCHELL COMMON STOCK.......................... 96 COMPARISON OF THE RIGHTS OF MITCHELL AND DEVON STOCKHOLDERS.............................................. 97 Authorized Capital Stock.................................. 97 Size of Board of Directors................................ 98 Cumulative Voting......................................... 98 Classes of Directors...................................... 98 Removal of Directors...................................... 98 Vacancies on the Board of Directors....................... 99 Action by Written Consent................................. 99 Amendments to Charter..................................... 99 Amendments to Bylaws...................................... 100 Special Meetings of Stockholders.......................... 100 Vote on Extraordinary Corporate Transactions.............. 101 Inspection of Documents................................... 101 Dissenters' Rights of Appraisal........................... 102 State Anti-Takeover Statutes.............................. 103 Constituency Statute...................................... 103 Stockholder Rights Plan................................... 104 Special Voting Stock...................................... 104 Notice of Stockholder Proposals and Director Nominations............................................ 105 ADDITIONAL INFORMATION...................................... 106 Deadline for Future Stockholder Proposals................. 106 Legal Matters............................................. 106 Experts................................................... 106 Where You Can Find More Information....................... 107 Transfer Agents and Registrars............................ 109 Forward-Looking Statements................................ 109 COMMONLY USED OIL AND GAS TERMS............................. 111 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 113 INDEX TO HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF ANDERSON EXPLORATION LTD.................................. FS-1 ANNEXES Annex A: Amended and Restated Agreement and Plan of Merger.................................................... A-1 Annex B: Principal Shareholders Agreement Containing a Voting Agreement and Irrevocable Proxy (as Amended and Restated)..................................... B-1 Annex C: Amended and Restated Investor Rights Agreement.... C-1 Annex D: Opinion of Goldman, Sachs & Co. to Mitchell's Board of Directors................................ D-1 Annex E: Opinion of J.P. Morgan Securities Inc. to Mitchell's Board of Directors..................... E-1 Annex F: Opinion of UBS Warburg LLC to Devon's Board of Directors......................................... F-1 Annex G: Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act (Dissenters' Rights of Appraisal)........................................ G-1 Annex H: Devon Holdco Corporation Consolidated Balance Sheet.............................................. H-1 |
SUMMARY
This summary highlights some of the information in this document. It may not contain all of the information that is important to you. To understand the transaction fully and for a more complete description of the legal terms of the transaction, you should carefully read this document and the other documents to which we have referred you. See "Additional Information -- Where You Can Find More Information" for more details.
THE COMPANIES
Mitchell Energy & Development Corp.
2001 Timberloch Place -- P.O. Box 4000
The Woodlands, Texas 77387-4000
Telephone: (713) 377-5500
Mitchell is one of the largest producers of natural gas and natural gas liquids, or NGLs, in the United States. The company finds, develops and produces natural gas and oil, primarily in North Texas, East Texas and along the Texas Gulf Coast. Mitchell enhances the value of those assets through its gas-gathering, processing and marketing operations.
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Telephone: (405) 235-3611
Devon is an independent energy company engaged primarily in oil and natural gas exploration, development and production and in the acquisition of producing properties. Devon currently owns oil and natural gas properties concentrated in five operating divisions:
- the Permian/Mid-Continent, Rocky Mountain and Gulf Divisions, which include onshore properties in the continental United States and offshore properties primarily in the Gulf of Mexico;
- the Canadian Division, which includes properties in the Western Canadian Sedimentary Basin in Alberta and British Columbia and northern Canada; and
- the International Division, which includes properties in Azerbaijan, South America, Southeast Asia, Egypt and West Africa.
Devon Holdco Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Telephone: (405) 235-3611
Devon formed Devon Holdco Corporation on October 4, 2001 for the purpose of effecting the alternate structure that will be used to complete the transaction in the event that the tax opinions that are a condition to the transaction are not available under the original structure. Devon Holdco is wholly owned by Devon and has not engaged in any activity since its formation other than activities related to the transaction. Devon Holdco will not undertake any operation except as may be necessary to complete the transaction under the alternate structure. If the alternate structure must be used to complete the transaction, Devon Holdco common stock will be issued in the transaction instead of Devon common stock and Devon Holdco will change its name to Devon Energy Corporation and become a publicly traded holding company, with Mitchell and Devon being two of its subsidiaries.
In this document, we sometimes refer to the combined businesses of Devon, Mitchell and their respective subsidiaries as "we" or the "combined company." Unless the context otherwise indicates, when we refer to the "combined company" in this document we are including Anderson.
THE SPECIAL MEETINGS
MITCHELL SPECIAL MEETING
Where and when: The Mitchell meeting will take place at MND Learning Center, 2002 Timberloch Place, The Woodlands, Texas, on , 2001, at a.m., local time.
What you are being asked to vote on: At the Mitchell meeting, Mitchell stockholders will vote on the approval of the merger agreement. A vote to approve the merger agreement will constitute a vote in favor of both the merger and the merger involving Mitchell that is part of the alternate structure. Mitchell stockholders also may be asked to consider other matters as may properly come before the meeting. At the present time, Mitchell knows of no other matters that will be presented for consideration at the meeting.
Who may vote: You may vote at the Mitchell meeting if you owned Mitchell common
stock at
the close of business on the record date, , 2001. On that date, there were shares of Mitchell common stock outstanding and entitled to vote. You may cast one vote for each share of Mitchell common stock that you owned on that date.
What vote is needed: The affirmative vote, cast in person or by proxy, of the holders of at least two-thirds of the shares of Mitchell common stock outstanding on the record date is required for approval of the merger agreement.
DEVON SPECIAL MEETING
Where and when: The Devon meeting will take place at the Renaissance Oklahoma
City Hotel, Ten North Broadway, Oklahoma City, Oklahoma, on , 2001, at
a.m., local time.
What you are being asked to vote on: At the Devon meeting, Devon stockholders will vote on the approval and adoption of the merger agreement and the transactions that it contemplates. A vote to approve and adopt the merger agreement will constitute a vote in favor of both (1) the issuance of Devon common stock in the merger and (2) the alternate structure, including the merger involving Devon that would be effected under the alternate structure. Devon stockholders also may be asked to consider other matters as may properly come before the meeting. At the present time, Devon knows of no other matters that will be presented for consideration at the meeting.
Who may vote: You may vote at the Devon meeting if you owned Devon common stock or exchangeable shares issued by Devon's subsidiary, Northstar Energy Corporation, at the close of business on , 2001. On that date, there were shares of Devon voting stock outstanding and entitled to vote, consisting of shares of Devon common stock and Northstar exchangeable shares. Holders of Devon common stock and Northstar exchangeable shares will vote as a single class. You may cast one vote for each share of Devon common stock and one vote for each Northstar exchangeable share that you owned on that date.
Voting Northstar Exchangeable Shares: Each exchangeable share issued by Northstar is entitled to one vote at the Devon meeting through a voting agreement. Under the voting agreement, the trustee exercises voting rights on behalf of holders of the exchangeable shares. The trustee holds one share of special voting stock of Devon. The special voting share is entitled to one vote for each outstanding exchangeable share held by persons other than Devon. The trustee will vote only as instructed by the holders of exchangeable shares.
What vote is needed: The affirmative vote of the holders of at least a majority of the votes cast in person or by proxy by holders of Devon voting stock is required to approve the issuance of Devon common stock in the merger. The affirmative vote, cast in person or by proxy, of the holders of at least a majority of the shares of Devon common stock and Northstar exchangeable shares outstanding, voting as a single class, is required to approve the merger involving Devon under the alternate structure.
If the required vote to approve the issuance of Devon common stock in the merger is received but the required vote to approve the merger involving Devon under the alternate structure is not received, the transaction will still be completed using the original structure -- that is, the merger of Mitchell with and into a wholly owned subsidiary of Devon -- if all of the other conditions to the transaction are satisfied or waived, including delivery of the required tax opinions. Failure to receive the higher vote required to complete the transaction under the alternate structure would only mean that the parties could not complete the transaction under the alternate structure.
WHAT MITCHELL STOCKHOLDERS WILL RECEIVE IN THE MERGER
Each Mitchell stockholder, other than those exercising dissenters' rights, will receive $31.00 in cash and 0.585 of a share of Devon's common stock for each share of Mitchell common stock that the stockholder owns at the effective time of the merger. Instead of issuing fractional shares, Devon will pay cash, without interest, for any fractional shares based on the average closing price for a share of Devon common stock on the American Stock Exchange on the five trading days immediately prior to the last business day before the date of the merger. On a pro forma basis, assuming that the merger had occurred on June 30, 2001, this would have resulted in Devon paying approximately $1.5 billion in cash and
issuing approximately 29.2 million shares of its common stock to Mitchell stockholders.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The transaction has been structured so that, in general, Mitchell stockholders recognize gain for U.S. federal income tax purposes as a result of the transaction, only to the extent of the cash received for shares of Mitchell common stock, but otherwise will not recognize gain or loss. As a condition to the transaction, Mitchell and Devon must each receive a satisfactory opinion from its own legal counsel regarding the U.S. federal income tax treatment of the transaction.
Tax matters are very complicated. The tax consequences of the transaction to you will depend on your own situation. We urge that you consult your tax advisor for a full understanding of the U.S. federal, state, local and foreign tax consequences of the transaction to you.
THE ALTERNATE STRUCTURE
If the tax opinions that are required to complete the transaction are not available under the original structure -- that is, the merger of Mitchell into a wholly owned subsidiary of Devon -- then an alternate structure will be used to complete the transaction. Under this alternate structure, wholly owned subsidiaries of Devon Holdco Corporation, a wholly owned subsidiary of Devon, would be merged with and into Mitchell and Devon. As a result of those mergers, both Mitchell and Devon would become wholly owned subsidiaries of Devon Holdco, which would change its name to Devon Energy Corporation.
Each Mitchell stockholder, other than those exercising dissenters' rights, would receive $31.00 in cash and 0.585 of a share of Devon Holdco common stock for each share of Mitchell common stock that the stockholder owns at the effective time of merger involving Mitchell under the alternate structure. Each Devon common stockholder would receive one share of Devon Holdco common stock for each share of Devon common stock that the stockholder owns at the effective time of the merger involving Devon under the alternate structure. The merger agreement also requires the parties to take other actions, such as causing Devon Holdco's board of directors to be identical to Devon's board of directors, designed to ensure that the only material difference between the original structure and the alternate structure would be the corporate structure of the combined company.
The tax opinions that are a condition to the merger under the original structure will not be available if Devon's stock declines to the point that the value of the Devon stock issuable in the merger would constitute less than 40% of the value of the total consideration paid to the Mitchell stockholders. However, the necessary tax opinions would be available under the alternate structure regardless of Devon's stock price.
Devon and Mitchell are required to complete the transaction under the original structure, assuming that all of the other conditions to the transaction are satisfied or waived, unless the tax opinions required to complete the transaction are not available under the original structure. Mitchell and Devon expect that those tax opinions would be available under the original structure if Devon's stock price remains at the price it was as of the last trading day before the date of this proxy statement/prospectus.
DIRECTORS AND SENIOR MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE TRANSACTION
The board of directors of the combined company will consist of 10 directors: the nine members of Devon's current board of directors will retain their positions and one new member designated by Mitchell, J. Todd Mitchell, who is currently a member of Mitchell's board of directors, will be added to the board.
J. Larry Nichols, the Chairman, President and Chief Executive Officer of Devon, will be the Chairman, President and Chief Executive Officer of the combined company. The other members of Devon's executive staff will continue in their current capacities with the combined company. The combined company may select members of Mitchell's executive staff to augment its management team.
MARKET PRICES OF DEVON AND MITCHELL COMMON STOCK ON IMPORTANT DATES
Shares of Devon common stock are traded on the American Stock Exchange under the symbol "DVN" and shares of Mitchell common stock are traded on the New York Stock Exchange under the symbol "MND." The following table shows
the closing per share sales prices of Devon and Mitchell common stock on:
- August 13, 2001 -- the last full trading day before Devon and Mitchell announced the proposed transaction; and
- , 2001 -- the last full trading day before the date of this document.
DEVON MITCHELL DATE COMMON STOCK COMMON STOCK ---- ------------ ------------ August 13, 2001...... $50.26 $45.65 , 2001.... |
OUR RECOMMENDATIONS TO STOCKHOLDERS
TO MITCHELL STOCKHOLDERS:
Mitchell's board of directors has unanimously approved and adopted the merger agreement and determined that the merger agreement and the transactions that it contemplates are advisable and in the best interests of Mitchell and its stockholders. Accordingly, the board recommends that Mitchell stockholders vote to approve the merger agreement.
Approximately 46% of the outstanding shares of Mitchell common stock currently are held by Mitchell's directors, executive officers and their respective affiliates, all of whom Mitchell expects will vote their shares for approval of the merger agreement. George P. Mitchell, the Chairman and Chief Executive Officer of Mitchell, and his wife, Cynthia Woods Mitchell, have granted Devon an irrevocable proxy to vote their shares for approval of the merger agreement. Mr. and Mrs. Mitchell collectively beneficially own approximately 45% of the outstanding shares of Mitchell common stock, including 404,666 shares covered by outstanding options. Mr. Mitchell does not intend to exercise these options prior to the effective date of the transaction. Please refer to the section of this document entitled "Ownership of Mitchell Common Stock" for information as to the beneficial ownership of Mitchell's common stock by its management.
TO DEVON STOCKHOLDERS:
Devon's board of directors has unanimously approved and adopted the merger agreement and determined that the merger agreement and the transactions that it contemplates are advisable and in the best interests of Devon and its stockholders. Accordingly, the board recommends that Devon stockholders vote to approve and adopt the merger agreement and the transactions that it contemplates.
Less than 1% of Devon's outstanding voting shares currently are held by Devon's directors, executive officers and their affiliates, all of whom Devon expects will vote their shares for approval and adoption of the merger agreement.
MITCHELL'S REASONS FOR THE MERGER
Mitchell's board of directors considered various factors in approving and adopting the merger agreement and the transactions that it contemplates, including the merger consideration, the opinions of Mitchell's financial advisors, the tax consequences of the transaction and the other matters referred to under "The Merger -- Recommendation of Mitchell's Board of Directors and Reasons for the Merger."
DEVON'S REASONS FOR THE MERGER
Devon's board of directors considered various factors in approving and adopting the merger agreement and the transactions that it contemplates, including expected per share accretion in various financial measures on a pro forma basis, opportunities for increased production, marketing and transportation opportunities, the addition of significant midstream assets (which are facilities that transport oil and gas, and process gas for the removal of natural gas liquids, carbon dioxide or hydrogen sulfide and/or compress gas between producing properties and major oil or gas pipelines), expected benefits from improved technologies, increased size and the other matters referred to under "The Merger -- Recommendation of Devon's Board of Directors and Reasons for the Merger."
INTERESTS OF MITCHELL'S EXECUTIVE OFFICERS AND DIRECTORS IN THE TRANSACTION
Some of Mitchell's executive officers and directors have interests in the transaction that are different from yours:
- at the effective time of the transaction, J. Todd Mitchell, who is currently a member of Mitchell's board of directors, or an alternate Mitchell designee, will be appointed to the combined company's board of directors to serve until his
successor is elected and qualified or until his earlier resignation or removal;
- George P. Mitchell, who is currently the Chairman and Chief Executive Officer of Mitchell, and his wife, Cynthia Woods Mitchell, have entered into an agreement with Devon and Devon Holdco that, subject to a number of conditions, will provide them with rights to require Devon or Devon Holdco, as the case may be, to use its reasonable best efforts to register the resale of the shares of Devon or Devon Holdco common stock that they receive in the transaction. Also, Mr. and Mrs. Mitchell will be subject to legal and contractual restrictions on the resale of the shares of Devon or Devon Holdco common stock that they receive in the transaction not generally applicable to other Mitchell stockholders;
- all outstanding stock options and bonus units, including those held by Mitchell's executive officers, will fully vest at the effective time of the transaction and, if not exercised at that time, will be converted into fully vested options to purchase shares of Devon or Devon Holdco common stock and bonus units redeemable for cash based on the appreciation of Devon or Devon Holdco common stock, respectively, in each case subject to adjustment to reflect the value of the consideration paid by Devon or Devon Holdco in the transaction;
- after the transaction, some Mitchell executive officers may remain executive officers of the surviving corporation of the merger or may become officers of the combined company;
- Mitchell executive officers will be entitled to severance payments and enhanced pension benefits in the event that their employment ceases after the transaction;
- benefits of Mitchell's executive officers under their individual severance agreements cannot be reduced for 24 months following the transaction;
- benefits under Mitchell's non-qualified retirement plans held by some of Mitchell's executive officers will automatically be distributed as a lump sum into the Mitchell Energy & Development Corp. 1998 Mutual Fund Option Plan upon their retirement; and
- the merger agreement generally requires Devon or Devon Holdco, as the case may be, to honor Mitchell's existing employee benefit plans and commitments in accordance with their terms after the transaction.
Mitchell's directors and executive officers beneficially owned approximately 47% of the outstanding shares of Mitchell common stock as of August 13, 2001, including shares covered by outstanding options. Devon's directors and executive officers did not beneficially own any shares of Mitchell common stock as of that date.
The boards of directors of both companies were aware of these interests and considered them in approving the merger agreement and the transactions that it contemplates.
OPINIONS OF FINANCIAL ADVISORS
The opinions of Mitchell's and Devon's financial advisors are attached as Annexes D, E and F. We encourage you to read those opinions carefully, as well as the descriptions of the analyses and assumptions on which the opinions were based in the "The Merger -- Opinions of Financial Advisors" section of this document. Each opinion is directed to the applicable company's board of directors and does not constitute a recommendation to any stockholder as to any matter relating to the transaction.
OPINIONS OF MITCHELL'S FINANCIAL ADVISORS
On August 13, 2001, Goldman, Sachs & Co. and J.P. Morgan Securities Inc., Mitchell's financial advisors, each delivered its opinion to Mitchell's board of directors to the effect that, as of the date of its opinion and subject to the matters and assumptions set forth in the opinion, the consideration to be received by the holders of Mitchell common stock in the merger was fair from a financial point of view to the holders.
At the request of Mitchell's board of directors, JPMorgan delivered its updated opinion dated as of September 7, 2001, to the effect that, as of the date of its opinion and subject to the matters and assumptions set forth in the opinion, the consideration to be received by the holders of Mitchell common stock in the merger was fair from a financial point of view to the holders. JPMorgan's updated opinion took into account Devon's acquisition of Anderson. Mitchell's board of directors did not request, however, that Goldman Sachs update its analysis or opinion to
take into account Devon's acquisition of Anderson because of the board's view that one updated opinion would suffice.
OPINION OF DEVON'S FINANCIAL ADVISOR
UBS Warburg LLC, Devon's financial advisor, delivered its opinion to Devon's board of directors on August 13, 2001 to the effect that, as of the date of its opinion and subject to the matters and assumptions set forth in the opinion, the consideration to be paid by Devon in connection with the merger was fair from a financial point of view to Devon. This opinion did not take into account Devon's subsequent acquisition of Anderson.
THE MERGER AGREEMENT
The merger agreement is attached as Annex A. We encourage you to read the merger agreement because it is the legal document that governs the transaction.
WHAT WE NEED TO DO TO COMPLETE THE MERGER
Devon and Mitchell will complete the merger only if the conditions set forth in the merger agreement are satisfied or, in some cases, waived. These conditions are:
- approval by Mitchell's stockholders of the merger agreement;
- approval by Devon's stockholders of the issuance of Devon common stock in the merger;
- the expiration of applicable antitrust waiting periods or the receipt of necessary antitrust approvals;
- the absence of legal prohibitions to the merger;
- the continued effectiveness of the registration statement of which this document is a part;
- the approval for listing on the American Stock Exchange of the shares of Devon common stock to be issued in the merger;
- the continued accuracy of each company's representations and warranties;
- the performance by each company of its obligations under the merger agreement; and
- the receipt of legal opinions from counsel for each company as to the treatment of the merger for U.S. federal income tax purposes. Either Devon or Mitchell may choose to complete the merger even though a condition to that company's obligation has not been satisfied if the necessary stockholder approvals have been obtained and the law allows the company to do so.
TERMINATION OF THE MERGER AGREEMENT
Devon and Mitchell can agree to terminate the merger agreement at any time without completing the transaction, even after stockholder approval. In addition, either company can terminate the merger agreement on its own without completing the transaction if:
- the transaction is not completed by March 13, 2002, other than due to a breach of the merger agreement by the terminating party;
- the necessary approval of the stockholders of the other company is not obtained at their meeting and 20 days have passed since that meeting;
- any legal prohibition to completing the transaction has become final and non-appealable; or
- the other company materially breaches the merger agreement and cannot or does not correct the breach within a 30-day cure period.
Devon can terminate the merger agreement if Mitchell's board of directors:
- withdraws, modifies or changes, in a manner adverse to Devon, its approval or recommendation of the merger; or
- recommends approval of a proposed business transaction with a third party that conflicts with the merger.
Mitchell can terminate the merger agreement if Devon's board of directors withdraws, modifies or changes, in a manner adverse to Mitchell, its approval or recommendation of the merger.
TERMINATION FEES AND EXPENSES
If the merger agreement is terminated under circumstances involving a
proposed business transaction between either Mitchell or Devon and a third party
that conflicts with the merger and certain other conditions are satisfied,
either Mitchell will be required to pay Devon (if Mitchell received the proposal
from the third party) or Devon will be required to pay Mitchell (if Devon
received the proposal from the third
party) a $100 million termination fee and, in addition, reimburse the other party for all expenses incurred by the other party in connection with the merger agreement up to $10 million.
NO SOLICITATION BY MITCHELL
Mitchell has generally agreed not to initiate or continue any discussions with another party regarding a business combination while the merger is pending or to engage in any such discussions unless required by fiduciary obligations under applicable law.
AGREEMENTS AMONG DEVON, GEORGE P. MITCHELL AND CYNTHIA WOODS MITCHELL
George P. Mitchell and Cynthia Woods Mitchell entered into two agreements, discussed in the following paragraphs, with Devon and Devon Holdco in connection with the transaction. They collectively beneficially own approximately 45% of the outstanding shares of Mitchell common stock, including 404,666 shares covered by outstanding options. George P. Mitchell is the Chairman and Chief Executive Officer of Mitchell. Cynthia Woods Mitchell is his wife.
PRINCIPAL SHAREHOLDERS AGREEMENT CONTAINING A VOTING AGREEMENT AND AN
IRREVOCABLE PROXY
The principal shareholders agreement was entered into as an inducement to Devon to enter into the merger agreement and as a condition to Devon's willingness to do so. Under that agreement, Mr. and Mrs. Mitchell, as well as a family partnership to which the Mitchells recently contributed 600,000 shares of Mitchell common stock have:
- agreed for two years to vote all of the shares of Mitchell common stock beneficially owned by them in favor of the approval of the merger agreement and, generally, against any proposal inconsistent with the merger, including a competing transaction; and
- granted Devon an irrevocable proxy to vote their shares of Mitchell common stock in accordance with the agreement.
The principal shareholders agreement cannot be terminated by Mr. and Mrs. Mitchell unless the merger agreement is (1) terminated by Devon or (2) terminated by Mitchell because any of the conditions to its obligation to complete the merger is not and cannot be satisfied, other than the condition that the merger agreement be approved by the required vote of Mitchell stockholders. Together with the termination fees provided for in the merger agreement, the principal shareholders agreement may have the effect of discouraging a third party from proposing a competing transaction, including one that might be more favorable than the merger to Mitchell stockholders.
INVESTOR RIGHTS AGREEMENT
The investor rights agreement contains restrictions on Mr. and Mrs. Mitchell's ability to sell or otherwise dispose of the Devon common stock that they will receive in the merger or the Devon Holdco common stock that they will receive if the alternate structure is used. It also requires Devon to use reasonable best efforts to register the resale of those shares at the request of Mr. and Mrs. Mitchell, subject to some limitations.
COMPARATIVE RIGHTS OF MITCHELL AND DEVON STOCKHOLDERS
Some of the rights of a Mitchell stockholder are different from the rights of a Devon stockholder. One of the most important differences is that Devon has a stockholder rights plan that may discourage unwelcome or hostile takeover attempts. Mitchell has no such plan. Another difference is that Devon's board of directors is divided into three classes, with only one class elected each year. In contrast, Mitchell's entire board of directors stands for election every year. If the alternate structure is used to complete the transaction, the rights of a stockholder of Devon Holdco will be substantially identical to the rights of a Devon stockholder. See "Comparison of the Rights of Mitchell and Devon Stockholders" for more information concerning the comparative rights of Mitchell and Devon stockholders.
DEVON'S ACQUISITION OF ANDERSON
On August 31, 2001, Devon entered into an agreement to acquire Anderson Exploration Ltd., a Canadian-based independent oil and natural gas producer engaged in oil and natural gas exploration, acquisition, development and production in western and northern Canada. On October 17, 2001, Devon completed its acquisition of Anderson. The cost to Devon of acquiring Anderson's outstanding common shares and paying for the
intrinsic value of Anderson's outstanding options and appreciation rights was about U.S.$3.5 billion.
Devon financed the Anderson acquisition with (1) $0.5 billion of borrowings under a $3.0 billion senior unsecured credit facility that Devon entered into on October 12, 2001 and (2) the proceeds from the issuance on October 3, 2001 of $3.0 billion of debt securities of Devon Financing Corporation, U.L.C., an indirect wholly owned subsidiary of Devon. Devon fully and unconditionally guaranteed the obligations of Devon Financing Corporation, U.L.C. under those debt securities. See "The Merger -- Devon's Financing of the Merger" for more information regarding the terms of that credit facility and those debt securities.
OTHER INFORMATION
ANTITRUST CLEARANCE REQUIRED TO COMPLETE THE TRANSACTION
The transaction is subject to antitrust laws. We have made the required filings with the Department of Justice and the Federal Trade Commission relating to the original merger structure. On September 24, 2001, the Federal Trade Commission granted early termination of the waiting period in connection with those filings. On October , 2001 we made the required filings with the Department of Justice and the Federal Trade Commission relating to the alternate structure. Although we do not expect the federal or any state government to attempt to stop the transaction, we cannot assure you that they will not try to do so.
DEVON'S FINANCING OF THE MERGER
Devon intends to finance the cash portion of the merger consideration with borrowings under its $3.0 billion senior unsecured credit facility entered into on October 12, 2001. See "The Merger -- Devon's Financing of the Merger." Devon's obligation to complete the transaction is not subject to any financing contingency.
LISTING OF COMMON STOCK TO BE ISSUED IN THE TRANSACTION
Devon expects to obtain approval to list on the American Stock Exchange the additional shares of Devon common stock to be issued in the merger. Devon also expects to obtain approval to list on the American Stock Exchange the shares of Devon Holdco common stock that will be issued if the alternate structure must be used to complete the transaction.
DISSENTERS' RIGHTS OF APPRAISAL
Mitchell stockholders are entitled to exercise dissenters' rights of appraisal in connection with the transaction in accordance with Texas law. Devon stockholders are not entitled to dissenters' rights of appraisal in connection with the transaction. Holders of Devon's 6.49% cumulative preferred stock, Series A, will be entitled to dissenters' rights of appraisal if the alternate structure must be used to complete the transaction. See "The Merger -- Dissenters' Rights of Appraisal" for more information regarding the dissenters' rights of Mitchell and Devon stockholders.
ACCOUNTING TREATMENT
Devon will account for the transaction using the purchase method of accounting. Under that method of accounting, the aggregate consideration that Devon or Devon Holdco, as the case may be, pays to Mitchell stockholders will be allocated to Mitchell's assets and liabilities based on their fair values, with any excess being treated as goodwill.
SELECTED HISTORICAL FINANCIAL DATA OF DEVON
Devon is providing the following information to aid in your analysis of the
financial aspects of the merger. Devon derived this information from audited
financial statements for the years 1996 through 2000 and from unaudited
financial statements for the six months ended June 30, 2000 and 2001. In the
opinion of Devon's management, the unaudited interim information reflects all
adjustments, consisting only of normal and recurring adjustments, necessary for
a fair presentation of Devon's results of operations and financial condition for
the six months ended June 30, 2000 and 2001. Results for interim periods should
not be considered indicative of results for any other periods or for the year.
This information is only a summary. You should read it along with Devon's
historical financial statements and related notes and the section titled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in Devon's annual reports, quarterly reports and other
information on file with the Securities and Exchange Commission and incorporated
by reference into this document. See "Additional Information -- Where You Can
Find More Information."
DEVON ------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------------- ----------------------- 1996 1997 1998 1999 2000 2000 2001 -------- ---------- --------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) SELECTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS DATA: Oil, gas and NGL revenue......... $833,787 $ 966,268 $ 681,978 $1,256,872 $2,718,445 $1,184,128 $1,721,035 Other revenue.................... 36,470 48,255 24,248 20,596 65,658 24,772 27,714 -------- ---------- --------- ---------- ---------- ---------- ---------- Total revenue............ $870,257 $1,014,523 $ 706,226 $1,277,468 $2,784,103 $1,208,900 $1,748,749 ======== ========== ========= ========== ========== ========== ========== Earnings (loss) before extraordinary item and cumulative effect of change in accounting principle........... $157,003 $ (218,191) $(235,885) $ (149,944) $ 730,342 $ 258,521 $ 487,205 Extraordinary item............... (6,000) -- -- (4,200) -- -- -- Cumulative effect of change in accounting principle........... -- -- -- -- -- -- 49,452 -------- ---------- --------- ---------- ---------- ---------- ---------- Net earnings (loss).............. $151,003 $ (218,191) $(235,885) $ (154,144) $ 730,342 $ 258,521 $ 536,657 ======== ========== ========= ========== ========== ========== ========== Net earnings (loss) per share -- basic: Earnings (loss) before extraordinary item and cumulative effect of change in accounting principle........... $ 2.08 $ (3.35) $ (3.32) $ (1.64) $ 5.66 $ 2.00 $ 3.73 Extraordinary item............... (0.11) -- -- (0.04) -- -- -- Cumulative effect of change in accounting principle........... -- -- -- -- -- -- 0.38 -------- ---------- --------- ---------- ---------- ---------- ---------- Net earnings (loss).............. $ 1.97 $ (3.35) $ (3.32) $ (1.68) $ 5.66 $ 2.00 $ 4.11 ======== ========== ========= ========== ========== ========== ========== Net earnings (loss) per share -- diluted: Earnings (loss) before extraordinary item and cumulative effect of change in accounting principle........... $ 2.03 $ (3.35) $ (3.32) $ (1.64) $ 5.50 $ 1.97 $ 3.59 Extraordinary item............... (0.11) -- -- (0.04) -- -- -- Cumulative effect of change in accounting principle........... -- -- -- -- -- -- 0.37 -------- ---------- --------- ---------- ---------- ---------- ---------- Net earnings (loss).............. $ 1.92 $ (3.35) $ (3.32) $ (1.68) $ 5.50 $ 1.97 $ 3.96 ======== ========== ========= ========== ========== ========== ========== Cash dividends per share......... $ 0.09 $ 0.09 $ 0.10 $ 0.14 $ 0.17 $ 0.07 $ 0.10 ======== ========== ========= ========== ========== ========== ========== |
AS OF DECEMBER 31, -------------------------------------------------------------- AS OF JUNE 30, 1996 1997 1998 1999 2000 2001 ---------- ---------- ---------- ---------- ---------- -------------- (IN THOUSANDS) SELECTED HISTORICAL CONSOLIDATED BALANCE SHEET DATA: Investment in common stock of Chevron Corporation.................... $ -- $ -- $ -- $ 614,382 $ 598,867 $ 641,865 Total assets............................. 2,241,890 1,965,386 1,930,537 6,096,360 6,860,478 7,804,038 Debentures exchangeable into shares of Chevron Corporation common stock....... -- -- -- 760,313 760,313 642,329 Other long-term debt..................... 361,500 427,037 735,871 1,656,208 1,288,523 1,438,819 Convertible preferred securities of subsidiary trust....................... 149,500 149,500 149,500 -- -- -- Stockholders' equity..................... 1,159,772 1,006,546 749,763 2,521,320 3,277,604 3,857,241 |
SELECTED HISTORICAL FINANCIAL DATA OF MITCHELL
Mitchell is providing the following information to aid in your analysis of
the financial aspects of the merger. Mitchell derived this information from
audited financial statements for the periods 1996 through 2000 and from
unaudited financial statements for the six months ended June 30, 2000 and 2001.
In the opinion of Mitchell's management, the unaudited interim information
reflects all adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of Mitchell's results of operations and
financial condition for the six months ended June 30, 2000 and 2001. Results for
interim periods should not be considered indicative of results for any other
periods or for the year.
This information is only a summary. You should read it along with
Mitchell's historical financial statements and related notes and the section
titled "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in Mitchell's annual reports, quarterly reports and
other information on file with the Securities and Exchange Commission and
incorporated by reference into this document. See "Additional
Information -- Where You Can Find More Information."
MITCHELL ----------------------------------------------------------------------------------- ELEVEN MONTHS SIX MONTHS ENDED ENDED YEAR ENDED DECEMBER 31, JUNE 30, DECEMBER 31, ------------------------------------------- --------------------- 1996(1) 1997 1998 1999 2000 2000 2001 ------------- -------- -------- -------- ---------- -------- ---------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) SELECTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS DATA: Exploration and production revenue......................... $236,177 $273,953 $227,440 $265,888 $ 531,228 $195,659 $ 423,277 Gas services revenue.............. 570,050 536,791 492,820 628,468 1,140,906 479,612 717,913 -------- -------- -------- -------- ---------- -------- ---------- Total revenue............. $806,227 $810,744 $720,260 $894,356 $1,672,134 $675,271 $1,141,190 ======== ======== ======== ======== ========== ======== ========== Earnings (loss) from continuing operations...................... $ 76,219 $ 44,291 $(32,854) $ 67,334 $ 257,146 $ 87,421 $ 200,952 Discontinued operations........... 15,757 (58,515) 3,250 -- -- -- -- Extraordinary item................ -- (13,250) -- -- -- -- -- -------- -------- -------- -------- ---------- -------- ---------- Net earnings (loss)............... $ 91,976 $(27,474) $(29,604) $ 67,334 $ 257,146 $ 87,421 $ 200,952 ======== ======== ======== ======== ========== ======== ========== Net earnings (loss) per share -- basic: From continuing operations........ $ 1.47 $ 0.87 $ (0.67) $ 1.37 $ 5.22 $ 1.78 $ 4.03 Discontinued operations........... 0.30 (1.15) 0.07 -- -- -- -- Extraordinary item................ -- (0.26) -- -- -- -- -- -------- -------- -------- -------- ---------- -------- ---------- Net earnings (loss)............... $ 1.77 $ (0.54) $ (0.60) $ 1.37 $ 5.22 $ 1.78 $ 4.03 ======== ======== ======== ======== ========== ======== ========== Net earnings (loss) per share -- diluted: From continuing operations........ $ 1.47 $ 0.87 $ (0.67) $ 1.37 $ 5.13 $ 1.76 $ 3.95 Discontinued operations........... 0.30 (1.15) 0.07 -- -- -- -- Extraordinary item................ -- (0.26) -- -- -- -- -- -------- -------- -------- -------- ---------- -------- ---------- Net earnings (loss)............... $ 1.77 $ (0.54) $ (0.60) $ 1.37 $ 5.13 $ 1.76 $ 3.95 ======== ======== ======== ======== ========== ======== ========== Cash dividends per share: Combined........................ $ N/A $ N/A $ N/A $ N/A $ 0.2650 $ N/A $ 0.2650 Class A......................... 0.4800 0.7200 0.4800 0.4800 0.5025 0.5025 N/A Class B......................... 0.5300 0.7950 0.5300 0.5300 0.5150 0.5150 N/A |
AS OF DECEMBER 31, -------------------------------------------------------------- AS OF 1996 1997 1998 1999 2000 JUNE 30, 2001 ---------- ---------- ---------- ---------- ---------- ------------- (IN THOUSANDS) SELECTED HISTORICAL CONSOLIDATED BALANCE SHEET DATA: Total assets............................. $1,691,271 $1,273,959 $1,163,415 $1,163,679 $1,519,765 $1,731,587 Long-term debt, including current maturities............................. 730,000 414,267 472,767 379,267 300,342 273,775 Stockholders' equity..................... 543,812 412,005 341,282 385,174 620,186 811,525 |
(1) In 2000, Mitchell changed its fiscal year end from January 31 to December
31. Operating results related to the calendar years ended December 31, 1997,
1998 and 1999 were recast from the previously reported results ending on
January 31. To make this transition, it was necessary to have an
eleven-month transition reporting period ended December 31, 1996.
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL AND OTHER DATA
The following describes the pro forma effect of the transaction and the Anderson acquisition on (1) the statements of operations data of Devon, Anderson and Mitchell for the year ended December 31, 2000 and the six months ended June 30, 2001 and (2) the balance sheet data of Devon, Anderson and Mitchell as of June 30, 2001. The following data assumes that Devon's merger with Mitchell and its acquisition of Anderson had both occurred as of the dates indicated. If the alternate structure must be used to complete the transaction, the combined company's pro forma data would be substantially identical to the following data.
This information is only a summary. You should read the unaudited pro forma combined financial information and the accompanying notes that are included in this document. You should also read the historical information and related notes of Devon and Mitchell that are incorporated by reference into this document. You should also read the historical consolidated financial statements and related notes of Anderson that are included elsewhere in this document.
We are providing the unaudited pro forma combined condensed financial and other information for informational purposes only. It does not purport to represent what the financial position and results of operations of the combined company would actually have been had the merger, the Anderson acquisition and other pro forma adjustments in fact occurred at the dates indicated. It also does not purport to represent the future results that the combined company will achieve after the merger and the Anderson acquisition.
The unaudited pro forma combined condensed balance sheet data and the unaudited pro forma combined condensed statements of operations data show the estimated effects of the merger and the Anderson acquisition as if they had occurred on June 30, 2001 and January 1, 2000, respectively.
Anderson's historical financial information is prepared in accordance with accounting standards generally accepted in Canada, and is presented in Canadian dollars. Anderson's historical volumetric production data is prepared in accordance with the Canadian convention whereby such production data is shown before applicable royalty deductions. Also, Anderson's fiscal year ends on September 30, as opposed to Devon's year-end of December 31. For purposes of providing the pro forma effect of the Anderson acquisition on Devon's financial condition and results of operations, the following adjustments were made to Anderson's historical financial data:
- Anderson's historical results for the year ended September 30, 2000 were converted to results for the year ended December 31, 2000. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 1999 and adding its historical interim results for the three months ended December 31, 2000. Anderson's historical results for the nine months ended June 30, 2001 were converted to results for the six months ended June 30, 2001. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 2000.
- Anderson's balance sheet data as of June 30, 2001, and its results of operations for the year ended December 31, 2000 and the six months ended June 30, 2001, were converted to accounting principles generally accepted in the United States, including the full cost method of accounting for oil and gas properties. Such information was also converted to U.S. dollars using the appropriate exchange rates.
- Anderson's historical volumetric production data was converted to the U.S. convention whereby such production data is shown after applicable royalty deductions.
We prepared the pro forma information based on the following:
- Devon uses the full cost method of accounting for its oil and gas activities, while Mitchell uses the successful efforts method. Pro forma adjustments have been made to estimate the effect of converting Mitchell's successful efforts method to Devon's full cost method.
- Devon will account for the merger and accounted for the Anderson acquisition using the purchase method of accounting.
- In the six-month period ended June 30, 2001, Devon recognized a $49.5 million after-tax gain from the cumulative effect of a change in accounting principle. This related to Devon's adoption, as of January 1, 2001, of a new accounting principle related to accounting for derivative financial instruments. The $49.5 million gain is not included in the summary unaudited pro forma combined statements of operations for the six months ended June 30, 2001.
- We have not reflected as an adjustment to the historical data annual cost savings of approximately $20 million and $25 million that Devon expects to result from the elimination of duplicate expenses after the merger and the Anderson acquisition, respectively.
- In June 2000, Anderson sold its 50% interest in a pipeline transportation company. For the year ended December 31, 2000, Anderson recognized earnings from discontinued operations, net of tax, of $44.2 million. This gain is not included in the summary unaudited pro forma combined statements of operations for the year ended December 31, 2000.
No pro forma adjustments have been made with respect to the following unusual items. These items are reflected in the historical results of Devon, Anderson or Mitchell, as applicable, and should be considered when making period-to-period comparisons:
- In 2000, Devon recognized $60.4 million of expenses related to its merger with Santa Fe Snyder Corporation. Devon accounted for the Santa Fe Snyder merger using the pooling-of-interests method of accounting and, therefore, the expenses incurred related to the merger were expensed. The after-tax effect of these expenses in 2000 was $37.2 million.
- In 2000, Mitchell realized income tax savings of $12.8 million related to prior years' Section 29 tax credits and $6.3 million related to the reversal of prior years' deferred income taxes.
- In 2000, Mitchell recognized a $4.9 million gain from the exchange of certain
gas services assets. Also in 2000, Mitchell recognized a $10.8 million
impairment expense related to other gas services assets. Net of tax, these two
events reduced Mitchell's 2000 net earnings by $3.8 million.
- On May 17, 2000, Anderson acquired all of the outstanding shares of Ulster
Petroleums Ltd. The summary unaudited pro forma combined statements of
operations do not include any results from Ulster's operations prior to May
17, 2000.
- On February 12, 2001, Anderson acquired all of the outstanding shares of Numac Energy Inc. The summary unaudited pro forma combined statements of operations do not include any results from Numac's operations prior to February 12, 2001.
- During the second quarter of 2001, Devon elected to discontinue operations in Malaysia, Qatar and on certain properties in Brazil. Accordingly, during the second quarter of 2001, Devon recorded a $76.9 million charge associated with the impairment of those properties. The after-tax effect of this reduction was $62.1 million.
- Mitchell has incentive compensation plans pursuant to which it has periodically issued awards referred to as "bonus units" under which employees can earn compensation based on increases in the market price of Mitchell common stock. Mitchell generally awards these bonus units in lieu of stock option grants. Pro forma general and administrative expenses reported in the accompanying unaudited pro forma statements of operations for the year 2000 include $21.3 million of expense related to these plans, while pro forma general and administrative expenses for the first six months of 2001 include a credit in the amount of $4.1 million related to these plans. After taxes, these plans had the effect of decreasing 2000 unaudited pro forma net earnings by $13.8 million and increasing net earnings for the first half of 2001 by $2.7 million. Devon will not issue bonus units after the merger.
- Devon's historical results of operations for the year 2000 and the first half of 2001 include $41.3 million and $16.9 million, respectively, of amortization expense for goodwill related to previous mergers. As of January 1, 2002, in accordance with new accounting pronouncements recently issued, this goodwill will cease to
be amortized and, instead, will be tested for impairment at least annually. No goodwill amortization expense has been recognized in the pro forma statements of operations for the goodwill related to the merger and the Anderson acquisition.
COMBINED COMPANY PRO FORMA ------------------------------------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 2000 JUNE 30, 2001 -------------------- ------------------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Operating Results: Oil, gas and NGL sales.................................... $ 4,247,880 $ 2,922,331 Gas services revenue...................................... 1,201,866 756,412 Other revenue............................................. 47,451 18,378 ----------- ----------- Total revenue...................................... 5,497,197 3,697,121 ----------- ----------- Lease operating expenses.................................. 639,954 377,370 Transportation costs...................................... 118,835 75,007 Production taxes.......................................... 128,420 95,396 Gas services costs and expenses........................... 984,092 672,098 Depreciation, depletion and amortization of property and equipment............................................... 1,214,481 669,445 Amortization of goodwill.................................. 41,332 16,923 General and administrative expenses....................... 205,291 92,296 Expenses related to previous mergers...................... 60,373 -- Interest expense.......................................... 548,320 268,788 Deferred effect of changes in foreign currency exchange rate on subsidiary's long-term debt..................... 3,168 (5,699) Change in fair value of derivative instruments............ -- 19,292 Reduction of carrying value of oil and gas properties..... -- 76,942 ----------- ----------- Total costs and expenses........................... 3,944,266 2,357,858 ----------- ----------- Earnings before income taxes.............................. 1,552,931 1,339,263 Income tax expense: Current................................................. 161,476 188,061 Deferred................................................ 391,940 324,517 ----------- ----------- Total income tax expense........................... 553,416 512,578 ----------- ----------- Net earnings before cumulative effect of change in accounting principle.................................... 999,515 826,685 Preferred stock dividends................................. 9,735 4,868 ----------- ----------- Net earnings applicable to common stockholders............ $ 989,780 $ 821,817 =========== =========== Net earnings per share: Basic..................................................... $ 6.33 $ 5.19 Diluted................................................... 6.17 5.00 Cash dividends per share.................................... 0.18 0.10 Weighted average common shares outstanding: Basic..................................................... 156,256 158,420 Diluted................................................... 161,029 165,182 CASH FLOW DATA: Net cash provided by operating activities................... $ 2,423,725 $ 2,010,175 Net cash used in investing activities....................... (7,753,377) (2,177,060) Net cash provided by financing activities................... 5,028,484 336,501 OTHER DATA: Modified EBITDA(1)(3)....................................... $ 3,360,232 $ 2,384,954 Cash margin(2)(3)........................................... 2,650,436 1,928,105 PRODUCTION, PRICE AND OTHER DATA: Production: Oil (MBbls)............................................... 53,907 28,535 Gas (MMcf)................................................ 708,112 392,403 NGLs (MBbls).............................................. 16,168 7,967 MBoe...................................................... 188,094 101,902 |
COMBINED COMPANY PRO FORMA ------------------------------------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 2000 JUNE 30, 2001 -------------------- ------------------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) Average prices: Oil (per Bbl)............................................. $ 25.68 $ 23.13 Gas (per Mcf)............................................. 3.56 5.32 NGLs (per Bbl)............................................ 21.15 21.90 Per Boe................................................... 22.58 28.68 Costs per Boe: Operating costs........................................... $ 4.72 $ 5.38 Depreciation, depletion and amortization of full-cost oil and gas properties...................................... 5.86 6.00 General and administrative expenses....................... 1.09 0.91 |
COMBINED COMPANY PRO FORMA AS OF JUNE 30, 2001 -------------------------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) BALANCE SHEET DATA: Investment in common stock of Chevron Corporation........... $ 641,865 Total assets................................................ 19,047,671 Debentures exchangeable into shares of Chevron Corporation common stock.............................................. 642,329 Other long-term debt, including current maturities.......... 7,898,499 Stockholders' equity........................................ 5,421,267 Book value per share........................................ 34.17 |
(1) Modified EBITDA represents earnings before interest (including the deferred effect of changes in foreign currency exchange rate on a subsidiary's long-term debt), taxes, depreciation, depletion and amortization, reduction of carrying value of oil and gas properties and change in fair value of derivative instruments.
(2) Cash margin represents total revenue less cash expenses. Cash expenses are all expenses other than the non-cash expenses of depreciation, depletion and amortization, deferred effect of changes in foreign currency exchange rate on a subsidiary's long-term debt, reduction of carrying value of oil and gas properties, deferred income tax expense and change in fair value of derivative instruments. We use cash margin to measure the net cash that is generated by our operations during a given period, without regard to the period in which the cash is actually physically received or spent by us. Cash margin ignores the non-operational effect on our "net cash provided by operating activities," as measured by accounting principles generally accepted in the United States of America, from our activities as an operator of oil and gas wells and gas services facilities. Those activities produce net increases or decreases in temporary cash funds held by us that have no effect on our net earnings.
(3) Modified EBITDA is presented because it is a commonly used measurement in the oil and gas industry as a financial indicator of a company's ability to service or incur debt. Cash margin is presented because it is a commonly used measurement in the oil and gas industry as a financial indicator of a company's ability to fund capital expenditures or service debt. Modified EBITDA and cash margin are also presented because investors routinely request this information. Managements of Devon and Mitchell use modified EBITDA and cash margin as supplemental financial measurements in the evaluation of their businesses and interpret the trends of modified EBITDA and cash margin in a similar manner as trends in net earnings.
Neither modified EBITDA nor cash margin is a measurement of financial performance under generally accepted accounting principles. Accordingly, neither should be considered as an alternative to net cash provided by operating activities, as a measure of liquidity or as an alternative to net income as indicators of operating performance or any other measure of performance derived in accordance with accounting principles generally accepted in the United States of America. There may be operational or financial demands and requirements that reduce management's discretion over the use of modified EBITDA and cash margin. Modified EBITDA and cash margin may not be comparable to similarly titled measures used by other companies.
RISK FACTORS
You should consider carefully the following risk factors before deciding how to vote.
WE MAY NOT BE ABLE TO INTEGRATE THE OPERATIONS OF DEVON, MITCHELL AND ANDERSON SUCCESSFULLY
The merger will present challenges to management, including the integration of the operations, technologies and personnel of Devon and Mitchell. For example, the addition of Mitchell will substantially increase the midstream (i.e., gas processing and similar activities) business of Devon. Devon's acquisition of Anderson presents similar integration challenges, significantly increasing Devon's Canadian operations. Moreover, the simultaneous integration of Devon, Mitchell and Anderson into one combined company will necessarily involve more risk than if only two companies were being integrated. The merger and Devon's acquisition of Anderson will also include other risks commonly associated with similar transactions, including unanticipated liabilities, unanticipated costs and diversion of management's attention. Any difficulties that we encounter in the transition and integration processes could have an adverse effect on the revenue, level of expenses and operating results of the combined company. The combined company may also experience operational interruptions or the loss of key employees, customers or suppliers. As a result, we may not realize any of the anticipated benefits of the merger and Devon's acquisition of Anderson.
THE VALUE OF CONSIDERATION TO MITCHELL STOCKHOLDERS IN THE TRANSACTION WILL DECREASE IF THE MARKET VALUE OF DEVON COMMON STOCK DECREASES
Mitchell stockholders will not receive consideration in the transaction with a set market value or a minimum market value. The number of shares of Devon common stock that Mitchell stockholders will receive in the merger is fixed. If the alternate structure is used to complete the transaction, the number of shares of Devon Holdco common stock that Mitchell stockholders will receive will be equal to the number of shares of Devon common stock that they would have received had it been possible to complete the transaction using the original structure. The value of the shares received, in either case, will depend on the trading price of Devon common stock. No adjustment will be made to the number of shares of Devon common stock or Devon Holdco common stock to be received by Mitchell stockholders regardless of whether the market price of Devon common stock or Mitchell common stock increases or decreases. For historical and current market prices of Devon common stock and Mitchell common stock, see "Market Prices and Dividend Information."
WE EXPECT TO INCUR SIGNIFICANT COSTS IN CONNECTION WITH THE MERGER AND IN CONNECTION WITH DEVON'S ACQUISITION OF ANDERSON
We expect to incur costs of approximately $90 million related to the merger and approximately $125 million related to the Anderson acquisition. These costs will include investment banking expenses, severance, legal and accounting fees, printing expenses and other related charges incurred by Devon, Mitchell and Anderson. We may also incur additional unanticipated costs and expenses in connection with the merger and the Anderson acquisition. In addition, Devon expects to incur approximately $50 million of expenses in connection with its financing of the Anderson acquisition and the cash portion of the merger consideration.
MITCHELL'S SIGNIFICANT INVESTMENT IN THE BARNETT SHALE IN NORTH TEXAS MAY NOT GENERATE THE BENEFITS EXPECTED BY DEVON
Devon believes that a significant portion of Mitchell's value and future potential is tied to its assets in the Barnett Shale in North Texas. To the extent that these assets do not generate the return expected of them, the benefits of the transaction to Devon will be reduced. For more information on Mitchell's investment and operations in the Barnett Shale, see "Properties of the Combined Company -- Primary Operating Areas -- Mitchell's Properties -- Exploration and Production Operations."
THE COMBINED COMPANY MAY NOT REALIZE THE ACCRETION TO VARIOUS FINANCIAL
MEASUREMENTS THAT DEVON EXPECTS TO RESULT FROM THE MERGER AND DEVON'S ACQUISITION OF ANDERSON
Devon expects the merger to be accretive to its reserves per share, production per share, cash margin (i.e., revenue less cash expenses) per share and earnings per share on a pro forma basis to varying degrees, although the combination of both Anderson and Mitchell with Devon is expected to be dilutive to earnings per share in the near term. However, the merger may not be accretive to Devon's reserves per share, production per share, cash margin per share or earnings per share for any future periods. It is possible that the merger or Devon's acquisition of Anderson may, in fact, prove to be dilutive to Devon's actual per share results in the future and it is possible that Devon's acquisition of Anderson and the merger together will prove to be dilutive to Devon's earnings per share beyond the near term. Future events and conditions which could reduce or eliminate such accretion or cause such dilution include, among other things, adverse changes in:
- energy market conditions;
- commodity prices for natural gas, oil and NGLs;
- maintenance and growth of production levels;
- anticipated reserve levels;
- future operating results;
- competitive conditions;
- the effectiveness of technologies;
- the availability of capital resources;
- laws and regulations affecting the energy business;
- capital expenditure obligations; and
- general economic conditions.
THE COMBINED COMPANY WILL HAVE SIGNIFICANT ASSETS LOCATED IN NORTH TEXAS, WHICH COULD HEIGHTEN ITS EXPOSURE TO REGULATORY AND ENVIRONMENTAL ISSUES
Most of Mitchell's assets are located near large population centers in North Texas. This means that the combined company will be particularly sensitive to regulatory or environmental issues relating to these large population centers that could adversely affect the combined company's operating results.
THE COMBINED COMPANY'S DEBT LEVEL MAY LIMIT ITS FINANCIAL FLEXIBILITY
As of June 30, 2001, Devon had approximately $2.1 billion of total debt and a total debt to total capital ratio of 27% as calculated under the provisions of Devon's revolving credit facilities. After giving effect to Devon's financing of the Anderson acquisition and the cash portion of the merger consideration, as of June 30, 2001, the combined company would have had approximately $8.5 billion of total debt and a total debt to total capital ratio of 59%. The combined company may also incur additional debt in the future, including in connection with other acquisitions. The level of the combined company's debt could have several important effects on the combined company's future operations, including, among others:
- a significant portion of the combined company's cash flow from operations will be dedicated to the payment of principal and interest on the debt and will not be available for other purposes;
- rating agencies may view the combined company's debt level negatively;
- covenants contained in Devon's existing debt arrangements, including those contained in Devon's new $3.0 billion senior unsecured credit facility that was used to finance a portion of the Anderson acquisition and will be used to finance the cash portion of the merger consideration, will require the
combined company to meet financial tests that may affect the combined company's flexibility in planning for and reacting to changes in its business, including possible acquisition opportunities;
- the combined company's ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited;
- the combined company may be at a competitive disadvantage to similar companies that have less debt; and
- the combined company's vulnerability to adverse economic and industry conditions may increase.
THE COMBINED COMPANY MAY NOT ACHIEVE THE BENEFITS THAT DEVON EXPECTS FROM ANDERSON'S PROPERTIES LOCATED IN CANADA'S NORTHERN FRONTIER AREA IF A SUFFICIENT GAS PIPELINE IS NOT BUILT TO SERVE THAT AREA
There currently is no gas pipeline to deliver to market the amount of natural gas that Devon expects from Anderson's properties located in Canada's Northern Frontier area, sometimes referred to as "North of 60." Plans to build a gas pipeline that would enable the combined company to deliver natural gas from North of 60 to southern markets have been under consideration for nearly 30 years, but no construction has begun to date. In 1977, Canada and the United States executed a Transit Pipeline Agreement that provided specific requirements for the Alaska Natural Gas Transmission System, a proposed natural gas pipeline which would extend from Alaska through Canada to the United States. The Transit Pipeline Agreement was documented in the Alaskan Natural Gas Transportation Act which was ratified by the U.S. Congress in the late 1970's. Approvals to build the pipeline were obtained by Foothills Pipe Lines, Ltd, which was owned 50% by Westcoast Energy Inc. and 50% by TransCanada Pipelines, Ltd. However, the pipeline has not been built and there is considerable discussion occurring within the United States and Canada about what requirements will be necessary for a pipeline to transport gas from Alaska and/or the MacKenzie Delta/Beaufort Sea area through Canada to the U.S. Whether such a gas pipeline will be built and, if built, the timing of its construction and the gas pipeline's location are uncertain and depend on a number of factors that are beyond our control, including:
- the overall economic environment;
- political concerns, including relations between Canada and the United States and relations among Canadian provinces and territories;
- possible legislative and regulatory changes in both Canada and the United States; and
- related environmental risks and issues.
If a gas pipeline with sufficient capacity to deliver natural gas from North of 60 to southern markets is not built, the combined company will not achieve the benefits that Devon expects from its North of 60 properties.
DEVON'S OFFSHORE OPERATIONS ARE EXPOSED TO THE RISK OF TROPICAL WEATHER DISTURBANCES
Some of Devon's production and reserves are located offshore in the Gulf of Mexico. Operations in this area are subject to tropical weather disturbances. Some of these disturbances can be severe enough to cause substantial damage to facilities and possibly interrupt production. Losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. Devon may not be able to maintain adequate insurance in the future at rates that it considers to be reasonable or that any particular types of coverage will be available. An event that is not fully covered by insurance could have a material adverse effect on the combined company's financial position and results of operations.
DEVON IS SUBJECT TO UNCERTAINTIES OF FOREIGN OPERATIONS
Devon has significant international operations in Azerbaijan, South America, Southeast Asia and West Africa. Local political, economic and other uncertainties may adversely affect these operations. These uncertainties include:
- general strikes and civil unrest, such as occurred in Argentina and Indonesia;
- the risk of war, acts of terrorism, expropriation, forced renegotiation or modification of existing contracts;
- import and export regulations in China, Brazil, Egypt and other countries;
- taxation policies, including royalty and tax increases and retroactive tax claims, and investment;
- transportation regulations and tariffs;
- exchange controls, currency fluctuations, devaluation or other activities that limit or disrupt markets and restrict payments or the movement of funds, such as in Brazil and Argentina;
- laws and policies of the United States affecting foreign trade including trade sanctions applicable to Azerbaijan;
- the possibility of being subject to exclusive jurisdiction of foreign courts in connection with legal disputes relating to license to operate and concession rights in countries where Devon currently operates;
- the possible inability to subject foreign persons to the jurisdiction of courts in the United States; and
- difficulties in enforcing Devon's rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations in China and elsewhere.
DEVON IS SUBJECT TO FEDERAL ACREAGE LIMITATIONS AND, AS A RESULT, MAY BE REQUIRED TO REDUCE ITS ACREAGE IN WYOMING
Current United States law restricts the amount of federal acreage that can be controlled by individual parties within each state. This controlled acreage is considered "chargeable" to individual parties. The current federal limit within Wyoming is 246,080 chargeable acres. Controlled leasehold acreage that is part of a federally authorized drilling or production unit is, however, not considered chargeable acreage for the purposes of this limitation. Devon initially exceeded this limit in Wyoming as a result of its merger with Santa Fe Snyder Corporation in August 2000. Under current law, Devon will be required to reduce its chargeable acreage. Devon has petitioned the Bureau of Land Management for additional time to restructure its leasehold acreage. The Bureau of Land Management has granted Devon an additional year and has also assured Devon of its willingness to work together on any additional delays. Currently there are only two ways available to reduce Devon's chargeable acreage. One way is to sell or divest a portion of the acreage. The other way is to apply to the Bureau of Land Management to "unitize" a portion of the acreage. If approved, the acreage included in these federally authorized drilling or production units would not be counted as chargeable acreage. In the event that Devon is not compliant with the allowable acreage restriction within a year (September 1, 2002), it will request a renewal of the extension. It is anticipated that such extension will be granted, but if not, Devon believes at that time it will have no more than 12,000 acres above the limit, all of which will be non-producing. As such, divestiture or outright release should have no significant effect on future production, cash flow, or earnings.
DEVON MAY INCUR A TAX LIABILITY AS A RESULT OF ITS 1999 MERGER WITH PENNZENERGY
On August 17, 1999, Devon completed a merger with PennzEnergy Company. If PennzEnergy's distribution to its stockholders of the stock of Pennzoil-Quaker State Company in December 1998 were to be considered part of a plan or series of related transactions that includes the merger of Devon with
PennzEnergy, Devon would recognize gain under section 355(e) of the Internal Revenue Code. Devon believes the distribution and the merger with PennzEnergy should not be considered part of such a plan or series of related transactions because, among other things, prior to the distribution neither party contemplated a business combination with the other and, until April 1999, the parties had no discussions regarding a business combination. However, any transaction within a four-year period beginning two years before the distribution is presumed to be a part of such a plan. Devon may not be able to overcome this presumption. Devon currently estimates its potential tax liability upon such transaction at $16 million in additional tax for 1998 and the elimination of approximately $183 million in net operating loss carryovers.
REPORTED NATURAL GAS, OIL AND PLANT NGL RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN
Estimates of reserves are projections based on engineering data, projected future rates of production and the timing of future expenditures. Mitchell's estimates of its proved natural gas, oil and plant NGL reserves and projected future net revenue are based on reserve reports that Mitchell prepares. Devon's and Anderson's estimates of their respective proved natural gas, oil and plant NGL reserves and projected future net revenue are based on reserve reports that Devon or Anderson, as the case may be, prepares and on the reports of independent consulting petroleum engineers that they hire for that purpose. The process of estimating natural gas, oil and plant NGL reserves requires substantial judgment, resulting in imprecise determinations, particularly for new discoveries. Different reserve engineers may make different estimates of reserve quantities and related revenue based on the same data. Future performance that deviates significantly from the reserve reports could have a material adverse effect on the combined company's financial position and results of operations.
PRODUCT PRICES ARE VOLATILE, AND LOW PRICES CAN ADVERSELY IMPACT RESULTS
The results of operations of Devon, Mitchell and Anderson are highly dependent on the prices of and demand for natural gas, oil and NGLs. Historically, the markets for natural gas, oil and NGLs have been volatile and are likely to continue to be volatile in the future. Accordingly, the prices received by Devon, Mitchell and Anderson for their natural gas, oil and NGL production depend on numerous factors beyond their control. These factors include, among other things:
- the level of ultimate consumer product demand;
- governmental regulations and taxes;
- the price and availability of alternative fuels;
- the level of imports and exports of natural gas, oil and NGLs; and
- the overall economic environment.
Any significant decline in prices for natural gas, oil and NGLs, as has occurred from time to time in the past, could have a material adverse effect on the combined company's financial condition, results of operations and quantities of reserves recoverable on an economic basis. Should the oil and gas industry experience significant price declines or other adverse market conditions, the combined company may not be able to generate sufficient cash flows from operations to meet its obligations and to make planned capital expenditures.
DEVON HAS, AND DEVON HOLDCO WILL HAVE, CHARTER AND OTHER PROVISIONS THAT MAY MAKE IT DIFFICULT FOR SHAREHOLDERS TO REPLACE INCUMBENT DIRECTORS AND IMPLEMENT
MANAGEMENT CHANGES
Some provisions of Devon's charter and bylaws and of the Delaware General Corporation Law, as well as Devon's stockholder rights plan, may make it difficult for stockholders to replace incumbent directors with new directors who are willing to entertain changes that stockholders believe will lead to improvements in Devon's business or facilitate a business combination transaction that stockholders believe is desirable. These provisions include:
- a classified board, the members of which serve staggered three-year terms and may be removed by stockholders only for cause;
- a prohibition on stockholders calling special meetings or acting by written consent; and
- rights issued under Devon's rights plan that would be triggered if a person acquired 15% or more of Devon's common stock.
If the alternate structure is used to complete the transaction, Devon Holdco's charter and bylaws would be substantially identical to Devon's charter and bylaws, and Devon Holdco will have a stockholder rights plan substantially identical to Devon's stockholder rights plan. Devon Holdco is also subject to the same provisions of the Delaware General Corporation Law to which Devon is subject.
DEVON MAY NOT SUCCEED AT DIVESTING ASSETS OR MAY FAIL TO DO SO ON FAVORABLE TERMS
Devon intends to divest certain assets and use the proceeds from those divestitures to repay indebtedness. Devon may be unable to effect those divestitures or may be able to make those divestitures only on unfavorable terms. This may result in Devon being unable to reduce its indebtedness to the extent desired, which may result in higher than expected financing costs and limit Devon's financial flexibility in the future.
THE COMPANIES
MITCHELL ENERGY & DEVELOPMENT CORP.
Mitchell is one of the largest producers of natural gas and NGLs in the United States. Mitchell's two primary businesses are: (1) the exploration, development and production of natural gas and NGLs and (2) the gathering, processing and marketing of natural gas and NGLs. In 2000, Mitchell produced 101 Bcf of natural gas and 6.5 MMBbls of liquid hydrocarbons (NGLs, oil and condensate). Additionally, Mitchell sold 13.7 MMBbls of NGLs through its midstream operations. (The volumes in this paragraph are calculated on a "dry" gas basis which Devon uses to report its production. Mitchell reports its production on a "wet" basis. When reported on a wet basis, natural gas production volumes are reported based on the Mcfs produced, without taking into account the effect of processing the natural gas to extract NGLs produced with the natural gas. When reported on a "dry" basis, production volumes of natural gas are reported based on the residual volumes of natural gas remaining after shrinkage resulting from processing the natural gas to extract NGLs. On a dry basis, the volumes of NGLs extracted from the natural gas are also reported as production. Therefore, compared with the wet basis of reporting, the dry basis will report reduced volumes of natural gas, but increased volumes of NGLs.)
Exploration, Development and Production. As of December 31, 2000, Mitchell had interests in approximately 3,400 gross wells and approximately 1.1 million gross acres. Mitchell operates over 90% of its net wells and its proved reserve base reached almost 2.1 Tcfe as of June 30, 2001 determined on a "wet" gas basis. (On a "dry" gas basis, Devon estimates that Mitchell's June 30, 2001 proved reserves would have been 2.5 Tcfe.) These reserves are predominantly natural gas with an average reserve life of 14 years.
Mitchell produced 101 Bcf of natural gas in 2000, a 25% increase from the prior year, and is on pace to exceed the 25% growth target that it previously set for 2001. With its large backlog of undrilled well locations, Mitchell expects its gas production to increase at a compounded rate of more than 20% over the three-year period ending December 31, 2003. Such growth can be achieved exclusively from currently booked proved reserves.
Gas Services. Mitchell owns and operates all of its major midstream
assets, including six natural gas processing plants and approximately 9,100
miles of natural gas gathering pipelines, virtually all of which are located in
Texas. Natural gas processing plants extract NGLs such as ethane, propane and
butanes from streams of natural gas. Mitchell increased NGL production by 13% in
2000 to 18.2 MMBbls and, at year-end, its proved plant NGL reserves (NGL
reserves committed to Mitchell-owned natural gas processing plants) totaled 175
MMBbls. (On a "dry" gas basis, Mitchell's 2000 midstream NGL sales volumes were
13.7 MMBbls. Also, on a "dry" gas basis, Devon estimates that Mitchell's plant
NGL reserves totaled 105 MMBbls at December 31, 2000 and 143 MMBbls at June 30,
2001.)
Mitchell's pipelines intersect with both interstate and intrastate pipelines enhancing its natural gas marketing flexibility. In North Texas, Mitchell benefits from the integration of its pipeline operations with its natural gas production and processing operations. Mitchell also owns interests in two significant downstream assets located in the Texas Gulf Coast area. Specifically, the company has a one-third interest in an MTBE gasoline additive plant and a 38.75% interest in an NGL fractionator.
DEVON ENERGY CORPORATION
Devon is an independent energy company engaged primarily in oil and natural gas exploration, development and production and in the acquisition of producing properties. Devon currently ranks among the five largest U.S.-based independent oil and natural gas companies in terms of North American oil and natural gas reserves, oil and natural gas production, equity market capitalization and enterprise value (meaning total equity market capitalization plus long-term debt). As of December 31, 2000, the company owned proved oil and natural gas reserves of 1.1 billion Boe. Approximately 53% of these reserves were natural gas and 47% were oil and NGLs. North American proved reserves accounted for 75% of the
company's total reserves and were weighted 62% to natural gas. Devon's North American reserves are concentrated in four operating divisions:
- the Gulf Division, which includes oil and natural gas properties located primarily onshore in South Texas and South Louisiana and offshore in the Gulf of Mexico;
- the Rocky Mountain Division, which includes oil and natural gas properties located in the Rocky Mountains area of the United States ranging from the Canadian border south into northern New Mexico;
- the Permian/Mid-Continent Division, which includes oil and natural gas properties located in the United States other than those included in the Gulf Division and Rocky Mountain Division; and
- the Canadian Division, which includes properties in the Western Canadian Sedimentary Basin predominantly in Alberta and British Columbia.
Devon's proved reserves outside of North America totaled approximately 278 MMBoe as of December 31, 2000. The company's international activities are concentrated in four core areas:
- Azerbaijan;
- South America, which includes Argentina and Brazil;
- Southeast Asia, which includes Indonesia and China; and
- West Africa and North Africa, which include Ghana, Gabon, Congo and Egypt.
In addition to proved oil and natural gas properties, Devon has an inventory of exploration acreage of approximately 17.6 million net acres as of December 31, 2000. This includes 5.4 million net acres in North America.
ANDERSON EXPLORATION LTD.
The reserve and production statistics in the following paragraphs are before applicable royalty deductions.
Devon completed its acquisition of Anderson Exploration Ltd. on October 17, 2001. Anderson is a Canadian-based independent oil and natural gas producer engaged in oil and natural gas exploration, acquisition, development and production in western and northern Canada. As of December 31, 2000, adjusted for the February 2001 Numac acquisition, approximately 62% of the company's proved reserves and approximately 66% of the company's current production were natural gas. Anderson has a large oil and natural gas reserve base, operates over 75% of its production and internally initiates new oil and natural gas prospects.
The company operates exclusively in western and northern Canada with production concentrated in the Western Canadian Sedimentary Basin. Exploration efforts are concentrated in the "west of 5" and "west of 6" areas of Alberta and British Columbia, encompassing the Peace River Arch, Deep Basin, Foothills and Northeast British Columbia. The company also holds exploration acreage north of the 60th parallel in both the Mackenzie Delta/Beaufort Sea and the Yukon.
Anderson's operations are divided into seven main regions of exploration and development activity. This diversity enables Anderson to participate in a broad arena of geological plays and to produce all types of hydrocarbons. Devon believes that Anderson's portfolio of properties in western Canada provides substantial exploration and development opportunities over the near and intermediate term.
The company is the largest holder of exploration acreage in the Mackenzie Delta region of the Northwest Territories and the shallow water Beaufort Sea area. Anderson's diverse portfolio of northern properties exposes the company to additional long-term exploration and development opportunities.
In fiscal 2000, Anderson achieved record cash flow from operations, earnings and earnings per share, as well as the highest production levels in the company's history. Also in fiscal 2000, Anderson replaced
283% of its natural gas production, 325% of its crude oil production and 602% of its NGL production with proved reserve additions. The company added 648 Bcf of proved natural gas reserves, 34.5 MMbls of proved crude oil reserves and 25.0 MMBbls of proved NGL reserves during fiscal 2000. On a Boe basis, Anderson replaced 316% of its production with proved reserves in fiscal 2000.
PROPERTIES OF THE COMBINED COMPANY
The following table shows the total proved reserves, net of royalties, of Devon, Anderson and Mitchell as of December 31, 2000, July 31, 2001 and June 30, 2001, respectively, and on a combined basis:
DEVON AS ANDERSON MITCHELL OF AS OF AS OF DECEMBER 31, JULY 31, JUNE 30, BY OPERATING AREA 2000 2001(1) 2001(2) COMBINED MBoe% ----------------- ------------ -------------- -------------- --------- ----- NORTH AMERICA -- MBoe: United States -- Onshore........... 587,634 -- 415,342 1,002,976 49% United States -- Offshore.......... 103,639 -- -- 103,639 5% --------- --------- --------- --------- ---- Total United States...... 691,273 -- 415,342 1,106,615 54% Canada............................. 127,948 531,451 -- 659,399 32% --------- --------- --------- --------- ---- Total North America...... 819,221 531,451 415,342 1,766,014 86% --------- --------- --------- --------- ---- INTERNATIONAL -- MBoe: Azerbaijan......................... 104,222 -- -- 104,222 5% Southeast Asia..................... 94,521 -- -- 94,521 5% South America...................... 70,395 -- -- 70,395 3% Other.............................. 9,007 -- -- 9,007 1% --------- --------- --------- --------- ---- Total International...... 278,145 -- -- 278,145 14% --------- --------- --------- --------- ---- Total Company............ 1,097,366 531,451 415,342 2,044,159 100% ========= ========= ========= ========= ==== BY PRODUCT ----------------------------------- OIL -- MBbls: United States...................... 225,537 -- 19,770 245,307 12% Canada............................. 36,492 128,688 -- 165,180 8% International...................... 197,215 -- -- 197,215 10% --------- --------- --------- --------- ---- Total Company -- Oil..... 459,244 128,688 19,770 607,702 30% ========= ========= ========= ========= ==== NATURAL GAS -- MMcf: United States...................... 2,521,307 -- 1,761,771 4,283,078 35% Canada............................. 523,509 2,117,789 -- 2,641,298 22% International...................... 413,368 -- -- 413,368 3% --------- --------- --------- --------- ---- Total Company -- Natural Gas.................... 3,458,184 2,117,789 1,761,771 7,337,744 60% ========= ========= ========= ========= ==== NGLS -- MBbls: United States...................... 45,518 -- 101,943 147,461 7% Canada............................. 4,204 49,798 -- 54,002 2% International...................... 12,035 -- -- 12,035 1% --------- --------- --------- --------- ---- Total Company -- NGLs.... 61,757 49,798 101,943 213,498 10% ========= ========= ========= ========= ==== Total Company -- MBoe.... 1,097,366 531,451 415,342 2,044,159 100% ========= ========= ========= ========= ==== |
(1) These volumes represent Devon's estimates of Anderson's reserves as of July 31, 2001.
(2) These volumes represent Devon's estimates of Mitchell's reserves on a "dry" gas basis, which Devon uses to report its reserves.
PRIMARY OPERATING AREAS
Based upon the distribution of proved reserves, 86% of the combined company's oil and gas operations will be within North America. The remainder is in several other regions. Devon has organized its operations geographically into five separate divisions. Each division controls an underlying base of producing oil and gas wells and an inventory of undeveloped lands on which to explore for new oil and gas reserves. Anderson's operations are located entirely in Canada. Mitchell's operations are located entirely in the United States and primarily within the state of Texas.
DEVON'S PROPERTIES
ROCKY MOUNTAIN DIVISION
The Rocky Mountain Division extends north from New Mexico and includes the states of Colorado, Utah and Wyoming. Over a dozen oil and gas producing basins are located in the Rocky Mountains. As of December 31, 2000, this area comprised 24% of Devon's proved oil and gas reserves.
Devon's Rocky Mountain assets include interests in conventional oil and gas properties as well as three significant coalbed methane projects. The most significant conventional properties in the division lie in the gas-prone Washakie, Wind River, Big Horn and Green River basins in Wyoming and the oil prone Uinta basin in Utah. Significant coalbed methane properties are located in the San Juan Basin in northwest New Mexico and southern Colorado, the Powder River Basin in Wyoming and the Raton Basin of northeast New Mexico.
Devon was a pioneer in the production of natural gas from underground coal deposits, or coalbed methane. In the mid-1980s, Devon advanced one of the first and most successful coalbed methane projects in the world -- the Northeast Blanco Unit in the San Juan Basin. More than 15 years after its initial development this property is still producing significant quantities of natural gas.
Using the expertise gained in the San Juan Basin, Devon has established significant positions in two additional coalbed methane plays in the Rocky Mountains. In the Powder River Basin of Wyoming, Devon has drilled over 700 coalbed methane wells since 1998. It plans to drill more than 1,000 additional wells in the Powder River Basin over the next few years. Additionally, Devon controls a majority interest in a 126-mile gas transportation system servicing the Powder River Basin that commenced operations in the third quarter of 1999. The system has access to multiple interstate pipelines, and has an estimated capacity of 450 MMcf of gas per day. Devon is also aggressively developing coalbed methane production in the Raton Basin of northeast New Mexico and southeast Colorado. With an interest in approximately 280,000 prospective acres, Devon has one of the largest land positions in the play and expects to drill about 100 Raton Basin wells in each of the next few years.
PERMIAN BASIN/MID-CONTINENT DIVISION
Permian Basin. The Permian Basin encompasses approximately 66,000 square miles in southeastern New Mexico and west Texas and contains more than 500 major oil and gas fields. The area is characterized by prolific, long-lived oil and gas production from numerous formations found at a wide variety of depths. The Permian Basin represented 18% of Devon's proved reserves at December 31, 2000.
In the first half of 2001, Devon acquired an additional 140,000 net acres in the Permian Basin. The acquired acreage included 90,000 net acres in Lea and Eddy counties in New Mexico. This increased Devon's holdings in these counties to 330,000 net acres and provides an estimated 400 additional potential drilling locations. Devon is now one of the largest exploration and production companies in the area.
Mid-Continent. The majority of Devon's mid-continent assets are located in the states of Kansas, Oklahoma, Texas, Louisiana and Mississippi. The mid-continent covers a wide spectrum of geologic formations producing both oil and natural gas. Advanced technologies such as 3-D seismic enable Devon to study complex geologic environments and identify new exploratory prospects on its extensive undeveloped acreage base. Application of nuclear magnetic resonance logging and advanced fracture
stimulation technology have enabled exploitation of previously bypassed gas reserves in the Carthage-Bethany and Sligo fields of east Texas and north Louisiana. At December 31, 2000, the mid-continent area represented about 10% of Devon's proved reserves.
In the first half of 2001, Devon established a significant acreage position in a coalbed methane project in the mid-continent. It acquired an average working interest of almost 100% in over 370,000 acres in the Cherokee and Arkoma Basins of southeast Kansas and northeast Oklahoma. Devon expects to drill up to 400 wells per year with a target of 2,500 wells over the life of the play.
GULF DIVISION
Offshore. At December 31, 2000, 9% of Devon's proved reserves were attributable to the offshore Gulf of Mexico. The Gulf of Mexico is comprised of two major operating areas, as defined by water depth. In the "shelf" area, in water depths up to 600 feet, Devon is among the largest oil and gas producers. The shelf is a relatively mature producing region that is a vital source of U.S. natural gas supply. Devon holds approximately 650,000 net acres on the shelf, about one-half of which are developed.
The deepwater Gulf (600 feet to 5,000 feet in water depth) is a promising frontier area. Devon holds 400,000 net acres in the deepwater Gulf of Mexico of which about 90% are unexplored. Because deepwater exploration is capital intensive, the company's strategy is to move cautiously. Devon generally avoids ultra-deep water (greater than 5,000 feet) and focuses drilling efforts on prospects at water depths for which production technology is well-established. The company also shares projects with industry partners to further mitigate risk.
Onshore. Devon's Gulf Division includes operations onshore in south Texas and south Louisiana. This area accounted for 2% of proved reserves at year-end 2000. This area has a well-established infrastructure of pipelines and production facilities. In south Texas, where exploration for oil and gas is accelerating, Devon has 3-D seismic data covering its major acreage positions. Much of this acreage is prospective for production from the Vicksburg, Frio and Wilcox formations. The company's exploration efforts in south Louisiana are focused on natural gas prospects in the lower, mid and upper Miocene age formations.
CANADIAN DIVISION
Devon's Canadian operations are conducted through Devon Canada Corporation, its subsidiary headquartered in Calgary, Alberta. Canada accounted for 12% of Devon's proved reserves at year-end 2000. Devon's October 2001 acquisition of Anderson Exploration Ltd. significantly increased the relative importance of Devon's Canadian operations. The acquisition of Anderson increased the company's Canadian proved reserves by over 400 percent.
Devon's oil and gas operations in Canada are located almost entirely in western and northern Canada. Devon's current oil and gas production is primarily from conventional reservoirs. In addition, Devon has interests in both cold flow and thermal heavy oil properties.
Devon's Canadian properties provide a variety of opportunities for production and reserve growth through exploration. Devon has an extensive inventory of undeveloped acreage on which to explore for new oil and gas reserves. Devon is exploring for conventional oil and gas production and is conducting pilot projects on lands that are prospective for coalbed methane development.
Devon holds approximately eight million net undeveloped acres in western Canada and approximately two million net undeveloped acres in northern Canada. The western Canadian acreage is distributed throughout many established producing regions. The northern Canadian acreage is located in the Northwest Territories and the Yukon Territory. Within northern Canada, Devon's onshore acreage is primarily located in the Mackenzie Delta region. Its offshore acreage is primarily in the shallow waters of the Beaufort Sea.
INTERNATIONAL DIVISION
Approximately 25% of Devon's proved oil and gas reserves at December 31, 2000 were in countries outside North America. Most of these reserves are concentrated in three countries: Azerbaijan, Indonesia and Argentina. As one of the five largest U.S.-based independents, Devon has the technical capabilities and financial strength necessary to support an international exploration and production effort. Devon's international focus is on selected oil and gas provinces outside North America that can provide reserve growth opportunities, access to markets and favorable fiscal regimes.
Devon's international production is predominantly oil from operations in Indonesia, Argentina, Gabon, Egypt, and Azerbaijan. Devon operates oil fields in Indonesia and Egypt, and one field in Argentina. Devon has a 5.6% interest in the Azeri-Chirag-Gunashli (ACG) oil field. The ACG field is believed to contain over 4 billion barrels of proved reserves, making it one of the largest oil fields in the world. Devon produces natural gas from its properties in the Neuquen Basin of Argentina. Additionally, Devon signed agreements to supply Indonesian natural gas to Singapore in February 2001. These reserves are located on the island of Sumatra, and we forecast this production to commence from proved reserves in 2003. Devon holds substantial land positions offshore Brazil, Ghana, Gabon and Congo where it has active exploration programs underway. Devon will be conducting seismic surveys and drilling exploratory wells on these blocks over the next few years. Devon is currently drilling an exploration prospect offshore Brazil
MITCHELL'S PROPERTIES
Mitchell's operations are located almost entirely within the state of Texas. The operations include exploration and production activities in North Texas, East Texas and the Texas Gulf Coast as well as significant gas transportation, processing and marketing operations.
EXPLORATION AND PRODUCTION OPERATIONS
In North Texas, Mitchell has held acreage in the Fort Worth Basin since the 1950s and originally focused most of its drilling activities on the shallow conventional reservoirs above the Barnett Shale. Beginning in the early 1980s Mitchell directed its efforts towards unlocking the gas producing potential of the Barnett Shale. By the early 1990s, Mitchell was completing wells in the Barnett Shale using traditional heavy gel fracturing techniques. In 1998, Mitchell implemented the use of a new fracture completion technology in the Barnett Shale referred to as light sand fracturing, or LSF. LSF injects large volumes of water into the formation to create fissures within the rock that are propped open with a small amount of sand. This contrasts with gel fracturing where a smaller amount of water and a heavy gel are used to create fissures that are propped open with large amounts of sand. In October 1998, when LSF was adopted field wide, the cost of a standard LSF treatment was approximately $140,000 (60%) less than for a heavy gel fracture treatment. In addition to materially reducing total well costs, this also allowed completions in another section of the formation that were not economic with the more expensive gel fracs. As a result, well production rates and reserves were both increased.
Mitchell estimates that drilling on the current 55-acre spacing will recover only about 8% of the Barnett Shale gas originally in place. Mitchell is conducting pilot projects to determine how much additional gas can be recovered from infill drilling at 27-acre spacing. While per well recovery from the 27-acre wells could be somewhat less than for 55-acre wells due to well interference on the closer spacing, the potential number of economically viable well locations on existing acreage could essentially be doubled depending on the results of the pilot program.
Mitchell has also used LSF to rework and refrac more than 130 existing Barnett Shale wells that were originally completed with a conventional gel frac. This has resulted in an average eight-fold increase in individual well production rates with some wells actually producing at rates higher than when they were originally completed. Mitchell plans to rework and refrac over 200 additional existing wells that were originally completed with gel fracturing.
In addition, Mitchell expects to refrac LSF wells one or more times over their lives. Although none have been refraced to date because sufficient time has not elapsed from the original drilling date, refracs of LSF wells are expected to perform similarly to a refrac and rework of a conventional gel frac well. Mitchell believes that 27-acre well spacing, multiple refrac and reworks or some combination of the two will meaningfully raise recovery rates above the current 8% level.
MIDSTREAM OPERATIONS
Mitchell's midstream operations are the largest among independent producers in the United States. Mitchell owns 9,100 miles of natural gas transportation pipelines, six natural gas processing plants, a one-third interest in an MTBE plant and a 38.75% interest in an NGL fractionating plant. Concentration of these facilities near Mitchell's core operating areas in Texas enables it to gather approximately 87% of its own gas. About 46% of the NGLs produced at the six plants is from Mitchell operated gas. The remaining 54% is from third party operated gas. Mitchell markets its natural gas and NGL products primarily in the Dallas-Fort Worth and Texas Gulf Coast areas and also has interconnects with multiple interstate pipeline systems.
DEVELOPED AND UNDEVELOPED ACREAGE
The following tables set forth Devon's, Anderson's and Mitchell's combined developed and undeveloped oil and gas lease and mineral acreage on a pro forma basis. The information for Devon and Mitchell is as of December 31, 2000. The information for Anderson is as of June 30, 2001.
DEVELOPED -- GROSS DEVELOPED -- NET -------------------------------------- -------------------------------------- DEVON ANDERSON MITCHELL COMBINED DEVON ANDERSON MITCHELL COMBINED ----- -------- -------- -------- ----- -------- -------- -------- (IN THOUSANDS OF ACRES) United States -- Onshore....... 2,545 -- 682 3,227 1,342 -- 521 1,863 United States -- Offshore...... 756 -- -- 756 383 -- -- 383 Canada.................... 879 3,194 -- 4,073 540 1,983 -- 2,523 International............. 387 -- -- 387 102 -- -- 102 ----- ----- --- ----- ----- ----- --- ----- Total............ 4,567 3,194 682 8,443 2,367 1,983 521 4,871 ===== ===== === ===== ===== ===== === ===== |
UNDEVELOPED -- GROSS UNDEVELOPED -- NET --------------------------------------- --------------------------------------- DEVON ANDERSON MITCHELL COMBINED DEVON ANDERSON MITCHELL COMBINED ------ -------- -------- -------- ------ -------- -------- -------- (IN THOUSANDS OF ACRES) United States -- Onshore..... 4,518 -- 388 4,906 2,549 -- 284 2,833 United States -- Offshore.... 919 -- -- 919 653 -- -- 653 Canada.................. 3,117 12,095 -- 15,212 2,228 7,962 -- 10,190 International........... 19,419 -- -- 19,419 12,195 -- -- 12,195 ------ ------ --- ------ ------ ----- --- ------ Total.......... 27,973 12,095 388 40,456 17,625 7,962 284 25,871 ====== ====== === ====== ====== ===== === ====== |
COMPARATIVE PER SHARE DATA
The following table presents: (1) historical per share data for Devon; (2) pro forma per share data for Devon after giving effect to the Anderson acquisition; (3) pro forma per share data of the combined company after giving effect to the merger and the Anderson acquisition; and (4) historical and equivalent pro forma per share data for Mitchell. The combined company pro forma per share data was derived by combining information from the historical consolidated financial statements of Devon, Anderson and Mitchell using the purchase method of accounting for the merger and the Anderson acquisition. If the alternate structure must be used to complete the transaction, the combined company's pro forma data would be substantially identical to the pro forma data presented in this table. You should read this table in conjunction with the historical consolidated financial statements of Devon and Mitchell that are filed with the Securities and Exchange Commission and incorporated by reference into this document. See "Additional Information -- Where You Can Find More Information." You should also read this table in conjunction with the historical consolidated financial statements of Anderson included elsewhere in this document. You should not rely on the pro forma per share data as being necessarily indicative of actual results had the merger and the Anderson acquisition occurred prior to the relevant dates, or of future results.
DEVON MITCHELL PRO FORMA ------------------------ AFTER COMBINED EQUIVALENT DEVON ANDERSON COMPANY PRO HISTORICAL ACQUISITION(1) PRO FORMA(2) HISTORICAL FORMA(6) ---------- -------------- ------------ ---------- ----------- Net earnings per share -- basic: Year ended December 31, 2000.................. $ 5.66 $ 6.28 $ 6.33 $ 5.22 $ 7.55 Six months ended June 30, 2001(3)............... 3.73 5.05 5.19 4.03 6.19 Net earnings per share -- diluted: Year ended December 31, 2000.................. 5.50 6.11 6.17 5.13 7.36 Six months ended June 30, 2001(3)............... 3.59 4.85 5.00 3.95 5.96 Cash dividends per share: Year ended December 31, 2000(4)(5)............ 0.17 0.17 0.18 0.78 0.21 Six months ended June 30, 2001.................. 0.10 0.10 0.10 0.27 0.12 Book value per share as of June 30, 2001............ 29.79 29.79 34.17 16.26 40.76 |
(1) Devon's pro forma data after the Anderson acquisition includes the effect of the Anderson acquisition on the basis described in the notes to the unaudited pro forma combined financial information included elsewhere in this document.
(2) The combined company's pro forma data includes the effect of the merger and the Anderson acquisition on the basis described in the notes to the unaudited pro forma combined financial information included elsewhere in this document.
(3) Devon's historical basic and diluted earnings per share for the six months ended June 30, 2001 do not include the effect of a $49.5 million gain related to the cumulative effect of a change in accounting principle. The gain related to Devon's adoption as of January 1, 2001, of a new accounting principle related to accounting for derivative financial instruments. The $49.5 million gain represented $0.38
and $0.37 of basic and diluted earnings per share, respectively, for the six months ended June 30, 2001.
(4) For the year ended December 31, 2000, Devon's annual dividends were paid at the rate of $0.20 per share. However, the table above presents Devon's 2000 historical dividends at the rate of $0.17 per share. The difference is caused by the merger with Santa Fe Snyder Corporation, which was completed on August 29, 2000. Devon accounted for the Santa Fe Snyder merger using the pooling-of-interests method of accounting and, accordingly, historical results for the year ended December 31, 2000 are presented as though Devon and Santa Fe Snyder had been combined for the entire year. Since Santa Fe Snyder did not pay dividends on its common stock prior to the merger, the combined 2000 dividends per share of the two companies totaled $0.17, as opposed to Devon's stand-alone dividend rate of $0.20 per share. The payment of dividends by Devon in the future will depend on business conditions, Devon's financial condition, earnings and other factors.
(5) Prior to June 29, 2000, Mitchell had two classes of common stock. On June 29, 2000, following stockholder approval, Mitchell combined the two classes of common stock into a single class. Mitchell's historical 2000 dividends per share of $0.78 are presented as though the single class of stock had existed for the entire year. The $0.78 per share of historical dividends in 2000 includes a special dividend of $0.25 per share.
(6)Mitchell's equivalent pro forma amounts have been calculated by multiplying the combined company's pro forma net earnings, cash dividends and book value per share amounts by an "adjusted exchange ratio," so that the Mitchell equivalent pro forma per share amounts are comparable to the respective values of one share of Mitchell common stock. This adjusted exchange ratio reflects the equivalent value of the Devon stock and the $31 cash to be paid to the Mitchell stockholders. The adjusted exchange ratio is equal to 1.193 shares of Devon common stock for each share of Mitchell common stock. The cash consideration of $31 per share was converted to 0.608 shares of Devon common stock based on the average closing price of Devon common stock for the three days before and after announcement of the transaction. This adjusted exchange ratio is used only for the calculation of the Mitchell equivalent pro forma amounts in this table.
MARKET PRICES AND DIVIDEND INFORMATION
Shares of Devon common stock are traded on the American Stock Exchange under the symbol "DVN" and shares of Mitchell common stock are traded on the New York Stock Exchange under the symbol "MND." The following table sets forth, for the periods indicated, the range of high and low sales prices per share for Devon common stock, on the American Stock Exchange, and Mitchell common stock, on the New York Stock Exchange composite tape, as well as information concerning quarterly cash dividends paid on such shares. The sales prices are as reported in published financial sources.
SHARES OF DEVON COMMON STOCK SHARES OF MITCHELL COMMON STOCK ------------------------------ --------------------------------------------- HIGH LOW DIVIDENDS(1) HIGH LOW DIVIDENDS ------ ------ ------------ ------------ ------------ ------------- 1999 First Quarter........... $31.75 $20.13 $ 0.05 Mitchell had two classes of common stock Second Quarter.......... 37.44 25.94 0.05 until June 29, 2000. See the table below for Third Quarter........... 44.94 33.00 0.05 market price and dividend information on the Fourth Quarter.......... 42.00 29.50 0.05 two classes prior to their combination into 2000 one class of Mitchell common stock. First Quarter........... 48.56 31.38 0.05 Second Quarter.......... 60.94 43.75 0.05 Third Quarter........... 62.56 42.56 0.05 $50.50 $28.81 $0.3825 Fourth Quarter.......... 64.74 48.00 0.05 64.00 43.25 0.1325 2001 First Quarter........... 66.30 53.78 0.05 62.50 44.50 0.1325 Second Quarter.......... 62.42 49.15 0.05 59.45 46.20 0.1325 Third Quarter........... 54.50 30.55 0.05 60.99 42.51 0.1325 Fourth Quarter (through , 2001).... |
(1) Devon paid dividends on its common stock in 1999, 2000 and 2001 at a per share rate of $0.05 per quarter. No dividends were paid during 1999 or 2000 on shares of Santa Fe Snyder common stock prior to the August 2000 merger pursuant to which Santa Fe Snyder became a part of Devon. As adjusted for the Santa Fe Snyder merger, which Devon accounted for using the pooling-of-interests method of accounting, Devon's dividends per share reported for accounting purposes are lower than the historical per share rate of $0.05 per quarter. See "Summary -- Selected Historical Financial Data of Devon."
Until June 29, 2000, Mitchell had two classes of common stock, Class A shares and Class B shares. The two classes of Mitchell common stock were combined on June 29, 2000 when each Class B share was changed and converted into one Class A share. The following table sets forth, for the periods indicated, the range of high and low sales prices per share for Class A and Class B shares of Mitchell common stock on the New York Stock Exchange composite tape, as well as information concerning quarterly cash dividends paid on such shares.
SHARES OF MITCHELL COMMON STOCK ---------------------------------------------------------- CLASS A CLASS B --------------------------- ---------------------------- HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS ------ ------ --------- ------- ------ --------- 1999 First Quarter................ $14.38 $10.50 $ 0.12 $15.00 $11.00 $0.1325 Second Quarter............... 19.31 12.63 0.12 18.75 12.81 0.1325 Third Quarter................ 24.44 17.56 0.12 23.50 17.19 0.1325 Fourth Quarter............... 25.25 21.25 0.12 24.81 21.00 0.1325 2000 First Quarter................ 24.50 20.25 0.12 24.44 20.13 0.1325 Second Quarter (through June 29, 2000)................. 32.00 20.50 0.1325 31.75 21.00 0.1325 |
Devon is currently paying a regular quarterly cash dividend of $0.05 per share. The payment of dividends by Devon in the future will depend on business conditions, Devon's financial condition, earnings and other factors.
Mitchell has paid regular quarterly cash dividends for more than 20 years and, if the merger is not completed as expected, Mitchell currently intends to continue to pay regular quarterly cash dividends. The cash dividends of $0.3825 per share paid by Mitchell in the third quarter of 2000 included a special cash dividend of $0.25 and, in making that payment, Mitchell emphasized that the special cash dividend did not signal any future departure in the level of regular quarterly cash dividends. If the merger is not completed as expected, determination of the amount of future cash dividends to be declared and paid will depend on, among other things, Mitchell's results of operations, cash flows, anticipated capital requirements and restrictions contained in its debt instruments.
THE SPECIAL MEETINGS
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- TIME, PLACE AND , 2001 , 2001 DATE a.m., local time a.m., local time Renaissance Oklahoma City Hotel MND Learning Center Ten North Broadway 2002 Timberloch Place Oklahoma City, Oklahoma The Woodlands, Texas The meeting may be adjourned or The meeting may be adjourned or postponed to another date or place postponed to another date or place for proper purposes, including for for proper purposes, including for the purpose of soliciting the purpose of soliciting additional proxies. additional proxies. -------------------------------------------------------------------------------------------- PURPOSES - To consider and vote on the - To consider and vote on the approval and adoption of the approval of the Amended and Amended and Restated Agreement Restated Agreement and Plan of and Plan of Merger, dated as of Merger, dated as of August 13, August 13, 2001, by and among 2001, by and among Devon Energy Devon Energy Corporation, Devon Corporation, Devon NewCo NewCo Corporation, Devon Holdco Corporation, Devon Holdco Corporation, Devon Merger Corporation, Devon Merger Corporation, Mitchell Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Corporation and Mitchell Energy & Development Corp., and the Development Corp.; and transactions that it contemplates; and - To transact other business as may properly be presented at the - To transact other business as may meeting or any adjournments of properly be presented at the the meeting. meeting or any adjournments of the meeting. At the present time, Mitchell knows of no other matters that will be At the present time, Devon knows of presented for consideration at the no other matters that will be meeting. presented for consideration at the meeting. -------------------------------------------------------------------------------------------- QUORUM Presence, in person or by proxy, of Presence, in person or by proxy, of stockholders holding a majority of stockholders holding a majority of the shares entitled to vote at the the shares entitled to vote at the meeting. meeting. -------------------------------------------------------------------------------------------- RECORD DATE Close of business on , Close of business on , 2001. 2001. -------------------------------------------------------------------------------------------- SHARES ENTITLED - You may vote at the Devon meeting - You may vote at the Mitchell TO if you owned Devon common stock meeting if you owned Mitchell VOTE or exchangeable shares issued by common stock as of the record Devon's subsidiary, Northstar date. Energy Corporation, as of the record date. Holders of Devon - You may cast one vote for each common stock and Northstar share of Mitchell common stock that exchangeable shares will vote as you owned on the record date. a single class. - You may cast one vote for each share of Devon common stock and one vote for each Northstar exchangeable share that you owned on the record date. -------------------------------------------------------------------------------------------- |
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- RECOMMENDATIONS Devon's board of directors has Mitchell's board of directors has OF THE BOARD approved and adopted the merger approved and adopted the merger OF DIRECTORS agreement and determined that the agreement and determined that the merger agreement and the merger agreement is advisable and transactions that it contemplates in the best interests of Mitchell are advisable and in the best and its stockholders. Accordingly, interests of Devon and its the board recommends that Mitchell stockholders. Accordingly, the stockholders vote to approve the board recommends that Devon merger agreement. stockholders vote to approve and adopt the merger agreement and the transactions that it contemplates. -------------------------------------------------------------------------------------------- VOTES REQUIRED - The affirmative vote of the - The affirmative vote, cast in holders of at least a majority of person or by proxy, of the holders the votes cast in person or by of at least two-thirds of the proxy by holders of Devon voting shares of Mitchell common stock stock is required to approve the outstanding on the record date is issuance of Devon common stock in required for approval of the the merger. merger agreement. - The affirmative vote, cast in - A vote to approve the merger person or by proxy, of the holders agreement will constitute a vote of at least a majority of the in favor of both the merger and shares of Devon common stock and the alternate structure, Northstar exchangeable shares including the merger involving outstanding, voting as a single Mitchell that would be effected class, is required to approve the under the alternate structure. merger involving Devon under the alternate structure. - Abstentions will have the same effect as votes against approval of - A vote to approve and adopt the the merger agreement. merger agreement will constitute a vote in favor of both (1) the - The failure of a stockholder to issuance of Devon common stock in vote in person or by proxy will the merger and (2) the alternate also have the effect of a vote structure, including the merger against approval of the merger involving Devon that would be agreement. effected under the alternate structure. - If the required vote to approve the issuance of Devon common stock in the merger is received but the required vote to approve the merger involving Devon under the alternate structure is not received, the transaction will still be completed using the original structure -- that is, the merger of Mitchell with and into a wholly owned subsidiary of Devon -- if all of the other conditions to the transaction are satisfied or waived, including delivery of the required tax opinions. Failure to receive the higher vote required to complete the transaction under the alternate structure would only mean -------------------------------------------------------------------------------------------- |
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- that the parties could not complete the transaction under the alternate structure. - Abstentions will not affect the outcome of the vote with respect to the issuance of Devon common stock in the merger, but will have the same effect as votes against the merger involving Devon under the alternate structure. - Assuming a quorum is present, the failure of a stockholder to vote in person or by proxy also will not affect the outcome of the vote with respect to the issuance of Devon common stock in the merger. However, the failure of a stockholder to vote in person or by proxy will have the effect of a vote against the merger involving Devon under the alternate structure. -------------------------------------------------------------------------------------------- SHARES As of the record date, there were As of the record date, there were OUTSTANDING shares of Devon voting shares of Mitchell common stock outstanding and entitled to stock outstanding and entitled to vote, consisting of vote. shares of Devon common stock and Northstar exchangeable shares. -------------------------------------------------------------------------------------------- A proxy card will be sent to each Devon and Mitchell stockholder of record. VOTING PROCEDURES If you have timely and properly submitted your proxy, clearly indicated your vote and have not revoked your proxy, your shares will be voted as indicated. If you have timely and properly submitted your proxy but have not clearly indicated your vote, your shares will be voted FOR the proposal to approve the merger agreement. If any other matters are properly presented at the meeting for consideration, the persons named in your proxy will have the discretion to vote on these matters in accordance with their best judgment. Proxies voted against the proposals related to the merger will not be voted in favor of any adjournment of the meeting for the purpose of soliciting additional proxies. Voting by Holders of Devon Common Voting by Holders of Mitchell Stock Common Stock Each share of Devon common stock is Each share of Mitchell common stock entitled to one vote at the is entitled to one vote at the meeting. You may vote using any of meeting. You may vote using either the following methods: of the following methods: ------------------------------------------------------------------------ - phone the toll-free number listed - complete, sign and mail your on your proxy card and follow the proxy card in the postage-paid recorded instructions; envelope; or - go to the Internet website listed - attend the meeting and vote in on your proxy card and follow the person. instructions provided; -------------------------------------------------------------------------------------------- |
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- - complete, sign and mail your proxy card in the postage-paid envelope; or - attend the meeting and vote in person. -------------------------------------------------------------------------------------------- Voting by Holders of Northstar Exchangeable Shares Each Northstar exchangeable share is also entitled to one vote at the meeting through a voting and exchange trust agreement. Under that agreement, CIBC Mellon Trust Company, the trustee, is entitled to exercise voting rights on behalf of holders of Northstar exchangeable shares. The trustee holds one share of special voting stock of Devon. The share of special voting stock is entitled to a number of votes equal to the number of Northstar exchangeable shares outstanding that are held by persons other than Devon. Each holder of Northstar exchangeable shares, other than Devon, is entitled to give the trustee voting instructions for a number of votes equal to the number of that holder's Northstar exchangeable shares. A voting direction card is a means by which a holder of Northstar exchangeable shares may authorize the voting of his or her voting rights at the meeting. The trustee will exercise each vote only as directed by the relevant holders on the voting direction card. In the absence of instructions from a holder as to voting, the trustee will not exercise those votes. A holder of Northstar exchangeable shares may also instruct the trustee to give him or her a proxy entitling him or her to vote personally the relevant number of votes or to grant to Devon's management a proxy to vote those votes. -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- Revocation Revocation You may revoke your proxy at any You may revoke your proxy at any time prior to its exercise by: time prior to its exercise by: - giving written notice of - giving written notice of revocation to the Corporate revocation to the Secretary of Secretary of Devon; Mitchell; - appearing and voting in person at - appearing and voting in person at the Devon meeting; or the Mitchell meeting; or -------------------------------------------------------------------------------------------- |
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- - properly completing and executing - properly completing and executing a later dated proxy and delivering a later dated proxy and delivering it to the Corporate Secretary of it to the Secretary of Mitchell Devon at or before the Devon at or before the Mitchell meeting. meeting. Your presence without voting at the Your presence without voting at the meeting will not automatically meeting will not automatically revoke your proxy, and any revoke your proxy, and any revocation during the meeting will revocation during the meeting will not affect votes previously taken. not affect votes previously taken. -------------------------------------------------------------------------------------------- Validity Validity The inspectors of election will The inspectors of election will determine all questions as to the determine all questions as to the validity, form, eligibility validity, form, eligibility (including time of receipt) and (including time of receipt) and acceptance of proxies. Their acceptance of proxies. Their determination will be final and determination will be final and binding. Devon's board of directors binding. Mitchell's board of has the right to waive any directors has the right to waive irregularities or conditions as to any irregularities or conditions as the manner of voting. Devon may to the manner of voting. Mitchell accept your proxy by any form of may accept your proxy by any form communication permitted by Delaware of communication permitted by Texas law so long as Devon is reasonably law so long as Mitchell is assured that the communication is reasonably assured that the authorized by you. communication is authorized by you. -------------------------------------------------------------------------------------------- SOLICITATION OF The accompanying proxy is being The accompanying proxy is being PROXIES solicited on behalf of Devon's solicited on behalf of Mitchell's board of directors. The expenses of board of directors. The expenses of preparing, printing and mailing the preparing, printing and mailing the proxy and materials used in the proxy and materials used in the solicitation will be borne by solicitation will be borne by Devon. Mitchell. Georgeson Shareholder Georgeson Shareholder Communications, Inc., New York, New Communications, Inc., New York, New York, has been retained by Devon to York, has been retained by Mitchell aid in the solicitation of proxies to aid in the solicitation of for a fee of $10,000 and the proxies for a fee of $10,000 and reimbursement of out-of-pocket the reimbursement of out-of-pocket expenses. Proxies may also be expenses. Proxies may also be solicited from Devon's stockholders solicited from Mitchell by personal interview, telephone stockholders by personal interview, and telegram by Devon's directors, telephone and telegram by officers and employees, who will Mitchell's directors, officers and not receive additional compensation employees, who will not receive for performing that service. additional compensation for Arrangements also will be made with performing that service. brokerage houses and other Arrangements also will be made with custodians, nominees and brokerage houses and other fiduciaries for the forwarding of custodians, nominees and proxy materials to the beneficial fiduciaries for the forwarding of owners of Devon shares held by proxy materials to the beneficial those persons, and Devon will owners of Mitchell shares held by reimburse them for any reasonable those persons, and Mitchell will expenses that they incur. reimburse them for any reasonable expenses that they incur. -------------------------------------------------------------------------------------------- |
-------------------------------------------------------------------------------------------- DEVON MITCHELL -------------------------------------------------------------------------------------------- SHARES HELD General IN STREET NAME If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee when voting your shares or when granting or revoking a proxy. Absent specific instructions from you, your broker is NOT empowered to vote your shares, also known as "broker non-votes." -------------------------------------------------------------------------------------------- Effect of Broker Non-Votes Effect of Broker Non-Votes Broker non-votes will be counted as Broker non-votes will be counted as present and represented at the present and represented at the Devon meeting and (1) will not Mitchell meeting and will have the effect the outcome of the vote with same effect as a vote against respect to the issuance of Devon approval of the merger agreement. common stock in the merger, but (2) will have the same effect as a vote against the merger involving Devon under the alternate structure. -------------------------------------------------------------------------------------------- AUDITORS KPMG LLP serves as Devon's Arthur Andersen LLP serves as independent auditors. Mitchell's independent auditors. Representatives of KPMG LLP plan to Representatives of Arthur Andersen attend the Devon meeting and will LLP plan to attend the Mitchell be available to answer appropriate meeting and will be available to questions. Its representatives will answer appropriate questions. Its also have an opportunity to make a representatives will also have an statement at the meeting if they so opportunity to make a statement at desire, although it is not expected the meeting if they so desire, that any statement will be made. although it is not expected that any statement will be made. -------------------------------------------------------------------------------------------- |
THE MERGER
BACKGROUND OF THE MERGER
For Mitchell, the proposed merger with Devon represents the culmination of a lengthy and deliberate process.
In the late summer of 1999, Mitchell's board of directors determined to explore strategic alternatives for the company in order to increase stockholder returns. On October 6, 1999, Mitchell announced its engagement of Goldman, Sachs & Co. and a predecessor firm of J.P. Morgan Securities Inc. to advise Mitchell regarding strategic alternatives, including possible transactions that might result in a sale or merger. Mitchell engaged both Goldman Sachs and JPMorgan as financial advisors because both firms (including their affiliates or predecessors) had long-term relationships with Mitchell as investment or commercial bankers and financial advisors.
Over the next six months, Goldman Sachs and JPMorgan contacted on behalf of Mitchell numerous parties, including Devon, as to their interest in participating in an auction process leading to a possible business combination with Mitchell. Conditions within the energy industry and the stock market during the auction process were not, however, generally supportive of a business combination at a price acceptable to Mitchell. At that point, Mitchell's board of directors decided to terminate sales efforts.
In April 2000, Mitchell announced that, as a result of its review of strategic alternatives, the company planned to continue operating as an independent oil and gas company and to take several steps to improve its stock price performance. These steps included (1) accelerating its development drilling program, (2) expanding its North Texas gas processing facilities, (3) reducing long-term debt and (4) combining its Class A and Class B common stock into a single voting class. Mitchell believes that these efforts, combined with a 50% increase in reserves at mid-year 2000, rapidly growing gas production volumes, increasing gas prices and record earnings, contributed to a doubling of Mitchell's stock price by the early fall of 2000 and the realization of a stock trading multiple comparable to the leaders in the independent oil and natural gas sector. By mid-fall of 2000, Mitchell's management felt that its future outlook was promising enough to consider again a possible merger or sale of the company. Discussions ensued with Mitchell's financial advisors about the strategy and timing of such initiatives. Meanwhile, Mitchell's stock price continued to increase throughout the remainder of 2000, reaching an all time high of $64 per share in late December.
Beginning in late November and continuing into mid-December 2000, contacts occurred between Mitchell's senior management and another independent oil and gas company regarding that company's possible interest in pursuing a business combination with Mitchell. Although no transaction resulted from these contacts, in the course of discussions, several verbal merger proposals were made to Mitchell. A final offer was made in early March 2001 that valued Mitchell at or near the then current market price for Mitchell's stock. George P. Mitchell and W.D. Stevens, Mitchell's Chief Executive Officer and Chief Operating Officer, respectively, responded that the offer did not represent fair value for the company's assets and, consequently, Mitchell was not interested in pursuing the proposal. All negotiations were then terminated. Throughout this process, Mitchell management kept Mitchell's board of directors informed.
In the spring of 2001, George P. Mitchell, who was then the majority stockholder of the company, decided to sell a significant block of his Mitchell shares to meet certain personal estate planning, financial and philanthropic goals. Specifically, in early May 2001, Mr. Mitchell sold 4.7 million shares of Mitchell common stock in an underwritten public offering at a price to the public of $53 per share, reducing his beneficial ownership of the outstanding shares of Mitchell common stock to approximately 47%. Mr. Mitchell retained Bracewell & Patterson, L.L.P. to represent his personal interests in this offering.
Later in May 2001, Mitchell asked its two financial advisors, during the course of their routine contacts with a select group of energy companies, to make these companies aware of Mitchell's openness to a possible sale or merger. Some of these contacts expressed a possible interest, but no meaningful follow-up by them resulted. Subsequently, however, a representative of Goldman Sachs informally inquired
of J. Larry Nichols, Chairman, President and Chief Executive Officer of Devon, whether or not Devon might be interested in assessing a possible business combination with Mitchell. This inquiry met with a positive response from Devon. Selected publicly available information regarding Mitchell was provided to Devon.
On June 14, 2001, a meeting among Mr. Nichols, another then executive officer of Devon, Mr. Stevens and Mitchell's Chief Financial Officer occurred in Houston, Texas. At that meeting, Mitchell management confirmed Devon's interest in evaluating a possible business combination in light of Mitchell's transaction expectations in order to ensure that neither company would be wasting time and effort, as had happened with Mitchell earlier in the year. Satisfied that there was a reasonable basis for proceeding, the parties agreed generally on a schedule for beginning the evaluation process. On June 21, 2001, Mitchell entered into a confidentiality agreement with Devon. Shortly thereafter Devon commenced a due diligence investigation of Mitchell. Over the next several weeks, Mitchell furnished Devon with confidential evaluation materials in several meetings which took place between senior operating management of the two companies. Management of both companies informed the boards of directors of their respective companies of these meetings.
On August 7, 2001, Mr. Nichols submitted a letter to Mitchell's financial advisors proposing that Devon acquire Mitchell for cash of $30 per share and 0.585 of a share of Devon common stock for each share of Mitchell common stock. The letter stated that the proposal would expire on August 17, 2001. The Mitchell board of directors held a meeting the next day, August 8, 2001, at the company's offices in Houston. At that meeting, Mitchell's management, together with representatives of Mitchell's financial advisors and outside counsel, reviewed with Mitchell's board of directors the proposal contained in Mr. Nichols' August 7 letter as well as background information on Devon. Mitchell's board of directors authorized Mitchell's management to negotiate with Devon.
Later that same day, August 8, a representative of Goldman Sachs telephoned Mr. Nichols on behalf of Mitchell to inform him that Mitchell's board of directors had considered Devon's proposal and to discuss the board's response to that proposal.
At about this same time, Devon engaged UBS Warburg LLC to act as its financial advisor in connection with its possible acquisition of Mitchell.
Mr. Nichols, in the course of a telephone conversation on the evening of August 9 with a representative of Goldman Sachs, responded to the issues raised by Mitchell's board of directors in considering Devon's August 7 proposal, including the proposed merger consideration. Mr. Nichols stated that Devon was prepared to raise the cash portion of its offer to $31 per share. Furthermore, Mr. Nichols insisted that Devon would require Mr. and Mrs. George P. Mitchell to grant Devon an irrevocable proxy to vote their Mitchell shares in connection with the merger and an option to purchase those shares.
In telephone conversations on August 10, Mr. Stevens and a representative of Goldman Sachs discussed with Mr. Nichols the proposed terms of the merger and asked Devon to increase its offer again. Mr. Nichols refused to do so. Finally, Messrs. Stevens and Nichols agreed to meet in Houston over the next several days, together with their respective management teams, financial advisors and legal counsel, to complete mutual due diligence and to determine if Devon and Mitchell could agree on merger terms and if Devon could reach agreement with Mr. and Mrs. George P. Mitchell on contractual support for the merger. Later that same day, Devon instructed its outside legal counsel, Mayer, Brown & Platt, to commence documentation of the proposed merger as well as the proposed contractual arrangements between Devon and Mr. and Mrs. Mitchell.
The Devon and Mitchell groups met as proposed at the Houston offices of Vinson & Elkins L.L.P. beginning on Saturday, August 11, and continuing until the early evening of Monday, August 13. They were joined by Mr. and Mrs. George P. Mitchell's legal counsel. At his initial meeting with Devon's General Counsel and its outside legal counsel, Mayer, Brown & Platt, on August 11, Mr. and Mrs. Mitchell's legal counsel explained his clients' objection to the proposed grant of an option to Devon to purchase their Mitchell shares. In view of the relatively large number of Devon shares that Mr. and
Mrs. Mitchell would receive in the proposed merger, Mr. and Mrs. Mitchell's legal counsel also requested that Devon grant Mr. and Mrs. Mitchell both demand and "piggyback" registration rights. He indicated, however, that Mr. and Mrs. Mitchell were generally agreeable to entering an agreement with Devon to vote in favor of the merger and not to sell their Mitchell shares during the next two years. By the following Monday, August 13, Devon had reached the agreements with Mr. and Mrs. Mitchell that are embodied in the principal shareholders agreement and the investor rights agreement described under "Agreements among Devon, George P. Mitchell and Cynthia Woods Mitchell."
Mayer, Brown & Platt presented Mitchell and its outside legal counsel, Vinson & Elkins L.L.P., with a draft of the proposed merger agreement early on Saturday evening, August 11. Over the ensuing 48-hour period, Devon and Mitchell negotiated and documented a definitive merger agreement. For a description of the terms of the definitive merger agreement, see "The Merger Agreement."
During the course of negotiations in Houston on August 11 and 12, Mitchell and Devon and their financial advisors also completed their respective due diligence work.
During the afternoon of Monday, August 13, 2001, Mitchell's board of directors met at the company's offices in Houston to discuss the proposed transaction. After a management presentation, a member of Vinson & Elkins L.L.P. presented to Mitchell's board of directors an overview of the terms and conditions of the proposed merger agreement and advised the board as to its fiduciary duties. Mr. and Mrs. Mitchell's legal counsel summarized for Mitchell's board of directors the terms and conditions of the proposed principal shareholders agreement and investor rights agreement among Devon and Mr. and Mrs. Mitchell. Representatives of Goldman Sachs and JPMorgan then provided their respective financial analyses with regard to the proposed merger agreement. Goldman Sachs and JPMorgan then delivered their respective opinions to Mitchell's board of directors to the effect that, as of that date and subject to the assumptions and other matters set forth in the opinions, the consideration to be received by the holders of Mitchell common stock pursuant to the merger agreement was fair from a financial point of view to the holders. For a discussion of the opinions of Goldman Sachs and JPMorgan, see "-- Opinions of Financial Advisors -- Opinion of Goldman, Sachs & Co. -- Financial Advisor to Mitchell" and "-- Opinion of J.P. Morgan Securities Inc. -- Financial Advisor to Mitchell." Based on the information presented, Mitchell's board of directors unanimously approved and adopted the merger agreement and determined that the merger agreement and the merger are advisable and in the best interests of Mitchell and its stockholders. Mitchell's board of directors also adopted a resolution recommending to Mitchell stockholders that they vote FOR approval of the merger agreement.
On August 13, 2001, Devon's board of directors (with the exception of Michael Kanovsky, who was unable to attend the meeting) also met to discuss the proposed transaction. During that meeting, Devon's General Counsel and a representative of Mayer, Brown & Platt presented to Devon's board of directors and discussed with the board a legal overview of the terms and conditions of the proposed merger agreement and the proposed principal shareholders agreement and investor rights agreement among Devon and Mr. and Mrs. Mitchell. Representatives of Devon's management and UBS Warburg LLC then provided an overview of Mitchell's assets and a description of the combined company to Devon's board of directors. UBS Warburg LLC also discussed with the board a strategic and financial overview of the proposed merger. UBS Warburg LLC then delivered its opinion to Devon's board of directors to the effect that the consideration to be paid by Devon to holders of Mitchell common stock pursuant to the merger agreement was fair to Devon from a financial point of view as of that date. For a discussion of UBS Warburg LLC's opinion, see "-- Opinions of Financial Advisors -- Opinion of UBS Warburg LLC -- Financial Advisor to Devon." Based on the information presented, Devon's board of directors, by a unanimous vote of those directors who attended the meeting, approved and adopted the merger agreement and determined that the merger agreement and the merger are advisable and in the best interests of Devon and its stockholders. Devon's board of directors also adopted a resolution recommending to Devon stockholders that they vote FOR approval of the issuance of Devon common stock in the merger.
Devon purchased 100 shares of Mitchell common stock from Mr. Mitchell for $6,212 and the merger agreement, the principal shareholders agreement and the investor rights agreement were signed after the
close of trading on August 13, 2001. Devon purchased 100 shares of Mitchell common stock in order to assure the creation of an agreement among shareholders that would be enforceable under Section B, Article 2.30 of the Texas Business Corporation Act and which would help assure the enforceability of the irrevocable proxy granted to Devon in the shareholders agreement. Devon and Mitchell issued a joint press release announcing the merger the following morning before the stock markets opened.
On October 5, 2001, the parties amended and restated each of the merger agreement, the principal shareholders agreement and the investor rights agreement. The amendments agreed to by the parties provide for the alternate structure described in this document and reflect several other minor changes that do not materially affect the substantive terms of the transaction.
RECOMMENDATION OF MITCHELL'S BOARD OF DIRECTORS AND REASONS FOR THE MERGER
Mitchell's board of directors has approved and adopted the merger agreement and determined that the merger agreement and the transactions that it contemplates are advisable and in the best interests of Mitchell and its stockholders. Accordingly, the board recommends that Mitchell stockholders vote to approve the merger agreement.
Mitchell's board of directors considered various factors, including the following, in unanimously approving the merger agreement and the merger (the order does not reflect the relative significance):
- Merger Consideration -- The value of the merger consideration, as of August 13, 2001, represented a 32% premium over the closing price of Mitchell's common stock on that date and, in the board's view, was the only offer it had received for the company that appropriately reflected the company's enterprise value. The merger agreement requires Devon to pay approximately $1.6 billion and to issue approximately 30.2 million shares of its common stock to Mitchell stockholders. Accordingly, Mitchell stockholders will obtain in the merger cash for a substantial portion of the value of their shares and will also have the opportunity to participate in any post-merger appreciation in the value of Devon common stock.
- Increased Liquidity -- The combined company's common stock will be traded on the American Stock Exchange in substantially greater dollar volumes than that of Mitchell on the New York Stock Exchange, providing greater liquidity for Mitchell stockholders and for new institutional investors.
- Complementary Assets and Diversification -- Mitchell's operations and its reserves are concentrated in North Texas, East Texas and along the Texas Gulf Coast, complementing Devon's core operating areas elsewhere in the United States. Mitchell's largest field, the Newark East Barnett Shale field in North Texas, will also add a new high-growth core area to Devon's domestic natural gas assets and operations. Further, Devon's United States, Canadian and international oil and gas operations will provide Mitchell stockholders with a more diversified exploration and exploitation portfolio. Lastly, Mitchell is one of the nation's largest independent producers of NGLs, and Mitchell's NGL assets will expand considerably Devon's midstream business.
- Industry Leadership Position -- Devon and Mitchell together produced approximately 1.4 Bcf of natural gas per day in the United States during the second quarter of 2001, and the combined company (without giving effect to Devon's acquisition of Anderson) will be the second largest independent natural gas producer in the United States in terms of total per day natural gas production. Based on year-end 2000 reserve information and on a pro forma basis, Mitchell's merger with Devon will increase Devon's proved reserves by approximately 38% to 1.5 billion Boe.
- Strong Pro Forma Financial Profile -- Devon has a strong balance sheet and its debt securities carry higher ratings than Mitchell's debt securities. Mitchell's board of directors believes that the pro forma financial profile of the combined company will result in an improved ability to increase reserves and production through expanded exploration and development drilling programs than had Mitchell elected to remain independent.
- Tax Consequences of the Merger -- The merger is structured to be taxable, for U.S. federal income tax purposes to Mitchell stockholders, only to the extent that Mitchell stockholders receive cash in the merger, but otherwise to be tax-free to all parties.
- Opinions of Financial Advisors -- Mitchell's board of directors also considered the presentations and opinions of both Goldman Sachs and JPMorgan described elsewhere in this document to the effect that, based on their assumptions and other matters stated in their respective opinions, the consideration to be received by holders of Mitchell's common stock pursuant to the merger agreement was fair from a financial point of view to the holders as of the date of those opinions.
On September 7, 2001, Mitchell's board of directors met to discuss Devon's proposed acquisition of Anderson and the impact of that transaction on Mitchell's proposed merger with Devon. After a management presentation, representatives of JPMorgan reviewed with Mitchell's board of directors a financial analysis of the potential impact of the Anderson transaction on the proposed merger. JPMorgan then delivered its oral opinion, subsequently confirmed in writing, to Mitchell's board of directors to the effect that, as of that date and subject to the assumptions and other matters set forth in its written opinion dated as of September 7, 2001, the consideration to be received by the holders of common stock of Mitchell in the proposed merger with Devon was fair, from a financial view, to the holders. (Mitchell's board had requested only JPMorgan to update its opinion because of the board's view that one updated opinion would suffice.) Based on the information presented with respect to the Anderson transaction and its impact on the proposed merger, Mitchell's board of directors confirmed, by a unanimous vote of those directors present at the meeting, its earlier determination that the merger agreement and the merger are advisable and in the best interests of Mitchell and its stockholders. Mitchell does not intend to request either of its financial advisors to deliver any further updated opinion regarding the merger.
The preceding discussion of the information and factors considered and given weight by Mitchell's board of directors is not intended to be exhaustive. However, Mitchell's board of directors believes that the discussion includes all of the material factors that it considered. In reaching its decision to approve and to recommend approval to Mitchell stockholders of the merger agreement, Mitchell's board of directors did not assign any relative or specific weights to the factors it considered. Individual directors may have given different weights to different factors.
Mitchell's board of directors realizes that there are risks associated with the merger and an investment in the combined company, including the risks that:
- the operations of the two companies may not be successfully integrated; and
- the merger might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement.
These two and additional risks are discussed more fully under "Risk Factors."
RECOMMENDATION OF DEVON'S BOARD OF DIRECTORS AND REASONS FOR THE MERGER
Devon's board of directors has approved and adopted the merger agreement and determined that the merger agreement and the transactions that it contemplates are advisable and in the best interests of Devon and its stockholders. Accordingly, the board recommends that Devon stockholders vote to approve and adopt the merger agreement and the transactions that it contemplates.
The merger is part of Devon's overall business strategy for growth through exploration and development of existing properties and through strategic mergers and acquisitions. Following Devon's acquisitions of Anderson and Mitchell, Devon will be the largest independent natural gas producer in North America based on pro forma production for the quarter ended June 30, 2001. In reaching its decision to approve and adopt the merger agreement, Devon's board of directors consulted with Devon's management, as well as its financial and legal advisors. Devon's board of directors believes that Devon and its stockholders will benefit from the merger for the following reasons (the order does not reflect the relative significance):
- Per Share Accretion -- Devon anticipates that the merger will provide accretion, to varying degrees, in cash margin per share, earnings per share, reserves per share and production per share on a pro forma basis to varying degrees, although the combination of both Anderson and Mitchell with Devon is expected to be dilutive to earnings per share in the near term.
- Growth Oriented Asset Base -- Devon believes that there are significant development and exploitation projects in each of Mitchell's core areas. Devon expects these exploitation and development projects to provide Devon with relatively low-risk (geological and technical) opportunities to increase production for the next several years. Devon also anticipates that the midstream business will grow significantly during the next two years. Devon expects that this growth will come not only from the expected production growth, but also from additional processing capacity and efficiency to be realized from the investment of over $200 million that Mitchell has made over the last two years to expand and upgrade its midstream facilities.
- Marketing and Transportation Opportunities -- The pipeline infrastructure that Mitchell owns currently transports gas both from Mitchell's wells and from third parties' wells. These pipelines have multiple direct connections to end users of natural gas and to major interstate pipelines that can take gas to the east, midwest and southeast portions of the United States. Because the Mitchell pipelines have capacity to accept additional gas, Devon expects that these facilities will provide Devon an opportunity to deliver and sell its own gas to the most favorable of the multiple markets that the pipelines serve. In addition, the gas produced from Mitchell's Texas fields, when aggregated with Devon's east Texas and Permian Basin gas production, is expected to provide Devon with increased ability to negotiate the sale of its natural gas production.
- Midstream Opportunities -- Natural gas production often contains NGLs,
which can either be (1) left in the natural gas stream and sold along
with the natural gas or (2) extracted from the natural gas at a
processing facility and sold separately, depending on the quality of the
liquid, as pentane, butane, propane or similar products. The decision of
whether to sell the liquids with the gas stream or to extract the liquids
and sell them separately is based on a number of factors, including (1)
access to a processing facility; (2) fees charged by such facilities; and
(3) prices for natural gas and the separated liquids. Generally,
extracting the liquids and selling them separately results in more value
per Mcf produced than selling the natural gas with the liquids.
Mitchell's natural gas produced from the Barnett Shale, and natural gas
produced from some of Devon's other properties in the area, contain NGLs.
Owning Mitchell's processing facilities is expected to give Devon:
- the ability to increase the value of Devon's own natural gas production;
- additional revenue from processing third party natural gas; and
- a significant share of the regional NGL supply, which should enhance Devon's ability to negotiate the sale of NGL production.
In addition to its tangible cash generating value, Devon believes that there is significant intangible value to Mitchell's midstream business. Although Devon currently has midstream operations associated with existing producing properties, the merger would increase the size of Devon's midstream assets by more than eight-fold. The addition of these assets and the employees specialized in their operation is expected to enable Devon to deepen and broaden its knowledge and experience base in this business. It will also provide Devon a much larger platform on which to build.
- Knowledge and Experience with a Unique Technology -- In 1998, Mitchell began implementing a new fracture completion technology referred to as light sand fracturing, or LSF. This technology has significant intangible value to Devon. LSF costs materially less than more traditional hydraulic fracturing techniques. This has made it economical to expand development of the Barnett Shale. Devon believes that LSF technology can be used on other Devon assets to enhance recoveries and economics. Devon views the merger as an opportunity to gain Mitchell's experience and expertise with a lower-cost technology that is not yet widely used.
- Increased Exposure to North American Natural Gas -- Mitchell's reserves are in excess of 70% natural gas. Devon's reserves would increase from 53% natural gas to approximately 58% natural gas on a pro forma basis after giving effect to the merger. Given the current supply/demand balance within the North American natural gas market and the outlook for this market, Devon believes that increasing its exposure to North American natural gas is opportune.
- Larger Size -- The combined company (without giving effect to Devon's acquisition of Anderson) will be the fourth largest oil and gas company in North America, based on enterprise value. There are several intangible advantages to the larger size:
- Devon expects to have even greater liquidity in the market for its shares;
- Based on Devon's prior experience with making acquisitions, the combined company's larger size should allow Devon to consider future transactions that would not otherwise be possible; and
- The combined company's larger size is expected to give Devon greater marketing, purchasing and operating strengths.
- Opinion of Financial Advisor -- Devon's board of directors also considered the presentation and opinion of UBS Warburg LLC described elsewhere in this document to the effect that, based on its assumptions and other matters stated in its opinion, the merger consideration to be paid by Devon in the merger was fair from a financial paint of view to Devon as of the date of the opinion. Devon does not intend to request UBS Warburg to deliver any updated opinion regarding the merger.
The preceding discussion of the information and factors considered and given weight by Devon's board of directors is not intended to be exhaustive. However, Devon's board of directors believes that the discussion includes all of the material factors that it considered. In reaching its decision to approve the merger agreement and the transactions that it contemplates and to recommend approval to Devon stockholders of the issuance of Devon common stock in the merger, Devon's board of directors did not assign any relative or specific weights to the factors it considered. Individual directors may have given different weights to different factors.
Devon's board of directors realizes that there are risks associated with the merger, including the risks that:
- the operations of the two companies may not be successfully integrated;
- the merger might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement;
- Mitchell's significant investment in the Barnett Shale may not generate the benefits expected by Devon;
- the combined company may not realize the accretion that Devon expects from the merger to its reserves per share, production per share or cash margin per share; and
- Mitchell has significant assets located near large population centers in North Texas, which makes it particularly sensitive to regulatory or environmental issues relating to these large population centers.
These factors and additional factors are discussed more fully under "Risk Factors." However, Devon's board of directors believes that the positive factors should outweigh any negative factors, although Devon's board of directors can give no assurances in this regard.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF GOLDMAN, SACHS & CO. -- FINANCIAL ADVISOR TO MITCHELL
On August 13, 2001, Goldman Sachs delivered its opinion to Mitchell's board of directors that as of the date of the opinion and based on and subject to the various qualifications and assumptions described in the opinion, the consideration to be received by the holders of shares of Mitchell common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated August 13, 2001, is attached as Annex D. You are urged to, and should, read the Goldman Sachs opinion in its entirety. Goldman Sachs conducted its analysis and provided its opinion for the information and assistance of Mitchell's board of directors in connection with its consideration of the transactions contemplated by the merger agreement at the meeting of Mitchell's board of directors on August 13, 2001. Goldman Sachs has not been requested by Mitchell's board of directors to update its analysis or its opinion for events occurring subsequent to August 13, 2001. As a result, neither Goldman Sachs' analysis nor its opinion takes into account any events or circumstances relating to Mitchell or Devon that occurred after the meeting of Mitchell's board of directors on August 13, 2001, including the effects of Devon's acquisition of Anderson on the closing of the merger and on Devon in the future. The Goldman Sachs opinion is not a recommendation as to how any Mitchell stockholder should vote with respect to the approval of the merger agreement.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- annual reports to stockholders and annual reports on Form 10-K of Mitchell for the year ended December 31, 2000 and for the four fiscal years ended January 31, 2000;
- annual reports to stockholders and annual reports on Form 10-K of Devon for the five years ended December 31, 2000;
- interim reports to stockholders and quarterly reports on Form 10-Q of Mitchell and Devon, including a draft report on Form 10-Q of Devon for the six-month period ended June 30, 2001;
- other communications from Mitchell and Devon to their respective stockholders;
- reports of Mitchell management with respect to the estimated oil and gas reserves of Mitchell;
- reports of Devon management with respect to the estimated oil and gas reserves of Devon; and
- internal financial analyses and forecasts for Mitchell and Devon prepared by their respective managements, including certain cost savings and operating synergies projected by the managements of Mitchell and Devon to result from the merger.
Goldman Sachs also held discussions with the senior management of each of Mitchell and Devon regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the
past and current business operations, financial condition and future prospects of their respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for shares of Mitchell common stock and shares of Devon common stock;
- compared financial and stock market information for Mitchell and Devon with similar information for certain other companies that have publicly traded securities;
- reviewed the financial terms of certain recent business combinations in the oil and gas industry specifically and in other industries generally; and
- performed other studies and analyses that Goldman Sachs considered appropriate.
Goldman Sachs relied on the accuracy and completeness of all of the financial, accounting and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering its opinion. In that regard, Goldman Sachs assumed, with the consent of Mitchell's board of directors, that the financial forecasts prepared by the managements of Mitchell and Devon have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of Mitchell and Devon. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities of Mitchell or Devon or any of their subsidiaries and, except for the reserve reports provided by Devon's and Mitchell's management, was not furnished with any such evaluation or appraisal. The financial forecasts and other information provided to Goldman Sachs did not include any effects of Devon's acquisition of Anderson.
The following is a summary of the material financial analyses used by Goldman Sachs in connection with providing its opinion to Mitchell's board of directors on August 13, 2001. This summary does not purport to be a complete description of the analyses performed by Goldman Sachs. The following summary of the financial analyses include information presented in tabular form. In order to more fully understand each financial analysis used by Goldman Sachs, each table must be read together with the full text of the related part of the summary.
Selected Companies Analysis -- Mitchell. Goldman Sachs reviewed and compared selected financial information, ratios and public market multiples relating to Mitchell to corresponding financial information, ratios and public market multiples for the following six publicly traded companies:
- Burlington Resources Inc.;
- Cross Timbers Oil Company;
- EOG Resources, Inc.;
- Louis Dreyfus Natural Gas Corp.;
- Newfield Exploration Company; and
- Noble Affiliates, Inc.
Although none of these companies was directly comparable to Mitchell, the selected companies were chosen because they are publicly traded companies with operations that for purposes of this analysis may be considered similar to certain operations of Mitchell.
Goldman Sachs calculated and compared various financial multiples and ratios based on the most recent publicly available information. The multiples and ratios for Mitchell and each of the six selected companies were calculated using closing share prices as of August 10, 2001. Goldman Sachs' analyses of the selected companies compared the following to the results for Mitchell:
- closing share price on August 10, 2001 as a percentage of the highest share price over the prior 52-week period;
- closing share price on August 10, 2001 as a multiple of the mean estimated discretionary cash flow ("DCF") per share for 2001 and 2002 as reported by First Call, an electronic service provided by Thompson Financial that aggregates the earnings and cash flow estimates of equity research analysts;
- total enterprise value, which is the market value of common equity plus preferred stock plus minority interest plus total debt less working capital, as a multiple of estimated debt adjusted cash flow, which is DCF plus after-tax interest expense ("DACF"), for 2001 and 2002; and
- closing share price on August 10, 2001 as a multiple of First Call mean estimated earnings per share for 2001 and 2002.
The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
RANGE MEAN MEDIAN MITCHELL ----------- ----- ------ -------- August 10, 2001 closing share price as a percentage of 52-week high share price......... 57.3%-75.5% 65.0% 63.4% 70.3% August 10, 2001 closing share price as a multiple of First Call mean estimated 2001 DCF per share.......................................... 2.9x-4.3x 3.3x 3.2x 4.0x August 10, 2001 closing share price as a multiple of First Call mean estimated 2002 DCF per share.......................................... 3.3x-5.2x 3.9x 3.7x 4.2x Total enterprise value as a multiple of estimated 2001 DACF...................................... 3.7x-5.3x 4.4x 4.2x 4.5x Total enterprise value as a multiple of estimated 2002 DACF...................................... 4.1x-6.2x 5.1x 5.1x 4.8x August 10, 2001 closing share price as a multiple of First Call mean estimated 2001 earnings per share.......................................... 6.5x-10.9x 8.4x 8.3x 7.5x August 10, 2001 closing share price as a multiple of First Call mean estimated 2002 earnings per share.......................................... 8.6x-17.6x 13.7x 13.7x 8.9x |
Goldman Sachs also compared the following for the selected companies:
- total enterprise value per Mcfe of proved reserves;
- proved reserves as a multiple of production; and
- percentage of proved gas reserves.
The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
MITCHELL WITH RESERVES AS OF RANGE MEAN MEDIAN DECEMBER 31, 2000 ------------ ----- ------ ----------------- Total enterprise value per Mcfe of proved reserves....................... $0.90- $2.09 $1.23 $1.06 $1.73 Proved reserves as a multiple of production............................ 5.5x- 12.6x 10.4x 11.2x 10.0x % proved gas reserves................... 62%- 89% 79% 79% 95% |
Selected Companies Analysis -- Devon. Goldman Sachs also reviewed and compared selected financial information, ratios and public market multiples relating to Devon to corresponding financial information, ratios and public market multiples for the following eight publicly traded companies:
- Anadarko Petroleum Corporation;
- Apache Corporation;
- Burlington Resources Inc.;
- EOG Resources, Inc.;
- Kerr-McGee Corporation;
- Murphy Oil Corporation;
- Ocean Energy, Inc.; and
- Unocal Corporation.
Although none of these companies was directly comparable to Devon, the selected companies were chosen because they are publicly traded companies with operations that for purposes of this analysis may be considered similar to certain operations of Devon.
Goldman Sachs calculated and compared the same financial multiples and ratios that were used with respect to Mitchell based also on the most recent publicly available information and closing share prices as of August 10, 2001. The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
RANGE MEAN MEDIAN DEVON ----------- ----- ------ ----- August 10, 2001 closing share price as a percentage of 52-week high share price...... 57.3%-89.3% 77.4% 78.8% 74.6% August 10, 2001 closing share price as a multiple of First Call mean estimated 2001 DCF per share............................... 3.3x-4.5x 3.9x 3.9x 3.6x August 10, 2001 closing share price as a multiple of First Call mean estimated 2002 DCF per share............................... 3.6x-5.4x 4.5x 4.5x 4.3x Total enterprise value as a multiple of estimated 2001 DACF......................... 4.0x-5.9x 5.0x 5.1x 3.7x Total enterprise value as a multiple of estimated 2002 DACF......................... 5.0x-6.7x 5.7x 5.6x 4.5x August 10, 2001 closing share price as a multiple of First Call mean estimated 2001 earnings per share.......................... 7.6x-11.5x 9.8x 10.2x 8.4x August 10, 2001 closing share price as a multiple of First Call mean estimated 2002 earnings per share.......................... 9.8x-17.6x 13.8x 14.3x 12.9x |
Goldman Sachs also calculated and compared the same reserve multiples and ratios used with respect to Mitchell for Devon and the selected companies with operations similar to Devon. The results of these analyses are summarized as follows:
SELECTED PUBLICLY TRADED OIL AND GAS COMPANIES
DEVON WITH RESERVES AS OF RANGE MEAN MEDIAN DECEMBER 31, 2000 ------------ ----- ------ ----------------- Total enterprise value per Mcfe of proved reserves...................... $1.05-$1.66 $1.34 $1.33 $1.10 Proved reserves as a multiple of production........................... 8.7x-12.6x 10.1x 9.8x 8.9x % proved gas reserves.................. 26%-88% 56% 52% 53% |
Premium Analysis. Goldman Sachs reviewed the historical trading prices for Mitchell common stock and compared the closing prices to the $60.13 implied per share value of the consideration to be received by the holders of Mitchell common stock in the merger based on the closing price of Devon common stock as of August 10, 2001. The following table presents the premium of such implied per share value to the closing prices of Mitchell common stock for the periods presented.
PREMIUM ANALYSIS
CLOSING PRICE PREMIUM ------------- ------- August 10, 2001............................................. $44.97 34% 30-day Average.............................................. 45.08 33 60-day Average.............................................. 47.69 26 5-year High................................................. 64.00 (6) 5-year Low.................................................. 9.63 525 52 Week High................................................ 64.00 (6) 52 Week Low................................................. 32.17 87 |
Selected Transactions Analysis. Goldman Sachs analyzed publicly available information relating to 19 selected transactions in the oil and gas exploration and production industry since 1998. Goldman Sachs' analyses of the selected transactions compared the following to the results for Mitchell:
- the percentage premium of the announced transaction price over the acquired company's undisturbed market price;
- equity value as a multiple of DCF (one and two years forward); and
- reserve value, which is enterprise value less the value of nonreserve assets, to proved reserves.
The following table summarizes the results of the selected transactions analysis:
SELECTED TRANSACTIONS ANALYSIS
MITCHELL AT DEVON OFFER WITH RESERVES RANGE MEDIAN AS OF MAY 31, 2001 ----------- ------ ------------------- Percentage premium over undisturbed price...... 6%-61% 31% 34% Equity value as a multiple of DCF: 1 year forward............................... 3.1x-10.3x 4.4x 5.4x 2 years forward.............................. 1.5x-9.6x 4.4x 5.7x Reserve value/proved reserves.................. $0.60-$1.57 $0.91 $1.06 |
The following table summarizes the results of those of the selected transactions in which gas comprised more than 60% of reserves:
MITCHELL AT DEVON OFFER WITH RESERVES RANGE MEDIAN AS OF MAY 31, 2001 ----------- ------ ------------------- Percentage premium over undisturbed price...... 19%-61% 28% 34% Equity value as a multiple of DCF: 1 year forward............................... 3.8x-8.6x 4.6x 5.4x 2 years forward.............................. 4.1x-9.6x 4.4x 5.7x Reserve value/proved reserves.................. $1.08-$1.57 $1.22 $1.06 |
Financial Analysis of 3-Year Forecast. Goldman Sachs performed analyses to determine the present values as of August 10, 2001 of hypothetical future stock prices for Mitchell and future Mitchell dividends at Mitchell's current quarterly rate. These analyses were based on Mitchell management's three-year financial forecast, including its oil and gas pricing assumptions, and were calculated on the basis of both
price to discretionary cash flow terminal multiples and enterprise value to debt adjusted cash flow terminal multiples.
The following tables present the ranges of present values indicated by these analyses.
BASED ON PRICE/DISCRETIONARY CASH FLOW TERMINAL MULTIPLES
TERMINAL YEAR 2002E TERMINAL YEAR 2003E -------------------------------------------------------------- -------------------------------------------------------------- EQUITY DISCOUNT RATE EQUITY DISCOUNT RATE TERMINAL ------------------------------------------ TERMINAL ------------------------------------------ MULTIPLES 8.0% 9.0% 10.0% 11.0% 12.0% MULTIPLES 8.0% 9.0% 10.0% 11.0% 12.0% --------- ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ 3.0X............ $36.79 $36.45 $36.12 $35.80 $35.48 3.0X.............. $38.20 $37.51 $36.84 $36.19 $35.55 3.5X............ 42.83 42.44 42.06 41.68 41.31 3.5X.............. 44.40 43.60 42.82 42.06 41.32 4.0X............ 48.88 48.43 48.00 47.57 47.14 4.0X.............. 50.60 49.69 48.80 47.93 47.09 4.5X............ 54.93 54.43 53.93 53.45 52.97 4.5X.............. 56.81 55.78 54.78 53.81 52.86 5.0X............ 60.97 60.42 59.87 59.33 58.80 5.0X.............. 63.01 61.87 60.76 59.68 58.62 |
BASED ON ENTERPRISE VALUE/DEBT ADJUSTED CASH FLOW TERMINAL MULTIPLES
TERMINAL YEAR 2002E TERMINAL YEAR 2003E -------------------------------------------------------------- -------------------------------------------------------------- EQUITY DISCOUNT RATE EQUITY DISCOUNT RATE TERMINAL ------------------------------------------ TERMINAL ------------------------------------------ MULTIPLES 8.0% 9.0% 10.0% 11.0% 12.0% MULTIPLES 8.0% 9.0% 10.0% 11.0% 12.0% --------- ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ 3.5X............ $39.30 $38.94 $38.59 $38.25 $37.91 3.5X.............. $43.58 $42.79 $42.03 $41.28 $40.56 4.0X............ 45.49 45.08 44.67 44.27 43.88 4.0X.............. 49.87 48.97 48.09 47.24 46.41 4.5X............ 51.68 51.21 50.75 50.29 49.85 4.5X.............. 56.17 55.15 54.16 53.20 52.26 5.0X............ 57.87 57.34 56.82 56.31 55.81 5.0X.............. 62.46 61.33 60.23 59.16 58.12 5.5X............ 64.06 63.48 62.90 62.34 61.78 5.5X.............. 68.76 67.51 66.30 65.12 63.97 |
In addition, Goldman Sachs performed analyses with respect to the present values as of August 10, 2001 of hypothetical future stock prices for Mitchell and Mitchell dividends based on Mitchell management's forecasts as adjusted to reflect alternative assumptions as to future oil and gas pricing. The following table presents the ranges of present values indicated by the analyses using alternative pricing assumptions identified by Mitchell management and assuming the same range of discount rates and terminal multiples.
ALTERNATIVE 1 PRICING ALTERNATIVE 2 PRICING --------------------------- --------------------------- TERMINAL YEAR TERMINAL YEAR --------------------------- --------------------------- 2002E 2003E 2002E 2003E ------------ ------------ ------------ ------------ Based on price/discretionary cash flow terminal multiples............ $38.64-66.44 $33.47-59.28 $36.85-63.33 $37.28-66.10 Based on enterprise value/debt adjusted cash flow terminal multiples.......................... $42.47-70.90 $38.23-64.66 $39.88-67.02 $43.35-72.89 |
Mitchell Net Asset Valuation Analysis. Goldman Sachs analyzed the present value of the net assets of Mitchell based on projections provided by Mitchell's management, including estimates with respect to future production for proved, probable and possible reserves based on a reserve summary prepared by Mitchell's management as of May 31, 2001 and financial projections with respect to Mitchell's natural gas gathering, processing and marketing assets, and oil and gas pricing forecasts provided by Mitchell's management. The results of these analyses suggested a range of net asset values of $47.89 to $63.27 per share of Mitchell common stock. Goldman Sachs also performed these analyses on the net asset values using two alternative oil and gas pricing assumptions provided by Mitchell's management. Based on these alternative pricing assumptions, these analyses suggested a range of net asset values of $44.32 to $56.69 per share of Mitchell common stock using Alternative 1 pricing and $52.25 to $68.10 per share of Mitchell common stock using Alternative 2 pricing.
Pro Forma Merger Analysis. Goldman Sachs prepared a pro forma analysis of the financial impact of the merger on Devon. The analysis was based on First Call mean estimates as of August 10, 2001 and
guidance from Mitchell and Devon management, and assumed $10 million and $20 million in pre-tax synergies in 2002 and 2003, respectively.
This analysis indicated that the merger would be accretive to Devon -- that is, would represent an addition -- to both 2002 and 2003 estimated earnings per share and 2002 and 2003 estimated discretionary cash flow per share.
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all such analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination on the basis of its experience and professional judgment after considering the results of all of these analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Mitchell or Devon or the transaction contemplated by the merger agreement.
The analyses were prepared as of August 13, 2001 solely for purposes of providing an opinion to Mitchell's board of directors as to the fairness from a financial point of view of the consideration to be received by the holders of shares of Mitchell common stock in the merger. The analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based on forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based on numerous factors or events beyond the control of the parties or their respective advisors, none of Mitchell, Devon, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion was one of many factors taken into consideration by Mitchell's board of directors in making its determination to approve the merger agreement and the merger. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.
Goldman Sachs is familiar with Mitchell, having provided certain investment banking services to Mitchell from time to time, including having acted as a co-managing underwriter of a public offering in May 2001 of Mitchell common stock, and having acted as its financial advisor in connection with, and having participated in certain of the negotiations leading to, the merger agreement. Goldman Sachs received underwriting fees of approximately $2.3 million in connection with the May 2001 public offering and will receive a fee in connection with the merger as described below. Goldman Sachs has also provided certain investment banking services to Devon from time to time and may provide investment banking services to Devon in the future.
Goldman Sachs provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of Mitchell or Devon for its own account and for the accounts of customers.
Pursuant to a letter agreement dated August 27, 1999, Mitchell engaged Goldman Sachs to act as its financial advisor in connection with various financial alternatives available to it, including a possible merger or sale of Mitchell. Pursuant to the terms of that agreement, Mitchell has agreed to pay Goldman Sachs a fee in cash upon consummation of the merger equal to 0.5% of the aggregate consideration paid in connection with the merger. Mitchell has also agreed to reimburse Goldman Sachs for reasonable out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman Sachs against certain liabilities, including certain liabilities under the federal securities laws.
OPINION OF J.P. MORGAN SECURITIES INC. -- FINANCIAL ADVISOR TO MITCHELL
On August 13, 2001 and on September 7, 2001, JPMorgan delivered its oral opinions, subsequently confirmed in writing, to Mitchell's board of directors, to the effect that, as of those dates and based on and subject to certain matters stated in its written opinions, the merger consideration to be received by the holders of Mitchell common stock in the merger was fair, from a financial point of view, to the holders.
The full text of the JPMorgan's opinion, dated as of September 7, 2001, is attached as Annex E. JPMorgan's written opinions were addressed to Mitchell's board of directors, were directed only to the merger consideration to be received by the holders of Mitchell common stock in the merger and did not constitute a recommendation to any Mitchell stockholder as to how such stockholder should vote on the merger or any other matter. The following summary of the material provisions of JPMorgan's opinion dated as of September 7, 2001 is qualified by reference to the opinion. Mitchell stockholders are urged to read JPMorgan's opinion in its entirety.
In arriving at its opinion, JPMorgan, among other things:
- reviewed the merger agreement and the principal shareholders agreement;
- reviewed the acquisition agreement between Devon and Anderson dated August 31, 2001;
- compared certain publicly available business and financial information concerning Mitchell, Devon and Anderson and the industries in which they operate;
- compared the proposed financial terms of the merger and the Anderson acquisition with the publicly available financial terms of certain transactions involving companies deemed relevant and the consideration received for such companies;
- compared the financial and operating performance of Mitchell, Devon and Anderson with publicly available information concerning certain other companies deemed relevant and the current and historical market prices of Mitchell's, Devon's and Anderson's common stock and certain other publicly traded securities of those other companies;
- reviewed certain internal financial analyses and forecasts prepared by the managements of Mitchell and Devon relating to their respective businesses and certain financial analyses and forecasts prepared by the management of Devon with respect to Anderson's business;
- reviewed certain internal financial analyses and forecasts prepared by certain engineering consultants, including each of LaRoche Petroleum Consultants, Ryder Scott Company Petroleum Consultants and Paddock Lindstrom & Associates relating to the oil, gas and natural gas liquids reserves of Devon as of December 31, 2000; and
- reviewed other financial studies and analyses and other information deemed relevant by JPMorgan.
JPMorgan held discussions with certain members of the managements of Mitchell and Devon with respect to certain aspects of the merger, and the past and current business operations of Mitchell and Devon, the financial condition and future prospects and operations of Mitchell and Devon, the effects of the merger on the financial condition and future prospects of Mitchell and Devon, and certain other matters believed necessary or appropriate to JPMorgan's inquiry. JPMorgan also held discussions with certain members of Devon with respect to certain aspects of the Anderson acquisition, and the past and current business operations of Anderson, the financial condition and future prospects and operations of Anderson, the effects of the acquisition on the financial condition and future prospects of Devon, and certain other matters JPMorgan believed necessary or appropriate to its inquiry. JPMorgan noted that it relied solely upon its discussions with, and other materials, including financial forecasts, provided to it by, Devon in connection with JPMorgan's review of Anderson, and that JPMorgan did not receive any financial forecasts or other non-public information from Anderson.
In rendering its opinion, JPMorgan relied on and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or that was furnished to it by
Mitchell, Devon and the engineering consultants or otherwise reviewed by it, and JPMorgan did not assume any responsibility or liability therefor. JPMorgan did not conduct any valuation or appraisal of any assets or liabilities, nor have any valuations or appraisals (other than the reserve reports written by the engineering consultants) been provided to it. In relying on financial analyses and forecasts provided to it, JPMorgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Mitchell, Devon and Anderson to which such analyses or forecasts relate. In addition, JPMorgan assumed that the merger will qualify as a tax-free reorganization for U.S. federal income tax purposes, and that the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement and the parties to the principal shareholders agreement will perform their obligations under that agreement necessary for the merger to be effected. JPMorgan further assumed that the Anderson acquisition and the other transactions contemplated by the acquisition agreement will be consummated as described in the acquisition agreement. JPMorgan further assumed that all material governmental, regulatory or other consents necessary for the consummation of the merger and the Anderson acquisition will be obtained without any adverse effect on Mitchell, Devon or Anderson or on the contemplated benefits of the merger or the Anderson acquisition.
The projections furnished to JPMorgan for Mitchell and Devon were prepared by the respective managements of each company and the projections furnished to JPMorgan for Anderson were prepared by the management of Devon. Neither Mitchell nor Devon publicly discloses internal management projections of the type provided to JPMorgan in connection with JPMorgan's analysis of the merger consideration, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.
JPMorgan's opinions were necessarily based on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, the dates of its opinions. Subsequent developments may affect the written opinion dated as of September 7, 2001, and JPMorgan does not have any obligation to update, revise or reaffirm such opinion. JPMorgan's opinions were limited to the fairness, from a financial point of view, of the consideration to be received by the holders of Mitchell common stock and JPMorgan expressed no opinion as to the underlying decision by Mitchell to engage in the merger. JPMorgan expressed no opinion as to the price at which Mitchell's or Devon's common stock will trade at any future time.
JPMorgan's opinions noted that, although JPMorgan worked for Mitchell from August 1999 through April 2000, that engagement did not result in the consummation of a transaction. Since that time and in connection with the preparation of its opinions dated as of August 13, 2001 and as of September 7, 2001, JPMorgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Mitchell or any other alternative transaction. Therefore, JPMorgan assumed that such terms were the most beneficial terms from Mitchell's perspective that could under the circumstances be negotiated among the parties to those transactions, and JPMorgan expressed no opinion whether any alternative transaction might produce consideration for Mitchell stockholders in an amount in excess of that contemplated in the merger.
In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinions. The following is a summary of the material financial analyses utilized by JPMorgan in connection with delivering its opinion dated as of August 13, 2001.
Analysis of Mitchell
Net Asset Value Analysis. JPMorgan conducted a net asset value analysis to determine the net asset value per share of Mitchell's common stock. Using financial forecasts provided by Mitchell's management, JPMorgan estimated Mitchell's net asset value by discounting the projected after-tax cash flows from
Mitchell's exploration and production business at rates of 8% to 10% and Mitchell's natural gas gathering, processing and marketing business, referred to as its midstream business, at rates of 10% to 12%. JPMorgan used higher discount rates in its net asset valuation of Mitchell's midstream business than in Mitchell's exploration and production business because of the heightened risk inherent in the midstream business's cash flows which stem from the greater uncertainty of natural gas liquid prices and relatively higher fixed costs. These risks and uncertainties lead to a higher estimated cost of capital.
For the exploration and development business, free cash flows derived from production of existing reserves were discounted to July 31, 2001, based on management's current production forecast. Cash flows were taxed at an effective rate of 35%, with adjustments for certain existing tax assets that were valued at approximately $100 million in the aggregate. Based on the foregoing, this analysis indicated a value range for the exploration and production business of approximately $1,661 million to $1,895 million.
For the midstream business, free cash flows derived from financial forecasts provided by Mitchell's management for 2001 to 2005 were discounted to July 31, 2001. Cash flows were taxed at an effective rate of 35%. The present value of the 2005 terminal value was derived by applying a 6x to 8x multiple to 2005 projected EBITDA for the business and discounting this estimate at the above stated range of rates. Based on the foregoing, this analysis indicated a value range for the midstream business of approximately $1,038 million to $1,397 million.
JPMorgan then calculated an implied net asset value by summing the above value ranges and subtracting from this sum the net indebtedness of Mitchell and adding the value of current net working capital, both of which values came from Mitchell's June 30, 2001 unaudited financial statements. Based on the foregoing, this analysis implied a net asset value range of between approximately $52 and $57 per share of Mitchell common stock on a fully diluted basis, compared to the implied value of the consideration to be received in the merger of $60.13 per share of Mitchell common stock, based on the closing price per share of Devon common stock on August 10, 2001 of $49.79. In addition, JPMorgan calculated an implied asset value associated with further development of infill drilling locations and the refracturing of existing wells, which implied an incremental $2 of value per share of Mitchell common stock on a fully diluted basis.
Comparable Public Companies Analysis. Using publicly available information, JPMorgan compared certain financial and operating information and ratios for Mitchell with corresponding financial and operating information and ratios for the following five exploration and production companies that JPMorgan deemed generally comparable based upon their lines of business and their financial and operating characteristics, including market capitalization, asset composition and geographic location of operations:
- Cabot Corporation;
- EOG Resources, Inc.;
- Louis Dreyfus Natural Gas Corp.;
- Noble Affiliates, Inc.; and
- XTO Energy Inc.
This analysis indicated that:
- the ratio of the firm value to projected 2002 EBITDAX ranged from 3.8x to 4.6x, with a mean of 4.3x and a median of 4.5x; and
- the ratio of the equity value to projected 2002 cash flow ranged from 3.3x to 4.2x, with a mean and median of 3.7x.
This analysis indicated a range of implied prices per share of Mitchell's common stock on a fully-diluted basis of approximately $42 to $48 value per share by applying a range of 4.0x to 4.5x for the ratio of equity value to projected 2002 cash flow. JPMorgan also calculated a range of implied prices per share
of Mitchell's common stock of approximately $44 to $50 by applying a range of 4.0x to 4.5x for the ratio of firm value to 2002 estimated EBITDAX, compared to the implied value of the consideration to be received in the merger of $60.13 per share of Mitchell common stock, based on the closing price per share of Devon common stock on August 10, 2001 of $49.79.
Premiums Paid Analysis. JPMorgan reviewed the premiums paid in selected business combinations in the oil and gas exploration and production industry that JPMorgan deemed generally comparable based upon transaction size and the companies' lines of business and their financial and operating characteristics, including asset composition and geographic location of operations. The transactions considered and the month and year in which each transaction was announced were:
- Westport Resources Corporation's acquisition of Belco Oil & Gas Corp. (June 2001);
- Conoco Inc.'s acquisition of Gulf Canada Resources Limited (May 2001);
- Kerr-McGee Corporation's acquisition of HS Resources, Inc. (May 2001);
- The Williams Companies, Inc. acquisition of Barrett Resources Corporation (March 2001);
- Calpine Corporation's acquisition of Encal Energy Ltd. (February 2001);
- Anadarko Petroleum Corporation's acquisition of Berkely Petroleum Corp. (December 2000);
- Pogo Producing Company's acquisition of NORIC Corporation (the parent of North Central Oil Corporation) (November 2000);
- Gulf Canada Resources Limited's acquisition of Crestar Energy Inc. (October 2000);
- Forest Oil Corporation's acquisition of Forcenergy Inc. (July 2000);
- Devon Energy Corporation's acquisition of Santa Fe Snyder Corporation (May 2000); and
- Anadarko Petroleum Corporation's acquisition of Union Pacific Resources Group Inc. (April 2000).
For each transaction listed above, JPMorgan calculated the premium represented by the offer price over the target company's share price for the period one day, one week and one month prior to the date of the transaction's announcement. The analysis indicated that:
- the premium to the share price one day prior to the announcement ranged from negative 4% to 61%, with a mean of 21.9% and a median of 21.0%;
- the premium to the average share price one week prior to the announcement ranged from negative 2% to 63%, with a mean of 25.9% and a median of 28.7%; and
- the premium to the average share price one month prior to the announcement ranged from 4% to 55%, with a mean of 31.2% and a median of 32.0%.
JPMorgan calculated a range of implied prices per share of Mitchell's common stock by applying the median figures listed above to the corresponding average closing share price of Mitchell's common stock for the periods one day, one week and one month prior to the announcement. This analysis indicated an implied offer price per share of Mitchell's common stock on a fully diluted basis of approximately $54, $58 and $59, respectively, compared to the implied value of the consideration to be received in the merger of $60.13 per share of Mitchell common stock, based on the closing price per share of Devon common stock on August 10, 2001 of $49.79.
Selected Transaction Analysis. Using publicly available information, JPMorgan examined selected transactions in the oil and gas exploration and production industry to value Mitchell's exploration and production business that JPMorgan deemed generally comparable based upon transaction size and the companies' lines of business and their financial and operating characteristics, including asset composition and geographic location of operations. The transactions selected were the same transactions listed above in the premiums paid analysis. In addition, JPMorgan examined certain transactions involving companies with significant midstream operations in order to value Mitchell's midstream business.
The analysis of the exploration and production transactions indicated that:
- the consideration paid in the transaction divided by the most recently disclosed quantity of estimated reserves, on a dollars per millions of cubic feet equivalent, referred to as Mcfe, basis, ranged from $0.84 to $1.40, with a mean of $1.14 and a median of $1.19; and
- the ratio of transaction value to projected two-year forward EBITDAX ranged from 3.6x to 8.1x, with a mean of 5.2x and a median of 5.0x.
The analysis of the midstream transactions indicated that:
- the ratio of transaction value to LTM EBITDA ranged from 6.3x to 13.4x, with a mean of 8.9x and a median of 8.4x.
Based on the ranges of multiples derived from the above analyses, JPMorgan calculated the implied firm value of Mitchell by selecting a range of +/- 10% around the median value from each of the above metrics and applying these ranges to the relevant Mitchell statistics. JPMorgan combined the exploration and production value derived by applying the range of values paid per Mcfe to the range of values derived for the midstream business to arrive at a value per share of Mitchell common stock on a fully diluted basis of approximately $60 to $70. JPMorgan combined the exploration and production value derived by applying the range of EBITDAX multiples to the range of values derived for the midstream business to arrive at a value per share of Mitchell common stock on a fully diluted basis of approximately $54 to $65, compared to the implied value of the consideration to be received in the merger of $60.13 per share of Mitchell common stock, based on the closing price per share of Devon common stock on August 10, 2001 of $49.79.
Analysis of Devon
Comparable Public Company Analysis. Using publicly available information, JPMorgan compared certain financial and operating information and ratios for Devon with corresponding financial and operating information and ratios for the following companies in lines of business believed to be generally comparable to those of Devon based upon their lines of business and their financial and operating characteristics, including market capitalization, asset composition and geographic location of operations:
- Anadarko Petroleum Corporation;
- Apache Corporation;
- Burlington Resources Inc.;
- EOG Resources, Inc.;
- Kerr-McGee Corporation;
- Ocean Energy, Inc.; and
- Unocal Corporation.
This analysis indicated that:
- the ratio of the firm value to projected 2002 EBITDAX ranged from 4.2x to 6.2x, with a mean of 4.9x and a median of 4.8x;
- the ratio of the equity value to projected 2002 cash flow ranged from 3.6x to 5.4x, with a mean and median of 4.5x; and
- the ratio of firm value to total reserves on a dollars per Mcfe basis ranged from $0.98 to $1.55, with a mean of $1.24 and a median of $1.20.
Using First Call consensus estimates of 2002 EBITDAX and cash flow, and Devon's most recently published reserve estimate, and applying a ratio of equity value to projected 2002 cash flow of between 4.0x and 5.0x, a ratio of firm value to projected 2002 EBITDAX of between 4.25x and 5.25x and ratio of
firm value to total reserves on a dollars per Mcfe basis of between $1.10 and $1.30, this analysis indicated a range of implied per share values of Devon common stock on a fully diluted basis of approximately $46 to $57, $53 to $67 and $50 to $60, respectively, compared to the closing price per share of Devon common stock on August 10, 2001 of $49.79.
Net Asset Value Analysis. JPMorgan conducted a net asset value analysis to determine the net asset value per share of Devon's common stock. Using financial forecasts provided by Devon's management, JPMorgan estimated Devon's net asset value by discounting Devon's projected after-tax cash flows from Devon's exploration and development business at rates of 8% to 10%. Cash flows derived from production of existing reserves were discounted to July 31, 2001, based on management's current production forecast. Cash flows were taxed at an effective rate of 38%. Based on the foregoing, this analysis indicated a value range for Devon's exploration and production business of approximately $9,746 million to $10,877 million.
JPMorgan then calculated an implied net asset value by subtracting from this range the net indebtedness of Devon and adding the value of current net working capital, both of which values came from Devon's June 30, 2001 unaudited financial statements. Based on the foregoing, this analysis implied a net asset value range of between approximately $68 and $76 per share of Devon common stock on a fully diluted basis, compared with the closing price per share of Devon common stock on August 10, 2001 of $49.79.
Pro Forma Merger Analysis. JPMorgan also analyzed the pro forma effects of the merger on the projected cash flow of Devon for fiscal year 2002 based on projections provided by the managements of Mitchell and Devon. Incorporating assumptions with respect to various structural considerations, transaction and financing costs and estimated annual synergies of $20 million to be realized in 2002, this analysis indicated that the merger would be accretive to cash flow and dilutive to earnings per share of Devon common stock in 2002.
In connection with its written opinion dated as of September 7, 2001, in addition to the matters set forth in that opinion, JPMorgan reviewed the analysis used to render its August 13, 2001 opinion by performing procedures to update certain analyses and by reviewing the assumptions upon which such analyses were based and the factors considered in connection therewith.
The summary set forth above does not purport to be a complete description of the analyses or data presented by JPMorgan. The preparation of an opinion regarding fairness is a complex process and is not necessarily susceptible to partial analysis or summary description. JPMorgan believes that the summary set forth above and its analyses must be considered as a whole and that selecting portions thereof, without considering all of its analyses, could create an incomplete view of the processes underlying its analyses and opinion. JPMorgan based its analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. The other principal assumptions on which JPMorgan based its analyses are set forth above under the description of each such analysis. JPMorgan's analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be higher or lower than those indicated. Moreover, JPMorgan's analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold.
None of the comparable companies used in the comparable public companies analysis described above is identical to Mitchell or Devon, and none of the comparable transactions used in the comparable transactions analysis described above is identical to the merger. Accordingly, an analysis of publicly traded comparable companies and transactions is not exclusively mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading value of the comparable companies or company to which they are being compared.
As a part of its investment banking business, JPMorgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate and other purposes. JPMorgan was selected to advise Mitchell with respect to the merger and deliver its opinions to Mitchell's board of directors with respect to the merger on the basis of such experience and JPMorgan's familiarity with Mitchell.
For services rendered in connection with the merger and the delivery of its opinion, Mitchell has agreed to pay JPMorgan a fee payable in cash upon closing of the merger in the amount of 0.20% of the aggregate merger consideration plus all indebtedness for borrowed money of Mitchell, where the aggregate merger consideration will be determined by the average of the last sales price for Devon common stock on the five trading days ending prior to the consummation of the merger. Mitchell has agreed to pay JPMorgan an additional fee upon closing of the merger in connection with JPMorgan's analysis of the potential financial impact of Devon's acquisition of Anderson on the proposed merger in the amount of approximately $4.5 million, representing 0.10% of the aggregate consideration paid for Anderson plus all indebtedness of Anderson. In addition, Mitchell has agreed to reimburse JPMorgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify JPMorgan against certain liabilities, including liabilities arising under the federal securities laws.
Certain affiliates of JPMorgan have, from time to time, performed certain financial advisory and other commercial and investment banking services for Mitchell and Devon, for which they received customary compensation, and in the future may continue to perform, from time to time, certain financial advisory and other commercial and investment banking services for Mitchell or Devon, for which they would receive customary compensation. Affiliates of JPMorgan have acted as co-lead manager for a secondary offering of shares of Mitchell common stock of George P. Mitchell, have a commitment under Mitchell's revolving credit facility and have a commitment under Devon's revolving credit facility that currently has not been drawn upon. One of these affiliates is also the documentation agent with regard to Devon's revolving credit facility and was selected to be one of Devon's commercial paper dealers. Additionally, one of JPMorgan's affiliates acted as a co-manager to an affiliate of Devon in connection with the issuance on October 3, 2001 of $3.0 billion aggregate principal amount of notes and debentures. In the last two years, JPMorgan received aggregate fees in the amount of approximately $2.7 million from Mitchell (or, in the case of the secondary offering, George P. Mitchell).
In addition, in the ordinary course of their businesses, JPMorgan and its affiliates may actively trade the debt and equity securities and loans of Mitchell, Devon or Anderson for their own account or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or loans.
OPINION OF UBS WARBURG LLC -- FINANCIAL ADVISOR TO DEVON
On August 13, 2001, UBS Warburg LLC rendered its oral opinion, which was confirmed by its written opinion dated August 13, 2001, to Devon's board of directors to the effect that, as of the date of such opinion and based on and subject to various assumptions, matters considered and limitations described in the opinion and discussed below, the merger consideration to be paid by Devon in the merger was fair, from a financial point of view, to Devon.
The full text of UBS Warburg LLC's opinion, dated August 13, 2001, which sets forth a description of the assumptions made, general procedures followed, matters considered and limitations on the review undertaken, is attached as Annex F. UBS Warburg LLC's opinion is directed only to the fairness, from a financial point of view, of the merger consideration to be paid by Devon in the merger and does not constitute a recommendation to any Devon stockholder as to how such stockholder should vote on the approval of the issuance of Devon common stock in the merger. Devon stockholders are urged to read the opinion carefully in its entirety, especially with regard to the assumptions made and matters considered by UBS Warburg LLC. The summary of UBS Warburg LLC's opinion set forth in this document is qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, UBS Warburg LLC, among other things:
- reviewed the August 13, 2001 draft of the merger agreement;
- reviewed certain publicly available business and historical financial information relating to Devon and Mitchell;
- reviewed certain information and other data provided to it by Devon that is not publicly available relating to the business and prospects of Devon that was prepared by the management of Devon, including operating estimates and financial forecasts;
- reviewed certain information and other data provided to it by Devon and Mitchell that is not publicly available relating to the business and prospects of Mitchell that was prepared by the managements of Devon and Mitchell, including operating estimates and financial forecasts;
- considered estimates, prepared by the management of Devon and not publicly available, of the amounts and timing of the synergies expected to result from the merger;
- considered the pro forma financial effects of the merger on Devon;
- reviewed publicly available financial and stock market data with respect to certain other companies in lines of business it believes to be generally comparable to those of Devon and Mitchell;
- compared the financial terms of the merger with the financial terms of certain other selected transactions that it deemed to be relevant;
- reviewed the historical market prices and trading volumes of both Devon and Mitchell common stock;
- conducted discussions regarding Devon with selected members of Devon's senior management;
- conducted discussions regarding Mitchell with selected members of the senior management of Mitchell and Devon; and
- conducted such other financial studies, analyses and investigations, and considered such other information, as it deemed necessary or appropriate.
Devon did not impose any limitations on the scope of UBS Warburg LLC's analysis. In connection with its review, and at Devon's direction, UBS Warburg LLC did not assume any responsibility for independent verification of any of the information reviewed by UBS Warburg LLC for the purposes of its opinion and, at Devon's direction, relied on its being complete and accurate in all material respects. In addition, UBS Warburg LLC did not make any independent evaluation or appraisal of any of the assets or liabilities, contingent or otherwise, of Devon or Mitchell, nor has UBS Warburg LLC been furnished with any such evaluation or appraisal.
UBS Warburg LLC's opinion does not address Devon's underlying business decision to effect the merger and does not constitute a recommendation to any Devon stockholder as to how such stockholder should vote with respect to the approval of the issuance of Devon common stock in the merger. UBS Warburg LLC was not asked to, nor did UBS Warburg LLC, offer any opinion as to the material terms of the merger agreement or the form of the merger. UBS Warburg LLC expressed no opinion as to what the value of Mitchell common stock or Devon common stock would be at the time of the merger or the prices at which either would trade at any time in the future. In rendering its opinion, UBS Warburg LLC assumed, with Devon's consent, that Devon and Mitchell would comply with all of the material terms of the merger agreement.
With respect to the projected operating and financial information, estimates, pro forma effects and calculations of synergies referred to above, UBS Warburg LLC assumed, at Devon's direction, that they were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of each company as to the future performance of their respective companies. Moreover, UBS Warburg LLC assumed that all governmental, regulatory and other consents and approvals necessary for
the consummation of the merger would be obtained without any adverse effect on Devon or Mitchell. UBS Warburg LLC's opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to UBS Warburg LLC as of, the date of the opinion.
The following paragraphs summarize the material quantitative analyses performed by UBS Warburg LLC in arriving at the opinion dated August 13, 2001 presented to Devon's board of directors. The financial analyses summarized below include information presented in tabular format. In order to fully understand UBS Warburg LLC's financial analyses, the tables must be read together with the text of each summary. You should consider the tabular data below together with the full narrative description of the financial analyses described below, including the methodologies and assumptions underlying the analyses.
Where published equity research estimates were utilized by UBS Warburg LLC as referenced below, UBS Warburg LLC relied on research published by UBS Warburg LLC, where applicable, and where UBS Warburg LLC had not published research with respect to the applicable company, UBS Warburg LLC relied on the latest published third party research.
Mitchell Valuation Analysis
Comparable Company Analysis. UBS Warburg LLC reviewed the public stock market trading multiples for selected publicly traded independent exploration and production companies with financial and operating characteristics, such as market capitalization, location of proved reserves and the characterization of those reserves, including a review of the ratio of oil reserves to gas reserves, the ratio of proved developed reserves to proved undeveloped reserves and the reserves to production ratio, that UBS Warburg LLC deemed to be similar to those of Mitchell, including:
- EOG Resources, Inc.;
- Evergreen Resources, Inc.;
- Forest Oil Corporation;
- Louis Dreyfus Natural Gas Corp.;
- Newfield Exploration Company;
- Pioneer Natural Resources Company;
- Pogo Producing Company;
- Stone Energy Corporation;
- Western Gas Resources, Inc.; and
- XTO Energy, Inc.
Using publicly available information, including certain published equity research estimates from UBS Warburg LLC equity research and elsewhere, UBS Warburg LLC calculated and analyzed indicated reserve value ("IRV"), total enterprise value ("TEV") and equity market value ("EMV") multiples of certain historical and projected financial and operating metrics such as proved reserves, earnings before interest, taxes, exploration expense, depreciation, depletion and amortization ("EBITDA"), and cash flow from operations ("CFFO") for each of these companies. The total enterprise value of each company was obtained by adding its total debt at book value to the sum of the market value of its common equity, the liquidation value of its preferred stock, the book value of its long-term liabilities (excluding deferred taxes) and the book value of any minority interest minus cash and cash equivalents. The indicated reserve value of each company was obtained by subtracting from its total enterprise value the value of its working capital, excluding cash and cash equivalents and short-term debt, and an estimate of the value of its non-reserve tangible assets and undeveloped acreage. The indicated reserve value per proved reserves valuation for these companies ranged from $3.34 per Boe to $12.03 per Boe, with a median of $6.15 per Boe. The total enterprise value to projected 2001 EBITDA multiples ranged from 2.8x to 8.9x, with a median of
4.0x. The total enterprise value to projected 2002 EBITDA multiples ranged from 3.6x to 8.7x, with a median of 4.7x. The equity market value to projected 2001 CFFO multiples ranged from 2.4x to 8.5x, with a median of 3.3x. The equity market value to projected 2002 CFFO multiples ranged from 3.1x to 10.6x, with a median of 3.8x. UBS Warburg LLC then calculated and analyzed the corresponding statistics for Mitchell at the implied value per share of $60.13, based on the Devon closing price of $49.79 on August 10, 2001. Based on this implied value per share, Mitchell's indicated reserve value per proved reserves valuation was $6.23 per Boe. The total enterprise value to projected 2001 EBITDA and 2002 EBITDA multiples were 5.1x and 5.8x, respectively. The equity market value to projected 2001 CFFO and projected 2002 CFFO multiples were 5.4x and 5.7x, respectively.
Because of the inherent differences between the corporate structure, businesses, operations and prospects of Mitchell and the corporate structure, businesses, operations and prospects of the companies included in the group of selected comparable companies, UBS Warburg LLC believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the analysis and, accordingly, also made qualitative judgments concerning differences between the financial and operating characteristics of Mitchell and those of the companies in the comparable company group that would affect the public trading values of Mitchell and such comparable companies.
SUMMARY OF COMPARABLE COMPANY ANALYSIS
COMPARABLE COMPANIES --------------------- MITCHELL AT VALUATION MEASURE LOW MEDIAN HIGH $60.13 ----------------- ---- ------ ----- ----------- IRV/Proved Reserves ($/Boe)......................... 3.34 6.15 12.03 6.23 TEV/Projected 2001 EBITDA(x)........................ 2.8 4.0 8.9 5.1 TEV/Projected 2002 EBITDA(x)........................ 3.6 4.7 8.7 5.8 EMV/Projected 2001 CFFO(x).......................... 2.4 3.3 8.5 5.4 EMV/Projected 2002 CFFO(x).......................... 3.1 3.8 10.6 5.7 |
Comparable Transactions Analysis. UBS Warburg LLC reviewed certain acquisition multiples for selected independent exploration and production company transactions announced between April 1997 and July 2001. UBS Warburg LLC selected acquisitions of all public, US-based exploration and production companies where total consideration exceeded $1 billion since 1997 and certain other public US-based exploration and production acquisitions based on the characterization of the reserves of the acquired company. The selected transactions UBS Warburg LLC analyzed included:
- Amerada Hess Corporation/Triton Energy Limited;
- Westport Resources Corporation/Belco Oil & Gas Corp.;
- Kerr-McGee Corporation/HS Resources, Inc.;
- The Williams Companies, Inc./Barrett Resources Corporation;
- USX Marathon/Pennaco Energy, Inc.;
- Stone Energy Corporation/Basin Exploration, Inc.;
- Forest Oil Corporation/Forcenergy, Inc.;
- Devon Energy Corporation/Santa Fe Snyder Corporation;
- Anadarko Petroleum Corporation/Union Pacific Resources Group, Inc.;
- Devon Energy Corporation/PennzEnergy Company;
- Santa Fe Energy Resources Inc./Snyder Oil Corporation;
- Seagull Energy Corporation/Ocean Energy, Inc.;
- Kerr-McGee Corporation/Oryx Energy Company;
- Atlantic Richfield Co./Union Texas Petroleum Holdings, Inc.;
- Ocean Energy, Inc./United Meridian Corporation;
- Texaco, Inc./Monterey Resources Corp.;
- Burlington Resources Inc./Louisiana Land and Exploration Company; and
- Mesa Inc./Parker & Parsley Petroleum Co.
Using publicly available information, including certain published equity research estimates, UBS Warburg LLC calculated and analyzed indicated reserve value, total enterprise value and equity market value multiples of certain historical and projected financial and operating metrics such as proved reserves, EBITDA and CFFO. The indicated reserve value per proved reserves valuation ranged from $4.86 per Boe to $12.87 per Boe, with a median of $7.12 per Boe. The total enterprise value to latest twelve months ("LTM") EBITDA multiples ranged from 4.8x to 38.2x, with a median of 6.9x. The equity market value to LTM CFFO multiples ranged from 2.2x to 33.7x, with a median of 6.1x. The equity market value to one-year forward projected CFFO multiples ranged from 3.7x to 15.8x, with a median of 5.3x. The equity market value to two-year forward projected CFFO multiples ranged from 2.6x to 8.7x, with a median of 4.4x. UBS Warburg LLC noted that commodity prices increased sharply in late-2000 and remained at these increased levels in early-2001. As a result, UBS Warburg LLC deemed the six most recent transactions (the first six listed above) beginning October 2000 to be the most relevant transactions. For this group of six transactions, the median indicated reserve value per Boe was $8.21. The median total enterprise value to LTM EBITDA multiple was 8.3x. The median multiples of equity market value to LTM CFFO, and one-year and two-year forward projected CFFO for this group were 6.9x, 5.4x and 5.2x, respectively. UBS Warburg LLC then calculated and analyzed the corresponding statistics for Mitchell at the implied value per share of $60.13. Based on this implied value per share, Mitchell's indicated reserve value per proved reserves valuation was $6.23 per Boe. The total enterprise value to LTM EBITDA multiple was 4.9x. The multiples of equity market value to LTM CFFO, and one-year and two-year forward CFFO were 5.3x, 5.4x and 5.7x, respectively.
SUMMARY OF COMPARABLE TRANSACTIONS ANALYSIS
ALL COMPARABLE TRANSACTIONS SIX MOST --------------------- RECENT MITCHELL AT VALUATION MEASURE LOW MEDIAN HIGH MEDIAN $60.13 ----------------- ---- ------ ----- -------- ----------- IRV/Proved Reserves ($/Boe)............... 4.86 7.12 12.87 8.21 6.23 TEV/LTM EBITDA(x)......................... 4.8 6.9 38.2 8.3 4.9 EMV/LTM CFFO(x)........................... 2.2 6.1 33.7 6.9 5.3 EMV/Projected One-Year Forward CFFO(x)........................... 3.7 5.3 15.8 5.4 5.4 EMV/Projected Two Years Forward CFFO(x)........................... 2.6 4.4 8.7 5.2 5.7 |
Because the market conditions, rationale and circumstances surrounding each of the transactions analyzed were specific to such transaction and because of the inherent differences between the businesses, operations and prospects of Mitchell and those of the acquired businesses analyzed, UBS Warburg LLC believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the analysis and, accordingly, also made qualitative judgments concerning differences between the characteristics of each of these transactions and the proposed transaction.
Net Asset Value Analysis. UBS Warburg LLC estimated the present value of pre-tax cash flows that Devon expected Mitchell to generate from its total proved, probable and possible reserves in each of Mitchell's major operating regions. The present value calculations were performed as of June 1, 2001, used a pre-tax discount rate of 10% and were calculated under four separate price forecasts, set forth below. In addition, UBS Warburg LLC, at Devon's direction, applied a risk adjustment of 47% to the value of Mitchell's probable reserves and applied a risk adjustment of 45% to Mitchell's possible reserves.
In performing the net asset value analysis, UBS Warburg LLC used four separate commodity price forecasts, hereinafter referred to as the "UBS Warburg forecast", the "Devon price forecast", "the NYMEX strip price forecast" and the "Wall Street consensus forecast". The "UBS Warburg forecast" was based on commodity prices forecasted by UBS Warburg LLC equity research. The "Devon price forecast" was based on commodity prices forecasted by Devon's management. The "NYMEX strip price forecast" was based on the average futures prices listed on the NYMEX as of August 10, 2001. The "Wall Street consensus forecast" was based on the consensus forecasts for natural gas and oil prices as reported by First Call.
UBS Warburg LLC included in the net asset value analysis an assessment of the fair value of Mitchell's natural gas processing business. This assessment was made by UBS Warburg LLC based on information and assumptions provided by Devon's and Mitchell's managements and on various industry benchmarks. Mitchell's aggregate net asset value was calculated by adding the risk-adjusted present value of Mitchell's proved, probable and possible reserves to its working capital (including cash and cash equivalents), the value of its natural gas processing business and the value of its undeveloped acreage. After subtracting Mitchell's total debt, and other long-term liabilities other than deferred taxes, as of June 30, 2001, UBS Warburg LLC then determined a range of net asset values per share on a diluted basis. A summary of the per share value calculated as part of the net asset value analysis is set forth below:
SUMMARY OF NET ASSET VALUE ANALYSIS
COMMODITY PRICE FORECASTS ----------------------------------------------- NYMEX WALL STREET ($/SHARE) UBS WARBURG DEVON STRIP PRICE CONSENSUS --------- ----------- ----- ----------- ----------- Net Asset Value per Share.................. 59.24 47.28 64.72 63.69 |
Premiums Paid Analysis. UBS Warburg LLC, using a sample of 18 selected independent exploration and production company transactions announced between April 1997 and July 2001, reviewed the premiums paid to the price of the target one day, one week and one month prior to the announcement of the transaction. Using this information, UBS Warburg LLC determined the mean and median premiums paid one day prior to the announcement of such transactions to be 22.7% and 21.1%, respectively, the mean and median premiums paid one week prior to the announcement of such transactions to be 27.2% and 30.9%, respectively, and the mean and median premiums paid one month prior to the announcement of such transactions to be 30.2% and 33.4%, respectively. Further, UBS Warburg LLC reviewed 15 selected business combinations with disclosed total enterprise values of $3 billion to $4 billion announced since August 1, 1999. Using this information, UBS Warburg LLC determined the mean and median premiums paid one day prior to the announcement of such transactions to be 26.3% and 22.7%, respectively, the mean and median premiums paid one week prior to the announcement of such transactions to be 29.4% and 32.8%, respectively, and the mean and median premiums paid one month prior to the announcement of such transactions to be 39.6% and 38.4%, respectively. Based on implied consideration of $60.13 per share of Mitchell common stock, the premiums to Mitchell's stock price one day, one week and four weeks prior to announcement were 33.7%, 29.9% and 37.5%, respectively.
SUMMARY OF PREMIUMS PAID ANALYSIS
MITCHELL AT LOW MEAN MEDIAN HIGH $60.13 ----- ---- ------ ----- ----------- Selected US E&P Transactions One Day (%)................................ (7.5) 22.7 21.1 60.0 33.7 One Week (%)............................... (13.9) 27.2 30.9 65.0 29.9 One Month (%).............................. (15.6) 30.2 33.4 74.9 37.5 Selected M&A Transactions One Day (%)................................ 9.1 26.3 22.7 60.6 33.7 One Week (%)............................... 7.3 29.4 32.8 56.6 29.9 One Month (%).............................. (1.1) 39.6 38.4 110.1 37.5 |
Pro Forma Merger Consequences Analysis. UBS Warburg LLC analyzed certain pro forma effects that could result from the merger. In connection with such analyses, UBS Warburg LLC reviewed the estimates of UBS Warburg LLC equity research for Devon and the First Call consensus estimates for Mitchell. Based on these projections, certain financing assumptions and certain cost savings and synergies that Devon's management expected to result from the merger, UBS Warburg LLC examined the impact of the merger on Devon's diluted earnings per share and CFFO per share. The analysis indicated that the merger, assuming that the acquisition occurred at the beginning of each respective fiscal year, would be accretive to both earnings per share and CFFO per share for 2001 and 2002.
Devon Valuation Analysis
UBS Warburg LLC performed a valuation of Devon using the following methodologies: comparable company analysis and net asset value analysis.
Comparable Company Analysis. UBS Warburg LLC reviewed the public stock market trading multiples for selected publicly traded independent exploration and production companies with financial and operating characteristics, such as market capitalization, location of proved reserves and the characterization of those reserves, including a review of the ratio of oil reserves to gas reserves, the ratio of proved developed reserves to proved undeveloped reserves and the reserves to production ratio, that UBS Warburg LLC deemed to be similar to those of Devon, including:
- Anadarko Petroleum Corporation;
- Apache Corporation;
- Burlington Resources, Inc.;
- EOG Resources, Inc.;
- Kerr-McGee Corporation;
- Noble Affiliates, Inc.;
- Ocean Energy, Inc.; and
- Unocal Corporation.
Using publicly available information, including certain published equity research estimates from UBS Warburg LLC equity research and elsewhere, UBS Warburg LLC calculated and analyzed indicated reserve value, total enterprise value and equity market value multiples of certain historical and projected financial and operating metrics such as proved reserves, EBITDA and CFFO for each of these companies. The indicated reserve value per proved reserves valuation for these companies ranged from $5.27 per Boe to $8.93 per Boe, with a median of $6.28 per Boe. The total enterprise value to projected 2001 EBITDA multiples ranged from 3.4x to 5.2x, with a median of 4.4x. The total enterprise value to projected 2002 EBITDA multiples ranged from 4.4x to 6.6x, with a median of 5.0x. The equity market value to projected 2001 CFFO multiples ranged from 3.1x to 4.3x, with a median of 3.6x. The equity market value to
projected 2002 CFFO multiples ranged from 3.6x to 5.5x, with a median of 4.0x. UBS Warburg LLC then calculated and analyzed the corresponding statistics for Devon at its closing price as of August 10, 2001 of $49.79. Based on this price per share, Devon's indicated reserve value per proved reserves valuation was $6.24 per Boe. The total enterprise value to projected 2001 EBITDA and 2002 EBITDA multiples were 3.4x and 4.2x, respectively. The equity market value to projected 2001 CFFO and projected 2002 CFFO multiples were 3.5x and 4.3x, respectively.
SUMMARY OF COMPARABLE COMPANY ANALYSIS
COMPARABLE COMPANIES -------------------- DEVON AT VALUATION MEASURE LOW MEDIAN HIGH $49.79 ----------------- ---- ------ ---- -------- IRV/Proved Reserves ($/Boe)........................... 5.27 6.28 8.93 6.24 TEV/Projected 2001 EBITDA (x)......................... 3.4 4.4 5.2 3.4 TEV/Projected 2002 EBITDA (x)......................... 4.4 5.0 6.6 4.2 EMV/Projected 2001 CFFO (x)........................... 3.1 3.6 4.3 3.5 EMV/Projected 2002 CFFO (x)........................... 3.6 4.0 5.5 4.3 |
Because of the inherent differences between the corporate structure, businesses, operations and prospects of Devon and the corporate structure, businesses, operations and prospects of the companies included in the group of selected comparable companies, UBS Warburg LLC believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the analysis and, accordingly, also made qualitative judgments concerning differences between the financial and operating characteristics of Devon and those of the companies in the comparable company group that would affect the public trading values of Devon and such comparable companies.
Net Asset Value Analysis. UBS Warburg LLC estimated the present value of pre-tax cash flows that Devon expected to generate from its total proved, probable and possible reserves in each of its major operating regions. The present value calculations were performed as of January 1, 2001, used a pre-tax discount rate of 10% and were calculated assuming the same four commodity price forecasts used to perform the net asset value analysis on Mitchell described above. In addition, UBS Warburg LLC, at Devon's direction, applied a risk adjustment of 40% to the value of Devon's probable reserves and applied a risk adjustment of 30% to Devon's possible reserves.
Devon's aggregate net asset value was calculated by adding the risk-adjusted present value of its proved, probable and possible reserves to its working capital (including cash), the value of its other assets and undeveloped acreage. After subtracting its total debt at book value, preferred stock at liquidation value and other long-term liabilities (excluding certain deferred tax liabilities) at book value, as of March 31, 2001, a range of net asset values per share was then determined on a diluted basis. A summary of the per share value calculated as part of the net asset value analysis is set forth below:
SUMMARY OF NET ASSET VALUE ANALYSIS
COMMODITY PRICE FORECASTS ----------------------------------------------- NYMEX WALL STREET ($/SHARE) UBS WARBURG DEVON STRIP PRICE CONSENSUS --------- ----------- ----- ----------- ----------- Net Asset Value per Share.................. 62.16 61.42 70.86 70.01 |
UBS Warburg LLC is an internationally recognized investment banking firm that, as a part of its investment banking business, regularly is engaged in the evaluation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Devon's board of directors selected UBS Warburg LLC on the basis of its experience and independence. Over the past two years, UBS Warburg LLC and its predecessors have provided investment banking services to Devon, including advisory and financing services associated with the acquisition of Anderson, and received compensation for the rendering of such services of approximately $25 million. UBS Warburg LLC may in the future provide investment banking services to Devon and receive
compensation for such service. UBS Warburg LLC acted as joint lead manager and book runner with respect to Devon Financing Corporation, U.L.C.'s issuance on October 3, 2001 of $3.0 billion of debt securities and was an initial purchaser of a portion of those securities. UBS Warburg LLC acted as joint lead arranger with respect to Devon's new $3.0 billion senior unsecured credit facility. An affiliate of UBS Warburg LLC is the administrative agent and a lender under that new credit facility. In the ordinary course of business, UBS Warburg LLC, its successors and affiliates may trade securities of Devon or Mitchell for their own accounts and, accordingly, may at any time hold a long or short position in such securities.
Pursuant to the engagement letter, dated as of August 10, 2001, between Devon and UBS Warburg LLC, Devon has agreed to pay UBS Warburg LLC a fee of $3.5 million for services rendered in connection with the merger. Devon also has agreed to reimburse UBS Warburg LLC for the expenses reasonably incurred by it entering into and performing services in connection with its engagement and to indemnify UBS Warburg LLC and its officers, directors, employees, agents and controlling persons against certain expenses, losses, claims, damages or liabilities in connection with its services performed in connection with its engagement.
INTERESTS OF MITCHELL'S EXECUTIVE OFFICERS AND DIRECTORS IN THE TRANSACTION
In considering the recommendation of Mitchell's board of directors with respect to the transaction, Mitchell stockholders should be aware that some of Mitchell's executive officers and directors have interests in the transaction that are different from the interests of Mitchell stockholders generally. The boards of directors of both companies were aware of these interests and considered them in approving the merger agreement and the transactions that it contemplates.
Appointment of Mitchell's Designee to the Combined Company's Board of Directors
The merger agreement requires Devon's board of directors to appoint J. Todd Mitchell to the combined company's board of directors immediately prior to the effective time of the transaction. He will hold office until his successor is elected and qualified or until his earlier resignation or removal. If J. Todd Mitchell becomes unavailable or unwilling to serve, a substitute Mitchell designee acceptable to Devon will fill the vacancy on the combined company's board of directors. Accordingly, either J. Todd Mitchell or a substitute Mitchell designee will become a director of the combined company at the effective time of the transaction. Additional information regarding J. Todd Mitchell and his principal occupation and experience during the past five years appears later in this document under "Directors and Executive Officers of the Combined Company -- Directors."
Investor Rights Agreement among Devon, Devon Holdco, George P. Mitchell and Cynthia Woods Mitchell
George P. Mitchell, who is currently the Chairman and Chief Executive Officer of Mitchell, and his wife, Cynthia Woods Mitchell, have entered into an agreement with Devon and Devon Holdco that, subject to a number of conditions, will provide them with rights to require Devon or Devon Holdco, as the case may be, to use its reasonable best efforts to register the resale of the shares of Devon or Devon Holdco common stock that they receive in the transaction. This agreement also imposes limitations on Mr. and Mrs. Mitchell's ability to sell or transfer the shares of Devon or Devon Holdco common stock to be received by them that will not apply to other Mitchell stockholders. More details regarding the terms of this agreement can be found under "Agreements among Devon, George P. Mitchell and Cynthia Woods Mitchell -- Investor Rights Agreement."
Other Interests
Mitchell's executive officers also have the following interests in the transaction that are different from Mitchell stockholders' interests generally:
- All outstanding stock options and bonus units, including those held by Mitchell's executive officers, will fully vest at the effective time of the transaction and, if not exercised at that time, will be converted into fully vested options to purchase shares of Devon or Devon Holdco common stock and bonus units redeemable for cash based on the appreciation of Devon or Devon Holdco common stock, respectively, in each case subject to adjustment to reflect the value of the consideration to be paid by Devon or Devon Holdco in the transaction.
- At the effective time of the transaction, 439,735 bonus units held by Mitchell's executive officers and options held by them relating to 253,334 shares of Mitchell common stock, will vest.
- After the transaction, some Mitchell executive officers may remain officers of the surviving corporation of the merger or may become officers of the combined company.
- Mitchell executive officers will be entitled to severance payments and enhanced pension benefits in the event that their employment ceases after the transaction. If qualifying terminations are made after the merger, the estimated amounts of the severance payments, exclusive of any possible gross-ups for income taxes applicable to parachute payments, that would be payable as of September 30, 2001 to Mitchell's executive officers are as follows:
NAME/TITLE AMOUNT ---------- ---------- George P. Mitchell....................................... $2,900,000 Chairman and Chief Executive Officer W.D. Stevens............................................. 4,000,000 President and Chief Operating Officer Philip S. Smith.......................................... 2,200,000 Senior Vice President Allen J. Tarbutton, Jr. ................................. 1,900,000 Senior Vice President Thomas P. Battle......................................... 900,000 Senior Vice President |
- Benefits of Mitchell's executive officers under their individual severance agreements cannot be reduced for 24 months following the transaction.
- Except for Mr. Mitchell, benefits under Mitchell's non-qualified retirement plans held by Mitchell executive officers will automatically be distributed as a lump sum into the Mitchell Energy & Development Corp. 1998 Mutual Fund Option Plan upon their retirement.
- The merger agreement generally requires Devon to honor Mitchell's existing employee benefit plans and commitments in accordance with their terms after the transaction. The merger agreement also provides assurances that Mitchell officers and employees who become and remain full-time employees of the combined company after the transaction will receive employee benefits (other than stock-based benefits) no less favorable than those provided to similarly situated Devon employees for a two-year period after the transaction. Details regarding Devon's obligations with respect to Mitchell's existing employee benefit plans and commitments can be found under "The Merger Agreement -- Covenants and Other Agreements -- Employee Benefits."
Mitchell's directors and executive officers beneficially owned, as of August 13, 2001, approximately 47% of the outstanding shares of Mitchell common stock, including shares covered by outstanding options. They will be entitled to receive the same consideration as all other Mitchell stockholders.
Devon's directors and executive officers did not beneficially own any shares of Mitchell common stock as of August 13, 2001.
DEVON'S FINANCING OF THE MERGER
Devon intends to finance the cash portion of the merger consideration with borrowings under a new $3.0 billion senior unsecured credit facility of which approximately $0.5 billion of the credit availability thereof was used to complete Devon's acquisition of Anderson. Devon's obligation to complete the transaction described in this document is not subject to any financing contingency.
New Credit Facility
On October 12, 2001, Devon and Devon Financing Corporation, U.L.C. entered into a new $3.0 billion senior unsecured credit facility arranged by UBS Warburg LLC and Banc of America Securities LLC. The new credit facility has a term of five years. Devon and Devon Financing Corporation, U.L.C. may borrow funds under the new credit facility subject to conditions usual in commercial transactions of this nature, including the absence of any default under the new credit facility. Borrowings under the new credit facility may be based, at the applicable borrower's option, at the London Interbank Offered Rate for the relevant period or at UBS Warburg's base rate (which is the higher of UBS Warburg's prime commercial lending rate and the weighted average of rates on overnight Federal funds transactions with members of the Federal Reserve System plus .50%). The interest rates on each such borrowing will be equal to the rate on which such borrowing is based plus a margin determined by Devon's long-term senior, unsecured debt rating as follows:
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V -------------- ------------ ------------ ------------ -------------- A- BY BBB+ BY BBB BY BBB- BY BB+ BY S&P/ S&P/A3 S&P/Baa1 S&P/ S&P/Baa3 Ba1 BY BY MOODY'S BY Baa2 BY BY MOODY'S OR MOODY'S MOODY'S MOODY'S OR LOWER HIGHER LIBOR Interest Margin (%)..... 0.625 0.750 1.000 1.250 1.500 Base Rate Interest Margin (%)......................... 0.000 0.000 0.000 0.250 0.500 Availability Fee (%).......... 0.100 0.125 0.150 0.200 0.300 |
Notwithstanding the table above, the margin for borrowings based on the London Interbank Offered Rate will be 1.0% for the six-month period following completion of the syndication of the new credit facility to a broader group of lenders, which is expected to occur in November of 2001. In addition, the lenders under the new credit facility will be charging Devon a per annum availability fee on their daily average unused lending commitments equal to the percentage set forth in the table above. If the ratings established by Moody's and S&P fall within different levels, the rating at the inferior level (e.g., Level II is inferior to Level I) will be disregarded, except that in the event that the ratings differential is (i) two levels (e.g., Levels I and III), the intermediate level will be used, (ii) three levels (e.g., Levels I and IV), the higher of the two intermediate levels will be used (e.g., Level II is higher than Level III) and (iii) four levels (i.e., Levels I and V), Level III will be used. Currently, S&P and Moody's rate Devon's long-term senior, unsecured debt as "BBB+" and "Baa2," respectively.
No borrowings under the new credit facility may be made after September 13, 2002. Amounts borrowed under the new credit facility will be required to be repaid on the following dates in the following percentages:
October 15, 2004...................................... 7.651715040% April 15, 2005........................................ 19.788918206% October 15, 2005...................................... 19.788918206% April 15, 2006........................................ 26.385224274% October 15, 2006...................................... 26.385224274% |
The new credit facility contains representations and warranties, events of default (including with respect to a change in control of Devon), indemnification provisions and covenants customary for credit
facilities for borrowers of comparable creditworthiness, including covenants restricting the ability of the borrowers and their subsidiaries, subject to certain exceptions, (i) to incur or permit to exist certain types of indebtedness (including a prohibition on Devon maintaining a ratio of consolidated total debt to total capitalization in excess of 70% on or prior to June 30, 2002, or in excess of 65% after June 30, 2002), (ii) to incur or permit to exist certain liens, (iii) to consummate certain mergers, (iv) to issue capital stock of subsidiaries, (v) to engage in transactions with affiliates that are not on arm's-length terms and (vi) to enter into or maintain contracts that restrict such subsidiaries from making dividends, advances or other distributions or transfers to the relevant borrower.
Devon Financing Corporation U.L.C. Debt Securities
On October 3, 2001, Devon Financing Corporation, U.L.C. issued $1.75 billion aggregate principal amount of 6.875% notes due September 30, 2011 and $1.25 billion aggregate principal amount of 7.875% debentures due September 30, 2031. The debt securities are unsecured and unsubordinated obligations of Devon Financing Corporation U.L.C. Devon has fully and unconditionally guaranteed on an unsecured and unsubordinated basis the obligations of Devon Financing Corporation U.L.C. under the debt securities. If the alternate structure is used to complete the transaction, Devon Holdco will guarantee those obligations on the same basis
Interest on the debt securities will be payable by Devon Financing Corporation U.L.C. semiannually on March 30 and September 30 of each year, beginning on March 30, 2002. The indenture governing the debt securities limits both Devon Financing Corporation U.L.C.'s and Devon's ability to incur liens or enter into mergers or consolidations, or transfer all or substantially all of their respective assets, unless the successor company assumes Devon Financing Corporation U.L.C.'s or Devon's obligations under the indenture.
DISSENTERS' RIGHTS OF APPRAISAL
Mitchell Stockholders
Any stockholder of record of Mitchell may exercise dissenters' rights of appraisal in connection with the transaction by properly complying with the requirements of Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act. If you are a Mitchell stockholder and you want to exercise your dissenters' rights, you must follow the required procedure set forth in Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act exactly or you may lose your right to dissent from the transaction. The information that follows is a general summary of dissenters' rights available to Mitchell stockholders. If the alternate structure is used to complete the transaction, references to Devon in this summary of dissenters' rights of appraisal should be interpreted as references to Devon Holdco. This summary is qualified by and not a substitute for the provisions of Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act, the full text of which is attached as Annex G. Mitchell stockholders should read Annex G in its entirety for more complete information concerning their right to dissent from the transaction.
Mitchell stockholders of record who follow the procedures set forth in Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act will be entitled to demand that Devon purchase their shares of Mitchell common stock for a purchase price in cash equal to the fair value of their shares. Under Texas law, fair value of shares for purposes of the exercise of dissenters' rights is defined as the value of the shares as of the day immediately preceding the day the vote is taken approving the merger agreement, excluding any appreciation or depreciation in value of the shares in anticipation of the proposed merger.
In order to be entitled to exercise dissenters' rights, you must file a written objection to the transaction with Mitchell prior to the date of the Mitchell meeting. The written objection must state that you will exercise your right to dissent if the transaction becomes effective and give your address where notice of the effectiveness of the transaction should be delivered or mailed. Mitchell stockholders who desire to exercise their dissenter's rights should send this written objection to Mitchell Energy & Development Corp., P.O. Box 4000, The Woodlands, Texas 77387-4000, Attention: General Counsel.
Neither a proxy nor a vote against the transaction is sufficient to constitute a written objection as required under the Texas Business Corporation Act.
If the transaction is approved by the Mitchell stockholders and subsequently becomes effective, within 10 days of the effectiveness of the transaction, Devon must deliver or mail notice of the effectiveness of the transaction to each dissenting stockholder that did not vote in favor of the transaction. Any dissenting stockholder that did not vote to approve the merger agreement may then make a written demand on Devon for the payment of the fair value of the stockholder's shares within 10 days from the delivery or mailing of the notice by Devon. The failure to vote against approval of the merger agreement will not constitute a waiver of your right to dissent. Such demand must state the number and class of shares of Mitchell stock owned by the dissenting stockholder and the dissenting stockholder's estimate of the fair value of the dissenting stockholder's Mitchell stock. Any dissenting stockholder that fails to make such a demand within the 10-day period will lose the right to dissent and will be bound by the terms of the merger agreement. In order to preserve dissenters' rights, within 20 days of making a demand for payment, a dissenting stockholder must also submit such dissenting stockholder's Mitchell stock certificates to Devon for the appropriate notation of the demand. Devon, at its option, may terminate the dissenting stockholder's rights under Article 5.12 of the Texas Business Corporation Act for failure to submit the Mitchell stock certificates within the 20-day period unless a court of competent jurisdiction directs otherwise upon a showing to the court that there is good and sufficient cause.
Within 20 days of receipt of a proper demand for payment by a dissenting stockholder, Devon must deliver or mail to the dissenting stockholder written notice that either (1) Devon accepts the amount the dissenting stockholder claimed and agrees to pay the amount of the stockholder's demand within 90 days after the effectiveness of the transaction upon receipt of the dissenting stockholder's duly endorsed Mitchell stock certificates or (2) (A) contains an estimate by Devon of the fair value of the dissenting stockholders' Mitchell stock and (B) includes an offer to pay the amount of Devon's estimate upon receipt of the dissenting stockholder's duly endorsed Mitchell stock certificates within 90 days after the effectiveness of the transaction, provided that Devon receives notice from the stockholder within 60 days after the effective date of the transaction that the dissenting stockholder agrees to accept Devon's estimate. If the dissenting stockholder and Devon agree upon the value of the dissenting stockholder's shares within 60 days after effectiveness of the transaction, Devon must pay the amount of the agreed value to the dissenting stockholder upon receipt of the dissenting stockholder's duly endorsed Mitchell stock certificates within 90 days of the effectiveness of the transaction. Upon payment of the agreed value, the dissenting stockholder will no longer have any interest in such shares of Mitchell or in Devon.
If the dissenting Mitchell stockholder and Devon do not agree on the value of the dissenting stockholder's shares within 60 days after the effectiveness of the transaction, then either the dissenting stockholder or Devon may, within 60 days after the expiration of that 60-day period, file a petition in a court of competent jurisdiction in the county in Texas where the principal office of Mitchell is located (Montgomery County), seeking a determination of the fair value of the dissenting stockholder's shares. Devon must file with the court a list of all stockholders who have demanded payment for their shares with whom an agreement as to value has not been reached within 10 days following receipt of a petition filed by a dissenting stockholder or upon the filing of such a claim by Devon. The clerk of the court will give notice of the hearing of any such claim to Devon and to all of the dissenting stockholders on the list provided by Devon. All dissenting stockholders notified in this manner and Devon will be bound by the final judgment of the court as to the value of the shares.
In considering such a petition, the court will determine which of the dissenting Mitchell stockholders have complied with the provisions of the Texas Business Corporation Act and are entitled to the payment of the fair value of their shares and will appoint one or more qualified appraisers to determine the fair value of the shares who are directed to make such determination "upon such investigation as to them may seem proper." The appraisers will also allow the dissenting stockholders and Devon to submit to them evidence as to the fair value of the shares.
Upon receipt of the appraisers' report, the court will determine the fair value of the shares of the dissenting stockholders and will direct the payment to the dissenting stockholders of the amount of the fair value of their Mitchell shares, with interest from the date 91 days after the effectiveness of the transaction to the date of the judgment, by Devon, upon receipt of the dissenting stockholder's Mitchell stock certificates. Upon payment of the judgment, the dissenting stockholders will no longer have any interest in such Mitchell shares or in Devon. The court will allow the appraisers a reasonable fee as court costs and will allocate all court costs between the parties in such manner as it determines to be fair and equitable.
Any dissenting stockholder may withdraw his or her demand at any time before receiving payment for the shares or before a petition has been filed seeking determination of the fair value of the shares. No dissenting stockholder may withdraw his or her demand after payment has been made or, unless Devon consents to the withdrawal, where a petition has been filed.
Any dissenting stockholder who has properly demanded payment for his or her shares of Mitchell stock will not have any rights as a stockholder, except the right to receive payment for such shares and the right to claim that the merger and the related transactions were fraudulent.
For a discussion of the tax consequences of exercising dissenters' rights, please see "Material Federal Income Tax Considerations -- Exercise of Dissenters' Rights of Appraisal by Mitchell Stockholders."
If you are a Mitchell stockholder who is considering dissenting from the transaction, we urge you to consult with legal counsel.
Devon Stockholders
Devon stockholders are not entitled to dissenters' rights of appraisal in connection with the merger. Holders of Devon's 6.49% cumulative preferred stock, Series A, will be entitled to dissenters' rights of appraisal under Delaware law if the alternate structure is used to complete the transaction. Devon's other stockholders will not be entitled to dissenters' rights of appraisal if the alternate structure must be used to complete the transaction.
REGULATORY REQUIREMENTS
Under the Hart-Scott-Rodino Act and the rules promulgated thereunder by the Federal Trade Commission, the transaction cannot be completed until notifications have been given and certain information has been furnished to the Federal Trade Commission and the Antitrust Division of the Department of Justice and specified waiting period requirements have been satisfied. We filed notification and report forms under the Hart-Scott-Rodino Act with the Federal Trade Commission and the Antitrust Division on August 30, 2001 relating to the original merger structure. On September 24, 2001, the Federal Trade Commission granted early termination of the waiting period in connection with those filings. On October , 2001, we filed notification and report forms under the Hart-Scott-Rodino Act with the Federal Trade Commission and the Antitrust Division relating to the alternate merger structure. The waiting period for that filing will expire on November , 2001 unless it is extended or terminated earlier.
At any time before or after completion of the transaction, the Antitrust Division or the Federal Trade Commission or any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the transaction, to rescind the transaction or to seek divestiture of particular assets of Devon or Mitchell. Private parties also may seek to take legal action under the antitrust laws under certain circumstances. In addition, non-United States governmental and regulatory authorities may seek to take action under applicable antitrust laws. A challenge to the transaction on antitrust grounds may be made and, if such a challenge is made, it is possible that Devon and Mitchell will not prevail.
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement. It is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A. You should read the merger agreement because it, and not this document, is the legal document that governs the transaction.
STRUCTURE OF THE MERGER
At the effective time of the merger, Mitchell will merge with and into Devon NewCo Corporation, a newly formed, nominally capitalized Delaware corporation that is wholly owned by Devon. Devon NewCo Corporation will be the surviving corporation in the merger, and the surviving corporation will be wholly owned by Devon.
The certificate of incorporation and bylaws of Devon NewCo Corporation immediately before the effective time of the merger will be the certificate of incorporation and bylaws of the surviving corporation until duly amended. The directors of Devon NewCo Corporation at the effective time of the merger will be the directors of the surviving corporation. In addition, at the effective time of the merger, J. Todd Mitchell, or a substitute designee of Mitchell, will be appointed to fill a vacancy on Devon's board of directors. See "The Merger -- Interests of Mitchell's Executive Officers and Directors in the Transaction -- Appointment of Mitchell's Designee to the Combined Company's Board of Directors."
WHEN THE MERGER BECOMES EFFECTIVE
Mitchell and Devon NewCo Corporation will execute and file a certificate of merger with the Delaware Secretary of State and articles of merger with the Texas Secretary of State on the first business day after the day on which the last condition to completing the merger is satisfied or waived or at such other time as Devon and Mitchell may agree. The merger will become effective at the time and on the date on which those documents are filed or such other time and date on which the parties agree and specify in those documents. That time is referred to as the "effective time of the merger."
CONVERSION OF STOCK, STOCK OPTIONS AND OTHER AWARDS
At the effective time of the merger:
- each outstanding share of Mitchell common stock, other than (1) shares owned or held by Devon, Devon NewCo Corporation, Mitchell or their respective subsidiaries, including treasury stock, and (2) shares held by Mitchell stockholders who validly exercise their dissenters' rights under Texas law, will be converted into the right to receive $31.00 in cash and 0.585 of a share of Devon common stock;
- shares of Mitchell common stock held by Mitchell stockholders who exercise their dissenters' rights under Texas law will be treated as described under "The Merger -- Dissenters' Rights of Appraisal," assuming that those stockholders validly exercise their dissenters' rights; and
- shares of Mitchell common stock owned or held by Devon, Mitchell or their respective subsidiaries and not held on behalf of third parties, including treasury stock, will be canceled.
If, before the effective time of the merger, the issued and outstanding shares of Devon or Mitchell common stock are changed into a different number of shares as a result of a reclassification, stock split, reverse stock split, stock dividend, stock distribution or similar event, an appropriate adjustment will be made to the consideration to be received by the Mitchell stockholders.
Each outstanding option to purchase Mitchell common stock granted under Mitchell's stock plans that is unexercised as of the effective time of the merger will vest and will be converted automatically at the effective time of the merger into, and will become, a fully vested option to purchase 1.20 shares of Devon common stock for each share of Mitchell common stock covered by the option before the merger. After conversion, the exercise price per share of Devon common stock subject to each option will equal
the pre-conversion exercise price per share of Mitchell common stock subject to each option, divided by 1.20. Bonus units issued by Mitchell will be similarly converted into Devon bonus units.
For a description of Devon's or Mitchell's common stock and a description of the comparative rights of holders of Devon common stock and Mitchell common stock, see "Comparison of the Rights of Mitchell and Devon Stockholders."
EXCHANGE OF SHARES; FRACTIONAL SHARES
Exchange Agent. At or prior to the effective time of the merger, Devon
will (1) deposit with the exchange agent, for the benefit of the holders of
Mitchell common stock, an amount in cash sufficient to effect the conversion of
Mitchell common stock into the cash consideration to be paid in the merger and
(2) authorize the exchange agent to credit a sufficient number of shares of
Devon common stock to direct registration (book-entry) accounts maintained by
Devon's transfer agent, or to issue certificates representing those shares, to
effect the conversion of Mitchell common stock into the stock consideration to
be paid in the merger. Devon will also make funds available to the exchange
agent from time to time after the effective time of the merger as needed to pay
any cash instead of fractional shares or any dividends or other distributions
declared by Devon on its common stock with a record date after the effective
time of the merger and a payment date on or before the date the relevant
Mitchell stock certificate was surrendered.
At the effective time of the merger, the stock transfer books of Mitchell will be closed and no further issuances or transfers of shares of Mitchell common stock will be made. If, after the effective time, valid Mitchell stock certificates are presented to the surviving corporation for any reason, they will be cancelled and exchanged as described above to the extent allowed by applicable law.
Exchange of Shares. If you own Mitchell common stock, promptly after the merger, but in no event more than three business days following the effective time of the merger, the exchange agent will mail to you a transmittal letter and instructions explaining how to surrender your certificates to the exchange agent.
Mitchell stockholders who surrender their stock certificates to the exchange agent, together with a properly completed and signed transmittal letter and any other documents required by the instructions to the transmittal letter, will receive:
- the number of shares of Devon common stock to which each holder is entitled in accordance with the 0.585 exchange ratio; and
- after giving effect to any required tax withholdings, a check in the aggregate amount of:
- $31.00 per share of Mitchell common stock surrendered to the exchange agent;
- the amount of cash being paid in lieu of fractional shares of Devon common stock; and
- any cash dividends and any other dividends or other distributions declared by Devon on its common stock with a record date after the effective time of the merger and a payment date on or before the date the relevant Mitchell stock certificate was surrendered.
Devon uses a direct registration (book-entry) program with respect to record ownership of Devon common stock. Direct registration is a service that allows shares to be owned, reported and transferred electronically without having a physical stock certificate issued. Ownership of the shares is recorded in the names of the owner electronically on Devon's books and records. Direct registration is intended to alleviate problems relating to stolen, misplaced or lost stock certificates and to reduce the paperwork relating to the transfer of ownership of Devon common stock. Under direct registration, the voting, dividend and other rights and benefits of holders of Devon common stock remain the same as with holders of certificates.
Mitchell stockholders who surrender their stock certificates to the exchange agent, together with a properly completed and signed transmittal letter and any other documents required by the instructions to the transmittal letter, will be issued the appropriate number of shares of Devon common stock through
direct registration. As soon as reasonably practicable following the crediting of shares to their respective book-entry account, Mitchell stockholders will receive account statements from Devon's transfer agent evidencing their holdings, as well as general information on the book-entry form of ownership through Devon's direct registration system. You are not required to maintain a book-entry account and you may at any time obtain a physical stock certificate for all or a portion of your shares of Devon common stock received in the merger at no cost to you. Instructions describing how you can obtain stock certificates will be included with the account statement mailed to you and can also be obtained upon request from Devon's transfer agent.
If you have a Mitchell stock certificate, you should surrender that certificate for exchange after the effective time of the merger. Until you surrender your Mitchell stock certificates, dividends or other distributions declared with a record date after the effective time of the merger will accrue, but will not be paid, on shares of Devon common stock that you are entitled to receive as a result of the conversion of your shares of Mitchell common stock. When you surrender your certificates, any unpaid dividends or other distributions will be paid, less the amount of any withholding taxes that may be required. No interest will be paid or accrued on:
- the $31.00 in cash being paid per share of Mitchell common stock surrendered to the exchange agent;
- the amount of cash being paid in lieu of fractional shares of Devon common stock; or
- any cash dividends and any other dividends or other distributions declared by Devon on its common stock with a record date after the effective time of the merger and a payment date on or before the date the relevant Mitchell stock certificate was surrendered.
The exchange agent will deliver to Devon any shares of Devon common stock to be issued in the merger or funds set aside by Devon to pay the cash consideration, cash in lieu of fractional shares in connection with the merger or to pay dividends or other distributions on shares of Devon common stock to be issued in the merger that are not claimed by former Mitchell stockholders within 180 days after the effective time of the merger. Thereafter, Devon will act as the exchange agent and former Mitchell stockholders may look only to Devon for payment of their shares of Devon common stock, cash consideration, cash in lieu of fractional shares and unpaid dividends and distributions. None of Devon, the surviving corporation, the exchange agent or any other person will be liable to any former Mitchell stockholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
If any shares of Devon common stock are to be issued in a name other than that in which the Mitchell common stock certificate surrendered in exchange for such shares is registered, the person requesting the exchange must (1) pay any transfer or other taxes required by reason of the issuance of shares of Devon common stock in a name other than that of the registered holder of the certificate surrendered or (2) establish to the satisfaction of Devon or the exchange agent that such tax has been paid or is not applicable.
MITCHELL STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY CARD. A TRANSMITTAL LETTER AND ACCOMPANYING INSTRUCTIONS WILL BE PROVIDED TO MITCHELL STOCKHOLDERS FOLLOWING THE MERGER.
Fractional Shares. No fractional shares of Devon common stock will be issued to Mitchell stockholders. Instead of fractional shares, each Mitchell stockholder otherwise entitled to a fractional share will receive, in cash and without interest, an amount representing the fractional share, rounded to the nearest one-hundredth of a share, multiplied by the average closing price of Devon common stock as reported in The Wall Street Journal, Southwestern edition, on the five trading days immediately prior to the last business day before the effective time of the merger.
Lost, Stolen or Destroyed Certificates. If a Mitchell stock certificate has been lost, stolen or destroyed, the exchange agent will issue the consideration properly payable in accordance with the merger agreement, without interest, upon receipt of (1) an affidavit of that fact by the person claiming the
certificate is lost, stolen or destroyed and (2) appropriate and customary indemnification or the posting of a bond in the form customarily required by Devon to indemnify against any claim that may be made against it with respect to such certificate.
CONDITIONS TO THE MERGER
Conditions to Each Company's Obligation to Effect the Merger. The obligations of Devon and Mitchell to complete the merger are subject to the following conditions:
- approval by Mitchell's stockholders of the merger agreement;
- approval by Devon's stockholders of the issuance of Devon common stock in the merger;
- the expiration or early termination of the waiting period under (1) the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and (2) any mandatory waiting period or required consent under any applicable material foreign competition or antitrust law or regulation;
- the absence of any statute, rule, regulation, decree, order or injunction prohibiting the consummation of the merger, provided that the parties have agreed to use their reasonable best efforts to have any applicable decree, order or injunction lifted;
- the continued effectiveness of the registration statement of which this document is a part, provided that the Securities and Exchange Commission shall not have issued or threatened to issue a stop order suspending the effectiveness of that registration statement; and
- the approval for listing on the American Stock Exchange of the shares of Devon common stock to be issued in the merger, subject to official notice of issuance.
Additional Conditions to Each Company's Obligations. The obligations of Devon and Mitchell to complete the merger are subject to the following additional conditions, unless waived by the other:
- material compliance with its agreements and covenants contained in the merger agreement;
- the representations and warranties set forth in the merger agreement and the documents delivered in connection with the merger agreement to the extent (1) qualified as to materiality shall be true and correct and (2) not qualified as to materiality shall be true and correct in all material respects; and
- receipt of a written opinion of Vinson & Elkins L.L.P., in the case of Mitchell, and Mayer, Brown & Platt, in the case of Devon, to the effect that:
- the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of section 368(a) of the Internal Revenue Code; and
- in the case of the Vinson & Elkins L.L.P. opinion, no gain or loss will be recognized by Mitchell or its stockholders to the extent that they receive Devon common stock, and, in the case of the Mayer, Brown & Platt opinion, no gain or loss will be recognized by any corporation that is a party to the merger.
Waiver of Conditions. Either Devon or Mitchell may choose to complete the merger even though a condition to that company's obligation has not been satisfied if the necessary stockholder approvals have been obtained and the law allows the company to do so.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties by Mitchell as to itself and its subsidiaries concerning, among other things:
- incorporation, standing and authority;
- corporate authorization to enter into the merger and related transactions;
- capital structure;
- significant subsidiaries;
- compliance with agreements, court orders and laws;
- the absence of defaults caused by execution or consummation of the merger agreement;
- accuracy of financial statements and reports filed with the Securities and Exchange Commission;
- the absence of material litigation;
- the absence of certain changes or events;
- tax matters;
- employee benefits and labor matters;
- the absence of violations or liabilities under environmental laws;
- the ownership and rights to use intellectual property;
- title to properties;
- insurance matters;
- broker's and finder's fees;
- receipt of financial advisors' opinions;
- material contracts;
- required board and stockholder approvals;
- the inapplicability of Section 13.03 of the Texas Business Corporation Act or any other fair price, moratorium, control share acquisition, interested stockholder or other similar anti-takeover provision; and
- the absence of non-competition and material asset sale or purchase contracts.
The merger agreement contains representations and warranties by Devon as to itself and its subsidiaries concerning, among other things:
- incorporation, standing and authority;
- corporate authorization to enter into the merger and related transactions;
- capital structure;
- significant subsidiaries;
- compliance with agreements, court orders and laws;
- the absence of defaults caused by the execution or consummation of the merger agreement;
- accuracy of financial statements and reports filed with the Securities and Exchange Commission;
- the absence of certain changes or events;
- broker's and finder's fees;
- receipt of financial advisor's opinion;
- required board and stockholder approvals;
- ability to finance the merger;
- the absence of material litigation; and
- title to properties.
COVENANTS AND OTHER AGREEMENTS
Operating Covenants. Prior to the merger and unless Devon has consented in writing, with certain exceptions Mitchell has agreed:
- to conduct its operations in the ordinary course in substantially the same manner as previously conducted and to use its reasonable best efforts to preserve intact its business organization and goodwill;
- to keep available the services of its officers and maintain satisfactory relationships with those persons with whom it has business relationships;
- not to amend its articles of incorporation or bylaws;
- to promptly notify Devon of any material change in its financial condition or business or any material litigation or material governmental complaints, investigations or hearings or the breach in any material respect of any representation or warranty contained in the merger agreement;
- to promptly deliver to Devon any filings made with the Securities and Exchange Commission subsequent to the date of the merger agreement;
- not to issue any shares of its capital stock, effect any change in its capitalization or grant any right to acquire shares of its capital stock, other than to new employees consistent with past practice in an amount not to exceed 100,000 shares of Mitchell common stock or pursuant to existing contractual commitments;
- not to increase any compensation or benefits, other than in the ordinary course of business consistent with past practice;
- not to enter into or amend any employment agreement with any of its present or future officers or directors, except with new employees consistent with past practice;
- not to adopt any new employee benefit plan or amend any existing employee benefit plan in any material respect;
- not to declare, set aside or pay dividends, other than its ordinary quarterly dividend, or redeem, purchase or otherwise acquire any shares of its capital stock;
- not to dispose of material assets outside the ordinary course of business;
- not to acquire businesses or entities for aggregate consideration in excess of $3.0 million;
- not to change any of its accounting principles or practices, except as may be required by a change in law or in generally accepted accounting principles;
- to use its reasonable best efforts to maintain its insurance;
- not to make or rescind any tax election, settle or compromise any tax liability, or materially change its method of reporting income or deductions for U.S. federal income tax purposes from those used in the preparation of its federal income tax return for the most recent fiscal year for which a return has been filed, except as may be required by applicable law or where it would not have a material adverse effect on Mitchell;
- not to incur any indebtedness for borrowed money, except under credit lines existing as of the date of the merger agreement;
- not to guarantee any indebtedness, issue any debt securities or warrants or rights to acquire any debt securities or guarantee any debt securities of others;
- not to enter into any material leases or create any material mortgages, liens, security interests or other encumbrances on its property in connection with any indebtedness, except in the ordinary course of business;
- not to make or commit to make any capital expenditures in excess of $50 million over its fiscal 2001 capital expenditures budget;
- not to take any action that is likely to delay materially or adversely affect any party's ability to obtain any consent or approval of any regulatory body or the expiration of any waiting period required to consummate the merger;
- not to terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which it is a party or fail to enforce to the fullest extent permitted under applicable law the provisions of those agreements;
- not to enter into or amend any agreement with any holder of Mitchell common stock with respect to holding, voting or disposing of shares;
- not to cause the acceleration of rights, benefits or payments under any of its benefit plans by a resolution of its board of directors; or
- not to enter into any additional hedging arrangements with respect to its oil production and more than 10% of its budgeted natural gas production for 2001 and, in any event, for a term longer than 12 months.
Other Agreements Relating to the Period Before the Effective Time. The merger agreement contains additional agreements between Devon and Mitchell relating to, among other things:
- the preparation, filing and distribution of this document and Devon's and Devon Holdco's filing of the registration statements of which this document is a part;
- the required recommendations by each company's board of directors to their respective stockholders;
- convening and holding the Devon and Mitchell stockholders meetings;
- access to information and cooperation regarding filings with governmental and other agencies and organizations;
- using their reasonable best efforts to satisfy the conditions to closing;
- Mitchell refraining from, without Devon's prior written consent, committing to any divestitures, licenses, hold separate agreements or similar matters, and Mitchell using its reasonable best efforts to effect any such divestitures, licenses, hold separate arrangements or similar matters as Devon may request, if such actions are contingent on the consummation of the transaction;
- Devon's ability to enter into agreements with respect to other business combinations, except where those agreements would not be reasonably likely to prevent or delay the satisfaction of any of the conditions to the merger;
- public announcements;
- the listing on the American Stock Exchange of the Devon common stock to be issued in the merger and the Devon Holdco common stock to be issued if the alternate structure must be used to complete the transaction;
- if requested by either Devon, Devon Holdco or Mitchell, the delivery of "comfort letters" from Devon's and Mitchell's independent accountants;
- actions or omissions that would result in the merger not qualifying as a reorganization under section 368(a) of the Internal Revenue Code; and
- the coordination of dividend record and payment dates so that Mitchell stockholders do not fail to receive a dividend in any calendar quarter or receive dividends on both Mitchell common stock and Devon common stock received in the merger in any calendar quarter.
Employee Benefits. The merger agreement provides that Devon will honor Mitchell's employee benefit plans and commitments entered into prior to the date of the merger agreement, provided that Devon may modify any such plan or commitment in accordance with its terms, subject to some exceptions. Specifically, Devon has agreed to, among other things:
- continue retiree medical benefits for former Mitchell employees receiving such benefits at the effective time of the merger and provide substantially equivalent retiree medical benefits, upon termination, for Mitchell employees that become or remain full-time employees of Devon, referred to as continuing employees, who have attained the age of 55 and have had 10 years of service with Mitchell at the effective time of the merger;
- for at least one year after the effective time of the merger, provide to continuing employees severance benefits at least as favorable as those provided by Mitchell; and
- for at least one year after the effective time of the merger, either (1) continue Mitchell's defined benefit pension plan and supplemental retirement plans for continuing employees or (2) provide benefits under another Devon defined benefit pension plan, and for at least 13 months after the effective time of the merger, not amend the form of payment provisions in Mitchell's supplemental retirement plans.
In addition, if Devon materially modifies the benefits of continuing employees within two years of the effective time of the merger, Devon has agreed to provide those employees for the remainder of such two-year period with benefits, other than stock options and stock appreciation rights, no less favorable than those provided to similarly situated Devon employees. Mitchell employees that become participants in Devon's employee benefit plans will be given credit under the plans for their prior service with Mitchell for purposes of eligibility, vesting and benefit determination.
Affiliate Agreements. Mitchell has agreed to use its reasonable best efforts to cause its affiliates, as defined by Rule 145 under the Securities Act of 1933, to enter into written agreements prior to the effective time of the merger that restrict their ability to sell, pledge, transfer or otherwise dispose of any shares of Devon common stock issued to them in connection with the merger or any shares of Devon Holdco common stock issued to them if the alternate structure must be used to complete the transaction, except:
- in compliance with Rule 145 under the Securities Act of 1933;
- pursuant to an effective registration statement under the Securities Act of 1933; or
- in reliance upon a written opinion of counsel delivered to Devon or Devon Holdco, as the case may be, in a form and substance reasonably acceptable to Devon or Devon Holdco, as the case may be, to the effect that such sale, pledge, transfer or other disposition is exempt from registration under the Securities Act of 1933.
Indemnification and Insurance. For a period of six years after the merger, Devon will cause the surviving corporation to indemnify and hold harmless to the fullest extent permitted under applicable law each person who is, or has been at any time prior to the effective time of the merger, an officer or director of Mitchell and each person who served at the request of Mitchell as a director, officer, trustee or fiduciary of another entity. Those persons will be indemnified to the fullest extent permitted by law against all losses, including fees and expenses of counsel, arising out of or pertaining to actions taken by them, or failures to act, while serving in those capacities, whether claimed before or after the effective time of the merger.
The surviving corporation will maintain directors' and officers' liability insurance for six years after the effective time of the merger to cover persons who are or were covered by Mitchell's existing directors' and officers' liability insurance policies at any time before the effective time of the merger. The terms of the insurance will be substantially no less advantageous to such persons than the existing insurance with respect to acts or omissions prior to the effective time of the merger. However, the surviving corporation will not be required to pay annual premiums in excess of 250% of the last annual premium paid by Mitchell, but will be required to purchase as much coverage as reasonably practicable for such amount. Devon has the right to cause Mitchell's directors and officers liability insurance to be extended by obtaining a six-year "tail" policy on terms no less advantageous than Mitchell's existing directors and officers liability insurance.
Other Acquisition Proposals. In the merger agreement, Mitchell has agreed that it and its subsidiaries:
- will not, and will not permit any of their officers, directors, employees, agents or representatives to, solicit, initiate or encourage any inquiry, proposal or offer for a third-party tender offer, merger, consolidation, business combination or similar transaction involving 10% or more of Mitchell's assets or capital stock, taken as a whole, or participate in any discussions or negotiations concerning such an acquisition proposal; and
- will immediately cease any existing negotiations with any third parties with respect to any of the above transactions, except that Mitchell or its board of directors may respond publicly to a third-party tender offer as required by the federal securities laws or provide information prior to the vote of its stockholders on a confidential basis to any person, or have negotiations or discussions with any person, who makes an unsolicited bona fide acquisition proposal, provided that:
- Mitchell (1) provides notice to Devon within 24 hours that it has received the unsolicited request for information or an acquisition proposal identifying the person requesting the information or making the acquisition proposal and stating the material terms and conditions of the acquisition proposal, and (2) continues to provide updates as to material developments within 24 hours;
- Mitchell's board of directors in good faith (1) after consultation with
its financial advisors and taking into account the likelihood of
consummation, determines that the acquisition proposal is reasonably
likely to result in a transaction that is more favorable from a
financial point of view to Mitchell stockholders than the merger, and
(2) after consultation with its outside legal counsel, determines that
the failure to respond to the information request or to engage in
discussions would be inconsistent with its fiduciary obligations under
applicable law; and
- Mitchell may not enter into any agreement with respect to an acquisition proposal prior to the termination of the merger agreement.
Prior to the effective time of the merger, the board of directors of Devon or Mitchell may withdraw or change its original recommendation to stockholders to vote for the merger, or recommend that stockholders vote instead for a superior acquisition proposal, but only if the board determines in good faith, after consultation with its outside legal counsel, that the failure to do so would be inconsistent with its fiduciary obligations under applicable law.
TERMINATION
Before the effective time of the merger, the merger agreement may be terminated:
- by mutual written consent of Devon and Mitchell;
- by either Devon or Mitchell, in either case upon payment, if applicable, of the termination fee described below, if:
- the merger is not consummated by March 13, 2002, so long as the party seeking to terminate did not prevent the merger from occurring by failing to perform or observe its obligations under the merger agreement in any material respect;
- 20 days elapse after the meeting of the Mitchell stockholders at which the stockholders fail to approve the merger agreement; or
- 20 days elapse after the meeting of the Devon stockholders at which the stockholders fail to approve the issuance of shares of Devon common stock in the merger.
- by either Devon or Mitchell, if there is a legal prohibition to closing the merger that has become final and non-appealable, so long as the party seeking termination has used its reasonable best efforts to remove the prohibition;
- by Mitchell, after consultation with its legal advisors, if:
- Devon breaches any of its representations, warranties or agreements in the merger agreement or if any representation or warranty of Devon becomes untrue resulting in a condition of the merger not being satisfied, and the breach is not cured within 30 days, provided that Mitchell is not also in material breach of the merger agreement; or
- Devon's board of directors withdraws, modifies or changes, in a manner adverse to Mitchell, its approval or recommendation of the merger, or resolves to do so; or
- by Devon, after consultation with its legal advisors, if:
- Mitchell breaches any of its representations, warranties or agreements in the merger agreement or if any representation or warranty of Mitchell becomes untrue resulting in a condition of the merger not being satisfied, and the breach is not cured within 30 days, provided that Devon is not also in material breach of the merger agreement; or
- Mitchell's board of directors withdraws, modifies or changes, in a manner adverse to Devon, its approval or recommendation of the merger or recommends an acquisition proposal, or resolves to do so.
TERMINATION FEES AND EXPENSES
Termination Fees and Expenses Potentially Payable by Mitchell. Mitchell has agreed to pay Devon a $100 million termination fee and to reimburse Devon for expenses incurred in connection with the merger agreement up to a maximum of $10 million if either of the following circumstances occurs:
- Devon terminates the merger agreement after Mitchell's board of directors has (1) withdrawn, modified or changed, in a manner adverse to Devon, its approval or recommendation of the merger or (2) recommended an acquisition proposal, or resolves to do either; or
- Devon or Mitchell terminates the merger agreement after a person publicly makes, or publicly announces an intention to make, an acquisition proposal for Mitchell prior to or at the time of the Mitchell meeting and, at the time of such termination, (1) the Devon stockholders have approved the issuance of Devon common stock in the merger and (2) the Mitchell stockholders have not approved the merger agreement.
Termination Fees and Expenses Potentially Payable by Devon. Devon has agreed to pay Mitchell a $100 million termination fee and reimburse Mitchell for expenses incurred in connection with the merger agreement up to a maximum of $10 million if either of the following circumstances occurs:
- Mitchell terminates the merger agreement after Devon's board of directors has withdrawn, modified or changed, in a manner adverse to Mitchell, its approval or recommendation of the merger, or resolves to do so; or
- Devon or Mitchell terminates the merger agreement after a person publicly makes, or publicly announces an intention to make, an acquisition proposal for Devon prior to or at the time of the Devon meeting and, at the time of such termination, (1) the Mitchell stockholders have approved the merger agreement and (2) the Devon stockholders have not approved the issuance of Devon common stock in the merger.
If either company fails to promptly pay any termination fee due and, in order to obtain payment, the other party commences a suit that results in a judgment against the party owing the termination fee, the party owing the termination fee must pay to the other party its costs and expenses in connection with the suit, together with interest on the termination fee from the date payment was required until the date such payment is made at the annual prime lending rate of The Chase Manhattan Bank in effect on the date the payment was required to be made, plus 1%.
Other Expenses. All costs and expenses incurred in connection with the merger agreement and related transactions will be paid by the party incurring them, except that termination fees and expenses will be paid as described above.
AMENDMENT; EXTENSION AND WAIVER
Amendment. Subject to the next sentence, the merger agreement may be amended at any time with the consent of Devon's board of directors and Mitchell's board of directors. If the merger agreement has been approved by the Devon stockholders and the Mitchell stockholders, then no amendment can be made that by law requires the further approval of stockholders without obtaining such further stockholder approval.
Extension and Waiver. At any time prior to the effective time of the merger, each of Devon and Mitchell may, to the extent permitted by law, (1) grant the other party additional time to perform its obligations under the merger agreement, (2) waive any inaccuracies in the representations and warranties of the other party and (3) waive compliance with any agreements or conditions for the benefit of that party.
THE ALTERNATE STRUCTURE
If the tax opinions that are required to complete the transaction are not available under the original structure -- that is, the merger of Mitchell into a wholly owned subsidiary of Devon -- then an alternate structure will be used to complete the transaction. The parties have included this feature in the merger agreement to ensure that the transaction can be completed even if tax opinions are unavailable under the original structure and that the transaction will be taxable only to the extent that Mitchell stockholders receive cash, and will otherwise be tax-free.
The alternate structure would not affect the economics of the transaction. The merger agreement contains a number of provisions designed to change the mechanics of the transaction to ensure that the only material difference between the original structure and the alternate structure would be the corporate structure of the combined company. A summary of these provisions follows.
The Alternate Mergers. Under the alternate structure, two wholly owned subsidiaries of Devon Holdco Corporation, a wholly owned subsidiary of Devon, will be merged with and into Mitchell and Devon. The surviving corporations of those alternate mergers will be wholly owned subsidiaries of Devon Holdco, which will change its name to Devon Energy Corporation. Prior to those alternate
mergers, Devon
will (1) cause Devon Holdco to amend its certificate of incorporation and bylaws to be substantially identical in form and substance to the certificate of incorporation and bylaws of Devon at that time (except that Devon Holdco will not have a series of preferred stock designated as 6.49% cumulative preferred stock, Series A, because that series of preferred stock will be converted into preferred stock of the surviving corporation of the merger involving Devon under the alternate structure) and (2) cause Devon Holdco's board of directors to adopt a stockholder rights plan substantially identical in form and substance to Devon's stockholder rights plan as it existed on October 1, 2001. In addition, immediately prior to those alternate mergers, J. Todd Mitchell, or a substitute designee of Mitchell, will be appointed to Devon Holdco's board of directors. See "The Merger -- Interests of Mitchell's Executive Officers and Directors in the Transaction -- Appointment of Mitchell's Designee to the Combined Company's Board of Directors."
At the effective time of the alternate merger involving Mitchell, Mitchell Merger Corporation, a newly formed, nominally capitalized Texas corporation that is wholly owned by Devon Holdco, will merge with and into Mitchell. Mitchell will be the surviving corporation in that merger. The articles of incorporation and bylaws of Mitchell immediately before the effective time of that merger will be the articles of incorporation and bylaws of the surviving corporation until duly amended, except that the authorized capital stock of the surviving corporation will be reduced to a nominal level. The directors of Mitchell Merger Corporation at the effective time of that merger, all of whom are Devon employees, will be the directors of the surviving corporation.
At the effective time of the alternate merger involving Devon, Devon Merger Corporation, a newly formed, nominally capitalized Delaware corporation that is wholly owned by Devon Holdco, will merge with and into Devon. Devon will be the surviving corporation in that merger. Subject to the next sentence, the certificate of incorporation and bylaws of Devon immediately before the effective time of that merger will be the certificate of incorporation and bylaws of the surviving corporation until duly amended. The certificate of incorporation of the surviving corporation of the alternate merger involving Devon will be amended to (1) authorize only a nominal number of shares of common stock, (2) change the name of the surviving corporation to Devon Intermediate Holding Corporation, and (3) eliminate a number of provisions regarding the election of directors, meetings of stockholders, the prohibition against stockholder action by written consent and amendments to the corporation's certificate of incorporation and bylaws. The directors of Devon Merger Corporation at the effective time of that merger, all of whom are Devon employees, will be the directors of the surviving corporation.
Conversion of Mitchell Stock, Stock Options and Other Awards. At the effective time of the alternate merger involving Mitchell:
- each outstanding share of Mitchell common stock, other than (1) shares owned or held by Devon, Mitchell or their respective subsidiaries, including treasury stock, and (2) shares held by Mitchell stockholders who validly exercise their dissenters' rights under Texas law, will be converted into the right to receive $31.00 in cash and 0.585 of a share of Devon Holdco common stock;
- shares of Mitchell common stock held by Mitchell stockholders who exercise their dissenters' rights under Texas law will be treated as described under "The Merger -- Dissenters' Rights of Appraisal," assuming that those stockholders validly exercise their dissenters' rights; and
- shares of Mitchell common owned or held by Devon, Mitchell or their respective subsidiaries and not held on behalf of third parties, including treasury stock, will be canceled.
Each outstanding option to purchase Mitchell common stock granted under Mitchell's stock plans that is unexercised as of the effective time of the alternate merger involving Mitchell will vest and will be converted automatically at the effective time of that merger into, and will become, a fully vested option to purchase 1.20 shares of Devon Holdco common stock for each share of Mitchell common stock covered by the option before that merger. After conversion, the exercise price per share of Devon Holdco common stock subject to each option will equal the pre-conversion exercise price per share of Mitchell common
stock subject to each option, divided by 1.20. Bonus units issued by Mitchell will be similarly converted into Devon Holdco bonus units.
Conversion of Devon Stock and Stock Options. At the effective time of the alternate merger involving Devon:
- each outstanding share of Devon common stock, other than shares owned or held by Devon, Mitchell or their respective subsidiaries, including treasury stock, will be converted into one share of Devon Holdco common stock;
- each outstanding share of Devon's 6.49% cumulative preferred stock, Series A, other than (1) shares owned or held by Devon, Mitchell or their respective subsidiaries, including treasury stock, and (2) shares held by holders of 6.49% cumulative preferred stock who validly exercise their dissenters' rights under Delaware law, will remain outstanding as one share of preferred stock of the surviving corporation of the alternate merger involving Devon having the same preferences and rights with respect to the surviving corporation as those that the 6.49% cumulative preferred stock had with respect to Devon;
- the one share of Devon's special voting stock will be converted into one share of Devon Holdco's special voting stock having the same preferences and rights with respect to Devon Holdco as those that Devon's special voting stock had with respect to Devon; and
- shares of Devon common stock and 6.49% cumulative preferred stock owned or held by Devon, Mitchell or their respective subsidiaries and not held on behalf of third parties, including treasury stock, will be canceled.
Each outstanding option to purchase Devon common stock granted under Devon's stock plans that is unexercised as of the effective time of the alternate merger involving Devon will be converted automatically at the effective time of that merger into, and will become, an option to purchase one share of Devon Holdco common stock for each share of Devon common stock covered by the option before that merger. After conversion, the exercise price per share of Devon Holdco common stock subject to each option will be the same as the exercise price per share of Devon common stock subject to each option, and the other terms of each option, including the vesting schedule of each option, will remain unchanged.
The merger agreement also requires Devon to take all necessary actions to provide for:
- the succession of Devon Holdco for Devon under the support agreement and voting agreement related to Northstar Energy Corporation's exchangeable shares that vote as a single class with Devon common stock and are convertible at any time, on a one-for-one basis, into shares of Devon common stock;
- the making of changes to or in the rights of holders of Northstar exchangeable shares as are economically equivalent to the changes to or in the rights of holders of Devon common stock, that are a result of the exchange of Devon Holdco common stock for Devon common stock in the alternate merger involving Devon; and
- the convertibility of Devon's Zero Coupon Convertible Senior Debentures due 2020, which currently are convertible into shares of Devon common stock, into shares of Devon Holdco common stock, subject to the terms of the indenture governing the Zero Coupon Convertible Senior Debentures.
Exchange of Shares; Fractional Shares. The exchange procedures that Mitchell stockholders will be required to follow in order to receive their shares of Devon Holdco common stock will be substantially the same as those described under "-- Exchange of Shares; Fractional Shares." Holders of Devon common stock will also need to follow those exchange procedures in order to exchange their shares of Devon common stock for shares of Devon Holdco common stock. Mitchell stockholders otherwise entitled to receive a fractional share of Devon Holdco common stock will receive an amount, in cash and without interest, representing the fractional share, rounded to the nearest one-hundredth of a share, multiplied by
the average closing price of Devon common stock as reported in The Wall Street Journal, Southwestern edition, on the five trading days immediately prior to the last business day before the effective time of the alternate merger involving Mitchell.
Conditions to the Alternate Mergers. Except as described in this section, the obligations of Devon and Mitchell to complete the transaction under the alternate structure are identical to the conditions described under "-- Conditions to the Merger." An additional condition to complete the transaction under the alternate structure is that the shares of Devon Holdco common stock to be issued in the alternate mergers be approved for listing on the American Stock Exchange, subject to official notice of issuance. In addition, the required vote of Devon stockholders needed to complete the transaction under the alternate structure is higher than the required vote to complete the transaction under the original structure.
The tax opinions required as a condition to completing the transaction under the original structure are not required to complete the transaction under the alternate structure. Instead, Devon's and Mitchell's obligations to complete the transaction under the alternate structure are subject to the receipt of a written opinion of Vinson & Elkins L.L.P., in the case of Mitchell, and Mayer, Brown & Platt, in the case of Devon, to the effect that the alternate structure will qualify for U.S. federal income tax purposes as a nonrecognition transaction described in section 351 of the Internal Revenue Code, except to the extent that Mitchell stockholders receive cash in exchange for their shares of Mitchell common stock in the alternative merger involving Mitchell.
Other Terms Remain Substantially the Same. The merger agreement provides that all other agreements and obligations under the merger agreement will remain unaffected in the event that the transaction must be completed under the alternate structure, except that Devon Holdco will assume Devon's obligations to be performed or complied with after the transaction is complete. For example, Devon Holdco will be required to comply with obligations substantially identical to those described under "-- Covenants and Other Agreements -- Employee Benefits" and "-- Indemnification and Insurance."
Additional Actions and Adjustments. The parties to the merger agreement have agreed to use their reasonable best efforts to take any actions that may be required to ensure that, if the alternate structure must be used to complete the transaction, the transaction could nevertheless be completed under the alternate structure at the same time as the transaction could have been completed under the original structure. Devon and Mitchell have also agreed to take any further actions and to make any further adjustments to the terms of the merger agreement as may be necessary to ensure that Mitchell, Devon and their respective stockholders are placed in a position that is as close as possible to the position that they would have been in but for the need to complete the transaction under the alternate structure.
AGREEMENTS AMONG DEVON, GEORGE P. MITCHELL AND CYNTHIA WOODS MITCHELL
The following is a summary of the material terms of the agreements that Devon entered into with George P. Mitchell and Cynthia Woods Mitchell in connection with the merger agreement. This summary is qualified in its entirety by reference to those agreements, copies of which are attached as Annexes B and C. You should read those agreements because they, and not this document, are the legal documents that govern the matters described in this section. Mr. and Mrs. Mitchell collectively beneficially own approximately 45% of the outstanding shares of Mitchell common stock, including shares covered by outstanding options.
PRINCIPAL SHAREHOLDERS AGREEMENT CONTAINING A VOTING AGREEMENT AND AN IRREVOCABLE PROXY
Mr. and Mrs. Mitchell have agreed, among other things, to vote, and have granted Devon an irrevocable proxy to vote, the shares of Mitchell common stock beneficially owned by them in favor of the approval of the merger agreement and against any action that would result in a breach of any covenant, representation or warranty or any other obligation of Mitchell in the merger agreement or of Mr. and Mrs. Mitchell in the principal shareholders agreement. Mr. and Mrs. Mitchell have also agreed, except as otherwise agreed to in writing by Devon, to vote, and have granted Devon an irrevocable proxy to vote, against:
- any extraordinary corporate transactions involving Mitchell, including any merger, consolidation or other business combination;
- any sale, lease or transfer of a significant part of Mitchell's assets, or any reorganization, recapitalization, dissolution or liquidation of Mitchell;
- any change in the persons that comprise Mitchell's board of directors, unless approved in advance by at least a majority of Mitchell's directors who were directors on August 13, 2001;
- any change in Mitchell's capitalization or any amendment to Mitchell's articles of incorporation or bylaws;
- any other material change in Mitchell's corporate structure or business; and
- any other action or proposal involving Mitchell that is intended or expected to prevent, impede, interfere with, delay, postpone or adversely affect the merger.
The voting agreement applies to Mr. and Mrs. Mitchell solely as stockholders and it does not restrict Mr. Mitchell in his capacity as an officer and director of Mitchell. The voting agreement also applies to 600,000 shares of Mitchell common stock that were recently contributed by the Mitchells to a family partnership. The Mitchells disclaim any beneficial interest in these shares.
Mr. and Mrs. Mitchell have also agreed that, except for pledges in existence on August 13, 2001 and transfers to any trust, estate, family partnership, foundation or charitable organization that agrees to be bound by the terms of the principal shareholders agreement, not to sell, transfer, tender, pledge, encumber, assign or otherwise dispose of the shares of Mitchell common stock beneficially owned by them.
The voting agreement and irrevocable proxy granted to Devon by Mr. and Mrs. Mitchell will terminate on the earliest to occur of: (1) August 13, 2003; (2) the termination of the agreement with the mutual consent of Devon and Mr. and Mrs. Mitchell; (3) the effective time of the merger; and (4) the termination of the merger agreement (A) by Devon for any reason or (B) by Mitchell because any of the conditions to Mitchell's obligation to complete the merger is not and cannot be satisfied, other than the condition that the merger agreement be approved by the required vote of Mitchell stockholders.
The principal shareholders agreement was entered into as an inducement to Devon to enter into the merger agreement and as a condition to Devon's willingness to do so. Together with the termination fees provided for in the merger agreement, the principal shareholders agreement may have the effect of discouraging a third party from proposing a competing transaction, including one that might be more favorable than the merger to Mitchell stockholders.
INVESTOR RIGHTS AGREEMENT
The investor rights agreement contains restrictions on the ability of Mr. and Mrs. Mitchell and certain transferees to sell or otherwise dispose of the Devon common stock that they will receive in the merger or the Devon Holdco common stock they will receive if the alternate structure is used to complete the transaction. Specifically, Mr. and Mrs. Mitchell have agreed not to dispose, other than pursuant to an underwritten registered offering or to certain permitted transferees, of the Devon common stock that they will receive in the merger or the Devon Holdco common stock they will receive if the alternate structure is used to complete the transaction for nine months after the effective time of the transaction except that Mr. and Mrs. Mitchell may dispose of up to 2,000,000 shares to foundations or other charitable organizations. After that date, Mr. and Mrs. Mitchell have agreed to not dispose, other than pursuant to a registered offering or to certain permitted transferees, of more than 1,000,000 shares of Devon common stock or Devon Holdco, as the case may be, in any calendar quarter. In addition, beginning in the first calendar quarter of 2002, except that Mr. and Mrs. Mitchell may dispose of up to 500,000 shares per calendar quarter to foundations or other charitable organizations.
In the investor rights agreement, Devon has granted Mr. and Mrs. Mitchell the right to demand registration on two separate occasions of the shares of Devon common stock that they will receive in the merger or the Devon Holdco common stock they will receive if the alternate structure must be used to complete the transaction and the right to "piggyback" registration of those shares in the event that Devon or Devon Holdco, as the case may be, effects a registration for other reasons. Mr. and Mrs. Mitchell's registration rights are subject to customary restrictions such as blackout periods and limitations on the number of shares to be included in any underwritten offering imposed by the managing underwriter. All registration expenses, other than underwriting discounts, selling commissions, stock transfer taxes and Mr. and Mrs. Mitchell's legal fees, will be paid by Devon or Devon Holdco, as the case may be.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY
DIRECTORS
Devon's charter divides Devon's board of directors into three classes. At each annual meeting, Devon stockholders elect the members of one of the three classes to three-year terms. Immediately following the transaction, Devon expects that the board of directors of the combined company will consist of the following 10 members:
CURRENT BOARD EXPIRATION NAME AGE MEMBERSHIP OF TERM ---- --- ------------- ---------- John A. Hill............................................ 59 Devon 2002 William J. Johnson...................................... 67 Devon 2002 Michael M. Kanovsky..................................... 52 Devon 2002 Robert A. Mosbacher, Jr. ............................... 50 Devon 2002 J. Larry Nichols(1)..................................... 59 Devon 2003 Robert B. Weaver........................................ 62 Devon 2003 Thomas F. Ferguson(2)................................... 65 Devon 2004 David M. Gavrin(3)...................................... 67 Devon 2004 Michael E. Gellert(4)................................... 70 Devon 2004 J. Todd Mitchell........................................ 42 Mitchell 2004 |
(1) Chairman of the Board.
(2) Chairman of the Audit Committee.
(3) Chairman of the Compensation and Stock Option Committee.
(4) Chairman of the Nominating Committee.
Thomas F. Ferguson, 65, has been a Director of Devon since 1982 and is the Chairman of the Audit Committee. He is the Managing Director of United Gulf Management Ltd., a wholly-owned subsidiary of Kuwait Investment Projects Company KSC. Mr. Ferguson represents Kuwait Investment Projects Company on the boards of various companies in which it invests, including Baltic Transit Bank in Latvia and Tunis International Bank in Tunisia. Mr. Ferguson is a Canadian qualified Certified General Accountant and was formerly employed by the Economist Intelligence Unit of London as a financial consultant.
David M. Gavrin, 67, has been a Director of Devon since 1979, and serves as the Chairman of the Compensation and Stock Option Committee. He is a Director of United American Energy Corp., an independent power producer, and MetBank Holding Corporation. For 11 years prior to 1990 he was a General Partner of Windcrest Partners and for 14 years prior to that he was an officer of Drexel Burnham Lambert Incorporated.
Michael E. Gellert, 70, has been a Director of Devon since 1971 and is a member of the Compensation and Stock Option Committee. Mr. Gellert is a General Partner of Windcrest Partners, a private investment partnership in New York City, having held that position since 1967. From January 1958 until his retirement in October 1989, Mr. Gellert served in executive capacities with Drexel Burnham Lambert Incorporated and its predecessors in New York City. In addition to serving as a Director of Devon, Mr. Gellert also serves on the boards of High Speed Access Corporation, Humana Inc., Seacor Smit Inc., Six Flags Inc. and Smith Barney World Funds. Mr. Gellert is also a member of the Putnam Trust Company Advisory Board to The Bank of New York.
John A. Hill, 59, was elected to the Board of Directors in 2000. Prior to that, he served as a Director of Santa Fe Snyder Corporation. Mr. Hill has been with First Reserve Corporation, an oil and gas investment management company since 1983 and currently serves as the Vice Chairman and Managing
Director. Prior to joining First Reserve, Mr. Hill was President, Chief Executive Officer and Director of Marsh & McLennan Asset Management Company and served as the Deputy Administrator of the Federal Energy Administration during the Ford administration. Mr. Hill is Chairman of the Board of Trustees of the Putnam Funds in Boston, a Trustee of Sarah Lawrence College, a Director of TransMontaigne Inc., and various companies controlled by First Reserve Corporation and Continuum Health Partners.
William J. Johnson, 67, was elected to the Board of Directors in 1999. Mr. Johnson is a private consultant for the oil and gas industry. He is President and a Director of JonLoc Inc., an oil and gas company of which he and his family are sole shareholders. He also serves as a Director of Tesoro Petroleum Corp. From 1991 to 1994, Mr. Johnson was President, Chief Operating Officer and a Director of Apache Corporation.
Michael M. Kanovsky, 52, was elected to the Board of Directors in 1998. Mr. Kanovsky has been on the Board of Directors of Northstar Energy Corporation, Devon's Canadian subsidiary, since 1982. Mr. Kanovsky is President of Sky Energy Corporation, a privately held energy corporation. He is a Director of ARC Resources Ltd. and Bonavista Petroleum Corporation. Mr. Kanovsky was Chairman of Taro Industries Ltd., Vice Chairman of Precision Drilling Inc. and a past Director of the Canadian Association of Oilwell Drilling Contractors.
Robert A. Mosbacher, Jr., 50, was elected to the Board of Directors in 1999. Since 1986, Mr. Mosbacher has served as President and Vice Chairman of Mosbacher Energy Company and Vice Chairman of Mosbacher Power Group. Mr. Mosbacher was previously a Director of PennzEnergy Company and served on the Executive Committee. He currently serves as a Director of JPMorgan Chase and Company and is on the Executive Committee of the U.S. Oil & Gas Association.
J. Larry Nichols, 59, is a co-founder of Devon. He was named Chairman of the Board of Directors in 2000. He has been a Director since 1971, President since 1976 and Chief Executive Officer since 1980. Mr. Nichols is a Director of the Domestic Petroleum Council, the National Association of Manufacturers, the Independent Petroleum Association of America, the Natural Gas Supply Association, the Independent Petroleum Association of New Mexico, the Oklahoma Independent Petroleum Association and the National Petroleum Council. Mr. Nichols serves on the Board of Governors of the American Stock Exchange. He serves as a Director of BOK Financial Corporation which is listed on the NASDAQ, and also serves as a Director of New York Stock Exchange listed companies Smedvig asa and Baker Hughes Incorporated.
Robert B. Weaver, 62, was elected to the Board of Directors in 1999. He served as an energy finance specialist of the Chase Manhattan Bank, N.A., where he was in charge of its worldwide energy group from 1981 until his retirement in 1994. Mr. Weaver was previously a Director of PennzEnergy Company beginning in 1998, was Chairman of the Audit Committee and served on the Compensation Committee.
J. Todd Mitchell, 42, has been a member of Mitchell's board of directors since 1993. Mr. Mitchell has served as president of GPM, Inc., a family-owned investment company, since 1998. He has also served as President of and geologist to Dolomite Resources, Inc., a privately owned mineral exploration and investments company, since 1987 and as Chairman of Rock Solid Images, a privately owned seismic data analysis software company, since 1998. J. Todd Mitchell is the son of George P. Mitchell, the Chairman and Chief Executive Officer of Mitchell.
EXECUTIVE OFFICERS
The following executive officers of Devon will continue to serve in their respective capacities as executive officers of the combined company until their successors are duly elected and qualified or until their earlier resignation or removal:
CURRENT COMPANY NAME AGE POSITION IN THE COMBINED COMPANY AFFILIATION ---- --- -------------------------------- --------------- J. Larry Nichols............... 59 Chairman, President and Chief Devon Executive Officer Brian J. Jennings.............. 41 Senior Vice President -- Devon Corporate Development J. Michael Lacey............... 56 Senior Vice President -- Devon Exploration and Production Duke R. Ligon.................. 60 Senior Vice President -- General Devon Counsel Marian J. Moon................. 51 Senior Vice President -- Devon Administration John Richels................... 50 Senior Vice President -- Devon Canadian Division Darryl G. Smette............... 54 Senior Vice Devon President -- Marketing William T. Vaughn.............. 54 Senior Vice President -- Finance Devon |
Brian J. Jennings, 41, was elected to the position of Senior Vice President -- Corporate Development in July 2001. Mr. Jennings joined Devon in March 2000 as Vice President -- Corporate Finance. Prior to joining Devon, Mr. Jennings was, since 1997, a Managing Director in the Energy Investment Banking Group of PaineWebber, Inc. He began his banking career at Kidder, Peabody in 1989 before moving to Lehman Brothers in 1992 and later to PaineWebber in 1995. Mr. Jennings specialized in providing strategic advisory and corporate finance services to public and private companies in the E&P and oilfield service sectors. He began his energy career with ARCO International Oil Gas, a subsidiary of Atlantic Richfield Company. Mr. Jennings received his Bachelor of Science in Petroleum Engineering from the University of Texas at Austin and his Master of Business Administration from the University of Chicago's Graduate School of Business.
J. Michael Lacey, 56, was elected to the position of Senior Vice President -- Exploration and Production in 1999. Mr. Lacey had previously joined Devon as Vice President of Operations and Exploration in 1989. Prior to his employment with Devon Mr. Lacey served as General Manager in Tenneco Oil Company's Mid-Continent and Rocky Mountain Divisions. He is a registered professional engineer, and a member of the Society of Petroleum Engineers and the American Association of Petroleum Geologists. Mr. Lacey holds both undergraduate and graduate degrees in petroleum engineering from the Colorado School of Mines.
Duke R. Ligon, 60, was elected to the position of Senior Vice President -- General Counsel in 1999. Mr. Ligon had previously joined Devon as Vice President -- General Counsel in 1997. In addition to Mr. Ligon's primary role of managing Devon's corporate legal matters (including litigation), he has direct involvement with Devon's governmental affairs, purchasing and its merger and acquisition activities. Prior to joining Devon, Mr. Ligon practiced energy law for 12 years, most recently as a partner at the law firm of Mayer, Brown & Platt in New York City. In addition, he was a Senior Vice President and Managing Director for investment banking at Bankers Trust Company in New York City for 10 years. Mr. Ligon also served for three years in various positions with the U. S. Departments of the Interior and Treasury, as well as the Department of Energy. Mr. Ligon holds an undergraduate degree in chemistry from Westminister College and a law degree from the University of Texas School of Law.
Marian J. Moon, 51, was elected to the position of Senior Vice President -- Administration in 1999. Ms. Moon is responsible for Human Resources, Office Administration, Information Technology and Corporate Governance. Ms. Moon has been with Devon for 17 years, serving in various capacities, including Manager of Corporate Finance. Prior to joining Devon, Ms. Moon was employed for 11 years by Amarex, Inc., an Oklahoma City based oil and natural gas production and exploration firm, where she served most recently as Treasurer. Ms. Moon is a member of the American Society of Corporate Secretaries. She is a graduate of Valparaiso University.
John Richels, 50, was elected to the position of Senior Vice President -- Canadian Division in 2001. Prior to his election to Senior Vice President, Mr. Richels was appointed to the position of Chief Executive Officer of Northstar Energy Corporation, Devon's Canadian subsidiary in 1999. Mr. Richels served as Northstar's Executive Vice President and Chief Financial Officer from 1996 to 1998 and was on its Board of Directors from 1993 to 1996. Prior to joining Northstar, Mr. Richels was Managing Partner, Chief Operating Partner and a member of the Executive Committee of the Canadian based national law firm, Bennett Jones. Mr. Richels also served, on a secondment from Bennett Jones, as General Counsel of the XV Olympic Winter Games Organizing Committee in Calgary, Alberta. Mr. Richels has previously served as a Director of a number of publicly traded companies and is a member of the Broad of Governors of the Canadian Association of Petroleum Producers. He holds a bachelor's degree in economics from York University and law degree from the University of Windsor.
Darryl G. Smette, 54, was elected to the position of Senior Vice President -- Marketing in 1999. Mr. Smette previously held the position of Vice President -- Marketing and Administrative Planning since 1989. He joined Devon in 1986 as Manager of Gas Marketing. His marketing background includes 15 years with Energy Reserves Group, Inc./BHP Petroleum (Americas), Inc., most recently as Director of Marketing. He is also an oil and gas industry instructor, approved by the University of Texas Department of Continuing Education. Mr. Smette is a member of the Oklahoma Independent Producers Association, Natural Gas Association of Oklahoma and the American Gas Association. He holds an undergraduate degree from Minot State College and a master's degree from Wichita State University.
William T. Vaughn, 54, was elected to the position of Senior Vice President -- Finance in 1999. Mr. Vaughn previously served as Devon's Vice President of Finance in charge of commercial banking functions, accounting, tax and information services since 1987. Prior to that, he was Controller of Devon from 1983 to 1987. Mr. Vaughn's previous experience includes serving as Controller of Marion Corporation for two years and employment with Arthur Young & Co. for seven years most recently as Audit Manager. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. He is a graduate of the University of Arkansas with a Bachelor's of Science degree.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following describes the material U.S. federal income tax consequences of the merger and the alternate structure mergers. This disclosure is based on the current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), its legislative history, administrative pronouncements, judicial decisions and Treasury regulations, all of which are subject to change, possibly with retroactive effect. It does not purport to be a complete discussion of all U.S. federal income tax considerations relating to the merger or the alternate structure mergers and does not address the tax consequences of the merger or the alternate structure mergers under state, local or non-U.S. tax laws. In addition, this disclosure may not apply, in whole or in part, to particular categories of holders of Mitchell common stock or Devon common stock, such as financial institutions, dealers in securities, insurance companies, tax-exempt organizations, investment companies, foreign taxpayers, domestic stockholders whose "functional currency" is not the U.S. dollar, holders holding Mitchell common stock or Devon common stock as a part of a hedging, conversion or straddle transaction, individuals who acquired Mitchell common stock or Devon common stock pursuant to employee stock options and other special status taxpayers. Moreover, Mitchell stockholders and Devon stockholders should be aware that the Code contains limitations on the extent to which a holder may deduct capital losses from ordinary income, and the federal income tax rate for individual holders on long-term capital gains may be significantly lower than the rate imposed on ordinary income or short-term capital gains. Finally, a tax ruling from the Internal Revenue Service has not been requested. ALL HOLDERS OF MITCHELL COMMON STOCK AND DEVON COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER OR THE ALTERNATE STRUCTURE MERGERS, AS APPLICABLE, INCLUDING ANY ESTATE, GIFT, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES.
In general, the merger or the alternate structure mergers, as applicable, have been structured to qualify as a tax-free transaction (except to the extent cash is received) for U.S. federal income tax purposes. It is a condition to closing of the merger or the alternate structure mergers, as applicable, that each of Devon and Mitchell receive an opinion from their respective counsel (Mayer, Brown & Platt in the case of Devon and Vinson & Elkins L.L.P. in the case of Mitchell) to that effect as of the closing. The tax opinions will be based in part on factual representations made by Devon and Mitchell. If those representations are inaccurate, the tax opinions could become invalid. The tax opinions will not be binding on the Internal Revenue Service, and there can be no assurance that the Internal Revenue Service will not contest the conclusions expressed in the tax opinions. If the tax opinions to be delivered as of the closing are materially different from the opinions respecting the federal income tax considerations expressed under this "Material Federal Income Tax Considerations" section, Devon and Mitchell would not effect the merger or the alternate structure mergers without resoliciting the approvals of their stockholders. The discussion below assumes that the merger, if consummated, will be treated as a reorganization within the meaning of sections 368(a)(1)(A) and 368(a)(2)(D) of the Code and that the alternate structure mergers, if consummated, will qualify as nonrecognition transactions within the meaning of section 351 of the Code. In general, based on that assumption, Mitchell stockholders and Devon stockholders will recognize gain to the extent of cash received in the merger or alternate structure mergers, as applicable, and neither Mitchell's nor Devon's stockholders will otherwise recognize gain or loss for U.S. federal income tax purposes as a result of the merger or alternate structure mergers, as applicable.
TAX TREATMENT OF THE COMPANIES, MITCHELL STOCKHOLDERS AND DEVON STOCKHOLDERS
No gain or loss will be recognized by Devon, Devon Holdco or Mitchell as a result of the merger or the alternate structure mergers, as applicable. Holders of Mitchell common stock who receive a combination of either Devon common stock or Devon Holdco common stock, and cash, in exchange for Mitchell common stock in the merger or the alternate structure mergers, as applicable, will recognize gain, if any, pursuant to section 356(a) of the Code if the merger is consummated or pursuant to section 351(b) of the Code if the alternate structure mergers are consummated, in an amount equal to the lesser of (1) the amount of cash received or (2) the amount of gain "realized" in the transaction. The
amount of gain a holder of Mitchell common stock "realizes" will equal the amount by which (1) the cash plus the fair market value at the effective time of the merger or the alternate structure mergers, as applicable, of the common stock received exceeds (2) the holders' basis in the Mitchell common stock to be surrendered in exchange therefor. The tax treatment of recognized gain is described under the next heading below. If the alternate structure mergers are consummated, Devon stockholders, who will receive solely Devon Holdco common stock, will not recognize any gain.
The Mitchell stockholders (whether the merger or the alternate structure mergers are consummated) and the Devon stockholders (if the alternate structure mergers are consummated) will not recognize any loss for U.S. federal income tax purposes.
A Mitchell stockholder's U.S. federal income tax consequences on the exchange will also depend on whether his or her shares of Mitchell common stock were purchased at different times at different prices. If they were, the holder of Mitchell common stock could realize gain with respect to some of the shares of Mitchell common stock and loss with respect to other shares. Such Mitchell stockholder would have to recognize gain to the extent that the Mitchell stockholder receives cash with respect to those shares in which the Mitchell stockholder's adjusted tax basis is less than the amount of cash plus the fair market value at the effective time of the merger or the alternate structure merger, as applicable, of the common stock received, but could not recognize loss with respect to those shares in which the Mitchell stockholder's adjusted tax basis is greater than the amount of cash plus the fair market value at the effective time of the merger or the alternate structure mergers, as applicable, of the common stock received. Any disallowed loss would be included in the adjusted basis of the common stock received. Such a Mitchell stockholder is urged to consult his or her own tax advisor respecting the tax consequences of the merger or the alternate structure mergers, as applicable, to that Mitchell stockholder.
In either the merger or the alternate structure mergers, the tax basis of the shares of Devon common stock or Devon Holdco common stock, as the case may be, received by a Mitchell stockholder will be the same as the basis of the shares of Mitchell common stock surrendered in exchange therefor, increased by the amount of gain recognized in the merger or alternate structure mergers, as applicable, and decreased by the amount of cash received in the merger or alternate structure mergers, as applicable. If the alternate structure mergers are consummated, the tax basis of the shares of Devon Holdco common stock received by a Devon stockholder will be the same as the basis of the Devon common stock surrendered in exchange therefor. The holding period for shares of Devon common stock or Devon Holdco common stock received by the holder will include the holder's holding period for the Mitchell common stock or Devon common stock, as applicable, surrendered in exchange therefor, provided that such shares were held as capital assets of the holder at the effective time of the merger or alternate structure mergers, as applicable.
TREATMENT OF CASH RECEIVED BY MITCHELL STOCKHOLDERS IF THE MERGER IS CONSUMMATED
The character of income of a holder of Mitchell common stock attributable to cash received if the merger is consummated is determined by reference to the rules of sections 356(a)(2) and 302 of the Code and, except in atypical circumstances, it is expected under these rules that Mitchell stockholders would recognize capital gain rather than dividend income. Under section 356(a)(2) of the Code, each holder of Mitchell common stock will be treated for tax purposes as if such holder had received only Devon common stock in the merger and, immediately thereafter, Devon had redeemed an appropriate portion of Devon common stock in exchange for the cash actually distributed to the Mitchell stockholder in the merger. Under section 302 of the Code, all of the cash representing gain recognized by a Mitchell stockholder on the exchange will be taxed as capital gain if the deemed redemption from the Mitchell stockholder (1) is a "substantially disproportionate redemption" of stock with respect to the Mitchell stockholder or (2) is "not essentially equivalent to a dividend" taking into account, in either case, certain constructive ownership rules described below and all other deemed redemptions. Under section 318 of the Code, a Mitchell stockholder may be considered to constructively own, after the merger, Devon common stock owned (and in some cases constructively owned) by certain members of the Mitchell stockholder's family or certain entities in which the Mitchell stockholder has an ownership or beneficial interest and Devon common stock that the Mitchell stockholder (or such individuals or entities) has the right to
acquire upon the exercise of options. This gain or loss will be a long-term capital gain or loss if the Mitchell stockholder's holding period is more than twelve months at the effective time of the merger. Under current law, the maximum tax rate on long-term capital gains realized by an individual is 20%.
The deemed redemption of a Mitchell stockholder's Devon common stock will be a "substantially disproportionate redemption" if, as a result of the deemed redemption, there is a greater than 20% reduction in (1) the percentage of all then-outstanding shares of Devon common stock then owned by the Mitchell stockholder and (2) the percentage of the voting power of all then-outstanding shares of Devon common stock represented by all Devon common stock then owned by the Mitchell stockholder.
The deemed redemption of a Mitchell stockholder's Devon common stock will be "not essentially equivalent to a dividend" if the Mitchell stockholder experiences a "meaningful reduction" in his or her proportionate equity interest in Devon by reason of the deemed redemption. In general, there are no fixed rules for determining when a "meaningful reduction" has occurred. However, based on a published ruling of the Internal Revenue Service, the receipt of cash in the merger would not be characterized as a dividend if the Mitchell stockholder's percentage stock ownership interest in Devon and Mitchell prior to the merger is minimal, the Mitchell stockholder exercises no control over the affairs of Devon or Mitchell, and the Mitchell stockholder's percentage equity interest in Devon is reduced in the deemed redemption to any extent.
If neither of the redemption tests described above is satisfied, a Mitchell stockholder will be treated as having received a dividend equal to the amount of the Mitchell stockholder's recognized gain (as described in the preceding heading), assuming that the Mitchell stockholder's ratable share of the accumulated earnings and profits of Mitchell (or possibly the total earnings and profits of Mitchell and Devon) equals or exceeds such recognized gain.
TREATMENT OF CASH RECEIVED BY MITCHELL STOCKHOLDERS IF THE ALTERNATE STRUCTURE MERGERS ARE CONSUMMATED
The character of income of a Mitchell stockholder attributable to cash received if the alternate structure mergers are consummated is expected to be capital gain. The gain will be long-term capital gain if the Mitchell stockholder's holding period is more than twelve months at the effective time of the alternate structure mergers. Under current law, the maximum tax rate on long-term capital gains realized by an individual is 20%.
EXERCISE OF DISSENTERS' RIGHTS OF APPRAISAL BY MITCHELL STOCKHOLDERS
The transaction will be a taxable event for a Mitchell stockholder who perfects his or her dissenters' rights of appraisal under Texas law, and receives solely cash in exchange for his or her shares. Such a holder should generally recognize capital gain or loss, provided that the holder's shares were held by the holder as capital assets at the effective time of the merger or alternate structure mergers, as applicable, equal to the difference between the amount of cash received and the holder's tax basis in the shares surrendered.
BACKUP WITHHOLDING; INFORMATION REPORTING
The cash payments due to a holder on the exchange of Mitchell common stock or Devon common stock, as applicable, in the merger or alternate structure mergers, other than certain exempt persons or entities, will be subject to "backup withholding" for U.S. federal income tax purposes unless certain requirements are met. Devon or Devon Holdco or a third-party paying agent, as the case may be, must withhold approximately 30% of the cash payments to a holder, unless the holder (1) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (2) provides Devon, Devon Holdco or a third-party paying agent, as the case may be, with his or her taxpayer identification number and completes a form in which he or she certifies that he or she has not been notified by the IRS that he or she is subject to backup withholding as a result of a failure to report interest and dividends. The taxpayer identification number of an individual is his or her Social Security number. Any amount paid as backup withholding will be credited against the holder's U.S. federal income
tax liability. In the case of the merger, holders must also comply with the information reporting requirements of the Treasury regulations under the tax-free reorganization provisions of the Code. Appropriate documentation for the foregoing purposes will be provided to holders by the exchange agent.
OWNERSHIP OF MITCHELL COMMON STOCK
To Mitchell's knowledge, George P. Mitchell is the only person who owns more than 5% of the outstanding shares of Mitchell common stock. The following table sets forth the number of shares of Mitchell common stock owned beneficially by each of Mitchell's directors, by its five most highly compensated executive officers during 2000 and by all its directors and executive officers as a group, in each case as of October 19, 2001. There were 50,216,830 shares of Mitchell common stock outstanding on such date.
TOTAL AMOUNT OF COMMON STOCK PERCENTAGE NAME OFFICE BENEFICIALLY OWNED(A) OF CLASS ---- ------ --------------------- ---------- Robert Baldwin................. Director 500 * Thomas P. Battle............... Senior Vice President, General 4,010 * Counsel and Secretary Bernard F. Clark............... Vice Chairman 34,547(b) * Charles J. DiBona.............. Director -- -- William D. Eberle.............. Director 1,198 * Shaker A. Khayatt.............. Director 532(c) * George P. Mitchell............. Chairman and Chief Executive 22,780,711(d)(e) 45.0% Officer J. Todd Mitchell............... Director 600,000(f) 1.2% M. Kent Mitchell............... Director 42,696 * Philip S. Smith................ Senior Vice President and Chief -- -- Financial Officer W. D. Stevens.................. Director, President and Chief 249,230(e) * Operating Officer Allen J. Tarbutton, Jr. ....... Senior Vice President 81,435(e) * All directors and executive 23,794,859(b-f) 46.7% officers as a group (12 persons)..................... |
* Less than 1%.
(a) Unless otherwise indicated, beneficial owners have sole rather than shared voting and investment power respecting their shares, other than shared rights created under joint tenancy or marital property laws as between Mitchell's directors and officers and their respective spouses, if any.
(b) Includes 16,194 shares held by Mr. Clark's wife, as to which Mr. Clark disclaims beneficial ownership.
(c) Includes 532 shares held by Mr. Khayatt's wife, as to which Mr. Khayatt disclaims beneficial ownership.
(d) Includes 1,022,506 shares held by George P. Mitchell's wife, as to which Mr. Mitchell disclaims beneficial ownership. Excludes all shares referred to in note (f) of this table as to which Mr. and Mrs. Mitchell disclaim beneficial ownership.
(e) Includes shares which certain executive officers have a right to acquire within 60 days following October 19, 2001 by exercising stock options. The following shares underlying such unexercised options were added to the holdings of each of the following executive officers: Mr. George Mitchell -- 404,666 shares; Mr. Stevens -- 235,400 shares; and Mr. Tarbutton -- 53,317 shares.
(f) Represents 600,000 shares of Mitchell common stock held by a family limited partnership, the general partner of which is a limited liability company that is owned in equal shares by the ten
adult children of Mr. and Mrs. Mitchell and for which J. Todd Mitchell acts as the sole manager. Mr. and Mrs. Mitchell currently own the limited partnership interests in the partnership. Without the prior approval of limited partners holding at least 51% of the partnership interests, the general partner may not authorize certain significant actions outside the ordinary course of the limited partnership's business, including the sale in any one calendar year of more than 25% of the Mitchell common stock transferred to the limited partnership by the Mitchells or the distribution in kind of partnership assets other than cash. J. Todd Mitchell disclaims beneficial ownership of the shares of Mitchell common stock referred to in this note (f).
COMPARISON OF THE RIGHTS OF MITCHELL AND DEVON STOCKHOLDERS
The rights of Mitchell stockholders are currently governed by Texas law, Mitchell's restated articles of incorporation, as amended, and Mitchell's bylaws. Upon completion of the merger, Mitchell stockholders will become Devon stockholders and their rights as Devon stockholders will be governed by Delaware law, Devon's restated certificate of incorporation, as amended, Devon's amended and restated bylaws and Devon's rights plan, dated as of August 17, 1999, as amended, between Devon and Fleet National Bank (f/k/a BankBoston, N.A.) relating to the rights to purchase shares of Devon common stock.
If the alternate structure is used to complete the transaction, the rights of a stockholder of Devon Holdco will be substantially identical to the rights of a Devon stockholder as described in this section. Devon Holdco is currently a nominally capitalized Delaware corporation and is wholly owned by Devon. Devon Holdco's certificate of incorporation and bylaws will be amended prior to completing the transaction under the alternate structure to be substantially identical in form and substance to the certificate of incorporation and bylaws of Devon, except that Devon Holdco would not have a series of preferred stock designated as 6.49% cumulative preferred stock, Series A, because that series of preferred stock would be converted into preferred stock of the surviving corporation of the merger involving Devon under the alternate structure. In addition, Devon Holdco's board of directors will adopt a stockholder rights plan prior to completing the transaction under the alternate structure that will be substantially identical in form and substance to Devon's shareholder rights plan as it existed on October 1, 2001.
The following describes the material differences between the rights of Mitchell stockholders and the rights of Devon stockholders. It is not a complete summary of the provisions affecting, and the differences between, the rights of Mitchell stockholders and Devon stockholders. The summary is qualified in its entirety by reference to the Texas Business Corporation Act; the Delaware General Corporation Law; Mitchell's restated articles of incorporation, as amended; Mitchell's bylaws; Devon's restated certificate of incorporation, as amended; Devon's amended and restated bylaws; and Devon's rights plan. We refer to Devon's restated certificate of incorporation, as amended, as "Devon's charter," and to Mitchell's restated articles of incorporation, as amended, as "Mitchell's charter" in the summary.
--------------------------------------------------------------------------------------------- AUTHORIZED CAPITAL STOCK --------------------------------------------------------------------------------------------- Mitchell Devon The authorized capital stock of Mitchell The authorized capital stock of Devon consists of 200,000,000 shares of common consists of 400,000,000 shares of common stock, par value $0.10 per share, and stock, par value $0.10 per share, 4,500,000 10,000,000 shares of preferred stock, par shares of preferred stock, par value $1.00 value $0.10 per share. per share, and one share of special voting stock, par value $0.10 per share. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- SIZE OF BOARD OF DIRECTORS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's board of directors has nine Devon's board of directors has nine members. members. Mitchell's bylaws provide that the Devon's charter and bylaws provide that the minimum number of directors is three, and number of directors will not be less than that the actual number of directors may be three nor more than 20, and that the actual fixed by the board of directors. number of directors may be fixed by a majority of the board of directors. --------------------------------------------------------------------------------------------- CUMULATIVE VOTING --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's charter expressly prohibits Under Delaware law, stockholders of a cumulative voting by Mitchell stockholders. Delaware corporation do not have the right to cumulate their votes in the election of directors, unless that right is granted in the certificate of incorporation of the corporation. Devon's charter expressly prohibits cumulative voting by Devon stockholders. --------------------------------------------------------------------------------------------- CLASSES OF DIRECTORS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's charter and bylaws do not provide Devon's charter provides that its board of for the classification of its board of directors is divided into three classes of directors. directors, of as equal size as practicable, with each class being elected to a staggered three-year term. --------------------------------------------------------------------------------------------- REMOVAL OF DIRECTORS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's bylaws provide that any director Under Delaware law, unless the certificate of may be removed, with or without cause, by incorporation provides otherwise, a director the affirmative vote of a majority of the of a Delaware corporation with a classified votes of the issued and outstanding stock board may be removed only for cause and only entitled to vote for the election of by the holders of a majority of the shares directors given at a special meeting of the entitled to vote. Devon's charter is silent stockholders called and held for that on this point and, accordingly, Devon's purpose, or by the affirmative vote of a directors may be removed only in the manner majority of its board of directors given at provided by Delaware law. a special meeting of the board of directors called and held for that purpose. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- VACANCIES ON THE BOARD OF DIRECTORS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's bylaws provide that a vacancy Under Delaware law, unless the certificate of occurring in the board of directors may be incorporation or bylaws provide otherwise, filled by a majority of the directors, the board of directors of a corporation may though less than a quorum, or by a sole fill any vacancy on the board, including remaining director. A directorship to be vacancies resulting from an increase in the filled by reason of an increase in the number of directors. Devon's charter provides number of directors may be filled either by that newly created directorships resulting election at an annual or special meeting of from any increase in the authorized number of stockholders called for that purpose or by directors, or resulting from death, the board of directors for a term of office resignation, disqualification, removal or continuing only until the next election of other cause, may be filled only by the one or more directors by the stockholders, affirmative vote of a majority of the provided that the board of directors may not remaining directors. fill more than two directorships during the period between any two successive annual meetings of stockholders. --------------------------------------------------------------------------------------------- ACTION BY WRITTEN CONSENT --------------------------------------------------------------------------------------------- Mitchell Devon As permitted by Texas law, Mitchell's bylaws As permitted by Delaware law, Devon's charter provide that any action required to be taken provides that any action required or at an annual or special meeting of permitted to be taken by stockholders must be stockholders may be taken without a meeting effected at a duly called annual or special only if all stockholders entitled to vote meeting of stockholders. Devon's charter with respect to the action consent in specifically prohibits stockholders from writing to that action. taking action by written consent. --------------------------------------------------------------------------------------------- AMENDMENTS TO CHARTER --------------------------------------------------------------------------------------------- Mitchell Devon Under Texas law, an amendment to Mitchell's As permitted by Delaware law, Devon's charter charter generally would require the approval provides that any alteration, amendment, of the holders of at least two-thirds of the repeal or rescission of Devon's charter must shares entitled to vote or, if any class is be approved by a majority of the authorized entitled to vote separately, the approval of number of directors and by a majority of the the holders of at least two-thirds of the combined voting power of the outstanding shares of the class entitled to vote and at shares of voting stock, voting together as a least two-thirds of the total shares single class, provided that any amendment entitled to vote. related to the election of directors, meetings of the stockholders, stockholder consent, director liability, indemnification or the required vote to amend Devon's charter or bylaws requires the approval of 66 2/3% of the combined voting power of the outstanding shares of voting stock, voting together as a single class. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- AMENDMENTS TO BYLAWS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's bylaws may be amended or As permitted by Delaware law, Devon's charter repealed, or new bylaws may be adopted, at provides that any alteration, amendment, any annual or special meeting of the repeal or rescission of Devon's bylaws may be stockholders by a majority of the total adopted either by the affirmative vote of at votes of the stockholders or when least a majority of its board of directors or stockholders are required to vote by class by the stockholders by the affirmative vote by a majority of the appropriate class. of at least 66 2/3% of the combined voting Mitchell's bylaws may also be amended or power of the outstanding shares of voting repealed, or new bylaws may be adopted, by stock, voting together as a single class. its board of directors at any meeting. In addition, Devon's charter authorizes Devon's board of directors, without additional authorization of the stockholders, to adopt, amend or repeal Devon's bylaws, including bylaws relating to (1) regulation of the procedure for submission by the stockholders of the nomination of directors, (2) regulation of the attendance at annual or special meetings of stockholders by persons other than holders of record or their proxies and (3) regulation of the business that may properly be brought by a stockholder before an annual or special meeting of stockholders. --------------------------------------------------------------------------------------------- SPECIAL MEETINGS OF STOCKHOLDERS --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell's bylaws provide that special Devon's charter and bylaws provide that meetings of the stockholders may be called special meetings of the stockholders may be by the holders of at least 10% of the called by a resolution adopted by a majority outstanding stock entitled to vote at of Devon's board of directors or by its meeting or by Mitchell's board of directors, Chairman of the Board or President, in either Chairman of the Board or President. case with the concurrence of a majority of its directors. Devon stockholders do not have the ability to call a special meeting of the stockholders. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- VOTE ON EXTRAORDINARY CORPORATE TRANSACTIONS --------------------------------------------------------------------------------------------- Mitchell Devon Unless the board of directors requires a Under Delaware law, a sale or other greater vote, Texas law, with limited disposition of all or substantially all of a exceptions, requires the affirmative vote of corporation's assets, a merger or the holders of at least two-thirds of the consolidation of a corporation with another outstanding shares entitled to vote to corporation or a dissolution of a corporation approve a merger agreement, in addition to requires the affirmative vote of the any required class vote. Similar voting corporation's board of directors (except in requirements apply for statutory share limited circumstances) plus, with limited exchanges or conversions. exceptions, the affirmative vote of a majority of the outstanding stock entitled to Texas law generally requires the affirmative vote on the transaction. Delaware law does vote of the holders of at least two-thirds not provide for statutory share exchanges. of the shares entitled to vote to approve Also, unlike the Texas corporate statute, the the sale, lease, exchange or other Delaware corporate statute does not define disposition of all or substantially all a what constitutes a sale of substantially all corporation's assets if other than in the of a corporation's assets. usual and regular course of business and, if any class of shares is entitled to vote as a class on a transaction, the affirmative vote of the holders of at least two-thirds of the outstanding shares of that class. Texas law does not require stockholder approval of a sale of assets in the usual and regular course of business unless otherwise specified in the articles of incorporation. Under Texas law, a sale of assets is deemed to be in the usual and regular course of business if the corporation continues to engage in one or more businesses or applies a portion of the proceeds to the conduct of a business in which it engages following the transaction. --------------------------------------------------------------------------------------------- INSPECTION OF DOCUMENTS --------------------------------------------------------------------------------------------- Mitchell Devon Under Texas law, any person who has been a Delaware law allows any stockholder the right stockholder of a corporation for at least to inspect for any proper purpose the six months immediately preceding the corporation's stock ledger, a list of its stockholder's demand, or is the holder of at stockholders and its other books and records, least 5% of the outstanding shares of a and to make copies or extracts from those corporation, has the right to examine the documents. A proper purpose means a purpose corporation's relevant books and records of reasonably related to the person's interest account, minutes and share transfer records as a stockholder. for any proper purpose. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- DISSENTERS' RIGHTS OF APPRAISAL --------------------------------------------------------------------------------------------- Mitchell Devon Stockholders of a Texas corporation Delaware law provides for dissenters' rights generally have the right to dissent from of appraisal with respect to mergers or significant business transactions requiring consolidations. However, stockholders of a stockholder approval, including mergers. Delaware corporation generally have no However, a stockholder of a Texas appraisal rights in the event of a merger or corporation has no right to dissent from any consolidation of a corporation if the stock plan of merger pursuant to which there is a of the Delaware corporation is listed on a single surviving or new domestic or foreign national securities exchange or the NASDAQ corporation or with respect to any plan of National Market; is held of record by more exchange if: than 2,000 stockholders; or in the case of a merger for which stockholder approval is not - the shares held by the stockholder are required by statute, in each such case, part of a class of shares listed on a unless stockholders of the Delaware national securities exchange, listed on corporation are required to accept for their the NASDAQ National Market or held of stock anything other than: record by not less than 2,000 holders; - the stockholder is not required to accept - shares of stock of the surviving for his or her shares any consideration corporation or depositary receipts in respect that is different than the consideration thereof, or shares of stock or depositary to be received by other holders of the receipts of any other corporation whose same class or series of shares held by share or depositary receipts will satisfy such stockholder other than cash in lieu the listing or ownership requirements of fractional shares; and described above; and - the stockholder is not required to accept - cash in lieu of fractional shares. any consideration other than shares of a Delaware law does not provide dissenters' corporation that satisfy the requirements rights of appraisal in connection with the of the first bullet point above and cash sale of substantially all the assets of a in lieu of fractional shares. corporation, reclassification of stock or other amendments to the certificate of The dissenters' rights of appraisal of incorporation that adversely affect a class Mitchell stockholders in the merger are of stock. summarized under "The Merger -- Dissenters' Rights of Appraisal." --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- STATE ANTI-TAKEOVER STATUTES --------------------------------------------------------------------------------------------- Mitchell Devon Texas law generally prohibits public Delaware law generally prohibits public corporations from engaging in significant corporations from engaging in significant business transactions, including mergers, business transactions, including mergers, with a beneficial owner of 20% or more of with a holder of 15% or more of the the corporation's stock for a period of corporation's stock for a period of three three years after the holder exceeds that years after the holder exceeds that ownership ownership level, unless: level, unless: - the board approves either the transaction - the board approves either the transaction in question or the acquisition of shares in question or the acquisition of shares by by the affiliated stockholder prior to the the interested stockholder prior to the interested stockholder's share acquisition time the stockholder becomes an interested date; or stockholder based on its direct or indirect - the transaction is approved by the holders ownership of 15% of the corporation's of at least two-thirds of the stock; or corporation's outstanding voting shares - when the interested stockholder exceeds the not beneficially owned by the affiliated 15% threshold, it acquires at least 85% of stockholder or its affiliates or the outstanding shares not held by certain associates, at a meeting of stockholders affiliates, such as pursuant to a tender not less than six months after the offer; or affiliated stockholder's share acquisition - the transaction is approved by the board of date. directors and the holders of at least two-thirds of the corporation's shares entitled to vote thereon, excluding the shares held by the interested stockholder, at a meeting of stockholders. Delaware law does not require that this vote occur at least six months after the interested stockholder's share acquisition date. --------------------------------------------------------------------------------------------- CONSTITUENCY STATUTE --------------------------------------------------------------------------------------------- Mitchell Devon Texas law expressly provides that, in Delaware law does not have such a provision discharging a director's fiduciary duties, a in its corporate statute. director, in considering the best interests of the corporation, may consider the long-term as well as the short-term interests of the corporation and its stockholders, including the possibility that those interests may be best served by the continued independence of the corporation. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- STOCKHOLDER RIGHTS PLAN --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell does not have a rights plan. Under Devon's rights plan, holders of Devon common stock have one right with respect to each share of Devon common stock held. The certificates representing outstanding shares of Devon common stock also evidence one right for each share. Currently, the rights trade with the shares of Devon common stock. Upon the occurrence of events generally associated with an unsolicited takeover attempt of Devon or transactions involving a change of control, the rights will be distributed, will become exercisable and will be tradeable separately from Devon common stock. If a person or group becomes the beneficial owner of, or commences a tender or exchange offer for, 15% or more of the voting shares of Devon, then each right would entitle the holders other than the acquiring person or group to purchase Devon common stock having a market value equal to twice the applicable purchase price. The rights do not become exercisable as a result of a stock acquisition by a tender or exchange offer for all outstanding shares of Devon common stock that is determined by the independent directors of Devon to be fair, not inadequate and otherwise in the best interest of Devon and its stockholders. The rights have some anti-takeover effects. They will cause substantial dilution to a person or group that attempts to acquire Devon in a manner that causes the rights to become exercisable. The rights may be redeemed by Devon's board of directors for $0.01 per right. The terms of the rights plan may be amended by Devon's board of directors without the consent of the holders of the Devon common stock or the rights. Devon's board of directors amended the rights plan on October 4, 2001 to exempt the merger agreement and the transactions that it contemplates from the application of the rights plan. --------------------------------------------------------------------------------------------- SPECIAL VOTING STOCK --------------------------------------------------------------------------------------------- Mitchell Devon Mitchell does not have special voting stock. Devon's charter provides for one share of special voting stock that is entitled to the number of votes equal to the number of exchangeable shares of Devon's subsidiary, Northstar Energy Corporation, outstanding from time to time that are held by persons other than Devon or its subsidiaries. --------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------- NOTICE OF STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS --------------------------------------------------------------------------------------------- Mitchell Devon A Mitchell stockholder must give notice, in A Devon stockholder must give notice, in proper form, of director nominations and proper form, of director nominations or proposed business to be conducted at an proposals for each annual meeting to the annual meeting of stockholders to the secretary between 90 and 120 days before the secretary between 20 and 60 days prior to one-year anniversary of the last annual the meeting. If less than 30 days' prior meeting. If the date of the annual meeting is notice or prior public disclosure of the moved more than 30 days before or after the date of the meeting is given or made to anniversary date, a stockholder notice must stockholders, the stockholder notice must be be given to the secretary between 70 and 90 received within 10 days after the date the days prior to the date of the meeting, or notice of the meeting was mailed or the within 10 days after the public announcement public disclosure was made. of the date of the meeting, if later. For a special meeting called to elect directors, a stockholder must give notice, in proper form, of director nominations to the secretary within 10 days after the public announcement of the date of the meeting. --------------------------------------------------------------------------------------------- |
ADDITIONAL INFORMATION
DEADLINE FOR FUTURE STOCKHOLDER PROPOSALS
Whether or not the transaction is completed as expected, Devon or Devon Holdco, as the case may be, will hold an annual stockholders' meeting in 2002. If the transaction is not completed, Mitchell will hold an annual stockholders' meeting in 2002.
Devon 2002 Annual Meeting
Any Devon stockholder desiring to present a proposal for inclusion in Devon's proxy statement for the Devon 2002 annual meeting of stockholders must present the proposal to the Corporate Secretary of Devon by December 10, 2001. Only those proposals that comply with the requirements of Rule 14a-8 promulgated under the Securities Exchange Act of 1934 will be included in Devon's proxy statement for Devon's 2002 annual meeting. Written notice of stockholder proposals submitted outside the process of Rule 14a-8 for consideration at Devon's 2002 annual meeting, but not included in Devon's proxy statement, must be received by the Corporate Secretary of Devon between January 17, 2002 and February 16, 2002 in order to be considered timely, subject to any provisions of Devon's bylaws. The chairman of the meeting may determine that any proposal for which Devon did not receive timely notice shall not be considered at the meeting. If, in the discretion of the chairman, any such proposal is to be considered at the meeting, the persons designated in Devon's proxy statement shall be granted discretionary authority with respect to the untimely stockholder proposal.
Mitchell 2002 Annual Meeting
In order to be included in the proxy materials for Mitchell's 2002 annual meeting of stockholders, stockholder proposals must be received by Mitchell by December 6, 2001.
LEGAL MATTERS
The validity of the securities to be issued in the transaction will be passed upon for Devon and Devon Holdco by Mayer, Brown & Platt. We expect that the opinions referred to in the discussion set forth under "Material Federal Income Tax Considerations" will be provided to Devon or Devon Holdco by Mayer, Brown & Platt and to Mitchell by Vinson & Elkins L.L.P. Vinson & Elkins L.L.P. represents Devon from time to time in matters unrelated to the merger.
EXPERTS
The consolidated financial statements of Mitchell and its subsidiaries as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 included in Mitchell's Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference into this document, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports.
The consolidated financial statements of Devon and its subsidiaries as of December 31, 2000, 1999, and 1998 and for each of the years then ended have been incorporated by reference into this document in reliance on the report of KPMG LLP, independent certified public accountants, incorporated by reference into this document, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG LLP expresses reliance on other auditors for 1999 and 1998.
The consolidated financial statements of Northstar Energy Corporation as of and for the year ended December 31, 1998, not separately presented in this Registration Statement on Form S-4 have been audited by Deloitte & Touche LLP, Chartered Accountants, whose report thereon appears in Devon's 2000 Annual Report on Form 10-K, incorporated by reference herein. Such consolidated financial statements, to the extent they have been included in the consolidated financial statements of Devon, have been so
included in reliance on the report of such independent accountants given on the authority of said firm as experts in accounting and auditing.
The audited consolidated financial statements of Santa Fe Snyder Corporation as of December 31, 1999 and 1998 and for the years then ended, not separately presented in this Devon Energy Corporation Registration Statement on Form S-4, have been audited by PricewaterhouseCoopers LLP, independent accountants, whose report thereon appears in Devon Energy Corporation's Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference herein. Such consolidated financial statements, to the extent they have been included in the consolidated financial statements of Devon Energy Corporation, have been so included in reliance on the report of such independent accountants given on the authority of said firm as experts in auditing and accounting.
The consolidated balance sheet of Devon Holdco Corporation and its subsidiaries as of October 18, 2001 has been included in this document and in the registration statement of which this document is a part in reliance on the report of KPMG LLP, independent certified public accountants, appearing elsewhere in this document and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Anderson Exploration Ltd. as of September 30, 2000 and 1999, and for each of the years in the three-year period ended September 30, 2000 have been included in this document and in the registration statement of which this document is a part in reliance on the report of KPMG LLP, Chartered Accountants, appearing elsewhere in this document and on the authority of said firm as experts in accounting and auditing.
Certain information with respect to Devon's oil and gas reserves derived from the reports of LaRoche Petroleum Consultants, Ltd., Ryder Scott Company, L.P., AMH Group, Ltd. and Paddock Lindstrom & Associates, Ltd., independent consulting petroleum engineers, has been included and incorporated by reference into this document on the authority of said firms as experts with respect to matters covered by such reports and in giving such reports.
Certain information relating to Anderson's oil and gas reserves derived from the reports of Gilbert Laustsen Jung Associates Ltd., independent consulting petroleum engineers, has been included in this document on the authority of said firm as experts with respect to such reports and in giving such reports.
WHERE YOU CAN FIND MORE INFORMATION
Devon and Devon Holdco have filed with the Securities and Exchange Commission registration statements under the Securities Act of 1933 that register the distribution of the shares of Devon common stock to be issued to Mitchell stockholders in connection with the merger and the distribution of the shares of Devon Holdco common stock to be issued to Devon and Mitchell stockholders if the alternate structure is used to complete the transaction. Those registration statements, including the attached exhibits and schedules, contain additional relevant information about Devon, Devon common stock, Devon Holdco and Devon Holdco common stock. The rules and regulations of the Securities and Exchange Commission allow us to omit some of the information included in the registration statements from this document.
In addition, Devon and Mitchell file reports, proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934. You may read and copy that information at the Securities and Exchange Commission's public reference room at the following location:
Public Reference Room 450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
1-800-732-0330
You may also obtain copies of this information by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world wide website that contains reports, proxy statements and other information about issuers, including Devon and Mitchell, that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.
The Securities and Exchange Commission allows Devon and Mitchell to "incorporate by reference" information into this document. This means that Devon and Mitchell can disclose important information by referring you to another document filed separately with the Securities and Exchange Commission. The information incorporated by reference is considered to be part of this document, except for any information that is superseded by information that is included directly in this document.
This document incorporates by reference the documents listed below that Devon and Mitchell have previously filed with the Securities and Exchange Commission. The documents contain important information about Devon and Mitchell and their respective financial conditions.
MITCHELL'S FILINGS (FILE NO. 1-6959) PERIOD ------------------------------------ ------ Annual Report on Form 10-K............................. Year ended December 31, 2000 Quarterly Reports on Form 10-Q......................... Quarters ended: - March 31, 2001 - June 30, 2001 Current Report on Form 8-K............................. Filed on August 14, 2001 The description of Mitchell capital stock set forth in the registration statement on Form S-3 filed by Mitchell with the Securities and Exchange Commission on April 3, 2001, including any amendment or report filed with the Securities and Exchange Commission for the purpose of updating that description. |
DEVON'S FILINGS (FILE NO. 0-30176) PERIOD ---------------------------------- ------ Annual Report on Form 10-K............................. Year ended December 31, 2000 Quarterly Reports on Form 10-Q......................... Quarters ended: - March 31, 2001 - June 30, 2001 Current Reports on Form 8-K............................ Filed on: - January 30, 2001 - September 20, 2001 - September 26, 2001 - September 27, 2001 - October 3, 2001 - October 11, 2001 - October 12, 2001 - October 26, 2001 The description of Devon capital stock set forth in the registration statement on Form S-3 filed by Devon with the Securities and Exchange Commission on December 15, 2000, including any amendment or report filed with the Securities and Exchange Commission for the purpose of updating that description. |
Devon and Mitchell also incorporate by reference additional documents that
either company may file with the Securities and Exchange Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between
the date of this document and the date of the Mitchell and Devon stockholders'
meetings. Those documents include periodic reports such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference into this document through Devon or Mitchell, as the case may be, or from the Securities and Exchange Commission's website at http://www.sec.gov. Documents incorporated by reference are available from Devon and Mitchell without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into this document. You may obtain documents incorporated by reference into this document by requesting them in writing or by telephone from the appropriate company as follows:
Mitchell Energy & Development Corp. Devon Energy Corporation 2001 Timberloch Place -- P.O. Box 4000 20 North Broadway, Suite 1500 Attention: Investor Relations Attention: Investor Relations The Woodlands, Texas 77387-4000 Oklahoma City, Oklahoma 73102-8260 Telephone: (713) 377-6625 Telephone: (405) 552-4570 |
If you would like to request documents incorporated by reference, please do so by , 2001, to receive them before the meeting. Please be sure to include your complete name and address in your request. If you request any documents, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request.
Neither Devon nor Mitchell has authorized anyone to give any information or make any representation about the transaction, Devon or Mitchell, that is different from, or in addition to, the information contained in this document or in any of the materials that we have incorporated into this document by reference. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this document or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this document unless the information specifically indicates that another date applies.
TRANSFER AGENTS AND REGISTRARS
EquiServe Trust Company is the transfer agent and registrar for Devon common stock and would be expected to be the transfer agent and registrar for Devon Holdco common stock. CIBC Mellon Trust Company is the Canadian co-registrar for Devon common stock and the transfer agent and registrar for Northstar exchangeable shares. In addition, CIBC Mellon Trust Company is the trustee under the voting and exchange trust agreement. The transfer agent for Mitchell common stock is Mellon Investor Services LLC. You may write to or telephone the appropriate company as follows:
DEVON COMMON STOCK AND NORTHSTAR EXCHANGEABLE SHARES MITCHELL COMMON STOCK ---------------------------------------------------- --------------------- EquiServe Trust Company, N.A. CIBC Mellon Trust Company Mellon Investor Services LLC Client Administration P.O. Box 1036 85 Challenger Road P.O. Box 8029 Adelaide Street Postal Station Overpeck Centre Boston, MA 02266-8029 Toronto, Ontario M5C 2K4 Ridgefield Park, New Jersey (800) 733-5001 (800) 387-0825 07660-2104 http://www.equiserve.com http://www.cibcmellon.ca (800) 522-6645 http://www.mellon-investor.com |
FORWARD-LOOKING STATEMENTS
Devon and Mitchell have made forward-looking statements in this document and in the documents incorporated by reference into this document, which are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our managements and on the information currently available to them.
Statements and calculations concerning oil and natural gas reserves and their present value also are forward-looking statements in that they reflect the determination, based on estimates and assumptions, that oil and natural gas reserves may be profitably exploited in the future. When used or referred to in this document or the documents incorporated by reference into this document, these forward-looking statements may be preceded by, followed by or otherwise include the words "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects" or similar expressions, or statements that certain events or conditions "will" or "may" occur. Forward-looking statements in this document also include:
- statements regarding Devon's expectation that the merger will be accretive to its reserves per share, production per share, cash margin per share and earnings per share;
- statements relating to the cost savings that Devon anticipates from the merger and Devon's acquisition of Anderson;
- statements regarding the number and location of undrilled well locations and planned wells;
- statements relating to future reserve replacement;
- statements with respect to various actions to be taken or requirements to be met in connection with completing the transaction and Devon's acquisition of Anderson or integrating Devon, Mitchell and Anderson; and
- statements relating to revenue, income and operations of the combined company after the transaction is completed and Devon's acquisition of Anderson.
These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements:
- expected cost savings from the merger or Devon's acquisition of Anderson may not be fully realized or realized within the expected time frame;
- revenue of the combined company following the transaction and Devon's acquisition of Anderson may be lower than expected;
- assumptions about energy markets, production levels, reserve levels, operating results, competitive conditions, technology, the availability of capital resources and capital expenditure obligations may prove to be incorrect;
- changes may occur in the supply and demand for oil, natural gas, NGLs and the other products or services provided or consumed by our three companies;
- changes may occur in the price of oil, natural gas, NGLs and the other products or services provided or consumed by our three companies;
- costs or difficulties related to obtaining regulatory approvals for completing the transaction and, following the transaction, to the integration of the businesses of Devon, Mitchell and Anderson, may be greater than expected;
- general economic conditions, either internationally or nationally or in the jurisdictions in which Devon, Mitchell or Anderson is doing business, may be less favorable than expected;
- legislative or regulatory changes, including changes in environmental regulation, may adversely affect the businesses in which Devon, Mitchell and Anderson are engaged;
- there may be environmental risks and liability under federal, state and foreign environmental laws and regulations; and
- changes may occur in the securities or capital markets.
Except for its ongoing obligations to disclose material information as required by the federal securities laws, neither Devon nor Mitchell has any intention or obligation to update these forward-looking statements after it distributes this document.
COMMONLY USED OIL AND GAS TERMS
The following are abbreviations and definitions of terms commonly used in the oil and gas industry and in this document:
"Bbl" means one stock tank barrel, or 42 U.S. gallons liquid volume of oil or NGLs. "Bcf" means one billion cubic feet. "Boe" means barrel of oil equivalent, determined by using the ratio of one |
Bbl of oil or NGLs to six Mcf of natural gas.
"BTUs" means British thermal units, a measure of heating value.
"gross acres" or "gross wells" means the total acres or number of wells in which a working interest is owned.
"MBbls" means one thousand Bbls. "MBoe" means one thousand Boe. "Mcf" means thousand cubic feet. "Mcfe" means one thousand cubic feet equivalent of natural gas, determined |
using the ratio of six Mcf of natural gas to one Bbl of oil or NGLs.
"MMBbls" means one million Bbls.
"MMBoe" means one million Boe. "MMcf" means one million cubic feet. "MTBE" means methyl tertiary butyl ether. |
"net acres" or "net wells" means the sum of the fractional working interests owned in gross acres or gross wells.
"NGL" or "NGLs" means natural gas liquids.
"oil" includes crude oil and condensate.
"Proved reserves" are the estimated quantities of crude oil, natural gas and NGLs that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made). Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based on future conditions.
(1) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes:
(A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and
(B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.
(2) Reserves that can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the "proved" classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.
(3) Estimates of proved reserves do not include the following:
(A) oil that may become available from known reservoirs but is classified separately as "indicated additional reserves;"
(B) crude oil, natural gas and NGLs, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors;
(C) crude oil, natural gas and NGLs, that may occur in undrilled prospects; and
(D) crude oil, natural and NGLs, that may be recovered from oil shales, coal, gilsonite and other such sources.
"Tcfe" means one trillion cubic feet equivalent of natural gas, determined by using the ratio of six Mcf of natural gas to one Bbl of oil or NGLs.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information relates to the merger between Devon and Mitchell, whereby Devon will acquire all of Mitchell's outstanding common shares with 0.585 shares of Devon common stock plus $31 per Mitchell common share in cash. The unaudited pro forma combined financial information also includes the effects of Devon's October 17, 2001 acquisition of Anderson for approximately $3.5 billion. The unaudited pro forma combined financial information includes a balance sheet as of June 30, 2001, which assumes the acquisitions of Mitchell and Anderson occurred on that date. The unaudited pro forma combined financial information also includes statements of operations for the year ended December 31, 2000 and the six months ended June 30, 2001, which assume the acquisitions occurred on January 1, 2000.
The following unaudited pro forma combined financial information has been prepared to assist in your analysis of the financial effects of the merger. This pro forma information is based on the historical financial statements of Devon and Mitchell and should be read in conjunction with those historical financial statements and related notes, which are incorporated by reference into this document. The pro forma information also includes the effect on Devon of its acquisition of Anderson. You should read the historical consolidated financial statements and related notes of Anderson that are included elsewhere in this document.
If the alternate structure is used to complete the transaction, the combined company's pro forma data would be substantially identical to the pro forma information presented in this section.
The pro forma information is based on the estimates and assumptions set forth in the notes to such information. The pro forma information is preliminary and is being furnished solely for information purposes and, therefore, is not necessarily indicative of the results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.
Anderson's historical financial information is prepared in accordance with accounting standards generally accepted in Canada, and is presented in Canadian dollars. Anderson's historical volumetric production data is prepared in accordance with the Canadian convention whereby such production data is shown before applicable royalty deductions. Also, Anderson's fiscal year ends on September 30, as opposed to Devon's year-end of December 31. For purposes of providing the pro forma effect of the pending Anderson acquisition on Devon's financial condition and results of operations, the following adjustments were made to Anderson's historical financial data:
- Anderson's historical results for the year ended September 30, 2000 were converted to results for the year ended December 31, 2000. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 1999 and adding its historical interim results for the three months ended December 31, 2000. Anderson's historical results for the nine months ended June 30, 2001 were converted to results for the six months ended June 30, 2001. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 2000.
- Anderson's balance sheet data as of June 30, 2001, and its results of operations for the year ended December 31, 2000 and the six months ended June 30, 2001, were converted to accounting principles generally accepted in the United States, including the full cost method of accounting for oil and gas properties. Such information was also converted to U.S. dollars using the appropriate exchange rates.
- Anderson's historical volumetric production data was converted to the U.S. convention whereby such production data is shown after applicable royalty deductions.
The information was prepared based on the following:
- Devon uses the full cost method of accounting for its oil and gas activities, while Mitchell uses the successful efforts method. Pro forma adjustments have been made to estimate the effect of converting Mitchell's successful efforts method to Devon's full cost method.
- Devon will account for the merger and the Anderson acquisition using the purchase method of accounting.
- The unaudited pro forma balance sheet has been prepared as if the merger and the Anderson acquisition occurred on June 30, 2001. The unaudited pro forma statements of operations have been prepared as if the merger and the Anderson acquisition occurred on January 1, 2000.
- In the six-month period ended June 30, 2001, Devon recognized a $49.5 million after-tax gain from the cumulative effect of a change in accounting principle. This related to Devon's adoption, as of January 1, 2001, of a new accounting principle related to accounting for derivative financial instruments. The $49.5 million gain is not included in the unaudited pro forma combined statements of operations for the six months ended June 30, 2001.
- We have not reflected as an adjustment to the historical data annual cost savings of approximately $20 million and $25 million that Devon expects to result from the elimination of duplicate expenses after the merger and the Anderson acquisition, respectively.
- In June 2000, Anderson sold its 50% interest in a pipeline transportation company. For the year ended December 31, 2000, Anderson recognized earnings from discontinued operations, net of tax, of $44.2 million. This gain is not included in the summary unaudited pro forma combined statements of operations for the year ended December 31, 2000.
No pro forma adjustments have been made with respect to the following unusual items. These items are reflected in the historical results of Devon, Anderson or Mitchell, as applicable, and should be considered when making period-to-period comparisons:
- In 2000, Devon recognized $60.4 million of expenses related to its merger with Santa Fe Snyder Corporation. Devon accounted for the Santa Fe Snyder merger using the pooling-of-interests method of accounting and, therefore, the expenses incurred related to the merger were expensed. The after-tax effect of these expenses in 2000 was $37.2 million.
- In 2000, Mitchell realized income tax savings of $12.8 million related to prior years' Section 29 tax credits and $6.3 million related to the reversal of prior years' deferred income taxes.
- In 2000, Mitchell recognized a $4.9 million gain from the exchange of certain gas services assets. Also in 2000, Mitchell recognized a $10.8 million impairment expense related to other gas services assets. Net of tax, these two events reduced Mitchell's 2000 net earnings by $3.8 million.
- On May 17, 2000, Anderson acquired all the outstanding shares of Ulster Petroleums Ltd. The summary unaudited pro forma combined statements of operations do not include any results from Ulster's operations prior to May 17, 2000.
- On February 12, 2001, Anderson acquired all of the outstanding shares of Numac Energy Inc. The summary unaudited pro forma combined statements of operations do not include any results from Numac's operations prior to February 12, 2001.
- During the second quarter of 2001, Devon elected to discontinue operations in Malaysia, Qatar and on certain properties in Brazil. Accordingly, during the second quarter of 2001, Devon recorded a $76.9 million charge associated with the impairment of those properties. The after-tax effect of this reduction was $62.1 million.
- Mitchell has incentive compensation plans pursuant to which it has periodically issued awards referred to as "bonus units" under which employees can earn compensation based on increases in the market price of Mitchell common stock. Mitchell generally awards these bonus units in lieu of
stock option grants. Pro forma general and administrative expenses reported in the accompanying unaudited pro forma statements of operations for the year 2000 include $21.3 million of expense related to these plans, while pro forma general and administrative expenses for the first six months of 2001 include a credit in the amount of $4.1 million related to these plans. After taxes, these plans had the effect of decreasing 2000 unaudited pro forma net earnings by $13.8 million and increasing net earnings for the first half of 2001 by $2.7 million. Devon will not issue such bonus units after the merger.
- Devon's historical results of operations for the year 2000 and the first half of 2001 include $41.3 million and $16.9 million, respectively, of amortization expense for goodwill related to previous mergers. As of January 1, 2002, in accordance with new accounting pronouncements recently issued, such goodwill will cease to be amortized and, instead, will be tested for impairment at least annually. No goodwill amortization expense has been recognized in the pro forma statements of operations for the goodwill related to the merger and the Anderson acquisition.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2001
DEVON PRO FORMA MITCHELL AFTER ANDERSON PRO FORMA COMBINED ACQUISITION MITCHELL ADJUSTMENTS COMPANY (NOTES 1 AND 8) HISTORICAL (NOTE 3) PRO FORMA --------------- ---------- ----------- ----------- (IN THOUSANDS) ASSETS: Current assets......................... $ 1,293,115 $ 250,854 $ -- $ 1,543,969 Property and equipment, net............ 9,808,344 1,438,347 1,821,231(a) 13,067,922 Investment in common stock of Chevron Corporation.......................... 641,865 -- -- 641,865 Goodwill, net.......................... 2,300,116 -- 1,198,575(a) 3,498,691 Other assets........................... 264,018 42,386 (572)(a) 317,536 11,704(c) ----------- ---------- ---------- ----------- Total assets................. $14,307,458 $1,731,587 $3,030,938 $19,069,983 =========== ========== ========== =========== LIABILITIES: Current liabilities.................... $ 945,259 $ 365,246 $ 105,340(a) $ 1,427,549 11,704(c) Debentures exchangeable into shares of Chevron Corporation common stock..... 642,329 -- -- 642,329 Other long-term debt................... 6,077,576 210,855 1,547,148(c) 7,835,579 Other long-term liabilities............ 257,120 90,714 (22,467)(a) 325,367 Fair value of derivative instruments... 48,025 -- -- 48,025 Deferred income taxes.................. 2,479,908 253,247 636,712(a) 3,369,867 STOCKHOLDERS' EQUITY: Preferred stock........................ 1,500 -- -- 1,500 Common stock........................... 12,963 5,386 2,920(a) 15,883 (5,386)(b) Additional paid-in capital............. 3,590,233 149,283 1,561,106(a) 5,151,339 (149,283)(b) Retained earnings...................... 304,130 752,868 (752,868)(b) 304,130 Accumulated other comprehensive loss... (43,313) (8,896) 8,896(b) (43,313) Treasury stock......................... (7,785) (87,116) 87,116(b) (7,785) Other.................................. (487) -- -- (487) ----------- ---------- ---------- ----------- Total stockholders' equity... 3,857,241 811,525 752,501 5,421,267 ----------- ---------- ---------- ----------- Total liabilities and stockholders' equity....... $14,307,458 $1,731,587 $3,030,938 $19,069,983 =========== ========== ========== =========== |
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
DEVON PRO FORMA MITCHELL MITCHELL AFTER ANDERSON HISTORICAL PRO FORMA COMBINED ACQUISITION RECLASSIFIED ADJUSTMENTS COMPANY (NOTES 1 AND 8) (NOTE 6) (NOTE 3) PRO FORMA --------------- ------------ ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales................................ $1,326,725 $ 57,516 $ -- $1,384,241 Gas sales................................ 2,140,726 380,981 -- 2,521,707 NGL sales................................ 250,344 91,588 -- 341,932 Gas services revenue..................... 60,960 1,140,906 -- 1,201,866 Other revenue............................ 43,357 4,094 -- 47,451 ---------- ---------- --------- ---------- Total revenue.................. 3,822,112 1,675,085 -- 5,497,197 ---------- ---------- --------- ---------- COSTS AND EXPENSES: Lease operating expenses................. 594,853 45,101 -- 639,954 Transportation costs..................... 93,018 25,817 -- 118,835 Production taxes......................... 106,433 21,987 -- 128,420 Exploration expenses..................... -- 12,028 (12,028)(f) -- Gas services costs and expenses.......... 32,646 951,446 -- 984,092 Depreciation, depletion and amortization of property and equipment.............. 1,003,472 155,376 55,633(d) 1,214,481 Amortization of goodwill................. 41,332 -- -- 41,332 General and administrative expenses...... 133,408 79,556 (7,673)(f) 205,291 Expenses related to previous mergers..... 60,373 -- -- 60,373 Interest expense......................... 449,303 25,817 73,200(e) 548,320 Deferred effect of changes in foreign currency exchange rate on subsidiary's long-term debt......................... 3,168 -- -- 3,168 ---------- ---------- --------- ---------- Total costs and expenses....... 2,518,006 1,317,128 109,132 3,944,266 ---------- ---------- --------- ---------- Earnings before income tax expense....... 1,304,106 357,957 (109,132) 1,552,931 INCOME TAX EXPENSE: Current.................................. 143,258 46,766 (28,548)(g) 161,476 Deferred................................. 350,471 54,045 (12,576)(g) 391,940 ---------- ---------- --------- ---------- Total income tax expense....... 493,729 100,811 (41,124) 553,416 ---------- ---------- --------- ---------- Net earnings............................. 810,377 257,146 (68,008) 999,515 Preferred stock dividends................ 9,735 -- -- 9,735 ---------- ---------- --------- ---------- Net earnings applicable to common stockholders........................... $ 800,642 $ 257,146 $ (68,008) $ 989,780 ========== ========== ========= ========== Net earnings per average common share outstanding: Basic.................................. $ 6.28 $ 5.22 $ 6.33 Diluted................................ 6.11 5.13 6.17 Weighted average common shares outstanding: Basic.................................. 127,421 49,291 156,256 Diluted................................ 131,730 50,084 161,029 |
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
DEVON PRO FORMA AFTER MITCHELL MITCHELL ANDERSON HISTORICAL PRO FORMA COMBINED ACQUISITION RECLASSIFIED ADJUSTMENTS COMPANY (NOTES 1 AND 8) (NOTE 6) (NOTE 3) PRO FORMA --------------- ------------ ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales.................................... $ 632,782 $ 27,220 $ -- $ 660,002 Gas sales.................................... 1,742,695 345,178 -- 2,087,873 NGL sales.................................... 124,080 50,376 -- 174,456 Gas services revenue......................... 38,499 717,913 -- 756,412 Other revenue................................ 18,958 (580) -- 18,378 ---------- ---------- -------- ---------- Total revenue...................... 2,557,014 1,140,107 -- 3,697,121 ---------- ---------- -------- ---------- COSTS AND EXPENSES: Lease operating expenses..................... 348,629 28,741 -- 377,370 Transportation costs......................... 59,647 15,360 -- 75,007 Production taxes............................. 77,632 17,764 -- 95,396 Exploration expenses......................... -- 8,697 (8,697)(f) -- Gas services costs and expenses.............. 30,114 641,984 -- 672,098 Depreciation, depletion and amortization of property and equipment..................... 551,793 89,944 27,708(d) 669,445 Amortization of goodwill..................... 16,923 -- -- 16,923 General and administrative expenses.......... 69,972 26,422 (4,098)(f) 92,296 Interest expense............................. 224,775 7,413 36,600(e) 268,788 Deferred effect of changes in foreign currency exchange rate on subsidiary's long-term debt............................. (5,699) -- -- (5,699) Change in fair value of derivative instruments................................ 19,292 -- -- 19,292 Reduction of carrying value of oil and gas properties................................. 76,942 -- -- 76,942 ---------- ---------- -------- ---------- Total costs and expenses........... 1,470,020 836,325 51,513 2,357,858 ---------- ---------- -------- ---------- Earnings before income tax expense........... 1,086,994 303,782 (51,513) 1,339,263 INCOME TAX EXPENSE: Current...................................... 150,229 52,106 (14,274)(g) 188,061 Deferred..................................... 279,013 50,724 (5,220)(g) 324,517 ---------- ---------- -------- ---------- Total income tax expense........... 429,242 102,830 (19,494) 512,578 ---------- ---------- -------- ---------- Net earnings before cumulative effect of change in accounting principle............. 657,752 200,952 (32,019) 826,685 Preferred stock dividends.................... 4,868 -- -- 4,868 ---------- ---------- -------- ---------- Net earnings applicable to common stockholders............................... $ 652,884 $ 200,952 $(32,019) $ 821,817 ========== ========== ======== ========== Net earnings per average common share outstanding: Basic...................................... $ 5.05 $ 4.03 $ 5.19 Diluted.................................... 4.85 3.95 5.00 Weighted average common shares outstanding: Basic...................................... 129,260 49,847 158,420 Diluted.................................... 135,402 50,906 165,182 |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 2000 AND JUNE 30, 2001
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma balance sheet and statements of operations present the pro forma effects of Devon's proposed merger with Mitchell. On October 17, 2001, Devon completed its acquisition of Anderson Exploration Ltd. Devon paid approximately $3.5 billion to acquire all of Anderson's outstanding common shares and to pay for the intrinsic value of Anderson's outstanding options and appreciation rights. The accompanying unaudited pro forma financial statements present the effect of the Mitchell merger on Devon's financial position and results of operations, assuming that the Anderson acquisition had already occurred. See Note 8 for the unaudited pro forma statements that combine, on a pro forma basis, the financial positions and results of operations of Devon and Anderson.
2. METHOD OF ACCOUNTING FOR THE MERGER
Devon will account for the merger using the purchase method of accounting for business combinations. Accordingly, Mitchell's assets acquired and liabilities assumed by Devon will be revalued and recorded at their estimated "fair values." In the merger, Devon will pay $31.00 in cash and issue 0.585 of a share of Devon common stock for each outstanding share of Mitchell common stock. On a pro forma basis, assuming that the merger had occurred on June 30, 2001, this would have resulted in Devon paying approximately $1.5 billion in cash and issuing approximately 29.2 million shares of its common stock to Mitchell stockholders.
The purchase price of Mitchell's net assets acquired will be based on the total value of the cash paid and the Devon common stock issued to the Mitchell stockholders. The value of the Devon common stock issued is based on the average closing price of Devon's common stock for a period of three days before and after the public announcement of the merger. This average closing price equaled $50.95 per share.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
3. PRO FORMA ADJUSTMENTS RELATED TO THE MERGER
The unaudited pro forma balance sheet includes the following adjustments:
(a) This entry adjusts the historical book values of Mitchell's assets and liabilities to their estimated fair values as of June 30, 2001. The calculation of the total purchase price and the preliminary allocation to assets and liabilities are shown below.
(IN THOUSANDS, EXCEPT FOR SHARE PRICE) Calculation and preliminary allocation of purchase price: Shares of Devon common stock to be issued to Mitchell stockholders........................................... 29,196 Average Devon stock price................................. $ 50.95 ---------- Fair value of common stock to be issued................... 1,487,536 Cash to be paid to Mitchell stockholders, calculated at $31 per outstanding common share of Mitchell........... 1,547,148 ---------- Fair value of Devon common stock and cash to be issued to Mitchell stockholders.................................. 3,034,684 Plus estimated merger costs to be incurred................ 90,000 Plus fair value of Mitchell employee stock options to be assumed by Devon....................................... 76,490 ---------- Total purchase price.............................. 3,201,174 Plus fair value of liabilities to be assumed by Devon: Current liabilities....................................... 380,586 Long-term debt............................................ 210,855 Other long-term liabilities............................... 68,247 Deferred income taxes..................................... 889,959 ---------- Total purchase price plus liabilities assumed..... $4,750,821 ========== Fair value of assets to be acquired by Devon: Current assets............................................ $ 250,854 Proved oil and gas properties............................. 1,663,751 Unproved oil and gas properties........................... 752,827 Gas services facilities and equipment..................... 840,000 Other property and equipment.............................. 3,000 Other assets.............................................. 41,814 Goodwill.................................................. 1,198,575 ---------- Total fair value of assets to be acquired......... $4,750,821 ========== |
The total purchase price includes the value of the cash and Devon common stock to be issued to Mitchell stockholders. The total purchase price also includes:
- $90.0 million of estimated merger costs. These costs include investment banking expenses, severance, legal and accounting fees, printing expenses and other merger-related costs. These costs have been added to current liabilities in the unaudited pro forma balance sheet.
- $76.5 million of Devon employee stock options to be issued in exchange for existing vested Mitchell employee stock options. The value of these options is added to additional paid-in capital in the unaudited pro forma balance sheet.
The purchase price allocation is preliminary and is subject to change due to several factors, including: (1) changes in the fair values of Mitchell's assets and liabilities as of the effective time of the merger; (2) the actual merger costs incurred; (3) the number of Mitchell shares and stock options outstanding as of the effective time of the merger; and (4) changes in Devon's valuation estimates that may be made
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
between now and the effective time of the merger. These changes will not be known until after the effective time of the merger. However, Devon does not believe that the final purchase price allocation will differ materially from the estimated allocation presented herein.
(b) This adjustment includes a $5.4 million reduction of common stock, a $149.3 million reduction of additional paid-in capital, a $752.9 million reduction of retained earnings, an $8.9 million reduction of accumulated other comprehensive loss and an $87.1 million reduction of treasury stock. These adjustments eliminate the historical book value of Mitchell's stockholders' equity.
(c) This adjustment increases long-term debt by $1.5 billion to include the long-term debt that Devon will incur to fund the cash portion of the merger consideration. The debt will be borrowed under Devon's $3 billion, variable interest rate, five year credit facility entered into on October 12, 2001. Debt under this facility matures between 2003 and 2005. The adjustment also includes $11.7 million of costs estimated to be incurred in connection with issuing this debt. The liability for these costs has been added to current liabilities in the unaudited pro forma balance sheet.
The unaudited pro forma statements of operations include the following adjustments:
(d) This adjustment increases historical depreciation, depletion and amortization to reflect the adjustment of Mitchell's assets from historical book value to fair value and a change to the full cost accounting method from the successful efforts method. For Mitchell's midstream assets acquired, pro forma depreciation expense was calculated using estimated useful lives of approximately 15 years. For Mitchell's oil and gas producing properties acquired, pro forma depreciation, depletion and amortization expense was calculated using the equivalent units-of-production method. Mitchell's proved oil and gas reserves, divided by its annualized production for the first half of 2001, yields an estimated reserve life of 14 years.
(e) This adjustment increases interest expense due to the $1.5 billion of long-term debt that Devon will incur to fund the cash portion of the merger consideration. This adjustment has been calculated using an estimated interest rate of 4.58%, plus the amortization of estimated financing costs to be incurred, on the variable rate debt. This assumed interest rate is based on the terms of Devon's $3 billion credit facility. The actual rate will vary with changes in market rates. A change in the interest rate of 0.125% would change the combined company pro forma interest expense by $2.8 million. This change includes the amount related to the debt borrowed under the $3 billion credit facility to fund a portion of the Anderson acquisition as described in Note 8.
(f) This adjustment eliminates historical amounts recognized by Mitchell under the successful efforts accounting method that are not recognized as expenses under the full cost accounting method. Included in this adjustment are costs incurred by Mitchell related to its property exploration activities such as exploratory dry holes and geological and geophysical costs that are expensed as incurred under the successful efforts method followed by Mitchell, but are capitalized under the full cost method followed by Devon. Also included in this adjustment are general and administrative expenses incurred by Mitchell which were directly identified with its acquisition, exploration and development activities undertaken for its own account. These costs are expensed as incurred under the successful efforts method, but are capitalized under the full cost method.
(g) This adjustment records the income tax impact of all pro forma adjustments at an effective tax rate of approximately 38%.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
4. COMMON SHARES OUTSTANDING
Net earnings per average share outstanding have been calculated based on the pro forma weighted average number of shares outstanding as follows:
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 2000 JUNE 30, 2001 ----------------- ---------------- (IN THOUSANDS) Basic: Devon's weighted average common shares outstanding..................................... 127,421 129,260 New Devon shares to be issued to Mitchell stockholders.................................... 28,835 29,160 ------- ------- Pro forma weighted average Devon shares outstanding..................................... 156,256 158,420 ======= ======= Diluted: Devon's weighted average common shares outstanding..................................... 131,730 135,402 New Devon shares to be issued to Mitchell stockholders.................................... 29,299 29,780 ------- ------- Pro forma weighted average Devon shares outstanding..................................... 161,029 165,182 ======= ======= |
Pro forma shares of Devon common stock outstanding at June 30, 2001, assuming the merger occurred on that date, are as follows:
(IN THOUSANDS) Devon's common shares outstanding...................... 129,475 New Devon shares to be issued to Mitchell stockholders......................................... 29,196 ------- Pro forma Devon common shares outstanding.............. 158,671 ======= |
5. GOODWILL
The preliminary allocation of the purchase price includes approximately $1.2 billion of goodwill. In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets." As a result of these two recent pronouncements, goodwill recorded in connection with business combinations completed after June 30, 2001 (including the merger) will not be amortized but, instead, will be tested for impairment at least annually. Accordingly, the accompanying unaudited pro forma statements of operations include no amortization of the goodwill to be recorded in the merger.
Statement No. 142 will be adopted by Devon as of January 1, 2002. Until that date, goodwill recognized from business combinations completed prior to June 30, 2001 must continue to be amortized. Therefore, Devon's historical goodwill amortization related to previous mergers has not been reversed in the accompanying unaudited pro forma statements of operations. As of January 1, 2002, goodwill related to these previous mergers will no longer be amortized but, instead, will be tested for impairment at least annually. The accompanying unaudited pro forma statements of operations for the year ended December 31, 2000 and the six months ended June 30, 2001 include amortization of goodwill related to previous mergers of $41.3 million and $16.9 million, respectively.
As indicated in Note 3, the allocation of the purchase price presented is preliminary. At the effective time of the merger, or shortly thereafter, Devon will finalize the purchase price allocation. Prior to that time, Devon may determine that there are intangible assets acquired in the merger separate and apart from goodwill. To the extent that such intangible assets, if any, have definite useful lives, the value assigned to those intangible assets would be amortized over such lives. Although the amount allocated to such intangible assets, if any, will not be known until the effective time of the merger, Devon does not believe that any such value, or the related amortization, would have a material effect on the unaudited pro forma financial information presented herein.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
6. DEVON AND MITCHELL HISTORICAL AND RECLASSIFIED BALANCES
Devon and Mitchell record certain revenue and expenses differently in their respective consolidated financial statements. To make the unaudited pro forma financial information consistent, we have reclassified certain of Devon's and Mitchell's balances to conform presentation.
Devon's historical balances for other revenue have been reclassified to include separate line items for gas services revenue and gas services costs and expenses to conform to Mitchell's presentation and Devon's expected presentation subsequent to the merger.
The following tables present Mitchell's balances as presented in its historical financial statements and the reclassified balances that are included in the accompanying unaudited pro forma statements of operations.
YEAR ENDED DECEMBER 31, 2000 SIX MONTHS ENDED JUNE 30, 2001 ------------------------------------- ------------------------------------- MITCHELL MITCHELL MITCHELL RECLASSI- HISTORICAL MITCHELL RECLASSI- HISTORICAL HISTORICAL FICATIONS RECLASSIFIED HISTORICAL FICATIONS RECLASSIFIED ---------- --------- ------------ ---------- --------- ------------ (IN THOUSANDS) REVENUE: Exploration and production...... $ 531,228 $(531,228) $ -- $ 423,277 $(423,277) $ -- Oil sales....................... -- 57,516 57,516 -- 27,220 27,220 Gas sales....................... -- 380,981 380,981 -- 345,178 345,178 NGL sales....................... -- 91,588 91,588 -- 50,376 50,376 Gas services revenue............ 1,140,906 -- 1,140,906 717,913 -- 717,913 Other revenue................... -- 4,094 4,094 -- (580) (580) ---------- --------- ---------- ---------- --------- ---------- Total revenue......... 1,672,134 2,951 1,675,085 1,141,190 (1,083) 1,140,107 ---------- --------- ---------- ---------- --------- ---------- COSTS AND EXPENSES: Exploration and production...... 239,628 (239,628) -- 149,561 (149,561) -- Lease operating expenses........ -- 45,101 45,101 -- 28,741 28,741 Transportation costs............ -- 25,817 25,817 -- 15,360 15,360 Production taxes................ -- 21,987 21,987 -- 17,764 17,764 Exploration expenses............ -- 12,028 12,028 -- 8,697 8,697 Gas services.................... 1,007,944 (56,498) 951,446 665,366 (23,382) 641,984 Depreciation, depletion and amortization of property and equipment..................... -- 155,376 155,376 -- 89,944 89,944 General and administrative expenses...................... 43,739 35,817 79,556 13,985 12,437 26,422 Interest expense................ 28,765 (2,948) 25,817 10,868 (3,455) 7,413 Other (income) expense, net........................... (5,899) 5,899 -- (2,372) 2,372 -- ---------- --------- ---------- ---------- --------- ---------- Total costs and expenses............ 1,314,177 2,951 1,317,128 837,408 (1,083) 836,325 ---------- --------- ---------- ---------- --------- ---------- Earnings before income taxes......................... 357,957 -- 357,957 303,782 -- 303,782 Income tax expense.............. 100,811 -- 100,811 102,830 -- 102,830 ---------- --------- ---------- ---------- --------- ---------- Net earnings.......... $ 257,146 $ -- $ 257,146 $ 200,952 $ -- $ 200,952 ========== ========= ========== ========== ========= ========== |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
7. GAS SERVICES INFORMATION
The following table provides certain information relating to the unaudited pro forma gas services revenues and costs and expenses for the year ended December 31, 2000 and the six months ended June 30, 2001.
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 2000 2001 ------------ ---------- (IN THOUSANDS) GAS SERVICES REVENUE: Gas processing operations: Percentage of proceeds NGL volumes (MBbls)............. 6,391 3,037 Keep whole NGL volumes (MBbls)......................... 8,074 3,987 ---------- -------- Total NGL volumes................................. 14,465 7,024 Average NGL price per barrel........................... $ 22.36 $ 22.34 ---------- -------- NGL revenue............................................ 323,462 156,900 NGL marketing and other revenue........................ 388,469 231,483 ---------- -------- Total gas processing revenue...................... 711,931 388,383 Natural gas gathering and marketing revenue............... 468,850 363,357 Other gas services revenue................................ 21,085 4,672 ---------- -------- Total gas services revenue........................ $1,201,866 $756,412 ========== ======== GAS SERVICES COSTS AND EXPENSES: Gas processing operations: Percentage of proceeds payments........................ $ 49,494 $ 33,830 Keep whole gas purchased............................... 146,764 82,283 Other NGL costs........................................ 31,908 20,282 ---------- -------- Total NGL costs................................... 228,166 136,395 NGL marketing and other costs and expenses............. 366,317 212,773 ---------- -------- Total gas processing costs and expenses........... 594,483 349,168 Natural gas gathering and marketing costs and expenses.... 388,965 322,624 Other gas services costs and expenses..................... 644 306 ---------- -------- Total gas services costs and expenses............. $ 984,092 $672,098 ========== ======== |
Natural gas gathering and marketing margins (natural gas gathering and marketing revenue less natural gas gathering and marketing costs and expenses) were unusually high in the periods presented in the above table. After the merger, Devon expects the combined company's natural gas gathering and marketing margin to approximate between $30 million and $40 million per year.
The above table contains the terms "percentage of proceeds" and "keep whole." These terms refer to two different types of contracts involving processing natural gas. Under a percentage of proceeds contract, the buyer and seller share in the net proceeds from the sale of all NGLs and residue gas allocated to the seller after reductions for fuel use, line loss and processing shrink. Residue gas refers to that portion of the seller's natural gas that remains after processing.
A keep whole contract allows the seller to sell 100% the BTUs it delivers at the wellhead even though the natural gas is being processed for the extraction of NGLs. To do this, the buyer must deliver to the seller an equivalent amount of BTUs as were extracted from the gas at the processing plant or reimburse the seller the value of the gas extracted. This is referred to as "keep whole gas" in the above table. The seller receives its allocation of residue gas plus the keep whole gas from the buyer, so that the seller's total wellhead BTUs are "kept whole". In this type of agreement, the buyer bears the processing risk, in that
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
the total revenues received from the NGLs sold must exceed the cost of the keep whole gas for the buyer to have a positive margin.
8. UNAUDITED PRO FORMA EFFECT OF ANDERSON ACQUISITION
The following presents the pro forma effect of the Anderson acquisition on Devon's historical balance sheet as of June 30, 2001 and Devon's historical statements of operations for the year ended December 31, 2000 and the six months ended June 30, 2001.
Anderson's historical amounts presented in the following statements have been converted to accounting principles generally accepted in the United States and to U.S. dollars. For information on such conversions, see Note 9.
Devon will account for the Anderson acquisition using the purchase method of accounting for business combinations. Accordingly, Anderson's assets acquired and liabilities assumed by Devon will be revalued and recorded at their estimated "fair values." In the Anderson acquisition, Devon will pay C$40 per share for each outstanding common share, including associated rights, of Anderson. On a pro forma basis, assuming that the Anderson acquisition had occurred on June 30, 2001, this would have resulted in Devon paying approximately $3.5 billion in cash to Anderson stockholders, as well as an additional $0.1 billion of cash which would have been paid to Anderson employees for the intrinsic value of outstanding stock options and appreciation rights. These U.S. dollar amounts are based on the June 30, 2001 exchange rate of C$1.00 to U.S.$0.6589.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
DEVON-ANDERSON
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2001
ANDERSON DEVON DEVON HISTORICAL PRO FORMA HISTORICAL RECLASSIFIED AFTER RECLASSIFIED U.S. GAAP PRO FORMA ANDERSON (NOTE 5) (NOTE 9) ADJUSTMENTS ACQUISITION ------------ ------------ ----------- ----------- (IN THOUSANDS) ASSETS: Current assets......................... $ 1,111,513 $ 181,602 $ -- $ 1,293,115 Property and equipment, net............ 5,640,137 3,431,437 736,770(a) 9,808,344 Investment in common stock of Chevron Corporation......................... 641,865 -- -- 641,865 Goodwill, net.......................... 277,767 -- 2,022,349(a) 2,300,116 Other assets........................... 132,756 6,430 93,570(a) 264,018 31,262(c) ------------ ---------- ----------- ----------- Total assets................... $ 7,804,038 $3,619,469 $ 2,883,951 $14,307,458 ============ ========== =========== =========== LIABILITIES: Current liabilities.................... $ 587,837 $ 326,160 $ 31,262(c) $ 945,259 Debentures exchangeable into shares of Chevron Corporation common stock.... 642,329 -- -- 642,329 Other long-term debt................... 1,438,819 969,843 (20,327)(a) 6,077,576 3,689,241(c) Other long-term liabilities............ 249,449 42,186 (34,515)(a) 257,120 Fair value of derivative instruments... 17,979 30,046 -- 48,025 Deferred income taxes.................. 1,010,384 1,077,677 391,847(a) 2,479,908 STOCKHOLDERS' EQUITY: Preferred stock........................ 1,500 -- -- 1,500 Common stock........................... 12,963 590,856 (590,856)(b) 12,963 Additional paid-in capital............. 3,590,233 68,153 (68,153)(b) 3,590,233 Retained earnings...................... 304,130 614,733 (614,733)(b) 304,130 Accumulated other comprehensive loss... (43,313) (100,185) 100,185(b) (43,313) Treasury stock......................... (7,785) -- -- (7,785) Other.................................. (487) -- -- (487) ------------ ---------- ----------- ----------- Total stockholders' equity..... 3,857,241 1,173,557 (1,173,557) 3,857,241 ------------ ---------- ----------- ----------- Total liabilities and stockholders' equity......... $ 7,804,038 $3,619,469 $ 2,883,951 $14,307,458 ============ ========== =========== =========== |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
DEVON-ANDERSON
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
ANDERSON DEVON DEVON HISTORICAL PRO FORMA HISTORICAL RECLASSIFIED AFTER RECLASSIFIED U.S. GAAP PRO FORMA ANDERSON (NOTE 5) (NOTE 9) ADJUSTMENTS ACQUISITION ------------ ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales................................ $1,078,759 $ 247,966 $ -- $1,326,725 Gas sales................................ 1,485,221 655,505 -- 2,140,726 NGL sales................................ 154,465 95,879 -- 250,344 Gas services revenue..................... 53,186 7,774 -- 60,960 Other.................................... 41,078 2,665 (386)(g) 43,357 ---------- ---------- --------- ---------- Total revenues................... 2,812,709 1,009,789 (386) 3,822,112 ---------- ---------- --------- ---------- COSTS AND EXPENSES: Lease operating expenses................. 440,780 154,073 -- 594,853 Transportation costs..................... 53,309 39,709 -- 93,018 Production taxes......................... 103,244 3,189 -- 106,433 Gas services costs and expenses.......... 28,606 4,040 -- 32,646 Depreciation, depletion and amortization of property and equipment............. 693,340 216,225 93,907(d) 1,003,472 Amortization of goodwill................. 41,332 -- -- 41,332 General and administrative expenses...... 93,008 40,400 -- 133,408 Expenses related to previous mergers..... 60,373 -- -- 60,373 Interest expense......................... 154,329 46,830 257,159(e) 449,303 (9,015)(f) Deferred effect of changes in foreign currency exchange rate on subsidiary's long-term debt.................................. 2,408 760 -- 3,168 ---------- ---------- --------- ---------- Total costs and expenses......... 1,670,729 505,226 342,051 2,518,006 ---------- ---------- --------- ---------- Earnings before income tax expense......... 1,141,980 504,563 (342,437) 1,304,106 INCOME TAX EXPENSE: Current.................................. 130,793 14,439 (1,974)(h) 143,258 Deferred................................. 280,845 215,481 (145,855)(h) 350,471 ---------- ---------- --------- ---------- Total income tax expense......... 411,638 229,920 (147,829) 493,729 ---------- ---------- --------- ---------- Net earnings............................... 730,342 274,643 (194,608) 810,377 Preferred stock dividends.................. 9,735 -- -- 9,735 ---------- ---------- --------- ---------- Net earnings applicable to common stockholders............................. $ 720,607 $ 274,643 $(194,608) $ 800,642 ========== ========== ========= ========== Net earnings per average common share outstanding: Basic.................................... $ 5.66 $ 6.28 Diluted.................................. 5.50 6.11 Weighted average common shares outstanding: Basic.................................... 127,421 127,421 Diluted.................................. 131,730 131,730 |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
DEVON-ANDERSON
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
ANDERSON DEVON DEVON HISTORICAL PRO FORMA HISTORICAL RECLASSIFIED AFTER RECLASSIFIED U.S. GAAP PRO FORMA ANDERSON (NOTE 5) (NOTE 9) ADJUSTMENTS ACQUISITION ------------ ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales.................................. $ 488,556 $144,226 $ -- $ 632,782 Gas sales.................................. 1,168,178 574,517 -- 1,742,695 NGL sales.................................. 64,301 59,779 -- 124,080 Gas services revenue....................... 34,644 3,855 -- 38,499 Other...................................... 21,179 (2,059) (162)(g) 18,958 ---------- -------- --------- ---------- Total revenues..................... 1,776,858 780,318 (162) 2,557,014 ---------- -------- --------- ---------- COSTS AND EXPENSES: Lease operating expenses................... 238,103 110,526 -- 348,629 Transportation costs....................... 35,823 23,824 -- 59,647 Production taxes........................... 74,058 3,574 -- 77,632 Gas services costs and expenses............ 28,109 2,005 -- 30,114 Depreciation, depletion and amortization of property and equipment.................. 367,594 167,900 16,299(d) 551,793 Amortization of goodwill................... 16,923 -- -- 16,923 General and administrative expenses........ 46,890 23,082 -- 69,972 Interest expense........................... 68,940 34,742 128,592(e) 224,775 (7,499)(f) Deferred effect of changes in foreign currency exchange rate on subsidiary's long-term debt.......................... -- (5,699) -- (5,699) Change in fair value of derivative instruments............................. 6,582 12,710 -- 19,292 Reduction of carrying value of oil and gas properties.............................. 76,942 -- -- 76,942 ---------- -------- --------- ---------- Total costs and expenses........... 959,964 372,664 137,392 1,470,020 ---------- -------- --------- ---------- Earnings before income tax expense........... 816,894 407,654 (137,554) 1,086,994 INCOME TAX EXPENSE: Current.................................... 142,892 22,284 (14,947)(h) 150,229 Deferred................................... 186,797 126,663 (34,447)(h) 279,013 ---------- -------- --------- ---------- Total income tax expense........... 329,689 148,947 (49,394) 429,242 ---------- -------- --------- ---------- Net earnings before cumulative effect of change in accounting principle............. 487,205 258,707 (88,160) 657,752 Preferred stock dividends.................... 4,868 -- -- 4,868 ---------- -------- --------- ---------- Net earnings applicable to common stockholders............................... $ 482,337 $258,707 $ (88,160) $ 652,884 ========== ======== ========= ========== Net earnings per average common share outstanding: Basic...................................... $ 3.73 $ 5.05 Diluted.................................... 3.59 4.85 Weighted average common shares outstanding: Basic...................................... 129,260 129,260 Diluted.................................... 135,402 135,402 |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
PRO FORMA ADJUSTMENTS RELATED TO THE ANDERSON ACQUISITION
The Devon-Anderson unaudited pro forma balance sheet presented in this note includes the following adjustments:
(a) This entry adjusts the historical book values of Anderson's assets and liabilities to their estimated fair values as of June 30, 2001. The calculation of the total purchase price and the preliminary allocation to assets and liabilities are shown below.
(IN THOUSANDS, EXCEPT FOR SHARE PRICE) -------------- Calculation and preliminary allocation of purchase price: Number of Anderson common shares outstanding.............. 131,477 Acquisition price per share............................... $ 26.36 ---------- Cash to be paid to Anderson stockholders.................. 3,465,212 Cash to be paid to settle Anderson employees' stock options and appreciation rights........................ 99,029 ---------- 3,564,241 Plus estimated acquisition costs to be incurred........... 125,000 ---------- Total purchase price.............................. 3,689,241 Plus fair value of liabilities to be assumed by Devon: Current liabilities....................................... 326,160 Long-term debt............................................ 949,516 Other long-term liabilities............................... 7,671 Fair value of financial instruments....................... 30,046 Deferred income taxes..................................... 1,469,524 ---------- Total purchase price plus liabilities assumed..... $6,472,158 ========== Fair value of assets to be acquired by Devon: Current assets............................................ $ 181,602 Proved oil and gas properties............................. 2,819,207 Unproved oil and gas properties........................... 1,329,000 Other property and equipment.............................. 20,000 Other assets.............................................. 100,000 Goodwill.................................................. 2,022,349 ---------- Total fair value of assets to be acquired......... $6,472,158 ========== |
The total purchase price includes $125 million of estimated acquisition costs. These costs include investment banking expenses, severance, legal and accounting fees, printing expenses and other merger-related costs. These costs have been added to long-term debt in the Devon-Anderson unaudited pro forma balance sheet.
The purchase price allocation is preliminary and is subject to change due to several factors, including: (1) changes in the fair values of Anderson's assets and liabilities as of the effective time of the Anderson acquisition; (2) the actual acquisition costs incurred; (3) the number of Anderson shares and stock options and appreciation rights outstanding as of the effective time of the Anderson acquisition; and (4) changes in Devon's valuation estimates that may be made between now and the effective time of the Anderson acquisition. These changes will not be known until after the effective time of the Anderson acquisition. However, Devon does not believe that the final purchase price allocation will differ materially from the estimated allocation presented herein.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(b) This adjustment includes a $590.9 million reduction of common stock, a $68.2 million reduction of additional paid-in capital, a $614.7 million reduction of retained earnings and a $100.2 million reduction in accumulated other comprehensive loss. These adjustments eliminate the historical book value of Anderson's stockholders' equity.
(c) This adjustment increases long-term debt by $3.7 billion to include the long-term debt that Devon will incur to fund the Anderson acquisition. Of this increase in debt, $3.0 billion represents borrowings of long-term debt issued on October 3, 2001, with a weighted average fixed rate of 7.4%, including amortization of discounts and related costs. Of this $3.0 billion, $1.75 billion is due in 2011 and $1.25 billion is due in 2031. The remaining $0.7 billion increase in debt represents borrowings under Devon's $3 billion, variable interest rate, five-year credit facility entered into on October 12, 2001. Debt under this facility matures between 2003 and 2005.
This adjustment (c) also includes $31.3 million of costs estimated to be incurred in connection with issuing this debt. The liability for these costs has been added to current liabilities in the Devon-Anderson unaudited pro forma balance sheet.
The Devon-Anderson unaudited pro forma statements of operations included in this note include the following adjustments:
(d) This adjustment increases historical depreciation, depletion and amortization expense to reflect the adjustment of Anderson's assets from historical book value to fair value. For Anderson's oil and gas producing properties acquired, pro forma depreciation, depletion and amortization expense was calculated using the equivalent units-of-production method. Anderson's proved oil and gas reserves, divided by its annualized production for the first half of 2001, yields an estimated reserve life of ten years.
(e) This adjustment increases interest expense due to the $3.7 billion of long-term debt that Devon will incur to fund the Anderson acquisition. This adjustment has been calculated using an average interest rate of 7.4% on the $3.0 billion of fixed rate debt, and an estimated rate of 4.58%, plus the amortization of estimated financing costs to be incurred, on the $0.7 billion of variable rate debt. The assumed interest rate on the variable rate debt is based on the terms of Devon's $3 billion credit facility. The actual rates on this variable rate debt will vary with changes in market rates. A change in the interest rate of 0.125% would change the pro forma interest expense by $0.9 million.
(f) This adjustment reduces interest expense to reflect the repayment of Anderson's bank debt with debt borrowed under Devon's $3 billion credit facility that bears a lower interest rate, net of an increase in interest expense related to the effect of valuing Anderson's fixed-rate debt at the estimated fair value of such debt. The adjustment relating to the repayment of Anderson's bank debt reduced interest expense for the year 2000 and the first half of 2001 by $11.9 million and $8.9 million, respectively. The adjustment relating to recording Anderson's fixed-rate debt at fair value increased interest expense for the year 2000 and the first half of 2001 by $2.9 million and $1.4 million, respectively.
(g) This adjustment reduces the Alberta Royalty Tax Credit as a result of the acquisition of Anderson.
(h) This adjustment records the income tax impact of all pro forma adjustments at an effective tax rate of approximately 43% for the year 2000 and 36% for the six months ended June 30, 2001. The rate for the first half of 2001 included the effect of a change in Canadian tax rates enacted during the second quarter of 2001. Excluding the retroactive effect of this rate change, the rate applied to the 2001 pro forma adjustments would have been 41%.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
GOODWILL
The preliminary allocation of the purchase price for the Anderson acquisition includes approximately $2.0 billion of goodwill. In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets." As a result of these two recent pronouncements, goodwill recorded in connection with business combinations completed after June 30, 2001 (including the Anderson acquisition) will not be amortized but, instead, will be tested for impairment at least annually. Accordingly, the Devon-Anderson unaudited pro forma statements of operations included in this note include no amortization of the goodwill to be recorded in the Anderson acquisition.
Statement No. 142 will be adopted by Devon as of January 1, 2002. Until that date, goodwill recognized from business combinations completed prior to June 30, 2001 must continue to be amortized. Therefore, Devon's historical goodwill related to previous mergers has not been reversed in the Devon- Anderson unaudited pro forma statements of operations included in this note. As of January 1, 2002, goodwill related to these previous mergers will no longer be amortized but, instead, will be tested for impairment at least annually. The Devon-Anderson unaudited pro forma statements of operations included in this note for the year ended December 31, 2000 and the six months ended June 30, 2001 include amortization of goodwill related to previous mergers of $41.3 million and $16.9 million, respectively.
As indicated previously in this note, the allocation of the Anderson acquisition purchase price is preliminary. Devon is in the process of finalizing the purchase price allocation. During this process, Devon may determine that there are intangible assets acquired in the Anderson acquisition separate and apart from goodwill. To the extent that such intangible assets, if any, have definite useful lives, the value assigned to those intangible assets would be amortized over such lives. Although the amount allocated to such intangible assets, if any, will not be known until Devon finalizes the purchase price allocation, Devon does not believe that any such value, or the related amortization, would have a material effect on the Devon-Anderson unaudited pro forma financial information presented in this note.
9. CONVERSION OF ANDERSON'S HISTORICAL FINANCIAL STATEMENTS
Anderson prepares its historical financial statements based on a fiscal year of September 30. To conform to Devon's year-end of December 31, Anderson's historical results for the year ended September 30, 2000 were converted to results for the year ended December 31, 2000. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 1999 and adding its historical interim results for the three months ended December 31, 2000. Anderson's historical results for the nine months ended June 30, 2001 were converted to results for the six months ended June 30, 2001. This conversion was done by subtracting Anderson's historical interim results for the three months ended December 31, 2000.
Anderson prepares its historical financial statements using accounting principles generally accepted in Canada ("Canadian GAAP") and Canadian dollars. The following tables provide information relating to the conversion of Anderson's historical financial statements to those prepared using accounting principles generally accepted in the United States ("U.S. GAAP") and U.S. dollars.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
ANDERSON UNAUDITED U.S. GAAP BALANCE SHEET
AS OF JUNE 30, 2001
U.S. GAAP ANDERSON AND OTHER ANDERSON HISTORICAL ADJUSTMENTS U.S. GAAP CONVERTED TO C$ C$ C$ U.S.$ ----------- ----------- ----------- ------------ (IN THOUSANDS) ASSETS: Current assets..................... C$ 275,614 C$ -- C$ 275,614 $ 181,602 Property and equipment, net........ 5,593,729 (528,100)(a) 5,207,827 3,431,437 218,700(c) (76,502)(e) Other assets....................... (1,542) 11,300(b) 9,758 6,430 ----------- ---------- ----------- ---------- Total assets............... C$5,867,801 C$(374,602) C$5,493,199 $3,619,469 =========== ========== =========== ========== LIABILITIES: Current liabilities................ C$ 495,007 C$ -- C$ 495,007 $ 326,160 Other long-term debt............... 1,471,913 -- 1,471,913 969,843 Other long-term liabilities........ 140,527 (76,502)(e) 64,025 42,186 Fair value of derivative instruments..................... -- 45,600(d) 45,600 30,046 Deferred income taxes.............. 1,771,670 (231,100)(a) 1,635,570 1,077,677 4,700(b) 110,800(c) (20,500)(d) STOCKHOLDERS' EQUITY: Common stock....................... 795,541 -- 795,541 590,856 Additional paid-in capital......... 91,763 -- 91,763 68,153 Retained earnings.................. 1,101,380 (297,000)(a) 906,180 614,733 6,600(b) 107,900(c) (12,700)(d) Accumulated other comprehensive loss............................ -- (12,400)(d) (12,400) (100,185) ----------- ---------- ----------- ---------- Total stockholders' equity................... 1,988,684 (207,600) 1,781,084 1,173,557 ----------- ---------- ----------- ---------- Total liabilities and stockholders' equity..... C$5,867,801 C$(374,602) C$5,493,199 $3,619,469 =========== ========== =========== ========== |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
ANDERSON UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
U.S. GAAP ANDERSON AND OTHER ANDERSON HISTORICAL ADJUSTMENTS U.S. GAAP CONVERTED TO C$ C$ C$ U.S.$ ---------- ----------- ---------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales............................... C$ 444,045 C$(75,760)(f) C$ 368,285 $ 247,966 Gas sales............................... 1,210,216 (236,646)(f) 973,570 655,505 NGL sales............................... 149,637 (7,235)(f) 142,402 95,879 Less royalties.......................... (393,104) 393,104(f) -- -- Gas services revenue.................... -- 11,546(f) 11,546 7,774 Other................................... 13,708 (9,750)(f) 3,958 2,665 ---------- --------- ---------- ---------- Total revenues.................. 1,424,502 75,259 1,499,761 1,009,789 ---------- --------- ---------- ---------- COSTS AND EXPENSES: Lease operating expenses................ 223,286 5,546(f) 228,832 154,073 Transportation costs.................... -- 58,977(f) 58,977 39,709 Production taxes........................ -- 4,736(f) 4,736 3,189 Gas services costs and expenses......... -- 6,000(f) 6,000 4,040 Depreciation, depletion and amortization of property and equipment............ 364,642 (63,000)(g) 321,142 216,225 19,500(i) General and administrative expenses..... 60,003 -- 60,003 40,400 Interest expense........................ 69,782 (229)(h) 69,553 46,830 Deferred effect of changes in foreign currency exchange rate on long-term debt................................. -- 1,129(h) 1,129 760 ---------- --------- ---------- ---------- Total costs and expenses........ 717,713 32,659 750,372 505,226 ---------- --------- ---------- ---------- Earnings before income tax expense........ 706,789 42,600 749,389 504,563 INCOME TAX EXPENSE: Current................................. 21,445 -- 21,445 14,439 Deferred................................ 307,137 12,900(k) 320,037 215,481 ---------- --------- ---------- ---------- Total income tax expense........ 328,582 12,900 341,482 229,920 ---------- --------- ---------- ---------- Net earnings before discontinued operations.............................. C$ 378,207 C$ 29,700 C$ 407,907 $ 274,643 ========== ========= ========== ========== Net earnings per average common share outstanding: Basic................................... C$ 2.94 C$ 3.17 $ 2.13 Diluted................................. 2.87 3.09 2.08 Weighted average common shares outstanding: Basic................................... 128,806 128,806 128,806 Diluted................................. 131,857 131,857 131,857 |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
ANDERSON UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
U.S. GAAP ANDERSON AND OTHER ANDERSON CONVERTED HISTORICAL ADJUSTMENTS U.S. GAAP TO C$ C$ C$ U.S.$ ----------- ----------- ----------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Oil sales............................. C$ 261,923 C$ (40,650)(f) C$ 221,273 $144,226 Gas sales............................. 1,124,760 (243,329)(f) 881,431 574,517 NGL sales............................. 112,250 (20,536)(f) 91,714 59,779 Less royalties........................ (351,019) 351,019 (f) -- -- Gas services revenue.................. -- 5,915 (f) 5,915 3,855 Other................................. 1,311 (4,470)(f) (3,159) (2,059) ----------- ---------- ----------- -------- Total revenues................ 1,149,225 47,949 1,197,174 780,318 ----------- ---------- ----------- -------- COSTS AND EXPENSES: Lease operating expenses.............. 166,731 2,839 (f) 169,570 110,526 Transportation costs.................. -- 36,551 (f) 36,551 23,824 Production taxes...................... -- 5,483 (f) 5,483 3,574 Gas services costs and expenses....... -- 3,076 (f) 3,076 2,005 Depreciation, depletion and amortization of property and equipment.......................... 275,494 (30,500)(g) 257,594 167,900 12,600 (i) General and administrative expenses... 35,412 -- 35,412 23,082 Interest expense...................... 56,757 (3,456)(h) 53,301 34,742 Deferred effect of changes in foreign currency exchange rate on long-term debt............................... -- (8,744)(h) (8,744) (5,699) ----------- ---------- ----------- -------- Total costs and expenses...... 534,394 17,849 552,243 359,954 ----------- ---------- ----------- -------- Earnings before change in fair value of derivative instruments and income tax expense............................... 614,831 30,100 644,931 420,364 Change in fair value of derivative instruments........................... -- (19,500)(j) (19,500) (12,710) ----------- ---------- ----------- -------- Earnings before income tax expense...... 614,831 10,600 625,431 407,654 INCOME TAX EXPENSE: Current............................... 34,189 -- 34,189 22,284 Deferred.............................. 190,328 4,000(k) 194,328 126,663 ----------- ---------- ----------- -------- Total income tax expense...... 224,517 4,000 228,517 148,947 ----------- ---------- ----------- -------- Net earnings............................ C$ 390,314 C$ 6,600 C$ 396,914 $258,707 =========== ========== =========== ======== Net earnings per average common share outstanding: Basic................................. C$ 2.98 C$ 3.03 $ 1.97 Diluted............................... 2.89 2.94 1.92 Weighted average common shares outstanding: Basic................................. 131,141 131,141 131,141 Diluted............................... 135,227 135,227 135,227 |
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
The following adjustments convert Anderson's Canadian GAAP balance sheet to a U.S. GAAP balance sheet:
(a) This adjustment reflects the cumulative effect of reductions to the carrying value of Anderson's oil and gas properties using the full cost ceiling limitations set forth by the Securities and Exchange Commission for the full cost method of accounting for oil and gas operations.
(b) This adjustment reverses foreign exchange gains deferred under Canadian GAAP but required to be included in the determination of earnings under U.S. GAAP.
(c) This adjustment reflects the impact of the adoption of the liability method of accounting for income taxes under U.S. GAAP.
(d) This adjustment records the fair value of derivative financial instruments under U.S. GAAP.
(e) This adjustment reclassifies accrued site restoration costs from other liabilities to accumulated depreciation, depletion and amortization to conform to Devon's presentation.
The following adjustments convert Anderson's Canadian GAAP statements of operating results to U.S. GAAP statements of operating results:
(f) This adjustment (1) allocates oil, gas and NGL royalty payments to
oil, gas and NGL revenues in accordance with U.S. GAAP; (2) reclassifies
third party processing revenues from lease operating expenses to gas
services revenues and expenses, and freehold mineral taxes from royalties
to production taxes, to conform to Devon's presentation; and (3)
reclassifies transportation costs which are netted against oil, gas and NGL
sales in Anderson's historical results as expenses in accordance with U.S.
GAAP.
(g) This adjustment records the impact of a lower depreciation, depletion and amortization rate for U.S. GAAP as a result of a reduction in carrying value of oil and gas properties which Anderson would have recognized in 1998 due to a U.S. full cost ceiling limitation.
(h) This adjustment recognizes foreign exchange gains and losses in accordance with U.S. GAAP.
(i) This adjustment reflects additional depreciation, depletion and amortization resulting from the accounting for the initial adoption of the liability method of accounting for income taxes as an adjustment to property and equipment.
(j) This adjustment records the impact of changes in the fair value of derivative instruments that do not qualify as hedges under U.S. GAAP.
(k) This adjustment records the income tax impact of all the U.S. GAAP adjustments described above.
For the June 30, 2001 U.S. GAAP balance sheet, the historical Canadian dollar amounts were converted to U.S. dollars using the June 30, 2001 exchange rate of C$1.00 to U.S.$0.6589. For the U.S. GAAP statements of operations for the year ended December 31, 2000 and six months ended June 30, 2001, Canadian dollars were converted to U.S. dollars using the exchange rates of $0.6733 and $0.6518, respectively. Such rates are the averages of the month end exchange rates for the year and six-month periods.
INDEX TO HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
ANDERSON EXPLORATION LTD.
PAGE ----- AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED SEPTEMBER 1998, 1999 AND 2000: Report of KPMG LLP to the Directors of Anderson Exploration Ltd....................................................... FS-2 Consolidated Balance Sheets as of September 30, 1999 and 2000...................................................... FS-3 Consolidated Statements of Earnings for the fiscal years ended September 30, 1998, 1999 and 2000.................................................. FS-4 Consolidated Statements of Retained Earnings for the fiscal years ended September 30, 1998, 1999 and 2000............. FS-5 Consolidated Statements of Cash Flows for the fiscal years ended September 30, 1998, 1999 and 2000................... FS-6 Notes to Consolidated Financial Statements for the fiscal years ended September 30, 1998, 1999 and 2000............. FS-7 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2001: Consolidated Balance Sheets as of September 30, 2000 and June 30, 2001............................................. FS-23 Consolidated Statements of Earnings for the three months ended June 30, 2000 and 2001 and for the nine months ended June 30, 2000 and 2001.................................... FS-24 Consolidated Statements of Retained Earnings for the nine months ended June 30, 2000 and 2001.................................................. FS-25 Consolidated Statements of Cash Flows for the three months ended June 30, 2000 and 2001 and for the nine months ended June 30, 2000 and 2001.................................... FS-26 Selected Notes to Consolidated Financial Statements for the period ended June 30, 2001................................ FS-27 DEVON HOLDCO CORPORATION Independent Auditors' Report................................ FS-33 Consolidated Balance Sheet as of October 18, 2001........... FS-34 Notes to Consolidated Balance Sheet......................... FS-35 |
FS-1
AUDITORS' REPORT TO THE DIRECTORS
We have audited the consolidated balance sheets of Anderson Exploration Ltd. as at September 30, 2000, and 1999 and the consolidated statements of earnings, retained earnings and cash flows for the years ended September 30, 2000, 1999 and 1998. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at September 30, 2000 and 1999 and the results of its operations and its cash flows for the years ended September 30, 2000, 1999 and 1998 in accordance with Canadian generally accepted accounting principles.
Accounting principles generally accepted in Canada vary in certain significant respects from accounting principles generally accepted in the United States. Application of accounting principles generally accepted in the United States would have affected results of operations for each of the years in the three year period ended September 30, 2000, and shareholders' equity as at September 30, 2000 and 1999, to the extent summarized in Note 13 to the consolidated financial statements.
/s/ KPMG LLP Chartered Accountants Calgary, Canada November 15, 2000 (except with respect to Note 13, which is dated as of April 24, 2001 and Note 14, |
which is dated as of October 17, 2001)
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ANDERSON EXPLORATION LTD.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 --------------------- 1999 2000 --------- --------- (STATED IN MILLIONS OF CANADIAN DOLLARS) ASSETS Current assets Accounts receivable....................................... $ 125.0 $ 227.7 Inventories............................................... 11.2 17.8 -------- -------- 136.2 245.5 Property, plant and equipment subject to amortization (note 3)........................................................ 2,291.0 3,353.1 Unproved properties (note 3)................................ 179.0 375.0 -------- -------- $2,606.2 $3,973.6 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness......................................... $ 14.7 $ 32.4 Accounts payable and accrued liabilities.................. 136.2 272.9 Taxes payable............................................. 14.3 3.2 Current portion of long term debt......................... 0.9 -- -------- -------- 166.1 308.5 Long term debt (note 4)..................................... 545.2 1,126.9 Other credits (note 5)...................................... 136.7 133.6 Deferred income taxes....................................... 622.4 841.1 -------- -------- 1,470.4 2,410.1 -------- -------- Shareholders' equity Share capital (note 6).................................... 791.1 905.3 Retained earnings......................................... 344.7 658.2 -------- -------- 1,135.8 1,563.5 -------- -------- $2,606.2 $3,973.6 ======== ======== |
Subsequent events (note 14)
See accompanying notes to consolidated financial statements.
FS-3
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30 ---------------------------------- 1998 1999 2000 --------- --------- ---------- (STATED IN MILLIONS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS) Revenues Oil and gas............................................... $ 655.9 $ 770.9 $1,417.1 Royalties, net of ARTC (1998 -- $1.4 million; 1999 -- $1.5 million; 2000 -- $0.7 million)......................... (107.7) (125.9) (291.8) ------- ------- -------- 548.2 645.0 1,125.3 ------- ------- -------- Expenses Operating................................................. 160.5 153.6 209.4 Depletion and depreciation................................ 252.8 260.7 312.0 General and administrative................................ 31.6 40.7 52.9 Interest (interest on long term debt; 1998 -- $43.3 million; 1999 -- $41.9 million; 2000 -- $58.3 million)............................................... 44.0 42.5 58.3 Future site restoration................................... 11.7 18.5 18.6 ------- ------- -------- 500.6 516.0 651.2 ------- ------- -------- Earnings from continuing operations before taxes............ 47.6 129.0 474.1 ------- ------- -------- Taxes (note 8) Current................................................... 6.7 20.5 7.8 Deferred.................................................. 23.0 42.1 218.1 ------- ------- -------- 29.7 62.6 225.9 ------- ------- -------- Earnings from continuing operations......................... 17.9 66.4 248.2 Earnings from discontinued operations (note 2).............. 6.7 4.0 65.3 ------- ------- -------- Earnings.................................................... $ 24.6 $ 70.4 $ 313.5 ======= ======= ======== Basic earnings per common share From continuing operations................................ $ 0.15 $ 0.54 $ 1.95 From discontinued operations.............................. 0.05 0.03 0.51 ------- ------- -------- $ 0.20 $ 0.57 $ 2.46 ======= ======= ======== Diluted earnings per common share (note 7) From continuing operations................................ $ 0.15 $ 0.54 $ 1.92 From discontinued operations.............................. 0.05 0.03 0.51 ------- ------- -------- $ 0.20 $ 0.57 $ 2.43 ======= ======= ======== Weighted average number of common shares outstanding (millions) Basic..................................................... 122.8 124.1 127.4 Diluted................................................... 123.1 124.5 129.3 ======= ======= ======== |
See accompanying notes to consolidated financial statements.
FS-4
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED SEPTEMBER 30 --------------------------------- 1998 1999 2000 --------- --------- --------- (STATED IN MILLIONS OF CANADIAN DOLLARS) Retained earnings, beginning of year........................ $249.7 $274.3 $344.7 Earnings.................................................... 24.6 70.4 313.5 ------ ------ ------ Retained earnings, end of year.............................. $274.3 $344.7 $658.2 ====== ====== ====== |
See accompanying notes to consolidated financial statements.
FS-5
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30 -------------------------------- 1998 1999 2000 -------- -------- ---------- (STATED IN MILLIONS OF CANADIAN DOLLARS) Cash provided by (used in): Operations Earnings from continuing operations....................... $ 17.9 $ 66.4 $ 248.2 Add (deduct) non-cash items: Depletion and depreciation............................. 252.8 260.7 312.0 Future site restoration................................ 11.7 18.5 18.6 Deferred taxes......................................... 23.0 42.1 218.1 Other.................................................. (9.1) (0.1) -- Cash flow from discontinued operations (note 2)........... 9.7 8.0 4.4 Change in deferred revenue................................ 61.2 (10.6) (10.4) Change in non-cash working capital related to: -- continuing operations (note 9)......................... 17.5 21.1 (17.6) -- discontinued operations (notes 2 and 9)................ 0.3 1.0 0.9 ------- ------- --------- 385.0 407.1 774.2 ------- ------- --------- Investments Additions to property, plant and equipment................ (500.4) (293.4) (679.8) Proceeds on disposition of property, plant and equipment.............................................. 24.2 9.6 10.4 Acquisition of Ulster Petroleums Ltd. (note 2)............ -- -- (550.1) Proceeds on disposition of Federated Pipe Lines Ltd. (note 2)..................................................... -- -- 103.3 Site restoration expenditures............................. (6.3) (6.3) (10.1) Change in non-cash working capital related to investments (note 9)............................................... (12.4) 4.8 (2.0) Discontinued operations (notes 2 and 9)................... (60.9) (8.0) (0.2) ------- ------- --------- (555.8) (293.3) (1,128.5) ------- ------- --------- Financing Increase (decrease) in long term debt..................... 100.4 (150.3) 331.7 Issue of common shares.................................... 12.0 42.7 49.4 Repurchase of common shares............................... -- -- (38.7) Discontinued operations (note 2).......................... 50.1 -- (5.8) ------- ------- --------- 162.5 (107.6) 336.6 ------- ------- --------- Increase (decrease) in cash................................. (8.3) 6.2 (17.7) Cash position, beginning of year............................ (12.6) (20.9) (14.7) ------- ------- --------- Cash position, end of year.................................. $ (20.9) $ (14.7) $ (32.4) ======= ======= ========= |
See accompanying notes to consolidated financial statements.
Cash position includes cash net of current bank indebtedness. Current bank indebtedness includes outstanding cheques.
The Ulster acquisition amount represents the value assigned to property, plant and equipment of $1,000.7 million less share consideration of $103.5 million and debt and non-cash working capital deficiency of $347.1 million assumed from Ulster. The Federated disposition amount represents net proceeds of $102.5 million plus bank indebtedness of $0.8 million assumed by the purchaser.
FS-6
ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
(TABULAR AMOUNTS IN MILLIONS OF CANADIAN DOLLARS, UNLESS OTHERWISE STATED)
ALL DOLLAR AMOUNTS IN THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF ANDERSON EXPLORATION LTD. AND IN THESE NOTES ARE EXPRESSED IN CANADIAN DOLLARS, UNLESS OTHERWISE STATED.
Anderson Exploration Ltd. ("Anderson Exploration" or "the Company") is engaged in the acquisition, exploration, development and production of oil and gas resources in western and northern Canada. The consolidated financial statements include the accounts of Anderson Exploration and its wholly owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in Canada.
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Joint interest operations
A significant proportion of the Company's oil and gas exploration, development and production activities are conducted with others and accordingly the accounts reflect only the Company's proportionate interest in such activities.
(b) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the specific item or average cost method.
(c) Property, plant and equipment
The Company follows the full cost method of accounting for oil and gas properties. Under this method, all costs relative to the exploration for and development of oil and gas reserves are capitalized into cost centres on a country by country basis. Capitalized costs include lease acquisitions, geological and geophysical costs, lease rentals on non-producing properties, costs of drilling productive and non-productive wells and plant and production equipment costs. General and administrative costs are not capitalized, except to the extent of the Company's working interest in operated capital expenditure programs to which overhead fees have been charged under standard industry operating agreements. Overhead fees are not charged on 100 percent owned projects. Proceeds received from disposals of oil and gas properties and equipment are credited against capitalized costs unless the disposal would alter the rate of depletion and depreciation by more than 20 percent, in which case a gain or loss on disposal is recorded.
Depletion of oil and gas properties and depreciation of plant and production equipment, including estimated future costs to develop proved reserves, are provided on the unit of production method based on total proven reserves before royalties as estimated by Company engineers. Natural gas sales and reserves are converted to equivalent units of crude oil using their relative energy content. Buildings and other equipment are depreciated over their useful lives using the declining balance and straight line methods at rates varying from five percent to 40 percent per annum.
The Company applies a ceiling test to capitalized oil and gas property costs to ensure that such costs do not exceed the estimated future net revenues from production of proven reserves, at prices and operating costs in effect at the balance sheet date, plus the cost of unevaluated properties less management's estimate of impairment. The test also provides for estimated future administrative overhead, financing costs and taxes.
FS-7
ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Future site restoration costs
Provisions for future site restoration costs are made using the unit of production method based on established reserves. Costs are based on engineering estimates considering current regulations, costs and industry standards. Actual expenditures incurred are applied against deferred future site restoration costs.
(e) Stock based compensation plans
Consideration received from employees or directors on the exercise of stock options under the employee stock option plan and the purchase of stock under the employee stock savings plan is recorded as share capital. The Company matches employee contributions to the stock savings plan and these cash payments are recorded as compensation expense.
Obligations for cash payments under the share appreciation rights plan are accrued as compensation expense over the vesting period of the rights. Changes in the share price, up or down, will change the compensation expense and are recognized prospectively when they occur.
(f) Income tax
The Company follows the tax allocation method of accounting for income taxes. Under this method, deferred income taxes are recorded to the extent that taxable income otherwise determined is adjusted by timing differences.
New recommendations issued in 1997 by the Accounting Standards Board of the Canadian Institute of Chartered Accountants will be adopted effective October 1, 2000.
(g) Revenue recognition
Oil and natural gas revenues are recognized when title passes to the purchaser.
Settlement payments received for restructuring or terminating long term natural gas sales contracts are deferred and recognized as revenue over the remaining period of the contracts, or over the life of the reserves associated with the contracts.
(h) Foreign currency translation
Monetary assets and liabilities denominated in a foreign currency are translated at the rate of exchange in effect at the balance sheet date while non-monetary assets and liabilities are translated at historical rates of exchange. Revenues and expenses are translated at monthly average rates of exchange. Translation gains and losses are included in earnings except for unrealized gains and losses on long term monetary items which are deferred and amortized to earnings over their remaining term.
(i) Hedging
The Company utilizes derivative financial instruments to manage its exposure to fluctuations in commodity prices and interest rates. Hedge accounting is used when there is a high degree of correlation between movements in the derivative instrument and the item designated as being hedged. Gains and losses on derivative instruments used for hedging purposes are recognized on an accrual basis. If correlation ceases, hedge accounting is terminated and future changes in the market value of the derivative instruments are recognized as gains or losses in the period of change.
FS-8
ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Per share amounts
Basic earnings per common share and cash flow from operations per common share are computed by dividing earnings and cash flow from operations by the weighted average number of common shares outstanding for the period. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments, in accordance with new standards approved by the Canadian Institute of Chartered Accountants.
(k) Use of estimates
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates.
2. CORPORATE ACQUISITION AND DISPOSITION
(a) Acquisition of Ulster Petroleums Ltd.
On May 17, 2000, the Company acquired all the outstanding shares of Ulster Petroleums Ltd. ("Ulster"), an oil and gas production company. The consideration given for each Ulster share was $13.10, made up of $11.00 cash and 0.09655 of an Anderson Exploration common share based on Anderson Exploration's closing price of $21.75 per share on the offer date. The transaction has been accounted for using the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the acquisition are as follows:
Net assets acquired, at assigned values: Property, plant and equipment............................. $1,000.7 Working capital deficiency................................ (32.1) Long term debt assumed.................................... (312.2) -------- $ 656.4 ======== Purchase price: Cash...................................................... $ 542.2 Common shares (4,758,727 shares).......................... 103.5 Transaction costs......................................... 10.7 -------- $ 656.4 ======== |
(b) Disposition of Federated Pipe Lines Ltd.
On June 28, 2000, the Company entered into an agreement to sell its 50 percent interest in Federated Pipe Lines Ltd. ("Federated"), a pipeline transportation company. The Company received net proceeds on the sale of $102.5 million, which were used to reduce debt related to the acquisition of Ulster.
The Company's proportionate interest in the results of operations of Federated are shown as discontinued operations in the consolidated statements of earnings and cash flows. The carrying values of
FS-9
ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the assets and liabilities attributable to the discontinued operations and included in the consolidated balance sheet at September 30, 1999 were as follows:
Current assets.............................................. $ 3.6 Property, plant and equipment............................... 102.8 Current liabilities......................................... (3.7) Long term debt.............................................. (65.0) Other....................................................... (0.5) ------ Net assets........................................ $ 37.2 ====== |
For the six months ended March 31, 2000, revenues from discontinued operations were $16.7 million, earnings were $1.8 million (net of taxes of $1.5 million) and net capital expenditures were $0.1 million. Results of discontinued operations subsequent to this date were included in the gain on sale of $63.5 million (net of taxes of $1.6 million), as a plan of arrangement to dispose of the assets existed at March 31, 2000.
3. PROPERTY, PLANT AND EQUIPMENT
1999 2000 ------------------------ ------------------------ ACCUMULATED ACCUMULATED DEPLETION AND DEPLETION AND COST DEPRECIATION COST DEPRECIATION -------- ------------- -------- ------------- Oil and gas properties subject to amortization, including plant and production equipment...... $4,598.7 $(2,436.1) $6,065.0 $(2,743.1) Buildings, land and other....................... 73.4 (47.8) 83.9 (52.7) Discontinued operations (note 2)................ 155.9 (53.1) -- -- -------- --------- -------- --------- $4,828.0 $(2,537.0) $6,148.9 $(2,795.8) ======== ========= ======== ========= Net book value........................ $ 2,291.0 $ 3,353.1 ========= ========= |
At September 30, 2000, oil and gas properties included $375.0 million (1999 -- $179.0 million) relating to unproved properties which have been excluded from depletion and depreciation calculations.
Unproved property costs at September 30, 2000 are as follows:
LAND GEOLOGICAL ACQUISITION AND GEOPHYSICAL COSTS COSTS TOTAL ----------- --------------- ------ Acquired in 2000........................................... $172.5 $50.8 $223.3 Acquired in 1999........................................... 28.8 9.2 38.0 Acquired in 1998........................................... 32.6 -- 32.6 Acquired prior to 1998..................................... 81.1 -- 81.1 ------ ----- ------ $315.0 $60.0 $375.0 ====== ===== ====== |
Future development costs of proven undeveloped reserves of $340.3 million (1999 -- $301.7 million) are included in depletion and depreciation calculations.
Depletion and depreciation per equivalent barrel of production for the years ended September 30, 1998, September 30, 1999 and September 30, 2000 were $5.35, $5.57 and $5.89, respectively.
At the balance sheet dates, the Company had substantial surpluses in its ceiling tests using balance sheet date prices.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG TERM DEBT
1999 2000 ---------------------- ---------------------- BALANCE INTEREST BALANCE INTEREST OUTSTANDING RATE* OUTSTANDING RATE* ----------- -------- ----------- -------- Continuing operations Bank loans.......................................... $ 27.2 5.30% $ 385.9 6.68% Bank loans subject to swaps......................... 253.0 6.69% 253.0 6.94% Medium term notes, maturing July 2005............... -- 175.0 7.25% Senior U.S. dollar notes, maturing October 2000 to October 2006 (U.S.$75.0 million)................. -- 113.0 7.44% Oil indexed debentures, maturing October 2000....... 200.0 8.26% 200.0 8.26% ------ -------- $480.2 $1,126.9 ====== ======== Discontinued operations (note 2) Bank loans.......................................... 55.1 5.39% -- 9.54% sinking fund debentures, maturing October 2002............................................. 10.8 9.54% -- Less current portion................................ (0.9) -- ------ -------- 65.0 $545.2 $1,126.9 ====== ======== |
* As at September 30.
The Company has a $500 million syndicated revolving credit facility with an extendible 364 day revolving period and a six year term period. Advances under the facility can be drawn in either Canadian or U.S. funds. The facility bears interest at the bank's prime lending rate, bankers' acceptance rates plus applicable margins or U.S. LIBOR rates plus applicable margins.
The Company has another syndicated revolving credit facility that was arranged in May 2000 to finance the acquisition of Ulster (note 2). The facility is made up of three separate components. Tranche A is a committed 364 day $100 million bridge facility available by way of a single draw. Tranche B is a committed 18 month $300 million bridge facility available by way of a single draw. Tranche C is a committed $500 million 364 day revolving credit facility, followed by a committed two year term period. In July 2000, the full amount of Tranche A and $75 million of Tranche B were repaid with proceeds from the issue of medium term notes. Tranche A is no longer available and Tranche B has been reduced to $225 million. Advances under the facility can be drawn in either Canadian or U.S. funds. The facility bears interest at the bank's prime lending rate, bankers' acceptance rates plus applicable margins or U.S. Libor rates plus applicable margins.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has fixed the rate of interest on $253.0 million of its bank loans through swap agreements at an average rate of 6.94 percent. These agreements mature at various dates as shown below:
AMOUNT INTEREST RATE* MATURITY DATE ------ -------------- -------------- $35.0 7.36% September 2001 32.5 6.66% October 2001 53.0 6.05% November 2001 7.5 6.80% October 2002 40.0 7.32% February 2007 30.0 7.53% March 2007 30.0 7.32% June 2007 25.0 6.85% July 2007 ------ ----- $253.0.. 6.94% ====== ===== |
* Includes margin.
On June 29, 2000, the Company filed a short form shelf prospectus in connection with a two year medium term note program. Medium term notes may be issued from time to time in an aggregate principal amount of up to $500 million and are offered at prices and contain such other terms as may be determined at the time of issue. On July 18, 2000, the Company issued $175 million of 7.25 percent unsecured, non-redeemable notes maturing July 18, 2005 pursuant to the program. At September 30, 2000, the medium term notes were rated "A-" by CBRS Inc. and "BBB (high)" by Dominion Bond Rating Service Limited.
The senior U.S. dollar notes were assumed on the acquisition of Ulster (note 2). The senior notes are denominated in U.S. dollars and were issued in October 1995 in three series as follows:
Series A 7.23%, due in total in October 2000......................... U.S.$15.0 Series B 7.42%, due in October 2005, annual principal repayments of U.S.$5.8 million begin in October 2001...................... 29.0 Series C 7.57%, due in October 2006, annual principal repayments of U.S.$10.3 million begin in October 2004..................... 31.0 --------- U.S.$75.0 ========= |
The bank loans, medium term notes and senior U.S. dollar notes are unsecured and rank equally with one another and are subject to the maintenance of certain financial ratios.
The oil indexed debentures bear interest at a fixed rate of 5.0 percent per annum plus a variable rate of up to 16.8 percent per annum based upon the average price of crude oil. The effective rate of interest on the debentures has been fixed to maturity at 8.26 percent by an unsecured interest rate swap agreement.
The Company has a $100 million operating line of credit, of which $14.7 million was unused at September 30, 2000. The operating line is being used to support outstanding letters of credit associated with the Company's work proposals in northern Canada (note 12).
It is anticipated that the revolving credit facilities (other than the bridge facilities) will be extended. If this is the case, the aggregate amount of payments estimated to be required in each of the next five years are $222.6 million in 2001, $232.7 million in 2002, $8.7 million in 2003, $8.7 million in 2004 and $199.3 million in 2005. If the revolving credit facilities are not extended, the payments would be $222.6 million in 2001, $296.1 million in 2002, $107.0 million in 2003, $72.1 million in 2004 and $262.7 million in 2005. The payments in 2001 consist of the Series A senior U.S. dollar notes repaid on
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
October 4, 2000 and the oil indexed debentures repaid on October 31, 2000. The repayments were financed using existing long term revolving credit facilities and so were not classified as current liabilities in these consolidated financial statements.
5. OTHER CREDITS
1999 2000 ------ ------ Continuing operations Deferred future site restoration costs.................... $ 60.0 $ 68.4 Deferred revenue.......................................... 70.0 59.7 Pension accrual (note 10)................................. 5.6 5.5 ------ ------ 135.6 133.6 Discontinued operations (note 2)............................ 1.1 -- ------ ------ $136.7 $133.6 ====== ====== |
Site restoration involves the surface clean-up and reclamation of well sites and field production facilities to ensure they can be safely returned to appropriate land uses. In addition, certain plant facilities will require decommissioning which will involve dismantling of facilities as well as the decontamination and reclamation of these lands. Total estimated future costs, given the current inventory of wells and facilities, are approximately $283.4 million, of which $68.4 million has been accrued to date.
6. SHARE CAPITAL
Authorized:
Common shares: unlimited
Preferred shares: unlimited
Junior preferred shares, redeemable, participating: unlimited
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Issued:
1998 1999 2000 ------------------------ ------------------------ ------------------------ NUMBER OF AMOUNT NUMBER OF AMOUNT NUMBER OF AMOUNT SHARES (MILLIONS) SHARES (MILLIONS) SHARES (MILLIONS) ----------- ---------- ----------- ---------- ----------- ---------- Common shares Balance, beginning of year.................... 122,360,963 $582.8 123,260,352 $594.9 126,030,334 $637.6 Issued for cash on exercise of stock options........ 694,207 8.9 2,553,155 39.2 2,857,210 45.3 Issued for cash under employee stock savings plan.................... 205,182 3.2 216,827 3.5 183,793 4.1 Issued on acquisition of Ulster.................. -- -- -- -- 4,758,727 103.5 Repurchase of shares under Normal Course Issuer Bid..................... -- -- -- -- (2,303,138) (11.7) ----------- ------ ----------- ------ ----------- ------ Balance, end of year....... 123,260,352 594.9 126,030,334 637.6 131,526,926 778.8 ----------- ------ ----------- ------ ----------- ------ Contributed surplus Balance, beginning of year.................... 153.5 153.5 153.5 Repurchase of shares under Normal Course Issuer Bid..................... -- -- (27.0) ----------- ------ ----------- ------ ----------- ------ Balance, end of year....... 153.5 153.5 126.5 ----------- ------ ----------- ------ ----------- ------ 123,260,352 $748.4 126,030,334 $791.1 131,526,926 $905.3 =========== ====== =========== ====== =========== ====== |
The Company has an employee stock option plan under which both employees and directors are eligible to receive grants. On September 30, 2000, 6,769,320 common shares were reserved for issuance under the plan. Options granted under the plan generally have a term of five years to expiry and vest equally over a three year period starting on the first anniversary date of the grant. The exercise price of each option equals the market price of the Company's common shares on the date of the grant. At September 30, 2000, 6,466,771 options with exercise prices between $13.15 and $32.90 were outstanding and exercisable at various dates to the year 2005.
1998 1999 2000 -------------------------- --------------------------- --------------------------- WEIGHTED- WEIGHTED- WEIGHTED- NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE --------- -------------- ---------- -------------- ---------- -------------- Stock options outstanding, beginning of year... 6,066,176 $15.42 7,647,502 $15.95 7,423,564 $15.71 Granted............... 2,746,600 16.36 2,595,800 14.68 2,109,600 19.35 Exercised............. (694,207) 12.78 (2,553,155) 15.35 (2,857,210) 15.87 Cancelled............. (471,067) 16.27 (266,583) 15.93 (209,183) 16.16 --------- ------ ---------- ------ ---------- ------ Stock options outstanding, end of year................ 7,647,502 $15.95 7,423,564 $15.71 6,466,771 $16.81 ========= ====== ========== ====== ========== ====== Exercisable at year end................. 3,125,100 $15.32 2,560,734 $15.95 2,000,936 $16.05 ========= ====== ========== ====== ========== ====== |
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------- ---------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE OF OPTIONS REMAINING EXERCISE OPTIONS EXERCISE EXERCISE PRICES OUTSTANDING TERM (YEARS) PRICE EXERCISABLE PRICE --------------- ----------- ------------ -------- ----------- -------- Under $15.00............................ 2,137,320 3.2 $14.46 613,820 $14.49 $15.00 to 16.99......................... 1,459,201 2.5 16.33 693,099 16.34 $17.00 to 18.99......................... 798,950 2.0 17.06 662,650 17.03 Over $19.00............................. 2,071,300 4.5 19.47 31,367 19.40 --------- --- ------ --------- ------ 6,466,771 3.3 $16.81 2,000,936 $16.05 ========= === ====== ========= ====== |
In 1999, the employee stock option plan was amended to give the Board of Directors the discretion to attach share appreciation rights to stock options granted after February 10, 1999. Share appreciation rights give the holder of the options the right to surrender his or her options for cancellation and receive a cash payment from the Company equal to the excess of the then current market price of the common shares over the exercise price of the options. To date, share appreciation rights have not been attached to stock options granted.
A separate share appreciation rights plan, where employees are granted the right to receive cash payments from the Company, but not common shares, was established in 2000. Under this plan, employees are entitled to cash payments equal to the excess of the then current market price of the common shares over the exercise price of the right. Other terms of the plan are similar to the employee stock option plan. During the year ended September 30, 2000, 1,738,101 rights at a weighted average exercise price of $22.09 were granted and, following employee departures, 95,040 rights at a weighted average price of $24.55 were cancelled. At September 30, 2000, 1,643,061 rights with exercise prices between $17.75 and $32.90 were outstanding and exercisable at various dates to the year 2005. At September 30, 2000, the weighted average exercise price of the rights was $21.95 and the weighted average remaining contractual life of the rights was 4.5 years. Compensation expense of $4.1 million has been recorded in the current year related to this plan.
Under the employee stock savings plan, the Company is authorized to issue shares of common stock to all of its permanent employees. Under the terms of the plan, qualifying employees may contribute from four percent to eight percent of basic annual earnings. Employee contributions are invested in the Company's common shares purchased from treasury at market prices. The Company matches the employees' contributions, investing in qualified money market instruments or additional common shares of the Company purchased on the open market. The Company's share of contributions is recorded as compensation expense and amounted to $4.1 million in 2000 (1999 -- $3.5 million, 1998 -- $3.2 million). At September 30, 2000, 859,565 common shares were reserved for issuance under the plan.
On November 16, 1999, the Board of Directors approved a Notice of Intention to make a Normal Course Issuer Bid, under which the Company could acquire up to five percent of its outstanding common shares through the facilities of The Toronto Stock Exchange. During the year, the Company repurchased 2.3 million shares at an average price of $16.81 per share. The repurchased shares were cancelled and returned to treasury.
On August 18, 1999, the Board of Directors adopted a Shareholder Rights Plan to replace the Company's previous plan which expired in 1999. The Plan was approved by shareholders on February 16, 2000. If a bid to acquire control of the Company is made, the Plan is designed to give the Board of Directors of the Company time to consider alternatives to allow shareholders to receive full and fair value for their shares. In the event that a bid, other than a permitted bid, is made, shareholders become entitled to exercise rights to acquire common shares of the Company at 50 percent of market value. This would significantly dilute the value of the bidder's holdings.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PER SHARE AMOUNTS
The Canadian Institute of Chartered Accountants has approved a new standard for the computation, presentation and disclosure of earnings per share. In the fourth quarter of fiscal 2000, the Company retroactively adopted the new standard. Under the new standard, the treasury stock method is used instead of the imputed earnings method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only "in the money" dilutive instruments impact the diluted calculations.
In computing diluted earnings and cash flow from operations per share, 1.9 million shares were added to the weighted average number of common shares outstanding during the year ended September 30, 2000 (1999 -- 0.4 million shares, 1998 -- 0.3 million shares) for the dilutive effect of employee stock options. No adjustments were required to reported earnings or cash flow from operations in computing diluted per share amounts.
Prior period diluted earnings per share and cash flow from operations per share have been restated for this change. If the imputed earnings method had been used to calculate these amounts, the reported amounts would have been:
1998 1999 2000 ----- ----- ----- Diluted earnings per common share From continuing operations................................ $0.15 $0.53 $1.87 From discontinued operations.............................. 0.05 0.03 0.49 ----- ----- ----- $0.20 $0.56 $2.36 ===== ===== ===== |
8. TAXES
The provision for taxes differs from the result which would have been obtained by applying the combined federal and provincial tax rate to earnings before taxes. The difference results from the following items:
1998 1999 2000 ------ ------ ------- Earnings from continuing operations before taxes.......... $ 47.6 $129.0 $ 474.1 ====== ====== ======= Combined federal and provincial tax rate.................. 44.8% 44.8% 44.8% ====== ====== ======= Computed "expected" tax................................... $ 21.3 $ 57.8 $ 212.4 Increase (decrease) in taxes resulting from: Royalties and other payments to provincial governments.......................................... 42.1 49.5 116.4 Non-deductible depletion................................ 2.2 1.2 6.4 Resource allowance...................................... (39.0) (49.7) (111.9) Income tax rebates and credits.......................... (2.7) (2.1) (7.6) Capital taxes........................................... 7.0 7.0 10.3 Other................................................... (1.2) (1.1) (0.1) ------ ------ ------- Provision for taxes....................................... $ 29.7 $ 62.6 $ 225.9 ====== ====== ======= |
Property, plant and equipment with a net book value of $435.7 million (1999 -- $33.1 million, 1998 -- $37.3 million) has no cost base for income tax purposes.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. CHANGE IN NON-CASH WORKING CAPITAL
1998 1999 2000 ------ ------ ------- Accounts receivable....................................... $ 17.3 $(23.6) $(102.7) Inventories............................................... (0.3) (1.4) (6.7) Accounts payable and accrued liabilities.................. (33.1) 35.9 136.7 Taxes payable............................................. 12.0 13.4 (11.1) Acquisition of non-cash working capital deficiency........ -- -- (34.9) Disposition of non-cash working capital deficiency........ -- -- (0.2) ------ ------ ------- $ (4.1) $ 24.3 $ (18.9) ====== ====== ======= |
The following cash receipts (payments) have been included in the determination of earnings from continuing operations:
1998 1999 2000 ------ ------ ------ Dividends received......................................... $ 0.1 $ 1.1 $ 1.0 Interest paid.............................................. (44.7) (42.2) (54.1) Taxes (paid) recovered..................................... 0.3 (7.3) (19.0) |
10. PENSION PLANS
The Company has a non-contributory registered defined benefit pension plan. In June 1995, the plan was amended to give active employees an opportunity to opt out of the plan in favour of a defined contribution alternative. Most employees opted out of the plan. These employees and all new employees accrue future benefits based on defined contributions. Employees remaining in the plan continue to accrue benefits under the defined benefit plan. The plan is funded based on independent actuarial valuations. Plan assets are invested primarily in treasury bills and/or publicly traded equity and fixed income securities. Retirement benefits are based on the employees' years of credited service and salaries during the last years of employment.
The retirement benefit under the registered plan is subject to a maximum pension as determined under the Income Tax Act (Canada). To the extent this limitation applied, supplemental retirement allowances were provided to qualifying employees at the time so that the total retirement benefits were sufficient to provide the annuity that those employees would have been entitled to without the limitation. To support the Company's obligations under the supplemental plan, the Company has issued a letter of credit to the custodian of the supplemental plan.
In August 1997, the Company purchased annuity contracts in respect of all the then retired and deferred vested members of the registered plan. Pension assets were used to purchase the annuities. Projected benefit obligations were reduced to reflect this purchase of annuities.
Based on an actuarial valuation dated September 30, 2000, the status of the plans on that date was:
1999 2000 ----- ----- Pension plan assets......................................... $20.3 $21.0 Projected benefit obligations............................... (8.8) (9.0) ----- ----- Excess of pension plan assets over projected benefit obligations............................................... $11.5 $12.0 ===== ===== |
In 2000, the Company recorded pension expense of $0.4 million (1999 -- $0.4 million, 1998 -- $0.4 million).
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 6, 2000, a benefit enhancement of approximately $8.3 million was granted to those retired and deferred vested members of the registered plan as of December 31, 2000 for whom annuities were purchased in 1997. Pension plan assets were reduced by this amount subsequent to September 30, 2000.
11. FINANCIAL INSTRUMENTS
(a) Interest rate risk
The Company has entered into fixed rate debt agreements and interest rate swap agreements in order to manage its interest rate exposure on debt instruments. These agreements are described in note 4.
(b) Foreign currency exchange risk
The Company is exposed to foreign currency fluctuations as crude oil and natural gas prices received are referenced to U.S. dollar denominated prices.
(c) Credit risk
A substantial portion of the Company's accounts receivable are with customers and joint venture partners in the oil and gas industry and are subject to normal industry credit risks. Purchasers of the Company's natural gas, crude oil and natural gas liquids are subject to an internal credit review to minimize the risk of non-payment.
The Company is also exposed to credit risk associated with possible non-performance by counterparties to the interest rate swap agreements. The Company believes these risks to be minimal as the counterparties are major financial institutions which have at least an AA credit rating as determined by recognized credit rating agencies.
(d) Fair value of financial instruments
The carrying amounts of financial instruments included in the consolidated balance sheet, other than long term debt, approximate their fair value due to their short term maturity.
The estimated fair values of long term debt and derivative instruments have been determined based on discounted cash flow analysis using current market interest rates for financial instruments with similar maturities.
The carrying values and estimated fair values of long term debt and derivative instruments are as follows:
1999 2000 ----------------- ----------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE -------- ------ -------- ------ Continuing operations Bank loans...................................... $280.2 $280.2 $638.9 $638.9 Interest rate swaps on bank loans............... -- 2.4 -- 2.2 Medium term notes............................... -- -- 175.0 177.2 Senior U.S. dollar notes........................ -- -- 113.0 112.6 Oil indexed debentures.......................... 200.0 199.3 200.0 200.0 Interest rate swap on oil indexed debentures.... -- 6.2 -- -- Discontinued operations (note 2) Bank loans...................................... 55.1 55.1 -- -- 9.54% sinking fund debentures................... 10.8 11.6 -- -- |
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS
In 1999 and 2000, the Company acquired interests in northern Canada for total work expenditure proposals of $376.7 million. Work expenditures commenced in fiscal 2000, with $4.6 million of eligible expenditures incurred. Expenditures will continue over the next five years and include obligations to drill at least one well on each licence or permit. The proposals are supported by deposits of $85.0 million in letters of credit. The letters of credit will be reduced proportionately as eligible expenditures are incurred.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP") that, in most respects, conform to accounting principles generally accepted in the United States ("U.S. GAAP"). Canadian GAAP differs from U.S. GAAP in the following respects:
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, NOTE 1998 1999 2000 ---- ------------- ------------- ------------- (MILLIONS OF DOLLARS) Earnings from continuing operations, as reported.............................. $ 17.9 $ 66.4 $248.2 Impact of U.S. GAAP Full cost accounting.................. A (711.0) 72.2 64.9 Related income taxes............... 311.0 (31.5) (28.4) Foreign exchange on long term debt.... B -- -- (1.6) Related income taxes............... -- -- 0.7 Accounting for income taxes -- impact on depletion and depreciation expense............................ C (3.5) (2.6) (13.9) Related income taxes............... 3.6 2.3 11.9 ------- ------ ------ Earnings from continuing operations, as adjusted.............................. (382.0) 106.8 281.8 Discontinued operations................. 6.7 4.0 65.3 ------- ------ ------ Earnings, as adjusted................... $(375.3) $110.8 $347.1 ======= ====== ====== Basic earnings per common share From continuing operations, as adjusted........................... $ (3.11) $ 0.86 $ 2.21 From discontinued operations.......... 0.05 0.03 0.51 ------- ------ ------ $ (3.06) $ 0.89 $ 2.72 ======= ====== ====== Diluted earnings per common share From continuing operations, as adjusted........................... $ (3.10) $ 0.86 $ 2.17 From discontinued operations.......... 0.05 0.03 0.51 ------- ------ ------ $ (3.05) $ 0.89 $ 2.68 ======= ====== ====== |
Under U.S. GAAP, the classification of certain revenue and expense items differs from Canadian GAAP. These classification differences do not have an impact on reported earnings.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Balance sheet items in accordance with U.S. GAAP are as follows:
YEAR ENDED YEAR ENDED SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 ------------------- ------------------- CANADIAN U.S. CANADIAN U.S. NOTE GAAP GAAP GAAP GAAP ---- -------- -------- -------- -------- (MILLIONS OF DOLLARS) Current assets, net of current liabilities......................... $ (29.9) $ (29.9) $ (63.0) $ (63.0) Property, plant and equipment....... A,B 2,291.0 1,675.4 3,353.1 3,092.3 Unproved properties................. 179.0 179.0 375.0 375.0 Long term debt...................... 545.2 545.2 1,126.9 1,126.9 Other credits....................... 136.7 136.7 133.6 133.6 Deferred taxes...................... A,C 622.4 366.4 841.1 906.3 Capital stock....................... 791.1 791.1 905.3 905.3 Retained earnings (deficit)......... A-C 344.7 (14.9) 658.2 332.2 |
Cash flows by activity on the consolidated statement of cash flows in accordance with U.S. GAAP would be as follows:
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1998 1999 2000 ------------- ------------- ------------- (MILLIONS OF DOLLARS) Cash flows from operating activities.......... $ 378.7 $ 400.8 $ 764.1 Cash flows from investing activities.......... (549.5) (287.0) (1,118.4) Cash flows from financing activities.......... 162.5 (107.6) 336.6 |
On the consolidated statement of cash flows, site restoration expenditures of $10.1 million (1999 -- $6.3 million; 1998 -- $6.3 million) which are disclosed as investing activities under Canadian GAAP would be disclosed as operating activities under U.S. GAAP.
(a) Full cost accounting
Under the full cost method of accounting in the United States, a ceiling test is applied to ensure that capitalized oil and gas property costs do not exceed the present value, discounted at 10%, of the unescalated estimated future net revenues from the production of proven reserves, plus the cost of unevaluated properties less management's estimate of impairment, less applicable taxes. Under Canadian GAAP, future net revenues are not discounted but interest and general and administrative expenses are deducted.
As a result of applying the U.S. GAAP ceiling test rules in prior years,
the Company recorded additional depletion of $711.0 million ($400.0 million
after tax) that reduced the carrying amount of its property, plant and
equipment. This additional depletion was not recorded for Canadian GAAP
purposes. As a result, depletion and depreciation expense is lower under U.S.
GAAP.
(b) Foreign exchange on long term debt
U.S. GAAP requires long term debt denominated in foreign currencies be translated at the rates of exchange in effect on the balance sheet date, with inclusion of the resulting gain or loss in earnings for the period. Canadian GAAP requires these gains and losses be amortized over the life of the long term debt.
(c) Accounting for income taxes -- impact on depletion and depreciation expense
U.S. GAAP required the adoption of the liability method of accounting for income taxes in 1993, while under Canadian GAAP the Company followed the deferral method until September 30, 2000.
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 1, 2000, the Company adopted the liability method for Canadian GAAP purposes. While this will eliminate a conceptual difference between Canadian and U.S. GAAP, adoption under Canadian GAAP resulted in a charge of $120.8 million to retained earnings, whereas, under U.S. GAAP, this adjustment would be reflected in property, plant and equipment. As a result of the different implementation methods, differences in depletion and depreciation expense will continue to exist in future years.
(d) Derivative financial instruments
The Company has designated, for Canadian GAAP purposes, its derivative financial instruments as hedges of anticipated revenue and expenses. In accordance with Canadian GAAP, payments or receipts on these contracts are recognized in earnings concurrently with the hedged transaction. The fair value of contracts deemed to be hedges are not reflected in the financial statements.
Effective October 1, 2000, for U.S. GAAP purposes, the Company would be required to adopt the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS No. 137 and 138). The statement, as amended, establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met, including formal documentation requirements. The standard is applied prospectively.
If the statement provisions were required to be applied to financial instruments in place at September 30, 2000, approximately $4.0 million of additional net liabilities would be recognized on the balance sheet, representing the fair value of those financial instruments not currently recognized for accounting purposes. As none of these financial instruments have been designated as hedges for U.S. GAAP purposes, a $2.3 million after tax charge to earnings would have been recorded.
(e) Recent Developments in U.S. Accounting Standards
The Financial Accounting Standards Board recently issued Statement No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Statement No. 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. Since the requirement is to recognize the obligation when incurred, approaches that have been used in the past to accrue the asset retirement obligation over the life of the asset are no longer acceptable. Statement No. 143 also requires the enterprise to record an increase to the carrying amount of the related long-lived asset (i.e., the associated asset retirement costs) and to depreciate that cost over the remaining useful life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e., accretion expense) and changes in the estimated future cash flows underlying the initial fair value measurement. Enterprises are required to adopt Statement No. 143 for fiscal years beginning after June 15, 2002. Anderson Exploration is currently assessing the impact that adoption of this standard would have on the consolidated financial position and results of operations of the Company.
The Financial Accounting Standards Board also recently issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Statement No. 144 will replace previous United States generally accepted accounting principles regarding accounting for impairment of long-lived assets and accounting and reporting for discontinued operations. Enterprises utilizing generally accepted accounting principles of the United States will be required to adopt Statement No. 144 for financial statements issued for periods beginning after December 15, 2001. Anderson Exploration is currently assessing the impact that
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ANDERSON EXPLORATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adoption of this standard would have on the consolidated financial position and results of operations of the Company.
NOTE 14 -- SUBSEQUENT EVENTS
(a) Acquisition of Numac Energy Inc.
Effective February 12, 2001, the Company acquired all of the outstanding shares of Numac Energy Inc. ("Numac"), an oil and gas production company for a cash consideration of $8.00 per share. The transaction has been accounted for using the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the acquisition are as follows:
($ MILLIONS) Net assets acquired Property, plant and equipment............................. $ 933.5 Deferred financing costs.................................. 3.5 Working capital deficiency, including bank indebtedness assumed of $1.5 million................................ (12.4) Long term debt assumed.................................... (135.7) Pension and lease obligations assumed..................... (6.6) Future income tax adjustment to property, plant and equipment.............................................. 419.8 Future income taxes....................................... (419.8) ------- $ 782.3 ======= Purchase price Cash...................................................... $ 773.3 Transaction costs......................................... 9.0 ------- $ 782.3 ======= |
The Company arranged a new $1 billion non-revolving bridge credit facility through a group of Canadian chartered banks to finance the acquisition of Numac. In March 2001, a new U.S. debt issue and existing credit facilities were used to repay the outstanding amount under the bridge facility, and the facility was cancelled.
(b) Issuance of Senior Unsecured 6.75% Notes
On March 14, 2001, Anderson Exploration sold U.S. $400 million principal amount of 6.75% senior unsecured notes due 2011 to purchasers in the United States. Net proceeds from the issue were used to repay a portion of the bridge facility associated with the Numac acquisition.
(c) Issuance of Unsecured, Non-redeemable 6.55% Notes
On August 2, 2001, Anderson Exploration issued $200 million principal amount of 6.55% unsecured, non-redeemable notes due 2006. Net proceeds from the issue were used to repay bank debt.
(d) Property Disposition
Effective July 1, 2001, Anderson Exploration agreed to sell certain non-core producing oil and gas properties for proceeds of approximately $150 million. The transaction closed on September 6, 2001.
(e) Devon Energy Corporation Acquisition of Anderson Exploration
On October 17, 2001, Devon Energy Corporation ("Devon") completed its acquisition of all of the issued and outstanding shares of the Company. On that date, Anderson Exploration Ltd. became a wholly-owned subsidiary of Devon.
FS-22
ANDERSON EXPLORATION LTD.
INTERIM FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 2001
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(STATED IN MILLIONS OF CANADIAN DOLLARS)
SEPTEMBER 30, JUNE 30, 2000 2001 ------------- -------- ASSETS Current assets Accounts receivable....................................... $ 227.7 $ 258.6 Inventories............................................... 17.8 17.0 -------- -------- 245.5 275.6 Property, plant and equipment (notes 1 and 2)............... 3,353.1 4,983.7 Unproved properties......................................... 375.0 608.5 -------- -------- $3,973.6 $5,867.8 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness......................................... $ 32.4 $ 19.5 Accounts payable and accrued liabilities.................. 272.9 433.5 Taxes payable............................................. 3.2 42.0 -------- -------- 308.5 495.0 Long term debt (note 2)..................................... 1,126.9 1,471.9 Other credits (notes 1 and 2)............................... 133.6 140.5 Future income taxes (notes 1 and 2)......................... 841.1 1,771.7 -------- -------- 2,410.1 3,879.1 -------- -------- Shareholders' equity Share capital (note 3).................................... 905.3 887.3 Retained earnings (note 1)................................ 658.2 1,101.4 -------- -------- 1,563.5 1,988.7 -------- -------- $3,973.6 $5,867.8 ======== ======== |
See selected notes to consolidated financial statements.
FS-23
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(STATED IN MILLIONS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30 JUNE 30 ------------------ ------------------ 2000 2001 2000 2001 ------- -------- ------- -------- Revenues Oil and gas.......................................... $382.7 $ 680.6 $ 925.9 $2,166.8 Royalties, net of ARTC (2000 -- $0.5 million; 2001 -- $0.4 million)..................................... (79.4) (152.1) (185.0) (503.0) ------ ------- ------- -------- 303.3 528.5 740.9 1,663.8 ------ ------- ------- -------- Expenses Operating............................................ 52.9 91.0 142.5 223.7 Depletion and depreciation........................... 82.7 142.4 216.7 364.2 General and administrative........................... 14.3 17.2 35.8 53.4 Interest............................................. 17.7 26.9 35.6 77.1 Future site restoration.............................. 4.8 6.5 13.6 16.2 ------ ------- ------- -------- 172.4 284.0 444.2 734.6 ------ ------- ------- -------- Earnings from continuing operations before taxes....... 130.9 244.5 296.7 929.2 ------ ------- ------- -------- Taxes Current.............................................. (0.2) 3.4 7.3 52.1 Future (note 1)...................................... 63.0 50.7 132.9 312.8 ------ ------- ------- -------- 62.8 54.1 140.2 364.9 ------ ------- ------- -------- Earnings from continuing operations.................... 68.1 190.4 156.5 564.3 Earnings from discontinued operations (note 5)......... 63.5 -- 65.3 -- ------ ------- ------- -------- Earnings............................................... $131.6 $ 190.4 $ 221.8 $ 564.3 ====== ======= ======= ======== Basic earnings per common share From continuing operations........................... $ 0.53 $ 1.45 $ 1.24 $ 4.30 From discontinued operations......................... 0.50 -- 0.51 -- ------ ------- ------- -------- $ 1.03 $ 1.45 $ 1.75 $ 4.30 ====== ======= ======= ======== Diluted earnings per common share From continuing operations........................... $ 0.52 $ 1.42 $ 1.23 $ 4.21 From discontinued operations......................... 0.49 -- 0.51 -- ------ ------- ------- -------- $ 1.01 $ 1.42 $ 1.74 $ 4.21 ====== ======= ======= ======== Weighted average number of common shares outstanding (millions) Basic................................................ 128.2 131.5 126.2 131.2 Diluted.............................................. 130.7 134.4 127.7 134.1 ====== ======= ======= ======== |
See selected notes to consolidated financial statements.
FS-24
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
(STATED IN MILLIONS OF CANADIAN DOLLARS)
NINE MONTHS ENDED JUNE 30 ----------------- 2000 2001 ------ -------- Retained earnings, beginning of period...................... $344.7 $ 658.2 Retroactive adjustment to opening retained earnings (note 1)........................................................ -- (121.1) Earnings.................................................... 221.8 564.3 ------ -------- Retained earnings, end of period............................ $566.5 $1,101.4 ====== ======== |
See selected notes to consolidated financial statements.
FS-25
ANDERSON EXPLORATION LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(STATED IN MILLIONS OF CANADIAN DOLLARS)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30 JUNE 30 ------------------- --------------------- 2000 2001 2000 2001 -------- -------- --------- --------- Cash provided by (used in): Operations Earnings from continuing operations............... $ 68.1 $ 190.4 $ 156.5 $ 564.3 Add (deduct) non-cash items: Depletion and depreciation..................... 82.7 142.4 216.7 364.2 Future site restoration........................ 4.8 6.5 13.6 16.2 Future taxes................................... 63.0 50.7 132.9 312.8 Other.......................................... -- (0.3) -- 6.9 Cash flow from discontinued operations (note 5)... -- -- 4.4 -- Change in deferred revenue........................ (2.6) (2.1) (7.7) (7.2) Change in non-cash working capital related to: -- continuing operations....................... (44.6) 37.2 (53.4) 126.7 -- discontinued operations (note 5)............ -- -- 0.9 -- ------- ------- --------- --------- 171.4 424.8 463.9 1,383.9 ------- ------- --------- --------- Investments Additions to property, plant and equipment........ (117.9) (196.5) (503.6) (807.6) Proceeds on disposition of property, plant and equipment...................................... 0.6 1.3 9.4 5.6 Acquisition of Numac Energy Inc. (note 2)......... -- -- -- (783.8) Acquisition of Ulster Petroleums Ltd.............. (550.1) -- (550.1) -- Proceeds on disposition of Federated Pipe Lines Ltd. (note 5).................................. 103.3 -- 103.3 -- Site restoration expenditures..................... (2.2) (2.7) (6.6) (8.2) Change in non-cash working capital related to investments.................................... (189.3) (124.9) (106.4) 27.7 Discontinued operations (note 5).................. -- -- (0.2) -- ------- ------- --------- --------- (755.6) (322.8) (1,054.2) (1,566.3) ------- ------- --------- --------- Financing Increase (decrease) in long term debt............. 538.3 (68.4) 589.1 209.3 Issue of common shares............................ 33.1 10.8 41.8 26.1 Repurchase of common shares....................... -- (7.7) (38.5) (44.1) Change in non-cash working capital related to financing...................................... -- 4.0 -- 4.0 Discontinued operations (note 5).................. -- -- (5.8) -- ------- ------- --------- --------- 571.4 (61.3) 586.6 195.3 ------- ------- --------- --------- Increase (decrease) in cash......................... (12.8) 40.7 (3.7) 12.9 Cash position, beginning of period.................. (5.6) (60.2) (14.7) (32.4) ------- ------- --------- --------- Cash position, end of period........................ $ (18.4) $ (19.5) $ (18.4) $ (19.5) ======= ======= ========= ========= |
See selected notes to consolidated financial statements.
Cash position includes cash net of current bank indebtedness. Current bank indebtedness includes outstanding cheques.
The Numac acquisition amount represents the value assigned to property, plant and equipment of $933.5 million less debt, non-cash working capital deficiency and other obligations of $149.7 million assumed from Numac.
FS-26
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2001
(UNAUDITED)
The interim consolidated financial statements of Anderson Exploration Ltd. ("Anderson Exploration" or "the Company") have been prepared by management in accordance with accounting principles generally accepted in Canada. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal and recurring nature necessary to present fairly the Company's financial position at June 30, 2001 and the results of its operations and its cash flows for the three and nine months ended June 30, 2001 and 2000. The results of operations and cash flows are not necessarily indicative of the results of operations or cash flows to be expected for the year ending September 30, 2001. The interim consolidated financial statements have been prepared following the same accounting policies and methods of computation as the consolidated financial statements for the fiscal year ended September 30, 2000, except as described below. The disclosures included below are incremental to those included with the annual consolidated financial statements. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the Company's annual report for the year ended September 30, 2000.
NOTE 1 -- CHANGE IN ACCOUNTING POLICY
Effective October 1, 2000, the Company adopted the Canadian Institute of Chartered Accountants accounting recommendations with respect to income taxes and employee future benefits. The new recommendations were applied retroactively without restatement of prior year financial statements. Under the new recommendations for income taxes, the liability method of tax allocation accounting is used. The change in policy resulted in an increase in property, plant and equipment of $77.2 million, an increase in future income tax liabilities of $198.0 million and a charge to retained earnings of $120.8 million. As a result of applying the liability method of tax allocation accounting, earnings at June 30, 2001 were increased by $57 million ($0.43 per share), representing the reduction in the future tax liability resulting from a reduction in the Alberta provincial corporate tax rate on April 1, 2001.
As a result of the adoption of the new accounting recommendations relating to future employee benefits, a charge of $0.3 million was recorded against retained earnings with the corresponding liability reflected in the pension accrual. The effect of this change on earnings in the first nine months of fiscal 2001 was not significant.
NOTE 2 -- ACQUISITION OF NUMAC ENERGY INC.
Effective February 12, 2001, the Company acquired all of the outstanding shares of Numac Energy Inc. ("Numac"), an oil and gas production company for a cash consideration of $8.00 per share.
FS-27
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The transaction has been accounted for using the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the acquisition are as follows:
($ MILLIONS) Net assets acquired Property, plant and equipment............................. $ 933.5 Deferred financing costs.................................. 3.5 Working capital deficiency, including bank indebtedness assumed of $1.5 million................................ (12.4) Long term debt assumed.................................... (135.7) Pension and lease obligations assumed..................... (6.6) Future income tax adjustment to property, plant and equipment.............................................. 419.8 Future income taxes....................................... (419.8) ------- $ 782.3 ======= Purchase price Cash...................................................... $ 773.3 Transaction costs......................................... 9.0 ------- $ 782.3 ======= |
The Company arranged a new $1 billion non-revolving bridge credit facility through a group of Canadian chartered banks to finance the acquisition of Numac. The unsecured facility had a maturity date of October 1, 2002. On March 14, 2001, Anderson Exploration sold US$400 million principal amount of 6.75% senior unsecured notes due 2011 to purchasers in the United States. Net proceeds from the issue were used to repay a portion of the bridge facility. In March 2001, existing credit facilities were used to repay the remainder of the outstanding amount under the bridge facility, and the facility was cancelled.
NOTE 3 -- SHARE CAPITAL
Authorized:
Common shares: unlimited
Preferred shares: unlimited
Junior preferred shares, redeemable, participating: unlimited
Issued:
NUMBER OF AMOUNT SHARES ($ MILLIONS) ----------- ------------ Common shares Balance at September 30, 2000............................. 131,526,926 $778.8 Issued for cash on exercise of stock options.............. 1,406,500 22.6 Issued for cash under employee stock savings plan......... 110,461 3.5 Repurchase of shares under Normal Course Issuer Bid....... (1,566,700) (9.3) ----------- ------ Balance at June 30, 2001.................................. 131,477,187 795.6 ----------- ------ Contributed surplus Balance at September 30, 2000............................. -- 126.5 Repurchase of shares under Normal Course Issuer Bid....... -- (34.8) ----------- ------ Balance at June 30, 2001.................................. -- 91.7 ----------- ------ ----------- ------ 131,477,187 $887.3 =========== ====== |
FS-28
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has an employee stock option plan under which both employees and directors are eligible to receive grants. On February 13, 2001, the shareholders of the Company approved an amendment to the plan to increase the maximum number of common shares reserved for issuance thereunder by 6,300,000. At June 30, 2001, there were 11,662,820 common shares reserved for issuance under the plan of which 7,470,520 options with exercise prices between $13.15 and $34.05 were outstanding and exercisable at various dates to the year 2006.
NUMBER OF WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE ---------- ---------------- Stock options outstanding at September 30, 2000........... 6,466,771 $16.81 Granted................................................. 2,563,300 32.44 Exercised............................................... (1,406,500) 16.09 Cancelled............................................... (153,051) 21.23 ---------- ------ Stock options outstanding at June 30, 2001................ 7,470,520 22.21 ---------- ------ Exercisable at June 30, 2001.............................. 2,776,069 $16.46 ========== ====== |
The Company also has a share appreciation rights plan, where employees are granted the right to receive cash payments from the Company, but not common shares. Other terms are similar to the employee stock option plan. At June 30, 2001, 1,538,438 rights with exercise prices between $17.75 and $34.05 were outstanding and exercisable at various dates to the year 2006. The weighted average exercise price of the rights was $23.06. Compensation expense of $7.1 million has been recorded in the nine months ended June 30, 2001 related to this plan.
At June 30, 2001, 749,104 common shares were also reserved for issuance under the employee stock savings plan.
NOTE 4 -- FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of fixed rate long term debt and the unrecognized gains (losses) on other financial instruments are as follows:
AT SEPTEMBER 30, 2000 AT JUNE 30, 2001 ----------------- ----------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE -------- ------ -------- ------ Fixed rate long term debt................................. $488.0 $489.8 $873.1 $868.8 Unrecognized gains/(losses): Interest rate swaps on bank loans....................... -- (2.2) -- (6.3) Foreign currency swap................................... -- -- -- (2.1) Oil and gas sales contracts............................. -- -- -- (15.1) Power hedging contracts................................. -- -- -- (22.1) |
NOTE 5 -- DISCONTINUED OPERATIONS
On June 28, 2000, the Company sold its 50% interest in Federated Pipe Lines Ltd. ("Federated"), a pipeline transportation company. Anderson Exploration's proportionate interest in the results of operations of Federated is shown as discontinued operations in the consolidated statements of earnings and cash flows.
FS-29
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP") that, in most respects, conform to accounting principles generally accepted in the United States ("U.S. GAAP"). Canadian GAAP differs from U.S. GAAP in the following respects:
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30 JUNE 30 ------------------- ----------------- NOTE 2000 2001 2000 2001 ---- -------- -------- ------- ------- (MILLIONS OF DOLLARS) Earnings from continuing operations................. $ 68.1 $190.4 $156.5 $564.3 Impact of U.S. GAAP Full cost accounting.............................. A 16.3 14.4 49.8 45.8 Related income taxes........................... (7.1) (6.3) (21.8) (20.0) Foreign exchange on long term debt................ B 0.5 30.7 0.5 12.9 Related income taxes........................... (0.2) (13.2) (0.2) (5.4) Accounting for income taxes -- impact on depletion and depreciation expense....................... C (4.4) (6.7) (5.6) (18.8) Related income taxes........................... 4.0 2.8 4.5 7.9 Derivative financial instruments.................. D -- 22.9 -- (23.5) Related income taxes........................... -- (9.5) -- 10.8 ------ ------ ------ ------ Earnings from continuing operations, as adjusted.... 77.2 225.5 183.7 574.0 Discontinued operations............................. 63.5 -- 65.3 -- ------ ------ ------ ------ Earnings, as adjusted............................... $140.7 $225.5 $249.0 $574.0 ====== ====== ====== ====== Basic earnings per common share From continuing operations, as adjusted........... $ 0.60 $ 1.71 $ 1.46 $ 4.38 From discontinued operations...................... 0.50 -- 0.51 -- ------ ------ ------ ------ $ 1.10 $ 1.71 $ 1.97 $ 4.38 ====== ====== ====== ====== Diluted earnings per common share From continuing operations, as adjusted........... $ 0.59 $ 1.68 $ 1.44 $ 4.28 From discontinued operations...................... 0.47 -- 0.48 -- ------ ------ ------ ------ $ 1.06 $ 1.68 $ 1.92 $ 4.28 ====== ====== ====== ====== |
Under U.S. GAAP, the classification of certain revenue and expense items differs from Canadian GAAP. These classification differences do not have an impact on reported earnings.
FS-30
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Balance sheet items in accordance with U.S. GAAP are as follows:
SEPTEMBER 30, 2000 JUNE 30, 2001 ------------------- ------------------- CANADIAN U.S. CANADIAN U.S. NOTE GAAP GAAP GAAP GAAP ---- -------- -------- -------- -------- (MILLIONS OF DOLLARS) Current assets, net of current liabilities......................... $ (63.0) $ (63.0) $ (219.4) $ (219.4) Property, plant and equipment......... A,B 3,353.1 3,092.3 4,983.7 4,685.6 Unproved properties................... 375.0 375.0 608.5 608.5 Long term debt........................ 1,126.9 1,126.9 1,471.9 1,471.9 Other credits......................... D 133.6 133.6 140.5 186.1 Deferred taxes........................ A,C 841.1 906.3 1,771.7 1,635.6 Capital stock......................... 905.3 905.3 887.3 887.3 Retained earnings..................... A-D 658.2 332.2 1,101.4 906.2 Accumulated Other Comprehensive Loss................................ D -- -- -- (12.4) |
Cash flows by activity on the consolidated statements of cash flows in accordance with U.S. GAAP would be as follows:
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30 JUNE 30 ------------------- --------------------- 2000 2001 2000 2001 -------- -------- --------- --------- (MILLIONS OF DOLLARS) Cash flows from operating activities........ $ 169.2 $ 422.1 $ 457.3 $ 1,375.7 Cash flows from investing activities........ (753.4) (320.1) (1,047.6) (1,558.1) Cash flows from financing activities........ 571.4 (61.3) 586.6 195.3 |
On the consolidated statements of cash flows, site restoration expenditures which are disclosed as investing activities under Canadian GAAP would be disclosed as operating activities under U.S. GAAP.
(a) Full cost accounting
Under the full cost method of accounting in the United States, a ceiling test is applied to ensure that capitalized oil and gas property costs do not exceed the present value, discounted at 10%, of the unescalated estimated future net revenues from the production of proven reserves, plus the cost of unevaluated properties less management's estimate of impairment, less applicable taxes. Under Canadian GAAP, future net revenues are not discounted but interest and general and administrative expenses are deducted.
As a result of applying the U.S. GAAP ceiling test rules in prior years,
the Company recorded additional depletion of $711.0 million ($400.0 million
after tax) that reduced the carrying amount of its property, plant and
equipment. This additional depletion was not recorded for Canadian GAAP
purposes. As a result, depletion and depreciation expense is lower under U.S.
GAAP.
(b) Foreign exchange on long term debt
U.S. GAAP requires long term debt denominated in foreign currencies be translated at the rates of exchange in effect on the balance sheet date, with inclusion of the resulting gain or loss in earnings for the period. Canadian GAAP requires these gains and losses be amortized over the life of the long term debt.
(c) Accounting for income taxes -- impact on depletion and depreciation expense
U.S. GAAP required the adoption of the liability method of accounting for income taxes in 1993, while under Canadian GAAP the Company followed the deferral method until September 30, 2000.
FS-31
ANDERSON EXPLORATION LTD.
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 1, 2001, the Company adopted the liability method for Canadian GAAP purposes. While this will eliminate a conceptual difference between Canadian and U.S. GAAP, adoption under Canadian GAAP resulted in a charge of $120.8 million to retained earnings, whereas, under U.S. GAAP, this adjustment would be reflected in property, plant and equipment. As a result of the different implementation methods, differences in depletion and depreciation expense will continue to exist in future years.
(d) Derivative financial instruments
The Company has designated, for Canadian GAAP purposes, its derivative financial instruments as hedges of anticipated revenue and expenses. In accordance with Canadian GAAP, payments or receipts on these contracts are recognized in earnings concurrently with the hedged transaction. The fair value of contracts deemed to be hedges are not reflected in the financial statements.
Effective October 1, 2000, for U.S. GAAP purposes, the Company was required to adopt the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS No. 137 and 138). The statement, as amended, establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met, including formal documentation requirements. The standard was applied prospectively. The cumulative impact of the adoption of this standard has been included in the income statement reconciliation with current year activity. The cumulative adjustment was a loss of $4.0 million ($2.3 million after tax).
(e) Recent Developments in U.S. Accounting Standards
The Financial Accounting Standards Board recently issued Statement No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Statement No. 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. Since the requirement is to recognize the obligation when incurred, approaches that have been used in the past to accrue the asset retirement obligation over the life of the asset are no longer acceptable. Statement No. 143 also requires the enterprise to record an increase to the carrying amount of the related long-lived asset (i.e., the associated asset retirement costs) and to depreciate that cost over the remaining useful life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e., accretion expense) and changes in the estimated future cash flows underlying the initial fair value measurement. Enterprises are required to adopt Statement No. 143 for fiscal years beginning after June 15, 2002. Anderson Exploration is currently assessing the impact that adoption of this standard would have on the consolidated financial position and results of operations of the Company.
The Financial Accounting Standards Board also recently issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Statement No. 144 will replace previous United States generally accepted accounting principles regarding accounting for impairment of long-lived assets and accounting and reporting for discontinued operations. Enterprises utilizing generally accepted accounting principles of the United States will be required to adopt Statement No. 144 for financial statements issued for periods beginning after December 15, 2001. Anderson Exploration is currently assessing the impact that adoption of this standard would have on the consolidated financial position and results of operations of the Company.
FS-32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
Devon Holdco Corporation:
We have audited the accompanying consolidated balance sheet of Devon Holdco Corporation and subsidiaries (the Company) as of October 18, 2001. This consolidated balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents fairly, in all material respects, the financial position of Devon Holdco Corporation and subsidiaries as of October 18, 2001, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Oklahoma City, Oklahoma
October 24, 2001
FS-33
DEVON HOLDCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
OCTOBER 18, 2001
ASSETS Cash -- total assets........................................ $1,000 ====== STOCKHOLDER'S EQUITY Common stock of $0.01 par value: Authorized 1,000 shares; issued and outstanding 100 shares................................................. $ 1 Additional paid-in capital.................................. 999 ------ Total stockholder's equity........................ $1,000 ====== |
See accompanying notes to the consolidated balance sheet.
FS-34
DEVON HOLDCO CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET
1. THE COMPANY
Devon Holdco Corporation (the Company) was incorporated under the Delaware General Corporation Law on October 4, 2001. The Company was formed for the purpose of effecting the proposed combination of Devon Energy Corporation and Mitchell Energy & Development Corp. pursuant to an amended and restated agreement and plan of merger, dated as of August 13, 2001. The Company is wholly owned by Devon Energy Corporation and has not engaged in any activity since its formation other than activities related to the proposed combination.
2. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated balance sheet includes all of the assets attributable to the Company and its wholly-owned subsidiaries, Devon Merger Corporation and Mitchell Merger Corporation. All intercompany accounts and transactions have been eliminated.
FS-35
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DEVON ENERGY CORPORATION,
DEVON NEWCO CORPORATION,
DEVON HOLDCO CORPORATION,
DEVON MERGER CORPORATION,
MITCHELL MERGER CORPORATION
AND
MITCHELL ENERGY & DEVELOPMENT CORP.
DATED AS OF AUGUST 13, 2001
TABLE OF CONTENTS
PAGE ---- ARTICLE 1 THE MERGER.................................................. A-4 Section 1.1 The Merger.................................................. A-4 Section 1.2 The Closing................................................. A-4 Section 1.3 Effective Time.............................................. A-4 Section 1.4 Certificate of Incorporation................................ A-4 Section 1.5 Bylaws...................................................... A-4 Section 1.6 Board of Directors.......................................... A-4 Section 1.7 Alternate Structure Event................................... A-4 ARTICLE 2 DIRECTORS OF PARENT......................................... A-5 Section 2.1 Directors of Parent......................................... A-5 ARTICLE 3 CONVERSION OF COMPANY SHARES................................ A-5 Section 3.1 Effect on Capital Stock..................................... A-5 Section 3.2 Exchange of Certificates for Shares......................... A-6 Section 3.3 Dissenters' Rights.......................................... A-8 Section 3.4 Adjustments to Prevent Dilution............................. A-8 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-8 Section 4.1 Existence; Good Standing; Corporate Authority............... A-8 Section 4.2 Authorization, Validity and Effect of Agreements............ A-8 Section 4.3 Capitalization.............................................. A-9 Section 4.4 Significant Subsidiaries.................................... A-9 Section 4.5 No Violation................................................ A-9 Section 4.6 No Conflict................................................. A-10 Section 4.7 SEC Documents............................................... A-10 Section 4.8 Litigation and Liabilities.................................. A-11 Section 4.9 Absence of Certain Changes.................................. A-11 Section 4.10 Taxes....................................................... A-11 Section 4.11 Employee Benefit Plans...................................... A-12 Section 4.12 Labor Matters............................................... A-13 Section 4.13 Environmental Matters....................................... A-13 Section 4.14 Intellectual Property....................................... A-14 Section 4.15 Title to Properties......................................... A-14 Section 4.16 Insurance................................................... A-14 Section 4.17 No Brokers.................................................. A-15 Section 4.18 Opinions of Financial Advisors.............................. A-15 Section 4.19 Contracts; Debt Instruments................................. A-15 Section 4.20 Vote Required............................................... A-15 Section 4.21 Certain Approvals........................................... A-15 Section 4.22 Certain Contracts........................................... A-16 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... A-16 Section 5.1 Existence; Good Standing; Corporate Authority............... A-16 Section 5.2 Authorization, Validity and Effect of Agreements............ A-16 Section 5.3 Capitalization.............................................. A-16 Section 5.4 Significant Subsidiaries.................................... A-17 Section 5.5 No Violation................................................ A-17 Section 5.6 No Conflict................................................. A-18 Section 5.7 SEC Documents............................................... A-18 Section 5.8 Absence of Certain Changes.................................. A-19 |
PAGE ---- Section 5.9 No Brokers.................................................. A-19 Section 5.10 Opinion of Financial Advisor................................ A-19 Section 5.11 Vote Required............................................... A-19 Section 5.12 Financing................................................... A-20 Section 5.13 Litigation and Liabilities.................................. A-20 Section 5.14 Title to Properties......................................... A-20 ARTICLE 6 COVENANTS................................................... A-20 Section 6.1 Conduct of Business......................................... A-20 Section 6.2 No Solicitation by the Company.............................. A-22 Section 6.3 Meetings of Stockholders.................................... A-23 Section 6.4 Filings; Reasonable Best Efforts............................ A-23 Section 6.5 Inspection.................................................. A-25 Section 6.6 Publicity................................................... A-25 Section 6.7 Registration Statement...................................... A-25 Section 6.8 Listing Applications........................................ A-26 Section 6.9 Letters of Accountants...................................... A-26 Section 6.10 Agreements of Affiliates.................................... A-26 Section 6.11 Expenses.................................................... A-27 Section 6.12 Indemnification and Insurance............................... A-27 Section 6.13 Employee Benefits........................................... A-28 Section 6.14 Reorganization.............................................. A-30 Section 6.15 Dividends................................................... A-30 ARTICLE 7 CONDITIONS.................................................. A-30 Section 7.1 Conditions to Each Party's Obligation to Effect the Merger...................................................... A-30 Section 7.2 Conditions to Obligation of the Company to Effect the Merger...................................................... A-31 Section 7.3 Conditions to Obligation of Parent to Effect the Merger..... A-31 ARTICLE 8 TERMINATION................................................. A-32 Section 8.1 Termination by Mutual Consent............................... A-32 Section 8.2 Termination by Parent or the Company........................ A-32 Section 8.3 Termination by the Company.................................. A-32 Section 8.4 Termination by Parent....................................... A-33 Section 8.5 Effect of Termination....................................... A-33 Section 8.6 Extension; Waiver........................................... A-34 ARTICLE 9 GENERAL PROVISIONS.......................................... A-34 Section 9.1 Nonsurvival of Representations, Warranties and Agreements... A-34 Section 9.2 Notices..................................................... A-34 Section 9.3 Assignment; Binding Effect; Benefit......................... A-35 Section 9.4 Entire Agreement............................................ A-35 Section 9.5 Amendments.................................................. A-35 Section 9.6 Governing Law; Jurisdiction; Waiver of Jury Trial........... A-36 Section 9.7 Counterparts................................................ A-36 Section 9.8 Headings.................................................... A-36 Section 9.9 Interpretation.............................................. A-36 Section 9.10 Waivers..................................................... A-37 Section 9.11 Incorporation of Exhibits................................... A-37 Section 9.12 Severability................................................ A-37 Section 9.13 Enforcement of Agreement.................................... A-37 Section 9.14 Obligation of Merger Sub, Alternate Holdco, Devon Merger Sub and Mitchell Merger Sub..................................... A-37 |
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 13, 2001, is among Devon Energy Corporation, a Delaware corporation ("Parent"); Devon NewCo Corporation, a Delaware corporation and a direct and wholly owned subsidiary of Parent ("Merger Sub"); Devon Holdco Corporation, a Delaware corporation and a direct and wholly owned subsidiary of Parent ("Alternate Holdco"); Devon Merger Corporation, a Delaware corporation and a direct and wholly owned subsidiary of Alternate Holdco ("Devon Merger Sub"); Mitchell Merger Corporation, a Texas corporation and a direct and wholly owned subsidiary of Alternate Holdco ("Mitchell Merger Sub"); and Mitchell Energy & Development Corp., a Texas corporation (the "Company").
RECITALS
WHEREAS, this Agreement (entered into as of October 5, 2001) amends and restates in its entirety the Agreement and Plan of Merger, dated as of August 13, 2001 (which shall be deemed to be the date of this Agreement and the date on which all representations and warranties herein shall be deemed to be made), by and among Parent, Merger Sub and the Company;
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub and the Company have determined that the merger of the Company with and into Merger Sub (the "Merger"), in the manner contemplated herein, is advisable and in the best interests of their respective corporations and stockholders and, by resolutions duly adopted, have approved and adopted this Agreement;
WHEREAS, the respective Boards of Directors of each of Parent, Alternate Holdco, Devon Merger Sub, Mitchell Merger Sub and the Company have determined that, if an Alternate Structure Event (as defined in Section 1.7 (a)) occurs, the Alternate Mergers (as defined in Section 1.7 (b)) are advisable and in the best interests of their respective corporations and stockholders and, by resolutions duly adopted, have approved and adopted this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger qualify as a reorganization within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code") or, alternatively, if an Alternate Structure Event occurs, it is intended that the Alternate Mergers qualify as nonrecognition transactions under section 351 of the Code; and
WHEREAS, as a condition and inducement to the willingness of Parent to enter into this Agreement, certain principal stockholders of the Company have entered into a shareholders agreement with Parent pursuant to which such stockholders have (i) agreed, among other things, to vote their shares of Company common stock in favor of the approval of this Agreement and (ii) granted to Parent an irrevocable proxy to vote their shares of Company common stock upon the terms and conditions set forth therein (the "Principal Shareholders Agreement").
NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.3), the Company shall be merged with and into Merger Sub in accordance with this Agreement, and the separate corporate existence of the Company shall thereupon cease. Merger Sub shall be the surviving corporation in the Merger and shall be a wholly owned subsidiary of Parent (sometimes hereinafter referred to as the "Surviving Corporation"). The Merger shall have the effects specified in the Delaware General Corporation Law ("DGCL") and the Texas Business Corporation Act (the "TBCA"). At the election of Parent, any direct wholly owned subsidiary of Parent may be substituted for Merger Sub as a constituent corporation in the Merger. In such event, the parties hereto agree to execute an appropriate amendment to this Agreement in order to reflect such substitution.
SECTION 1.2 The Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") shall take place (a) at the offices of Mayer, Brown & Platt, 700 Louisiana Street, Houston, Texas 77002, at 9:00 a.m., local time, on the first business day immediately following the day on which the last to be fulfilled or waived of the conditions set forth in Article 7 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to fulfillment or waiver of those conditions) shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as Parent and the Company may agree in writing. The date on which the Closing occurs is hereinafter referred to as the "Closing Date."
SECTION 1.3 Effective Time. If all the conditions to the Merger set forth in Article 7 shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in Article 8, on the Closing Date, a certificate of merger (the "Certificate of Merger") meeting the requirements of Section 252 of the DGCL shall be properly executed and filed with the Secretary of State of the State of Delaware and articles of merger (the "Articles of Merger") meeting the requirements of Article 5.04 of the TBCA will be filed with the Secretary of State of the State of Texas. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL and the issuance of a certificate of merger by the Secretary of State of the State of Texas in accordance with the TBCA, or at such later time that the parties hereto shall have agreed upon and designated in such filing as the effective time of the Merger (the "Effective Time").
SECTION 1.4 Certificate of Incorporation. The certificate of incorporation of Merger Sub in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation, until duly amended in accordance with applicable law.
SECTION 1.5 Bylaws. The bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation, until duly amended in accordance with applicable law.
SECTION 1.6 Board of Directors. The Board of Directors of the Surviving Corporation shall consist of the Board of Directors of Merger Sub, as it existed immediately prior to the Effective Time.
SECTION 1.7 Alternate Structure Event.
(a) Alternate Structure Event. An "Alternate Structure Event" shall have occurred if, at any time prior to the Effective Time:
(i) all conditions to the Closing set forth in Article 7 have been fulfilled or waived other than the conditions set forth in Section 7.2(b)or 7.3(b) and other than those conditions that by their nature are to be satisfied at the Closing; and
(ii) (A) in the case of the Company, the Company has used its
reasonable best efforts to obtain the opinion contemplated by Section
7.2(b) based on the assumption that the Closing Date would be the first
business day following the satisfaction of the conditions described in
Section 1.7(a)(i), but Vinson & Elkins L.L.P. has nonetheless advised the
Company that it is unable to deliver such an opinion or (B) in the case of
Parent, Parent has used its reasonable best efforts to obtain the opinion
contemplated by Section 7.3(b) based on the assumption that the Closing
Date would be the first business day following the satisfaction of the
conditions described in Section 1.7(a)(i), but Mayer, Brown & Platt has
nonetheless advised Parent that it is unable to deliver such an opinion.
(b) Effect of Alternate Structure Event. Upon the occurrence of an Alternate Structure Event, without any further action on the part of any party to this Agreement, this Agreement shall be deemed to be amended as follows: (1) all references to the term "Merger" in this Agreement shall be deemed to be references to the Alternate Mergers, (2) all references to the term "Parent Common Stock" when used in the context of Parent Common Stock to be issued in the Merger shall be deemed to be references to common stock to be issued by Alternate Holdco in the Mitchell Merger (as defined in Exhibit B), and (3) this Agreement shall be otherwise amended as set forth in Exhibit B. The Company and Parent further agree that, in such event, any other appropriate adjustments shall be made to the other terms and conditions of this Agreement to reflect the transactions contemplated by this Section 1.7 with a view to ensuring that the Company and Parent, and their respective stockholders, are placed in a position that is as close as possible to the position that they would have been in but for such restructuring. The mergers contemplated in this Section 1.7 and in Exhibit B are sometimes referred to as the "Alternate Mergers."
(c) Other Actions Related to Consummation of Alternate Mergers. Notwithstanding anything to the contrary set forth in this Agreement, each of the Company and Parent shall cooperate in good faith with one another, and use its reasonable best efforts, to take or cause to be taken all actions, and to do or cause to be done, all things necessary, proper or advisable to ensure that, if an Alternate Structure Event were to occur, the Alternate Mergers could be consummated at the same time as the Merger would have been consummated but for the Alternate Structure Event. For the avoidance of doubt, such actions shall include, without limitation, compliance with the obligations set forth in Sections 6.7(a) and 6.8.
ARTICLE 2
DIRECTORS OF PARENT
SECTION 2.1 Directors of Parent. At the Effective Time, the Board of Directors of Parent shall consist of a number of persons as determined by Parent. One member of the Board of Directors of Parent shall be J. Todd Mitchell (the "Company Designee"). The Company Designee shall be appointed to fill a vacancy on the Board of Directors existing immediately prior to the Effective Time. If, prior to the Effective Time, the Company Designee becomes unavailable or unwilling to serve, the Company shall designate a substitute designee acceptable to Parent. If necessary to comply with this Section 2.1, Parent shall cause to be presented to the meeting of its stockholders contemplated by Section 6.3 of this Agreement a proposal to amend Parent's certificate of incorporation to increase the number of directors that constitutes the entire Board of Directors.
ARTICLE 3
CONVERSION OF COMPANY SHARES
SECTION 3.1 Effect on Capital Stock. At the Effective Time, the Merger shall have the following effects on the capital stock of the Company and Merger Sub, without any action on the part of the holder of any capital stock of the Company or Merger Sub:
(a) Conversion of the Company Common Stock. Subject to the provisions of this Section 3.1 and Section 3.3, each share of Class A common stock, $0.10 par value per share, of the Company (each a "Company Share" and collectively the "Company Shares") issued and outstanding
immediately prior to the Effective Time (but not including any Dissenting
Shares (as defined below) and any Company Shares that are (i) owned (A) by
Parent, Merger Sub or any other direct or indirect Subsidiary of Parent or
(B) by the Company or any direct or indirect Subsidiary of the Company and
(ii) are not held on behalf of third parties (collectively, the "Excluded
Company Shares")) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into (i) the right to receive
$31.00 in cash (the "Cash Consideration") and (ii) 0.585 of a share (the
"Exchange Ratio") of Parent Common Stock (the "Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration"). "Parent
Common Stock" shall mean the common stock, par value $0.10 per share, of
Parent.
(b) Cancellation of Excluded Company Shares. Each Excluded Company Share issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, no longer be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation, and the Surviving Corporation shall thereby become a wholly owned subsidiary of Parent.
SECTION 3.2 Exchange of Certificates for Shares.
(a) Exchange Procedures. At or prior to the Effective Time, Parent shall deposit with the Exchange Agent, in trust for the benefit of the holders of Company Shares, an amount in cash and certificates representing shares of Parent Common Stock required to effect the conversion of the Company Shares into the Merger Consideration pursuant to Section 3.1(a). Parent shall make sufficient funds available to an exchange agent (the "Exchange Agent"), selected by Parent with the Company's prior approval, which shall not be unreasonably withheld, from time to time as needed to pay cash in respect of dividends or other distributions in accordance with Section 3.2(b). Promptly after the Effective Time, but in no event later than three business days following the Closing Date, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record as of the Effective Time of a certificate representing Company Shares (each a "Certificate") (other than holders of a Certificate in respect of Excluded Company Shares) (i) a letter of transmittal specifying that delivery of the Certificates shall be effected, and that risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or, in lieu of such Certificates, affidavits of loss together with either a reasonable undertaking to indemnify Parent or the Company, if Parent believes that the person providing the indemnity is sufficiently creditworthy, or, if Parent does not so believe, indemnity bonds) to the Exchange Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may reasonably agree, and (ii) instructions for exchanging the Certificates and receiving the Merger Consideration to which such holder shall be entitled therefore pursuant to Section 3.1(a). Subject to Section 3.2(g), upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (i) a certificate representing that number of whole shares of Parent Common Stock that such holder is entitled to receive pursuant to Section 3.1(a) and (ii) a check in the aggregate amount (after giving effect to any required tax withholdings) of (A) the cash that such holder is entitled to receive pursuant to Section 3.1(a) plus (B) any cash in lieu of fractional shares determined in accordance with Section 3.2(d) plus (C) any cash dividends and any other dividends or other distributions that such holder has the right to receive pursuant to the provisions of this Section 3.2. The Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on any amount payable upon due surrender of any Certificate. In the event of a transfer of ownership of Company Shares that occurred prior to the Effective Time, but is not registered in the transfer records of the Company, the Merger Consideration may be issued and/or paid to such a transferee if the Certificate formerly representing such Company Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of certificates for shares of Parent Common Stock in a name other than that of the registered holder of the Certificate surrendered, or shall establish to the satisfaction of Parent or the Exchange Agent that such tax has been paid or is not applicable.
(b) Distributions with Respect to Unexchanged Shares. Whenever a dividend
or other distribution is declared by Parent in respect of Parent Common Stock,
the record date for which is at or after the Effective Time, that declaration
shall include dividends or other distributions in respect of all shares of
Parent Common Stock issuable pursuant to this Agreement. No dividends or other
distributions so declared in respect of such Parent Common Stock shall be paid
to any holder of any unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Section 3.2. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be issued or paid, less the amount of any withholding taxes that may be
required thereon, to the holder of the certificates representing whole shares of
Parent Common Stock issued in exchange for such Certificate, without interest,
(i) at the time of such surrender, the dividends or other distributions with a
record date that is at or after the Effective Time and a payment date on or
prior to the date of surrender of such whole shares of Parent Common Stock and
not previously paid and (ii) at the appropriate payment date, the dividends or
other distributions payable with respect to such whole shares of Parent Common
Stock with a record date at or after the Effective Time but with a payment date
subsequent to surrender. For purposes of dividends or other distributions in
respect of shares of Parent Common Stock, all shares of Parent Common Stock to
be issued pursuant to the Merger shall be deemed issued and outstanding as of
the Effective Time.
(c) Transfers. After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the Company Shares that were outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of Parent Common Stock will be issued and any holder of Company Shares entitled to receive a fractional share of Parent Common Stock (after taking into account the aggregate number of shares of Parent Common Stock to be received in exchange for all shares held by such holder) but for this Section 3.2(d) shall be entitled to receive in lieu thereof an amount in cash (without interest) determined by multiplying such fraction (rounded to the nearest one-hundredth of a share) by the average closing price of a share of Parent Common Stock, as reported in The Wall Street Journal, Southwestern edition, on the five trading days immediately prior to the last business day before the Effective Time.
(e) Termination of Exchange Period; Unclaimed Merger Consideration. Any
shares of Parent Common Stock and any portion of the cash, dividends or other
distributions with respect to the Parent Common Stock deposited by Parent with
the Exchange Agent (including the proceeds of any investments thereof) that
remain unclaimed by the stockholders of the Company 180 days after the Effective
Time shall be paid to Parent. Any stockholders of the Company who have not
theretofore complied with this Article 3 shall thereafter be entitled to look
only to Parent for payment of their Merger Consideration and any cash, dividends
and other distributions in respect thereof issuable and/or payable pursuant to
Section 3.1, Section 3.2(b) and Section 3.2(d) upon due surrender of their
Certificates (or, in lieu of such Certificates, affidavits of loss together with
either a reasonable undertaking to indemnify Parent or the Company, if Parent
believes that the Person providing the indemnity is sufficiently creditworthy,
or, if Parent does not so believe, indemnity bonds), in each case, without any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Company Shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and if Parent believes that the Person providing the indemnity is sufficiently creditworthy, the making of a reasonable undertaking to indemnify Parent or the Company, or, if Parent
does not so believe, the posting by such Person of a bond in the form
customarily required by Parent to indemnify against any claim that may be made
against it with respect to such Certificate, Parent will issue the shares of
Parent Common Stock and the Exchange Agent will distribute such Merger
Consideration, dividends and other distributions in respect thereof issuable or
payable in exchange for such lost, stolen or destroyed Certificate pursuant to
Section 3.1, Section 3.2(b) and Section 3.2(d), in each case, without interest.
(g) Affiliates. Notwithstanding anything in this Agreement to the contrary, Certificates surrendered for exchange by any Rule 145 Affiliate (as determined pursuant to Section 6.10) of the Company shall not be exchanged until Parent has received a written agreement from such Person as provided in Section 6.10.
SECTION 3.3 Dissenters' Rights. Company Shares that are outstanding immediately prior to the Effective Time and that are held by stockholders who shall have not voted in favor of the Merger and who shall have made written demand for payment of the fair value for such shares in accordance with Section 5.12 of the TBCA (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration. Such stockholders shall be entitled to receive payment of the fair value of the Company Shares held by them in accordance with the TBCA, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Company Shares under the TBCA shall thereupon be deemed to have been converted into and to be exchangeable, as of the Effective Time, for Merger Consideration in the manner provided in Section 3.1(a).
SECTION 3.4 Adjustments to Prevent Dilution. In the event that prior to the Effective Time, there shall have been declared or effected a reclassification, stock split (including a reverse split), stock dividend, stock distribution or similar event made with respect to the Company Shares or the Parent Common Stock, the Merger Consideration shall be equitably adjusted to reflect such event.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered to Parent
concurrently with the execution hereof (the "Company Disclosure Letter") or as
disclosed with reasonable specificity in the Company Reports (as defined in
Section 4.7), the Company represents and warrants to Parent that:
SECTION 4.1 Existence; Good Standing; Corporate Authority. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Texas. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of any jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (as defined in Section 9.9). The Company has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted. The copies of the Company's articles of incorporation and bylaws previously made available to Parent are true and correct and contain all amendments as of the date hereof.
SECTION 4.2 Authorization, Validity and Effect of Agreements. The Company has the requisite corporate power and authority to execute and deliver this Agreement and all other agreements and documents contemplated hereby, to which it is a party. The consummation by the Company of the transactions contemplated hereby has been duly authorized by all requisite corporate action, other than, with respect to the Merger or the Mitchell Merger, as the case may be, the approval and adoption of this Agreement by the Company's stockholders. This Agreement constitutes the valid and legally binding obligation of the Company to the extent it is a party, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity.
SECTION 4.3 Capitalization. The authorized capital stock of the Company
consists of 200,000,000 Company Shares, and 10,000,000 shares of the Company
preferred stock, par value $0.10 per share ("Company Preferred Stock"). As of
August 10, 2001, there were (a) 49,911,612 Company Shares issued and
outstanding, (b) no shares of Company Preferred Stock issued and outstanding,
(c) 2,136,588 Company Shares subject to outstanding employee stock options, of
which the weighted average exercise price was approximately $27.67 per share and
(d) 1,056,257 Company bonus units outstanding, of which the weighted average
Designation Date Price (as defined in the Bonus Unit Plan) was approximately
$31.85 per unit. All issued and outstanding Company Shares (i) are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, (ii) were not issued in violation of the terms of any agreement or other
understanding binding upon the Company and (iii) were issued in compliance with
all applicable charter documents of the Company and all applicable federal and
state securities laws, rules and regulations. Except as set forth in this
Section 4.3 and except for any Company Shares issued pursuant to the plans
described in the Company Disclosure Letter, there are no outstanding shares of
capital stock and there are no options, warrants, calls, subscriptions,
shareholder rights plan or similar instruments, convertible securities, or other
rights, agreements or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock or other
voting securities of the Company or any of its Subsidiaries. The Company has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter.
SECTION 4.4 Significant Subsidiaries. For purposes of this Agreement, "Significant Subsidiary" shall mean significant subsidiary as defined in Rule 1-02 of Regulation S-X of the Securities Exchange Act (the "Exchange Act"). Each of the Company's Significant Subsidiaries is a corporation, limited liability company or partnership duly organized, validly existing and in good standing (where applicable) under the laws of its jurisdiction of incorporation or organization, has the corporate or partnership power and authority to own, operate and lease its properties and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing (where applicable) in each jurisdiction in which the ownership, operation or lease of its property or the conduct of its business requires such qualification, except for jurisdictions in which such failure to be so qualified or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All of the outstanding shares of capital stock of, or other ownership interests in, each of the Company's Significant Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by the Company free and clear of all liens, pledges, security interests, claims, preferential purchase rights or other rights, interests or encumbrances ("Liens"). Schedule 4.4 to the Company Disclosure Letter sets forth for each Significant Subsidiary of the Company, its name and jurisdiction of incorporation or organization.
SECTION 4.5 No Violation. Neither the Company nor any of its Subsidiaries is, or has received notice that it would be with the passage of time, in violation of any term, condition or provision of (a) its charter documents or bylaws, (b) any loan or credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or (c) any order of any court, governmental authority or arbitration board or tribunal, or any law, ordinance, governmental rule or regulation to which the Company or any of its Subsidiaries or any of their respective properties or assets is subject, or is delinquent with respect to any report required to be filed with any governmental entity, except, in the case of matters described in clause (b) or(c), as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except where it would not have a Company Material Adverse Effect, the Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all governmental authorities necessary for the lawful conduct of their respective businesses (the "Company Permits") and the Company and its Subsidiaries are in compliance with the terms of the Company Permits. No investigation by any governmental authority with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened, other than those that would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.6 No Conflict.
(a) Neither the execution and delivery by the Company of this Agreement nor
the consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof will: (i) conflict with or result in a breach
of any provisions of the charter documents or bylaws of the Company; (ii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or give rise to a right of purchase under, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the properties of the Company or its Subsidiaries under, or result
in being declared void, voidable, or without further binding effect, or
otherwise result in a detriment to the Company or any of its Subsidiaries under
any of the terms, conditions or provisions of, any note, bond, mortgage,
indenture, deed of trust, Company Permit, lease, contract, agreement, joint
venture or other instrument or obligation to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of its Subsidiaries or
any of their properties is bound or affected; or (iii) contravene or conflict
with or constitute a violation of any provision of any law, rule, regulation,
judgment, order or decree binding upon or applicable to the Company or any of
its Subsidiaries, except, in the case of matters described in clause (ii) or
(iii), as would not have or reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
(b) Neither the execution and delivery by the Company of this Agreement nor
the consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof or thereof will require any consent, approval
or authorization of, or filing or registration with, any governmental or
regulatory authority, other than (i) the filings provided for in Article l and
(ii) filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Exchange Act, the Securities Act or
applicable state securities and "Blue Sky" laws and applicable foreign
competition or antitrust laws ((i) and (ii) collectively, the "Regulatory
Filings"), except for any consent, approval or authorization the failure of
which to obtain and for any filing or registration the failure of which to make
would not prevent the consummation of the Merger or the Mitchell Merger, as the
case may be, or otherwise prevent the Company from performing its obligations
under this Agreement and would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Other than as contemplated by Section 4.6(b), no consents, assignments, waivers, authorizations or other certificates are necessary in connection with the transactions contemplated hereby to provide for the continuation in full force and effect of all of the Company's material contracts or leases or for the Company to consummate the transactions contemplated hereby, except when the failure to receive such consents or other certificates would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) Except as set forth on Schedule 4.6(d) to the Company Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) result in any
payment from the Company or its Subsidiaries (including severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee or independent contractor of the Company or any of its
Subsidiaries under any Company Plan (as defined in Section 4.11) or otherwise;
(ii) increase any benefits otherwise payable under any Company Plan or
otherwise; or (iii) result in the acceleration of the time of payment or vesting
of any such benefits.
SECTION 4.7 SEC Documents. The Company has made available to Parent each registration statement, report, proxy statement or information statement (other than preliminary materials) filed by the Company with the Securities and Exchange Commission ("SEC") since January 1, 2000, each in the form (including exhibits and any amendments thereto) filed with the SEC prior to the date hereof (collectively, the "Company Reports"), and the Company has filed all forms, reports and documents required to be filed by it with the SEC pursuant to relevant securities statutes, regulations, policies and rules since such time. As of their respective dates, the Company Reports (i) were prepared in accordance with the applicable requirements of the Securities Act of 1933 ("Securities Act"), the Exchange Act, and
the rules and regulations thereunder and complied with the then applicable accounting requirements and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading except for such statements, if any, as have been modified by subsequent filings with the SEC prior to the date hereof. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents the consolidated financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of earnings, cash flows and stockholders' equity included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents the results of operations, cash flows or changes in stockholders' equity, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to such exceptions as may be permitted by Form 10-Q of the SEC), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein.
SECTION 4.8 Litigation and Liabilities. There are no actions, suits or proceedings pending against the Company or any of its Subsidiaries or, to the Company's knowledge, threatened against the Company or any of its Subsidiaries, at law or in equity, or before or by any federal, state or foreign commission, board, bureau, agency or instrumentality, other than those that would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. There are no outstanding judgments, decrees, injunctions, awards or orders against the Company or any of its Subsidiaries, other than those that would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. There are no obligations or liabilities of any nature, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, including those relating to environmental and occupational safety and health matters, or any other facts or circumstances that could result in any claims against, or obligations or liabilities of, the Company or any of its affiliates, except for those that would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.9 Absence of Certain Changes. Since December 31, 2000, the
Company has conducted its business only in the ordinary and usual course of
business, and during such period there have not been (i) events, conditions,
actions, occurrences or omissions that would have or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect; (ii) any change by the Company or any of its Subsidiaries in any of its
accounting methods, principles or practices or any of its tax methods, practices
or elections, except for changes required by generally accepted accounting
principles; (iii) any material damage, destruction, or loss to the business or
properties of the Company and its Subsidiaries (whether or not covered by
insurance) taken as a whole; (iv) any declaration, setting aside or payment of
any dividend (other than ordinary quarterly dividends of $0.1325 per share) or
other distribution in respect of the capital stock of the Company, or any direct
or indirect redemption, purchase or any other acquisition by the Company of any
such stock; (v) any change in the capital stock or in the number of shares or
classes of the Company's authorized or outstanding capital stock (other than as
a result of issuances under the Company Plans or exercises of options to
purchase the Company Shares outstanding or issued as permitted hereunder); (vi)
any increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the ordinary course of business; or
(vii) any event, condition, action, occurrence or omission that is prohibited on
or after the date of this Agreement under Section 6.1 of this Agreement.
SECTION 4.10 Taxes.
(a) Each of the Company, its Subsidiaries and each affiliated, consolidated, combined, unitary or similar group of which any such corporation is or, since January 1, 1991, was a member has (i) duly filed (or there has been filed on its behalf) on a timely basis (taking into account any extensions of time to file before the date hereof) with appropriate governmental authorities all tax returns, statements, reports, declarations, estimates and forms ("Returns") required to be filed by or with respect to it, except to the
extent that any failure to file would not have or reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, and
(ii) duly paid or deposited in full on a timely basis or made adequate
provisions in accordance with generally accepted accounting principles (or there
has been paid or deposited or adequate provision has been made on its behalf)
for the payment of all taxes required to be paid by it other than those being
contested in good faith by the Company or a Subsidiary of the Company and except
to the extent that any failure to pay or deposit or make adequate provision for
the payment of such taxes would not have or reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) (i) The federal income tax returns of the Company and each of its Subsidiaries have been examined by the Internal Revenue Service (the "IRS") (or the applicable statutes of limitation for the assessment of federal income taxes for such periods have expired) for all periods; (ii) except to the extent being contested in good faith, all material deficiencies asserted as a result of such examinations and any other examinations of the Company and its Subsidiaries by any taxing authority have been paid fully, settled or adequately provided for in the financial statements contained in the Company Reports; (iii) as of the date hereof, neither the Company nor any of its Subsidiaries has granted any requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any taxes with respect to any Returns of the Company or any of its Significant Subsidiaries that will be outstanding as of the Effective Time; (iv) neither the Company nor any of its Subsidiaries is a party to, is bound by or has any obligation under any tax sharing, allocation or indemnity agreement or any similar agreement or arrangement that would have or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (v) there are no tax liens on any assets of the Company or its Subsidiaries except for taxes not yet currently due, with respect to matters being contested by the Company in good faith for which adequate reserves are reflected in the financial statements and those which could not reasonably be expected,individually or in the aggregate, to result in a Company Material Adverse Effect; and (vi) neither the Company nor any of its Subsidiaries is a party to an agreement that provides for the payment of any amount that would constitute a "parachute payment" within the meaning of section 280G of the Code.
For purposes of this Agreement, "tax" or "taxes" means all federal, state, county, local, foreign or other net income, gross income, gross receipts, sales, use, ad valorem, transfer, accumulated earnings, personal holding, excess profits, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, disability, capital stock, or windfall profits taxes, customs duties or other taxes, fees, assessments or governmental charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign).
SECTION 4.11 Employee Benefit Plans. For purposes of this Section 4.11,
the Company Subsidiaries shall include any enterprise which, with the Company,
forms or formed a controlled group of corporations, a group of trades or
business under common control or an affiliated service group, within the meaning
of section 414(b), (c) or (m) of the Code. All employee benefit plans, programs,
arrangements and agreements covering active, former or retired employees of the
Company and the Company Subsidiaries which provide material benefits to such
employees are listed in the Company Disclosure Letter (the "Company Plans"). The
Company has made available to Parent true, complete and correct copies of each
Company Plan, any related trust agreement, annuity or insurance contract or
other funding vehicle, and, except as would not have or reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect:
(a) each Company Plan has been maintained and administered in compliance with
its terms and is, to the extent required by applicable law or contract, fully
funded without having any deficit or unfunded actuarial liability or adequate
provision has been made therefor; (b) all required employer contributions under
any such plans have been made and the applicable funds have been funded in
accordance with the terms thereof, (c) each Company Plan that is required or
intended to be qualified under applicable law or registered or approved by a
governmental agency or authority has been so qualified, registered or approved
by the appropriate governmental agency or authority, and nothing has occurred
since the date of the last qualification, registration or approval to adversely
affect, or cause, the
appropriate governmental agency or authority to revoke such qualification,
registration or approval; (d) to the extent applicable, the Company Plans
comply, in all respects, with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and any other applicable
tax act and other laws, and any Company Plan intended to be qualified under
section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and nothing has occurred to cause the loss of such qualified
status; (e) no Company Plan is covered by Title IV of ERISA or section 412 of
the Code; (f) there are no pending or anticipated claims against or otherwise
involving any of the Company Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of the Company
Plan activities) has been brought against or with respect to any Company Plan;
(g) all contributions, reserves or premium payments required to be made as of
the date hereof to the Company Plans have been made or provided for; (h) neither
the Company nor any Company Subsidiary has incurred or reasonably expects to
incur any liability under subtitle C or D of Title IV of ERISA with respect to
any "single-employer plan," within the meaning of section 4001(a)(15) of ERISA,
currently or formerly maintained by the Company, any Company Subsidiary or any
entity which is considered one employer with the Company under section 4001 of
ERISA; (i) neither the Company nor any Company Subsidiary has incurred or
reasonably expects to incur any withdrawal liability under subtitle E of Title
IV of ERISA with respect to any "multi-employer plan," within the meaning of
section 4001(a)(3) of ERISA; and (j) neither the Company nor any Company
Subsidiary has any obligations for retiree health and life benefits under any
Company Plan.
SECTION 4.12 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization.
(b) Neither the Company nor any of its Subsidiaries is subject to a dispute, strike or work stoppage with respect to any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization to which it is a party or by which it is bound that would have or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) To the Company's knowledge, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of the Company or any of its Subsidiaries.
SECTION 4.13 Environmental Matters.
(a) Except as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there are not any present or, to the knowledge of the Company, past conditions or circumstances that interfere with the conduct of the business of the Company and each of its Subsidiaries in the manner now conducted or which interfere with compliance with any order of any court, governmental authority or arbitration board or tribunal, or any law, ordinance, governmental rule or regulation related to human health or the environment ("Environmental Law");
(b) Except as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there are not any present or, to the knowledge of the Company, past conditions or circumstances at, or arising out of, any current or, to the knowledge of the Company, former businesses, assets or properties of the Company or any Subsidiary of the Company, including but not limited to, on-site or off-site disposal or release of any chemical substance, product or waste, which constitute a violation under any Environmental Law or could reasonably be expected to give rise to: (i) liabilities or obligations for any cleanup, remediation, disposal or corrective action under any Environmental Law or (ii) claims arising for personal injury, property damage, or damage to natural resources;
(c) Except as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries has (i) received any notice of noncompliance with, violation of, or liability or potential liability under any Environmental Law,
(ii) received any notice regarding any existing, pending or threatened investigation or inquiry related to alleged violations under any Environmental Laws or regarding any claims for remedial obligations or contribution under any Environmental Laws or (iii) entered into any consent decree or order or is subject to any order of any court or governmental authority or tribunal under any Environmental Law or relating to the cleanup of any hazardous materials contamination;
(d) Except as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries have in full force and effect all material environmental permits, licenses, approvals and other authorizations required to conduct their operations and are operating in material compliance thereunder; and
(e) Except as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company does not know of any reason that would preclude it from renewing or obtaining a reissuance of the material permits, licenses or other authorizations required pursuant to any applicable Environmental Laws to operate and use any of the Company's or its Subsidiaries' assets for their current purposes and uses.
SECTION 4.14 Intellectual Property. The Company and its Subsidiaries own or possess all necessary licenses or other valid rights to use all patents, patent rights, trademarks, trademark rights and proprietary information used or held for use in connection with their respective businesses as currently being conducted, free and clear of Liens, except where the failure to own or possess such licenses and other rights would not have or would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, and there are no assertions or claims challenging the validity of any of the foregoing which would have or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except in the ordinary course of business, neither the Company nor any of its Subsidiaries has granted to any other person any license to use any of the foregoing. The conduct of the Company's and its Subsidiaries' respective businesses as currently conducted does not conflict with any patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights or copyrights of others in a way which would have, or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. There is no infringement of any proprietary right owned by or licensed by or to the Company or any of its Subsidiaries in a way which would have, or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.15 Title to Properties. Except for goods and other property sold, used or otherwise disposed of since December 31, 2000 in the ordinary course of business for fair value, the Company has defensible title for oil and gas purposes to all its properties, interests in properties and assets, real and personal, reflected in its December 31, 2000 financial statements, free and clear of any Lien, except: (a) Liens reflected in the balance sheet of the Company as of December 31, 2000; (b) Liens for current taxes not yet due and payable; and (c) such imperfections of title, easements and Liens that would not have or be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. All leases and other agreements pursuant to which the Company or any of its Subsidiaries leases or otherwise acquires or obtains operating rights affecting any real or personal property are in good standing, valid, and effective; and there is not, under any such leases, any existing or prospective default or event of default or event which with notice or lapse of time, or both, would constitute a default by the Company or any of its Subsidiaries that would not have or be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. All operating equipment of the Company and its Subsidiaries is in good operating condition, ordinary wear and tear excepted. The Company has not received any material advance, take-or-pay or other similar payments that entitle purchasers of production to receive deliveries of hydrocarbons without paying therefor, and, on a net, company-wide basis, the Company is neither underproduced nor overproduced under gas balancing or similar arrangements.
SECTION 4.16 Insurance. The Company and its Subsidiaries maintain insurance coverage adequate and customary in the industry for the operation of their respective businesses.
SECTION 4.17 No Brokers. The company has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of Parent, Merger Sub or the Company pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except that the Company has retained Goldman, Sachs & Co. and J.P. Morgan Securities Inc. to act as its financial advisors in connection with the Merger and render the opinions referred to in Section 4.18, the terms of which have been disclosed in writing to Parent prior to the date hereof.
SECTION 4.18 Opinions of Financial Advisors. The Board of Directors of the Company has received the opinion of Goldman, Sachs & Co. and J.P. Morgan Securities Inc. to the effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial point of view, to the holders of the Company Shares (other than Parent); it being understood and acknowledged by Parent that each such opinion has been rendered for the benefit of the Board of Directors of the Company, and is not intended to, and may not, be relied upon by Parent, its affiliates or their respective Subsidiaries.
SECTION 4.19 Contracts; Debt Instruments.
(a) Except as disclosed on Schedule 4.19 of the Company Disclosure Letter, there are no contracts that are material to the business, properties, assets, financial condition or results of operations of the Company and its Subsidiaries taken as a whole ("Material Contracts"). Neither the Company nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which with the passage of time or the giving of notice or both would cause such a violation of or default under) any Material Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that have not and could not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect. Each Material Contract is in full force and effect, and is a legal, valid and binding obligation of the Company or a Company Subsidiary and, to the knowledge of the Company, each of the other parties thereto, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. No condition exists or event has occurred which (whether with or without notice or lapse of time or both) would constitute a default by the Company or a Company Subsidiary or, to the knowledge of the Company, any other party thereto under any Material Contract or result in a right of termination of any Material Contract.
(b) Set forth in Schedule 4.19(b) of the Company Disclosure Letter is (i) a list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any indebtedness of the Company or its Subsidiaries in an aggregate principal amount in excess of $5,000,000 is outstanding or may be incurred, and (ii) the respective principal amounts currently outstanding thereunder.
(c) Neither the Company nor any of its Subsidiaries has entered into any contract and there is no commitment, judgment, injunction, order or decree to which the Company or any of its Subsidiaries is a party or subject to that has or could reasonably be expected to have the effect of prohibiting or impairing the conduct of business by the Company or any of its Subsidiaries or any contract that may be terminable as a result of Parent's status as a competitor of any party to such contract or arrangement.
SECTION 4.20 Vote Required. The affirmative vote of holders of two-thirds of the outstanding Company Shares is the only vote necessary to approve this Agreement and the transactions contemplated hereby (the "Company Requisite Vote").
SECTION 4.21 Certain Approvals. The Company's Board of Directors has taken any and all necessary and appropriate action to render inapplicable to the Merger, the Alternate Mergers and the transactions contemplated by this Agreement and the Principal Shareholders Agreement the provisions of Section 13.03 of the TBCA and any other "fair price," "moratorium," control share acquisition, interested shareholder or other similar antitakeover provision or regulation and any restrictive provision of any antitakeover provision in the articles of incorporation or bylaws of the Company.
SECTION 4.22 Certain Contracts. Neither the Company nor any of its Subsidiaries is a party to or bound by (i) any non-competition agreement or any other agreement or obligation which purports to limit the manner in which, or the localities in which, the current business of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, is conducted or (ii) any executory agreement or obligation which pertains to the acquisition or disposition of any asset, or which provides any third party any lien, claim or preferential right with regard thereto, except, in the case of this clause (ii), for such agreements or obligations that would not have or be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure letter delivered to the Company
concurrently with the execution hereof (the "Parent Disclosure Letter") or as
disclosed with reasonable specificity in the Parent Reports (as defined in
Section 5.7), Parent and Merger Sub, jointly and severally, represent and
warrant to the Company that:
SECTION 5.1 Existence; Good Standing; Corporate Authority. Each of Parent and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of Parent and Merger Sub is duly qualified to do business as a foreign corporation and is in good standing under the laws of any jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect (as defined in Section 9.9). Each of Parent and Merger Sub has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted. As of the date hereof, the copies of each of Parent's and Merger Sub's certificate of incorporation and bylaws previously made available to the Company are true and correct and contain all amendments.
SECTION 5.2 Authorization, Validity and Effect of Agreements. Each of Parent and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and all other agreements and documents contemplated hereby, to which it is a party. The consummation by each of Parent and Merger Sub of the transactions contemplated hereby, including the issuance and delivery by Parent of shares of Parent Common Stock pursuant to the Merger, has been duly authorized by all requisite corporate action, other than, with respect to the Merger or the Devon Merger, as the case may be, the approval and adoption of this Agreement by Parent's stockholders. This Agreement constitutes the valid and legally binding obligation of each of Parent and Merger Sub to the extent it is a party, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity.
SECTION 5.3 Capitalization. The authorized capital stock of Parent
consists of 400,000,000 shares of Parent Common Stock, one share of Parent
Special Voting Stock, par value $0.10 per share, and 4,500,000 shares of
Parent's preferred stock, par value $1.00 per share "Parent Preferred Stock").
As of August 10, 2001, there were (a) 125,983,553 shares of Parent Common Stock
issued and outstanding, (b) one share of Parent Special Voting Stock issued and
outstanding, (c) 5,842,587 shares of Parent Common Stock reserved for issuance
under the stock options plans of Parent described in the Parent Disclosure
Letter, (d) 125,444 shares of Parent Common Stock reserved for issuance under
the Parent Restricted Stock Award Plan, (e) 40,646 shares of Parent Common Stock
reserved for issuance under certain conditional stock awards granted to former
employees of PennzEnergy Company, (f) 2,128,248 shares reserved for issuance
upon exchange of outstanding exchangeable shares ("Northstar Exchangeable
Shares") issued by Northstar Energy Corporation, an Alberta corporation
("Northstar"), (g) 1,500,000 shares of Parent Preferred Stock designated as
6.49% Cumulative Preferred Stock, Series A, issued and outstanding and (h)
1,000,000 unissued shares of Parent Preferred Stock designated as Series A
Junior Participating Preferred Stock. All issued and outstanding shares of
Parent Common Stock (i) are duly
authorized, validly issued, fully paid, nonassessable and, except as set forth in the Parent Disclosure Letter, free of preemptive rights, (ii) were not issued in violation of the terms of any agreement or other understanding binding upon Parent and (iii) were issued in compliance with all applicable charter documents of Parent and all applicable federal and state securities laws, rules and regulations. One right to purchase Series A Junior Participating Preferred Stock of Parent (each, a "Parent Right") issued pursuant to a Rights Agreement, dated as of August 17, 1999 (the "Parent Rights Agreement"), between Parent and BankBoston, N.A., is associated with and attached to each outstanding share of Parent Common Stock. The shares of Parent Common Stock to be issued in connection with the Merger, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable. As of the date of this Agreement, except as set forth in this Section 5.3 and except for any shares of Parent Common Stock issued pursuant to the plans described in the Parent Disclosure Letter or otherwise issuable as described in the Parent Disclosure Letter, there are no outstanding shares of capital stock and there are no options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate Parent or any of its Subsidiaries to issue, transfer or sell any shares of capital stock or other voting securities of Parent or any of its Subsidiaries. As of the date of this Agreement, Parent has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter.
SECTION 5.4 Significant Subsidiaries.
(a) Each of Parent's Significant Subsidiaries is a corporation, limited liability company or partnership duly organized, validly existing and in good standing (where applicable) under the laws of its jurisdiction of incorporation or organization, has the corporate, limited liability company or partnership power and authority to own, operate and lease its properties and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing (where applicable) in each jurisdiction in which the ownership, operation or lease of its property or the conduct of its business requires such qualification, except for jurisdictions in which such failure to be so qualified or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. All of the outstanding shares of capital stock of, or other ownership interests in, each of Parent's Significant Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by Parent free and clear of all Liens. Schedule 5.4 to the Parent Disclosure Letter sets forth for each Significant Subsidiary of Parent its name and jurisdiction of incorporation or organization.
(b) Devon Energy Production Company, L.P. ("Devon Production"), a Significant Subsidiary, is a limited partnership (except for tax purposes) duly organized and validly existing under Oklahoma law, the general partner of which is Devon Energy Management Company, L.L.C., an Oklahoma limited liability company which is wholly owned by Devon Energy Corporation (Oklahoma), an Oklahoma corporation, and has elected to be treated as a sole proprietorship for federal income tax purposes. Devon Production has one limited partner. All of the outstanding partnership interests of Devon Production are owned directly or indirectly by Parent.
(c) All of the outstanding shares of capital stock of Merger Sub are owned directly by Parent. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby and has not engaged in any activities other than in connection with the transactions contemplated by this Agreement.
SECTION 5.5 No Violation. Neither Parent nor any of its Subsidiaries is, or has received notice that it would be with the passage of time, in violation of any term, condition or provision of (a) its charter documents or bylaws, (b) any loan or credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or (c) any order of any court, governmental authority or arbitration board or tribunal, or any law, ordinance, governmental rule or regulation to which Parent or any of its Subsidiaries or any of their respective properties or assets is subject, or is delinquent with respect to any report required to be filed with any governmental entity, except, in the case of matters described in
clause (b) or (c), as would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Except as would not have a Parent Material Adverse Effect, Parent and its Subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all governmental authorities necessary for the lawful conduct of their respective businesses (the "Parent Permits") and Parent and its Subsidiaries are in compliance with the terms of the Parent Permits. No investigation by any governmental authority with respect to Parent or any of its Subsidiaries is pending or, to the knowledge of Parent, threatened, other than those that would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.6 No Conflict.
(a) Neither the execution and delivery by Parent and Merger Sub of this Agreement nor the consummation by Parent and Merger Sub of the transactions contemplated hereby in accordance with the terms hereof will: (i) conflict with or result in a breach of any provisions of the charter documents or bylaws of Parent or Merger Sub; (ii) violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or give rise to a right of purchase under, or accelerate the performance required by, or result in the creation of any Lien upon any of the properties of Parent or its Subsidiaries under, or result in being declared void, voidable, or without further binding effect, or otherwise result in a detriment to Parent or any of its Subsidiaries under any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement, joint venture or other instrument or obligation to which Parent or any of its Subsidiaries is a party, or by which Parent or any of its Subsidiaries or any of their properties is bound or affected; or (iii) contravene or conflict with or constitute a violation of any provision of any law, rule, regulation, judgment, order or decree binding upon or applicable to Parent or any of its Subsidiaries, except, in the case of matters described in clause(ii) or (iii), as would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Neither the execution and delivery by Parent or Merger Sub of this
Agreement nor the consummation by Parent or Merger Sub of the transactions
contemplated hereby in accordance with the terms hereof will require any
consent, approval or authorization of, or filing or registration with, any
governmental or regulatory authority, other than Regulatory Filings, and (i) in
the case of the Merger, listing on the AMEX of the Parent Common Stock to be
issued in the Merger and issuable pursuant to the Assumed Options and (ii) in
the case of the Alternate Mergers, listing on the AMEX of the Alternate Holdco
common stock to be issued in the Alternate Mergers and issuable pursuant to
exercise of the Assumed Options and Devon Assumed Options (as defined in Exhibit
B) and exchange of the Northstar Exchange Shares and Zero Coupon Convertible
Debentures (as defined in Exhibit B), except, in each case, for any consent,
approval or authorization the failure of which to obtain and for any filing or
registration the failure of which to make would not prevent the consummation of
the Merger or the Alternate Mergers, as the case may be, or otherwise prevent
Parent from performing its obligations under this Agreement and would not have
or reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(c) Other than as contemplated by Section 5.6(b), no consents, assignments, waivers, authorizations or other certificates are necessary in connection with the transactions contemplated hereby to provide for the continuation in full force and effect of all of Parent's material contracts or leases or for Parent to consummate the transactions contemplated hereby, except when the failure to receive such consents or other certificates would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.7 SEC Documents. Parent has made available to the Company each registration statement, report, proxy statement or information statement (other than preliminary materials) filed by Parent with the SEC since January 1, 2000, each in the form (including exhibits and any amendments thereto) filed with the SEC prior to the date hereof (collectively, the "Parent Reports"), and Parent has filed all forms, reports and documents required to be filed by it with the SEC pursuant to relevant
securities statutes, regulations, policies and rules since such time. As of their respective dates, the Parent Reports (i) were prepared in accordance with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder and complied with the then applicable accounting requirements and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading except for such statements, if any, as have been modified by subsequent filings with the SEC prior to the date hereof. Each of the consolidated balance sheets included in or incorporated by reference into the Parent Reports (including the related notes and schedules) fairly presents the consolidated financial position of Parent and its Subsidiaries as of its date and each of the consolidated statements of operations, cash flows and stockholders' equity included in or incorporated by reference into the Parent Reports (including any related notes and schedules) fairly presents the results of operations, cash flows or changes in stockholders' equity, as the case may be, of Parent and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to such exceptions as may be permitted by Form 10-Q of the SEC), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein.
SECTION 5.8 Absence of Certain Changes. Since December 31, 2000, Parent has conducted its business only in the ordinary and usual course of business, and during such period there have not been (i) events, conditions, actions, occurrences or omissions that would have or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect; (ii) any change by Parent or any of its Subsidiaries in any of its accounting methods, principles or practices or any of its tax methods, practices or elections, except for changes required by generally accepted accounting principles; or (iii) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of Parent (except for, and provided that, Parent may continue to pay or cause to be paid, dividends upon the shares of Parent Common Stock and the Northstar Exchangeable Shares at a rate not greater than $.05 per share in any quarter and dividends upon its 6.49% cumulative preferred stock).
SECTION 5.9 No Brokers. Other than UBS Warburg LLC, Parent has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of Parent, Merger Sub or the Company to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby.
SECTION 5.10 Opinion of Financial Advisor. The Board of Directors of Parent has received the opinion of UBS Warburg LLC to the effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial point of view, to Parent; it being understood and acknowledged by Parent that such opinion has been rendered for the benefit of the Board of Directors of Parent, and is not intended to, and may not, be relied upon by the Company, its affiliates or their respective Subsidiaries.
SECTION 5.11 Vote Required. The affirmative vote of the holders of a majority of the votes cast in person or by proxy by holders of Parent Common Stock and the outstanding Northstar Exchangeable Shares, voting as a single class with the Parent Special Voting Share voting for the Northstar Exchangeable Shares as provided in Parent's charter, represented in person or by proxy at a meeting at which a quorum is present, approving the issuance of shares of Parent Common Stock required to be issued pursuant to Article 3, is the only vote of the holders of any class or series of Parent capital stock necessary to approve this Agreement and the transactions contemplated hereby (the "Parent Requisite Vote"); provided, however, (a) if a proposal to amend Parent's certificate of incorporation is presented at the meeting for approval pursuant to Section 2.1 hereof or (b) if the Devon Merger (as defined in Exhibit B) is presented for shareholder approval, then, in either case, the Parent Requisite Vote will be the affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock and the outstanding Northstar Exchangeable Shares, voting as a single class with the Parent Special Voting Share voting for the Northstar Exchangeable Shares as provided in Parent's charter.
SECTION 5.12 Financing. Parent has available to it sources of financing sufficient to satisfy its obligation to make the payment of the aggregate cash consideration when such payment is required pursuant to this Agreement.
SECTION 5.13 Litigation and Liabilities. There are no actions, suits or proceedings pending against Parent or any of its Subsidiaries or, to Parent's knowledge, threatened against Parent or any of its Subsidiaries, at law or in equity, or before or by any federal, state or foreign commission, board, bureau, agency or instrumentality, other than those that would not have or be reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect. There are no outstanding judgments, decrees, injunctions, awards or orders against Parent or any of its Subsidiaries, other than those that would not have or be reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 5.14 Title to Properties. Except for goods and other property
sold, used or otherwise disposed of since December 31, 2000 in the ordinary
course of business for fair value, Parent has defensible title for oil and gas
purposes to all its properties, interests in properties and assets, real and
personal, reflected in its December 31, 2000 financial statements, free and
clear of any Lien, except: (a) Liens reflected in the balance sheet of Parent as
of December 31, 2000; (b) Liens for current taxes not yet due and payable and
(c) such imperfections of title, easements and Liens that would not have or be
reasonably expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.
ARTICLE 6
COVENANTS
SECTION 6.1 Conduct of Business. Prior to the Effective Time, except as set forth in the Company Disclosure Letter or as expressly contemplated by any other provision of this Agreement, including Schedule 6.13, unless Parent has consented in writing thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its operations according to their usual, regular and ordinary course in substantially the same manner as heretofore conducted;
(b) shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, to preserve intact their business organizations and goodwill, keep available the services of their respective officers and employees and maintain satisfactory relationships with those persons having business relationships with them;
(c) shall not amend its articles of incorporation or bylaws;
(d) shall promptly notify Parent of any material change in its financial condition or business or any material litigation or material governmental complaints, investigations or hearings (or communications in writing indicating that such litigation, complaints, investigations or hearings may be contemplated), or the breach in any material respect of any representation or warranty contained herein;
(e) shall promptly deliver or otherwise make available to the other true and correct copies of any report, statement or schedule filed with the SEC subsequent to the date of this Agreement;
(f) shall not (i) except pursuant to the exercise of options, warrants, conversion rights and other contractual rights existing on the date hereof and disclosed in the Company Disclosure Letter, issue any shares of its capital stock, effect any stock split or otherwise change its capitalization as it existed on the date hereof; (ii) grant, confer or award any option, warrant, conversion right or other right not existing on the date hereof to acquire any shares of its capital stock except the grant of options to new employees consistent with past practice in an amount not to exceed 100,000 Company Shares or pursuant to contractual commitments existing on the date of this Agreement and disclosed in the Company Disclosure Letter; (iii) increase any compensation or benefits, except in the ordinary course of business consistent with past practice, or enter into or amend any employment agreement with any
of its present or future officers or directors, except with new employees consistent with past practice, or (iv) adopt any new employee benefit plan (including any stock option, stock benefit or stock purchase plan) or amend (except as required by law) any existing employee benefit plan in any material respect, except for changes which are less favorable to participants in such plans;
(g) shall not, and, in the case of clause (ii) below, shall not permit
any of its Subsidiaries to (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of its
capital stock (other than the Company's ordinary quarterly dividends
payable with respect to the Company Common Stock of $0.1325 per share) or
(ii) redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of any of its Subsidiaries or any option, warrant,
conversion right or other right to acquire such shares, or make any
commitment for any such action;
(h) shall not, and shall not permit any of its Subsidiaries to, sell, lease or otherwise dispose of any of its assets (including capital stock of Subsidiaries) which are material to the Company, individually or in the aggregate, except in the ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to, except pursuant to contractual commitments in effect on the date hereof and disclosed in the Company Disclosure Letter and except for amounts that in the aggregate do not exceed $3,000,000, authorize, propose, agree to, enter into or consummate any merger, consolidation or business combination transaction (other than the Merger or the Mitchell Merger) or acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof;
(j) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it;
(k) shall, and shall cause any of its Subsidiaries to, use reasonable best efforts to maintain with financially responsible insurance companies insurance in such amounts and against such risks and losses as are customary for such party;
(l) shall not, and shall not permit any of its Subsidiaries to, except where it would not have and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) make or rescind any express or deemed election relating to taxes, including elections for any and all joint ventures, partnerships, limited liability companies, working interests or other investments where it has the capacity to make such binding election, (ii) settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or (iii) change in any respect any of its methods of reporting any item for federal income tax purposes from those employed in the preparation of its federal income tax return for the most recent taxable year for which a return has been filed, except as may be required by applicable law;
(m) shall not, nor shall it permit any of its Subsidiaries to, (i) incur any indebtedness for borrowed money (except under credit lines in existence as of the date of this Agreement) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of such party or any of its Subsidiaries or guarantee any debt securities of others, (ii) except in the ordinary course of business, enter into any material lease (whether such lease is an operating or capital lease) or create any material mortgages, liens, security interests or other encumbrances on the property of Parent or the Company or any of their Subsidiaries in connection with any indebtedness thereof, or (iii) make or commit to make aggregate capital expenditures in excess of $50 million over the fiscal 2001 capital expenditures budget disclosed in reasonable detail on the Company Disclosure Letter;
(n) subject to Section 6.4, shall not take any action that is likely to delay materially or adversely affect the ability of any of the parties hereto to obtain any consent, authorization, order or approval of any governmental commission, board or other regulatory body or the expiration of any applicable waiting period required to consummate the Merger;
(o) shall not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which it or any of its respective Subsidiaries is a party; and during such period shall enforce, to the fullest extent permitted under applicable law, the provisions of such agreement, including by obtaining injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any court of the United States of America or any state having jurisdiction;
(p) shall not enter into or amend any agreement with any holder of Company Shares with respect to holding, voting or disposing of shares;
(q) shall not by resolution of its Board of Directors cause the acceleration of rights, benefits or payments under any Company Plans;
(r) shall not enter into any additional forward sales contracts, fixed price purchase or sale contracts, fixed price financial swaps, collars, options or other hedging arrangements with respect to its oil production and more than 10% of its budgeted gas production for the year 2001, and, in any event, for a term longer than 12 months; or
(s) shall not, nor shall it permit any of its Subsidiaries to, agree in writing or otherwise to take any of the foregoing actions.
SECTION 6.2 No Solicitation by the Company.
(a) The Company agrees that it and its Subsidiaries (i) will not (and it will not permit their officers, directors, employees, agents or representatives, including any investment banker, attorney or accountant retained by it or any of its Subsidiaries to) solicit, initiate or encourage (including by way of furnishing material non-public information) any inquiry, proposal or offer (including any proposal or offer to its stockholders) with respect to a third party tender offer, merger, consolidation, business combination or similar transaction involving any assets or class of capital stock of the Company, or any acquisition of 10% or more of the capital stock (other than upon exercise of the options to purchase Company Common Stock that are outstanding as of the date hereof) or 10% or more of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions, or any combination of the foregoing (any such proposal, offer or transaction being hereinafter referred to as a "Company Acquisition Proposal") or participate or engage in any discussions or negotiations concerning a Company Acquisition Proposal; and (ii) will immediately cease and cause to be terminated any existing negotiations with any third parties conducted heretofore with respect to any of the foregoing; provided that, subject to Section 6.3(b), nothing contained in this Agreement shall prevent the Company or its Board of Directors from (A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to a Company Acquisition Proposal or (B) prior to the Cutoff Date (as defined below), providing information (pursuant to a confidentiality agreement containing terms identical in all material respects to the terms of the confidentiality agreement, dated June 21, 2001, entered into between the Company and Parent (the "Company/Parent Confidentiality Agreement")) to or engaging in any negotiations or discussions with any person or entity who has made an unsolicited bona fide Company Acquisition Proposal if (x) in the good faith judgment of the Company's Board of Directors, taking into account the likelihood of consummation and after consultation with its financial advisors, such Company Acquisition Proposal is reasonably likely to result in a transaction more favorable to the holders of the Company Shares from a financial point of view than the Merger and (y) the Board of Directors of the Company, after consultation with its outside legal counsel, determines in good faith that the failure to do so would be inconsistent with its fiduciary obligations under applicable law.
(b) The Company will promptly (but in any event within 24 hours) notify Parent of any requests referred to in Section 6.2(a) for information or the receipt of any Company Acquisition Proposal, including the identity of the person or group engaging in such discussions or negotiations, requesting such information or making such Company Acquisition Proposal, and the material terms and conditions of any Company Acquisition Proposal, and shall keep Parent informed on a timely basis (but in any event within 24 hours) of any material changes with respect thereto. Prior to taking any action referred to in the
proviso of Section 6.2(a), if the Company intends to participate in any such discussions or negotiations or provide any such information to any such third party, the Company shall give prompt prior notice to Parent of each such action.
(c) Nothing in this Section 6.2 shall permit the Company to enter into any agreement with respect to a Company Acquisition Proposal during the term of this Agreement, it being agreed that, during the term of this Agreement, the Company shall not enter into any agreement with any person that provides for, or in any way facilitates, a Company Acquisition Proposal, other than a confidentiality agreement containing terms identical in all material respects to the terms of the Company/Parent Confidentiality Agreement.
(d) For purposes hereof, the "Cutoff Date" means the date the Company Requisite Vote has been obtained.
SECTION 6.3 Meetings of Stockholders.
(a) The Company will take all action necessary in accordance with applicable law and its articles of incorporation and bylaws to convene as promptly as practicable a meeting of its stockholders for purposes of obtaining the Company Requisite Vote to approve those matters under this Agreement (whether or not they are contingent on the occurrence of an Alternate Structure Event) that could require such a vote. Parent will take all action necessary in accordance with applicable law and its certificate of incorporation and bylaws to convene as promptly as practicable a meeting of its stockholders for purposes of obtaining the Parent Requisite Vote to approve those matters under this Agreement (whether or not they are contingent on the occurrence of an Alternate Structure Event) that could require such a vote.
(b) The Company and Parent, through their respective Boards of Directors, shall recommend approval of such matters; provided that the Board of Directors of the Company or Parent may at any time prior to the Effective Time withdraw, modify, or change any recommendation regarding this Agreement or the transactions contemplated hereby, or recommend and declare advisable any other offer or proposal, if its Board of Directors determines in good faith after consultation with its outside counsel that the failure to so withdraw, modify, or change its recommendation would be inconsistent with its fiduciary obligations under applicable law. Each of the Company and Parent shall be required to comply with its obligations under Section 6.3(a) whether or not its Board of Directors withdraws, modifies, or changes its recommendation regarding this Agreement or the transactions contemplated hereby or recommends any other offer or proposal.
(c) In the event that stockholders of the Company or Parent fail to approve this Agreement at a meeting (or any adjournment or postponement thereof) at which such stockholders considered and voted on this Agreement, the parties shall negotiate in good faith for at least 20 days to attempt to revise the structure and terms of the Merger to allow the combination of the respective businesses of Parent and the Company on terms they regard as likely to be approved by such stockholders.
SECTION 6.4 Filings; Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided, the Company and Parent shall:
(i) promptly (but in not more than 20 business days from the date hereof) make their respective filings under the HSR Act with respect to the Merger (including any submissions required for the Alternate Mergers) and thereafter shall promptly make any other required submissions under the HSR Act;
(ii) use their reasonable best efforts to satisfy the conditions to closing in Article 7 (including, in the case of the Company, obtaining the opinion described in Section 7.2(b) and, in the case of Parent, obtaining the opinion described in Section 7.3(b)) and to cooperate with one another in (a) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits or authorizations are required to be obtained prior to the Effective Time from governmental or regulatory authorities of the United States, the several states, and foreign jurisdictions in connection with the execution and delivery of this Agreement and the consummation
of the Merger or the Alternate Mergers and the transactions contemplated hereby; and (b) timely making all such filings and timely seeking all such consents, approvals, permits or authorizations;
(iii) promptly notify each other of any communication concerning this Agreement or the Merger or the Alternate Mergers to that party from any governmental authority and permit the other party to review in advance any proposed communication concerning this Agreement or the Merger or the Alternate Mergers to any governmental entity;
(iv) not agree to participate in any meeting or discussion with any governmental authority in respect of any filings, investigation or other inquiry concerning this Agreement or the Merger or the Alternate Mergers unless it consults with the other party in advance and, to the extent permitted by such governmental authority, gives the other party the opportunity to attend and participate thereat;
(v) furnish the other party with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between them and their affiliates and their respective representatives on the one hand, and any government or regulatory authority or members or their respective staffs on the other hand, with respect to this Agreement and the Merger or the Alternate Mergers; and
(vi) furnish the other party with such necessary information and reasonable assistance as such other parties and their respective affiliates may reasonably request in connection with their preparation of necessary filings, registrations or submissions of information to any governmental or regulatory authorities, including without limitation, any filings necessary or appropriate under the provisions of the HSR Act.
(b) Without limiting Section 6.4(a), Parent and the Company shall:
(i) each use its reasonable best efforts to avoid the entry of, or to have vacated or terminated, any decree, order or judgment that would restrain, prevent or delay the Closing, including without limitation defending through litigation on the merits any claim asserted in any court by any party; and
(ii) each use reasonable best efforts to avoid or eliminate each and every impediment under any antitrust, competition or trade regulation law that may be asserted by any governmental entity with respect to the Merger or the Alternate Mergers so as to enable the Closing to occur as soon as reasonably possible (and in any event no later than 60 days following the termination of all applicable waiting periods under the HSR Act, unless the parties are in litigation with the government, in which case at the conclusion of such litigation).
(c) Notwithstanding anything to the contrary in this Agreement, (i) the Company shall not, without Parent's prior written consent, commit to any divestitures, licenses, hold separate arrangements or similar matters, including covenants affecting business operating practices (or allow its Subsidiaries to commit to any divestitures, licenses, hold separate arrangements or similar matters), and the Company shall commit to, and shall use reasonable best efforts to effect (and shall cause its Subsidiaries to commit to and use reasonable best efforts to effect), any such divestitures, licenses, hold separate arrangements or similar matters as Parent shall request, but solely if such divestitures, licenses, hold separate arrangements or similar matters are contingent on consummation of the Merger or the Alternate Mergers and (ii) neither Parent nor any of its Subsidiaries shall be required (pursuant to Section 6.4(a)(ii) or otherwise) to agree (with respect to (x) Parent or its Subsidiaries or (y) the Company or its Subsidiaries) to any divestitures, licenses, hold separate arrangements or similar matters, including covenants affecting business operating practices, if such divestitures, licenses, arrangements or similar matters, individually or in the aggregate, would have or reasonably be expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect.
(d) Except as provided below, nothing in this Section 6.4 or any other part of this Agreement shall require Parent to refrain from entering into any agreement with respect to, or issuing Parent Common Stock or other consideration in connection with, a business combination with, or an acquisition of, a third party after the date of this Agreement and prior to the Effective Time (a "Subsequent Transaction");
provided, however, that Parent has a good faith belief at the time it enters into the definitive agreement calling for any such Subsequent Transaction that such Subsequent Transaction is not reasonably likely to prevent or delay satisfaction of any of the conditions set forth in Article 7. In the event of a Subsequent Transaction which would be permissible under the preceding sentence, Parent shall agree to any divestitures, licenses, hold separate arrangements or similar matters (including covenants affecting business operating practices) necessary in order to obtain prompt approval of the transactions contemplated by this Agreement under applicable competition laws that would not otherwise have been required in order to obtain such approval but for the Subsequent Transaction. For the avoidance of doubt, the parties agree that it was not a breach of this Agreement for Parent to enter into the Pre-Acquisition Agreement, dated as of August 31, 2001, between Parent and Anderson Exploration Ltd.
SECTION 6.5 Inspection. From the date hereof to the Effective Time, the Company and Parent shall allow all designated officers, attorneys, accountants and other representatives of the other party access at all reasonable times upon reasonable notice to the records and files, correspondence, audits and properties, as well as to all information relating to commitments, contracts, titles and financial position, or otherwise pertaining to the business and affairs of the Company and its Subsidiaries or Parent and its Subsidiaries, including inspection of such properties; provided that no investigation pursuant to this Section 6.5 shall affect any representation or warranty given by any party hereunder, and provided further that notwithstanding the provision of information or investigation by any party, no party shall be deemed to make any representation or warranty except as expressly set forth in this Agreement. Notwithstanding the foregoing, neither party shall be required to provide any information which it reasonably believes it may not provide to the other party by reason of applicable law, rules or regulations, which that party reasonably believes constitutes information protected by attorney/client privilege, or which it is required to keep confidential by reason of contract or agreement with third parties. The parties hereto will make reasonable and appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. The Company and Parent agree that they will not, and will cause their representatives not to, use any information obtained pursuant to this Section 6.5 for any purpose unrelated to the consummation of the transactions contemplated by this Agreement.
SECTION 6.6 Publicity. The parties will consult with each other and will mutually agree upon any press releases or public announcements pertaining to this Agreement or the transactions contemplated hereby and shall not issue any such press releases or make any such public announcements prior to such consultation and agreement, except as may be required by applicable law or by obligations pursuant to any listing agreement with any national securities exchange, in which case the party proposing to issue such press release or make such public announcement shall use its reasonable best efforts to consult in good faith with the other party before issuing any such press releases or making any such public announcements.
SECTION 6.7 Registration Statement.
(a) Each of Parent, Alternate Holdco and the Company shall cooperate and promptly prepare and Parent and Alternate Holdco shall file with the SEC as soon as practicable a Registration Statement on Form S-4 under the Securities Act (the "Registration Statement") and any amendments required thereto with respect to the Parent Common Stock issuable in the Merger or the Alternate Holdco common stock issuable in the Alternate Mergers if an Alternate Structure Event occurs. A portion of the Registration Statement shall also serve as the joint proxy statement with respect to the meetings of the stockholders of Parent and of the Company in connection with the Merger or the Alternate Mergers (the "Proxy Statement/Prospectus"). The respective parties will cause the Proxy Statement/Prospectus and the Registration Statement to comply as to form in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the rules and regulations thereunder. Parent and Alternate Holdco shall use their reasonable best efforts, and the Company will cooperate with Parent and Alternate Holdco, to have the Registration Statement declared effective by the SEC as promptly as practicable. Parent and Alternate Holdco shall use their reasonable best efforts to obtain, prior to the effective date of the Registration Statement, all necessary state securities law or "Blue Sky" permits or approvals required to carry out the transactions contemplated by this Agreement and will pay all expenses incident thereto.
Parent will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Parent Common Stock issuable in connection with the Merger or the Alternate Holdco common stock issuable in connection with the Alternate Mergers for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Proxy Statement/ Prospectus or the Registration Statement or comments thereon and responses thereto or requests by the SEC for additional information.
(b) Each of Parent and the Company will use its reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to its stockholders as promptly as practicable after the date hereof.
(c) Each of Parent and the Company agrees that the information provided by it for inclusion in the Proxy Statement/Prospectus and each amendment or supplement thereto, at the time of mailing thereof and at the time of the respective meetings of stockholders of Parent and of the Company, or, in the case of information provided by it for inclusion in the Registration Statement or any amendment or supplement thereto, at the time it is filed or becomes effective, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
SECTION 6.8 Listing Applications. Parent shall use its reasonable best efforts to cause the Parent Common Stock to be issued in the Merger to be approved for listing on the AMEX prior to the Effective Time, subject to official notice of issuance. Parent shall promptly prepare and submit to the AMEX a supplemental listing application covering the shares of Parent Common Stock issuable in the Merger and shares issuable pursuant to Assumed Options (as defined below). Parent and Alternate Holdco shall use their reasonable best efforts to cause the Alternate Holdco common stock to be issued pursuant to the Alternate Mergers and upon exercise of the Assumed Options (if an Alternate Structure Event occurs) to be approved for listing on the AMEX prior to the Effective Time (as defined in Exhibit B), subject to official notice of issuance.
SECTION 6.9 Letters of Accountants.
(a) If requested to do so by Parent, the Company shall use its reasonable best efforts to cause to be delivered to Parent and Alternate Holdco "comfort" letters of Arthur Andersen LLP, the Company's independent public accountants, dated the effective date of the Registration Statement and the Closing Date, respectively, and addressed to Parent and Alternate Holdco with regard to certain financial information regarding the Company included in the Registration Statement, in form reasonably satisfactory to Parent and customary in scope and substance for "comfort" letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement.
(b) If requested to do so by the Company, Parent shall use its reasonable best efforts to cause to be delivered to the Company "comfort" letters of KPMG LLP, Parent's independent public accountants, dated the effective date of the Registration Statement and the Closing Date,respectively, and addressed to the Company, with regard to certain financial information regarding Parent included in the Registration Statement, in form reasonably satisfactory to the Company and customary in scope and substance for "comfort" letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement.
SECTION 6.10 Agreements of Affiliates. Prior to the Effective Time, the Company shall cause to be prepared and delivered to Parent a list identifying all persons who, at the time of the meeting or the meeting of the Company's stockholders pursuant to Section 6.3, the Company believes may be deemed to be "affiliates" of the Company, as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates"). Parent or Alternate Holdco, as the case may be, shall be entitled to place restrictive legends on any shares of Parent Common Stock or Alternate Holdco common stock received by such Rule 145 Affiliates. The Company shall use its reasonable best efforts to cause each person who is identified as a Rule 145 Affiliate in such list to deliver to Parent and Alternate Holdco, at or prior to the Effective Time, a written agreement, in the form attached hereto as Exhibit A.
SECTION 6.11 Expenses. Whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, except as expressly provided in Section 8.5.
SECTION 6.12 Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving Corporation to indemnify, defend and hold harmless to the fullest extent permitted under applicable law each person who is, or has been at any time prior to the Effective Time, an officer or director of the Company (or any Subsidiary or division thereof) and each person who served at the request of the Company as a director, officer, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (individually, an "Indemnified Party" and, collectively, the "Indemnified Parties") against all losses, claims, damages, liabilities, costs or expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation arising out of or pertaining to acts or omissions, or alleged acts or omissions, by them in their capacities as such, whether commenced, asserted or claimed before or after the Effective Time. In the event of any such claim, action, suit, proceeding or investigation (an"Action"), (i) Parent shall cause the Surviving Corporation to pay, as incurred, the fees and expenses of counsel selected by the Indemnified Party, which counsel shall be reasonably acceptable to Parent, in advance of the final disposition of any such Action to the fullest extent permitted by applicable law, and, if required, upon receipt of any undertaking required by applicable law, and (ii) Parent will, and will cause the Surviving Corporation to, cooperate in the defense of any such matter; provided, however, neither Parent nor the Surviving Corporation shall be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed), and provided further that neither Parent nor the Surviving Corporation shall be obligated pursuant to this Section 6.12(a) to pay the fees and disbursements of more than one counsel for all Indemnified Parties in any single Action, unless, in the good faith judgment of any of the Indemnified Parties, there is or may be a conflict of interests between two or more of such Indemnified Parties, in which case there may be separate counsel for each similarly situated group.
(b) The parties agree that the rights to indemnification, including provisions relating to advances of expenses incurred in defense of any action or suit, in the articles of incorporation, bylaws and any indemnification agreement of the Company and its Subsidiaries with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of six years from the Effective Time; provided, however, that all rights to indemnification in respect of any Action pending or asserted or claim made within such period shall continue until the disposition of such Action or resolution of such claim.
(c) For a period of six years after the Effective Time, the Surviving Corporation shall maintain officers' and directors' liability insurance covering the Indemnified Parties who are or at any time prior to the Effective Time were covered by the Company's existing officers' and directors' liability insurance ("D&O Insurance") policies on terms substantially no less advantageous to the Indemnified Parties than such existing insurance with respect to acts or omissions, or alleged acts or omissions, prior to the Effective Time (whether claims, actions or other proceedings relating thereto are commenced, asserted or claimed before or after the Effective Time); provided, that after the Effective Time, the Surviving Corporation shall not be required to pay annual premiums in excess of 250% of the last annual premium paid by the Company prior to the date hereof (the amount of which premiums are set forth in the Company Disclosure Letter) (the "Maximum Premium"), but in such case shall purchase as much coverage as reasonably practicable for such amount. Parent shall have the right to cause coverage to be extended under the Company's D&O Insurance by obtaining a six-year "tail" policy on terms and conditions no less advantageous than the Company's existing D&O Insurance, and such "tail" policy shall satisfy the provisions of this Section 6.12(c).
(d) The rights of each Indemnified Party hereunder shall be in addition to any other rights such Indemnified Party may have under the articles of incorporation or bylaws of the Company or any of its
Subsidiaries, under the TBCA, or otherwise. The provisions of this Section 6.12 shall survive the consummation of the Merger and expressly are intended to benefit each of the Indemnified Parties.
(e) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of Parent, as the case may be, shall assume the
obligations set forth in this Section 6.12.
SECTION 6.13 Employee Benefits
(a) Parent hereby agrees to honor, and agrees to cause its Subsidiaries to honor, all employee benefit plans, contracts, agreements and commitments of the Company or any of its Subsidiaries maintained or entered into by the Company or any of its Subsidiaries prior to the date hereof that apply to any current or former employee or current or former director of the Company or any of its Subsidiaries, including, without limitation, the executive change-in-control severance agreements between the Company and certain of its key employees (copies of which executive change-in-control severance agreements have been furnished to Parent); provided, however, that except as provided in Section 6.13(c), Parent reserves the right to modify any such contract, agreement or commitment in accordance with its terms.
(b) If, within two years after the Effective Time, the benefits applicable to Continuing Employees are materially modified then, for the remainder of the two-year period after the Effective Time, Parent hereby agrees to, and agrees to cause its Subsidiaries to, provide to officers and employees of the Company and its Subsidiaries who become or remain regular (full-time) employees of Parent or any of its Subsidiaries ("Continuing Employees") employee benefits, other than stock options and stock appreciation rights, no less favorable than those provided by Parent and its Subsidiaries to their similarly situated officers and employees. Any employee of the Company or any of its Subsidiaries who becomes a participant in any employee benefit plan, program, policy, or arrangement of Parent or any of its Subsidiaries after the Effective Time shall be given credit under such plan, program, policy, or arrangement for all service with the Company or any of its Subsidiaries, and, if applicable, with Parent or any of its Subsidiaries, prior to becoming such a participant for purposes of eligibility and vesting and benefit determination (other than for determining accrual services under any defined benefit pension plan as defined in Section 3(35) of ERISA).
(c) Parent hereby agrees to, and agrees to cause its Subsidiaries to, provide the following benefits to Continuing Employees or to former employees of the Company and its Subsidiaries, as described below:
(i) Parent shall continue retiree medical benefits for each former employee of the Company and its Subsidiaries who was receiving retiree medical benefits at the Effective Time in accordance with the terms of the retiree medical benefit arrangements applicable to that employee.
(ii) Parent shall provide retiree medical benefits for Continuing Employees who have attained age 55 and have 10 years of service with the Company and its Subsidiaries at the Effective Time, with such retiree medical benefits to be provided when such Continuing Employee terminates employment with Parent or its Subsidiaries and with benefits substantially equivalent to the retiree medical benefits being provided to former employees of the Company and its Subsidiaries at the Effective Time and at the same percentage of contribution rate as in effect at the Effective Time in accordance with the terms of the retiree medical benefit arrangements in effect on the date hereof.
(iii) Parent shall provide coverage for severance benefits for Continuing Employees for a period of at least one year after the Effective Time, and the eligibility and coverage for, and the amount of, such severance benefits shall be at least as favorable as is provided by the Mitchell Energy & Development Corp. Severance Benefit Plan.
(iv) For a period of at least one year after the Effective Time, Parent shall continue defined benefit pension benefits for Continuing Employees by continuing the Mitchell Energy & Development Corp. Retirement Plan (the "Company Retirement Plan") and each of the Company's supplemental
retirement plans (the "Company's Supplemental Retirement Plans") for such Continuing Employees or by providing benefits under another defined benefit pension plan sponsored by Parent or its Subsidiaries, and for a period of at least 13 months after the Effective Time, Parent shall not permit the form of payment provisions in the Company's Supplemental Retirement Plans to be amended.
(v) At such time as Parent causes a Continuing Employee to be covered under a group health plan maintained by Parent or one of its Subsidiaries (other than the group health plan maintained by the Company at the Effective Time), Parent shall cause (1) such Continuing Employee and his or her eligible dependents (including, without limitation, all such Continuing Employee's dependents covered immediately prior to such time under the Company's group health plan) to be credited under such Parent group health plan, for the year during which such coverage under such group health plan begins, with any deductibles and copayments already incurred during such year under the Company's group health plan, and (ii) such Parent group health plan to waive any preexisting condition restrictions to the extent necessary to provide immediate coverage. Parent shall cause each other employee welfare benefit plan or program sponsored by Parent or one of its Subsidiaries that is of a similar type to a plan or program Continuing Employees participated in prior to the Effective Time to waive any preexisting condition exclusion with respect to Continuing Employees.
(d) Parent and the Company shall take such actions, including (with respect to the Company) the amendment of the options ("Stock Options") to purchase Company Shares, and the plans pursuant to which such options have been issued ("Option Plans"), to permit Parent to assume, and Parent shall assume, effective at the Effective Time, each Option Plan and each Stock Option that remains unexercised in whole or in part as of the Effective Time and substitute shares of Parent Common Stock for the Company Shares purchasable under each such assumed option ("Assumed Option"), which assumption and substitution shall be effected as follows:
(i) the number of shares of Parent Common Stock purchasable under the Assumed Option shall be equal to 1.20 times the number of shares of Company Common Stock underlying the Assumed Option (without regard to any vesting schedule and with any fractional amount rounded to the next lowest share);
(ii) the per share exercise price of such Assumed Option shall be an amount (with fractional amounts rounded to the next highest cent) equal to the per share exercise price of the Stock Option being assumed divided by 1.20;
(iii) Parent will provide each holder of each Stock Option being assumed with a statement showing the converted number of shares, the exercise price, and the expiration date for each Assumed Option; and
(iv) any other provisions of each Assumed Option shall remain in effect, and Parent shall not permit the acceleration of the exercisability or require the mandatory surrender of the Assumed Options in connection with the Merger pursuant to applicable provisions of the Option Plans.
(e) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of the Assumed Options, and, as soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or other appropriate form) with respect to the shares of Parent Common Stock subject to the Assumed Options, and shall use its reasonable best efforts to maintain the effectiveness of such registration statement for so long as any of the Assumed Options remain outstanding.
(f) Parent and the Company shall take such actions to permit Parent to assume, and Parent shall assume, effective at the Effective Time, each bonus unit ("Bonus Unit") issued under the Mitchell Energy & Development Corp. 1997 Bonus Unit Plan ("Bonus Unit Plan") that remains unredeemed in whole or in part as of the Effective Time and substitute the value of shares of Parent Common Stock for the value of the shares of Company Common Stock that is used to determine the amount payable to an employee
upon redemption of the Bonus Unit ("Assumed Bonus Unit"), which assumption and substitution shall be effected as follows:
(i) the number of Bonus Units redeemable under the Assumed Bonus Unit shall be equal to 1.20 times the number of Bonus Units being assumed (without regard to any vesting schedule and with any fractional amount rounded to the next lowest share);
(ii) the value of each Assumed Bonus Unit as of the Redemption Date (as defined in the Bonus Unit Plan) shall be equal to the amount, if any, by which (A) the closing price of a share of Parent Common Stock on such date exceeds (B) the "exercise price" of the Assumed Bonus Unit, which shall be the closing price of Company Common Stock on the Designation Date (as defined in the Bonus Unit Plan) divided by 1.20 (with fractional amounts rounded to the next highest cent);
(iii) Parent will provide each holder of Bonus Units being assumed with a statement showing the converted number of units, the exercise price of the Assumed Bonus Units, and the expiration date for each Assumed Bonus Unit; and
(iv) any other provisions of each Assumed Bonus Unit shall remain in
effect, and Parent shall not permit the acceleration of the exercisability
of the Assumed Bonus Units in connection with the Merger pursuant to
Section VII of the Bonus Unit Plan.
(g) Parent agrees that its Board of Directors (or the Compensation Committee thereof) shall, at or prior to the Effective Time, adopt resolutions specifically approving, for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, the receipt, pursuant to this Section 6.13, of Assumed Options and Assumed Bonus Units.
SECTION 6.14 Reorganization. From and after the date hereof and until the Effective Time, none of Parent, the Company or any of their respective Subsidiaries shall knowingly (i) take any action, or fail to take any reasonable action, as a result of which the Merger would fail to qualify as a reorganization within the meaning of section 368(a) of the Code or (ii) enter into any contract, agreement, commitment or arrangement to take or fail to take any such action. Following the Effective Time, Parent shall not knowingly take any action or knowingly cause any action to be taken which would cause the Merger to fail to qualify as a reorganization within the meaning of section 368(a) of the Code (and any comparable provisions of applicable state or local law). This Section 6.14 shall become inapplicable if an Alternate Structure Event occurs.
SECTION 6.15 Dividends. The Company shall coordinate with Parent the declaration, setting of record dates and payment dates of dividends on Company Shares so that holders of Company Shares do not receive dividends on both Company Shares and Parent Common Stock received in the Merger in respect of any calendar quarter or fail to receive a dividend on Company Shares or Parent Common Stock received in the Merger in respect of any calendar quarter.
ARTICLE 7
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:
(a) (i) The Company Requisite Vote shall have been obtained and (ii) the Parent Requisite Vote shall have been obtained.
(b) (i) The waiting period applicable to the consummation of the Merger shall have expired or been terminated under the HSR Act and (ii) any mandatory waiting period or required consent under any applicable foreign competition or antitrust law or regulation shall have expired or been obtained except where the failure to observe such waiting period or obtain a consent referred to in this clause (ii) would not reasonably be expected to delay or prevent the consummation of the Merger or have a
material adverse effect on the expected benefits of the transactions contemplated by this Agreement to Parent.
(c) None of the parties hereto shall be subject to any decree, order or injunction of a court of competent jurisdiction, U.S. or foreign, which prohibits the consummation of the Merger; and no statute, rule or regulation shall have been enacted by any governmental authority which prohibits or makes unlawful the consummation of the Merger.
(d) The Registration Statement shall have become effective and no stop order with respect thereto shall be in effect and no proceedings for that purpose shall have been commenced or threatened by the SEC.
(e) The shares of Parent Common Stock to be issued pursuant to the Merger and shares issuable pursuant to Assumed Options shall have been authorized for listing on the AMEX, subject to official notice of issuance.
SECTION 7.2 Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger shall be subject to the fulfillment or waiver by the Company at or prior to the Closing Date of the following conditions:
(a) Parent shall have performed in all material respects its covenants
and agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of Parent
and Merger Sub contained in this Agreement and in any document delivered in
connection herewith (i) to the extent qualified by Parent Material Adverse
Effect or any other materiality qualification shall be true and correct and
(ii) to the extent not qualified by Parent Material Adverse Effect or any
other materiality qualification shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the
Closing Date (except for representations and warranties made as of a
specified date, which need be true and correct only as of the specified
date), and the Company shall have received a certificate of Parent,
executed on its behalf by its President or a Senior Vice President of
Parent, dated the Closing Date, certifying to such effect.
(b) The Company shall have received the opinion of Vinson & Elkins L.L.P., counsel to the Company, in form and substance reasonably satisfactory to the Company, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which shall be furnished to Parent, to the effect that (i) the Merger will be treated for federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code and (ii) no gain or loss will be recognized by the Company or the stockholders of the Company to the extent they receive Parent Common Stock in exchange for Company Shares pursuant to the Merger. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations of officers of the Company, Merger Sub and Parent as to such matters as such counsel may reasonably request.
SECTION 7.3 Conditions to Obligation of Parent to Effect the Merger. The obligations of Parent and Merger Sub to effect the Merger shall be subject to the fulfillment or waiver by Parent at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date and the representations and warranties of the Company contained in this Agreement and in any document delivered in connection herewith (i) to the extent qualified by Company Material Adverse Effect or any other materiality qualification shall be true and correct and (ii) to the extent not qualified by Company Material Adverse Effect or any other materiality qualification shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except for representations and warranties made as of a specified date, which need be true and correct only as of the specified date), and Parent shall have received a certificate of the Company, executed on its behalf by its President or a Vice President of the Company, dated the Closing Date, certifying to such effect.
(b) Parent shall have received the opinion of Mayer, Brown & Platt, counsel to Parent, in form and substance reasonably satisfactory to Parent, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which will be furnished to the Company, to the effect that (i) the Merger will be treated for federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code and (ii) no gain or loss will be recognized by any corporation which is a party to the reorganization. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations of officers of the Company, Merger Sub and Parent as to such matters as such counsel may reasonably request.
ARTICLE 8
TERMINATION
SECTION 8.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Effective Time by the mutual written consent of the Company and Parent.
SECTION 8.2 Termination by Parent or the Company. This Agreement may be terminated by action of the Board of Directors of the Company or by action of the Board of Directors of Parent (in either case upon payment of the Termination Amount (as defined below) if payable), if:
(a) the Merger shall not have been consummated by the date that is seven months after the date of this Agreement; provided, however, that the right to terminate this Agreement pursuant to this clause (a) shall not be available to any party whose failure to perform or observe in any material respect any of its obligations under this Agreement in any manner shall have been the cause of, or resulted in, the failure of the Merger to occur on or before such date; or
(b) after the twentieth day following the date of the meeting (including adjournments and postponements) of the Company's stockholders for the purpose of obtaining the Company Requisite Vote, if such Company Requisite Vote shall not have been obtained; or
(c) after the twentieth day following the date of the meeting (including adjournments and postponements) of Parent's stockholders for the purpose of obtaining the Parent Requisite Vote, if such Parent Requisite Vote shall not have been obtained; or
(d) a United States federal or state court of competent jurisdiction or United States federal or state governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this clause (d) shall have complied with Section 6.4 and with respect to other matters not covered by Section 6.4 shall have used its reasonable best efforts to remove such injunction, order or decree.
SECTION 8.3 Termination by the Company. This Agreement may be terminated prior to the Effective Time, by action of the Board of Directors of the Company after consultation with its legal advisors, if:
(a) (i) there has been a breach by Parent or Merger Sub of any representation, warranty, covenant or agreement set forth in this Agreement or if any representation or warranty of Parent or Merger Sub shall have become untrue, in either case such that the conditions set forth in Section 7.2(a) would not be satisfied and (ii) such breach is not curable, or, if curable, is not cured within 30 days after written notice of such breach is given to Parent by the Company; provided, however, that the right to terminate this Agreement pursuant to this Section 8.3(a) shall not be available to the Company if it, at such time, is in material breach of any representation, warranty, covenant or agreement set forth in this Agreement such that the conditions set forth in Section 7.3(a) shall not be satisfied; or
(b) the Board of Directors of Parent shall have withdrawn, modified or changed, in a manner adverse to the Company, the Board's approval or recommendation of the Merger, or resolved to do so.
SECTION 8.4 Termination by Parent. This Agreement may be terminated at any time prior to the Effective Time, by action of the Board of Directors of Parent after consultation with its legal advisors, if:
(a) there has been a breach by the Company of any representation, warranty covenant or agreement set forth in this Agreement or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Section 7.3(a) would not be satisfied and (ii) such breach is not curable, or, if curable, is not cured within 30 days after written notice of such breach is given by Parent to the Company; provided, however, that the right to terminate this Agreement pursuant to this Section 8.4(a) shall not be available to Parent if it, at such time, is in material breach of any representation, warranty, covenant or agreement set forth in this Agreement such that the conditions set forth in Section 7.2(a) shall not be satisfied; or
(b) the Board of Directors of the Company shall have withdrawn, modified or changed, in a manner adverse to Parent, the Board's approval or recommendation of the Merger or recommended approval of a Company Acquisition Proposal, or resolved to do so.
SECTION 8.5 Effect of Termination.
(a) If this Agreement is terminated (i) by the Company or Parent pursuant
to Section 8.2(a) or 8.2(b) (and in either such case (x) prior to, or at the
time of the meeting for the purpose of obtaining the approval required by
Section 7.1(a)(i) (including adjournments or postponements), any person shall
have made a Company Acquisition Proposal that has become public or shall have
publicly announced an intention (whether or not conditional) to make a Company
Acquisition Proposal, (y) the condition set forth in Section 7.1(a)(i) was not
satisfied at the time of such termination and (z) the condition set forth in
Section 7.1(a)(ii) was satisfied at the time of such termination) or (ii) by
Parent pursuant to Section 8.4(b); then, the Company shall immediately pay
Parent the Termination Amount (as defined below) and, in addition, reimburse
Parent for all expenses incurred by Parent in connection with this Agreement up
to the Reimbursement Maximum Amount (as defined below) upon termination of this
Agreement. All payments shall be made in cash by wire transfer to an account
designated by Parent. The term "Termination Amount" shall mean $100 million and
the term "Reimbursement Maximum Amount" shall mean $10 million. The Company
acknowledges that the agreements contained in this Section 8.5(a) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay any amount due pursuant to
this Section 8.5(a), and, in order to obtain such payment, Parent commences a
suit which results in a judgment against the Company for the payment set forth
in this Section 8.5(a), the Company shall pay to Parent its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
on such amount from the date payment was required to be made until the date such
payment is actually made at the annual prime lending rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made plus one percent
(1%) (the "Adjusted Prime Rate").
(b) If this Agreement is terminated (i) by the Company or Parent pursuant
to Section 8.2(a) or 8.2(c) (and in either such case (x) prior to, or at the
time of the meeting for the purpose of obtaining the approval required by
Section 7.1(a)(ii), (including adjournments or postponements), any person shall
have made a Parent Acquisition Proposal (as defined below) that has become
public or shall have publicly announced an intention (whether or not
conditional) to make a Parent Acquisition Proposal, (y) the condition set forth
in Section 7.1(a)(ii) was not satisfied at the time of such termination and (z)
the condition set forth in Section 7.1(a)(i) was satisfied at the time of such
termination) to make a Parent Acquisition Proposal) or (ii) by the Company
pursuant to Section 8.3(b); then Parent shall immediately pay the Company the
Termination Amount and, in addition, reimburse the Company for all expenses
incurred by the Company in connection with this Agreement up to the
Reimbursement Maximum Amount upon termination of this Agreement. All payments
shall be made in cash by wire transfer to an account designated by the Company.
The term "Parent Acquisition Proposal" shall mean any inquiry, proposal or offer
(including any proposal or offer to its stockholders) with respect to a third
party tender
offer, merger, consolidation, business combination or similar transaction
involving any assets or class of capital stock of Parent, or any acquisition of
10% or more of the capital stock (other than upon exercise of Parent employee
stock options that are outstanding as of the date hereof) or 10% or more of the
assets of Parent and its subsidiaries, taken as a whole, in a single transaction
or a series of related transactions, or any combination of the foregoing. Parent
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Company would not enter into this Agreement;
accordingly, if Parent fails promptly to pay any amount due pursuant to this
Section 8.5(b) and, in order to obtain such payment, the Company commences a
suit which results in a judgment against Parent for the payment set forth in
this Section 8.5(b), Parent shall pay to the Company its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
on such amount from the date payment was required to be made until the date such
payment is actually made at the Adjusted Prime Rate.
(c) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article 8, all obligations of the parties hereto shall terminate, except the obligations of the parties pursuant to this Section 8.5 and Section 6.11 and except for the provisions of Sections 9.3, 9.4, 9.6, 9.8, 9.9, 9.12, 9.13 and 9.14, provided that nothing herein shall relieve any party from any liability for any breach by such party of any of its covenants or agreements set forth in this Agreement and all rights and remedies of such nonbreaching party under this Agreement in the case of such a breach, at law or in equity, shall be preserved.
SECTION 8.6 Extension; Waiver. At any time prior to the Effective Time, each party may by action taken by its Board of Directors, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger; provided, however, that the agreements contained in Article 2, Article 3 and in Sections 6.10, 6.11, 6.12, 6.13, 6.14 and this Article 9 (including, if an Alternate Structure Event occurs, the amendments to certain of such provisions contemplated by Exhibit B) and the agreements delivered pursuant to this Agreement shall survive the Merger, unless otherwise provided herein.
SECTION 9.2 Notices. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission or by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:
(a) if to Parent, Merger Sub, Alternate Holdco, Devon Merger Sub or Mitchell Merger Sub:
Devon Energy Corporation
20 N. Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attn: J. Larry Nichols
Chairman, President and Chief Executive Officer
Telecopy No.: (405) 552-8171
and
Devon Energy Corporation
20 N. Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attn: Duke R. Ligon
Senior Vice President and General Counsel
Telecopy No.: (405) 552-4550
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Facsimile: (312) 701-7711
Attn: Scott J. Davis
James T. Lidbury
(b) if to the Company:
2002 Timberloch Place
P.O. Box 4000
The Woodlands, Texas 77387-4000
Facsimile: (713) 377-7000
Attn: General Counsel
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Facsimile: (713) 615-5306
Attn: C. Michael Harrington
or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed.
SECTION 9.3 Assignment; Binding Effect; Benefit. Except as provided in
Section 1.1 hereof, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as provided in Section 6.12 and Section 6.13,
notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
SECTION 9.4 Entire Agreement. This Agreement, the Parent/Company Confidentiality Agreement (other than the sixth and seventh paragraphs thereof, which are hereby terminated and of no further force or effect), the exhibits to this Agreement, the Company Disclosure Letter, the Parent Disclosure Letter and any documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto.
SECTION 9.5 Amendments. This Agreement may be amended by the parties hereto, by action taken or authorized by their Boards of Directors, at any time before or after approval of matters presented in connection with the Merger by the stockholders of the Company or Parent, but after any such
stockholder approval, no amendment shall be made which by law requires the further approval of stockholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
SECTION 9.6 Governing Law; Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. EACH OF THE COMPANY, MERGER SUB AND PARENT HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA, IN EITHER CASE LOCATED IN DALLAS COUNTY, TEXAS (THE "TEXAS COURTS") FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE TEXAS COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY TEXAS COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
SECTION 9.7 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same instrument.
SECTION 9.8 Headings. Headings of the Articles and Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretative effect whatsoever.
SECTION 9.9 Interpretation. In this Agreement:
(a) Unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, and words denoting any gender shall include all genders and words denoting natural persons shall include corporations and partnerships and vice versa.
(b) The words "include", "includes" and "including" are not limiting.
(c) The phrase "to the knowledge of" and similar phrases relating to knowledge of the Company or Parent, as the case may be, shall mean the actual knowledge of its executive officers.
(d) "Material Adverse Effect" with respect to the Company or Parent shall mean a material adverse effect on or change in (a) the business, assets and liabilities (taken together) or financial condition of a party and its Subsidiaries on a consolidated basis or (b) the ability of the party to consummate the transactions contemplated by this Agreement or fulfill the conditions to closing set forth in Article 7; provided, however, that the inability to satisfy the condition in Section 7.2(b) shall not constitute a Company Material Adverse Effect and the inability to satisfy the condition in Section 7.3(b) shall not constitute a Parent Material Adverse Effect. "Company Material Adverse Effect" and "Parent Material Adverse Effect" mean a Material Adverse Effect with respect to the Company and Parent, respectively.
(e) "Person" or "person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or other entity or organization.
(f) "Subsidiary" when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, of which such party directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, or any organization of which such party is a general partner.
SECTION 9.10 Waivers. Except as provided in this Agreement, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. The waiver by any party hereto of a breach of any provision hereunder shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder.
SECTION 9.11 Incorporation of Exhibits. The Company Disclosure Letter, the Parent Disclosure Letter and all exhibits attached hereto and referred to herein are hereby incorporated herein and made a part hereof for all purposes as if fully set forth herein.
SECTION 9.12 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
SECTION 9.13 Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any Texas Court, this being in addition to any other remedy to which they are entitled at law or in equity.
SECTION 9.14 Obligation of Merger Sub, Alternate Holdco, Devon Merger Sub and Mitchell Merger Sub. Whenever this Agreement requires Merger Sub, Alternate Holdco, Devon Merger Sub or Mitchell Merger Sub (or any of their respective successors) to take any action prior to the Effective Time, such requirement shall be deemed to include an undertaking on the part of Parent to cause Merger Sub, Alternate Holdco, Devon Merger Sub or Mitchell Merger Sub, as the case may be, to take such action and a guarantee of the performance thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same to be duly delivered on their behalf as of the day and year first written above.
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: Chairman, President and Chief Executive Officer |
DEVON NEWCO CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: President |
DEVON HOLDCO CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: President |
DEVON MERGER CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: President |
MITCHELL MERGER CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: President |
MITCHELL ENERGY & DEVELOPMENT CORP.
By: /s/ GEORGE P. MITCHELL -------------------------------- Name: George P. Mitchell Title: Chairman of the Board and Chief Executive Officer |
EXHIBIT A
FORM OF COMPANY AFFILIATE'S LETTER
This SHAREHOLDER AGREEMENT, dated as of , 2001 (this "Agreement") is among Devon Energy Corporation, a Delaware corporation ("Parent"), Devon Holdco Corporation, a Delaware corporation ("Alternate Holdco"), and the undersigned shareholder ("Shareholder") of Mitchell Energy & Development Corp., a Texas corporation (the "Company"). Capitalized terms not otherwise defined in this Agreement have the meanings ascribed to them in the Merger Agreement.
RECITALS
A. Parent, Devon NewCo Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), Alternate Holdco, Devon Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Alternate Holdco, Mitchell Merger Corporation, a Texas corporation and a wholly owned subsidiary of Alternate Holdco, and the Company have entered into an Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001 (the "Merger Agreement"), pursuant to which the Company will merge (the "Merger") with and into Merger Sub, with Merger Sub surviving the Merger (or, if an Alternate Structure Event occurs, the parties will consummate the Alternate Mergers);
B. Pursuant to the Merger Agreement, at the Effective Time, outstanding Company Shares will be converted into (i) the right to receive cash and (ii) shares of Parent Common Stock (or, if an Alternate Structure Event occurs, at the Mitchell Merger Effective Time, outstanding Company Shares will be converted into (i) the right to receive cash and (ii) shares of Alternate Holdco common stock);
C. The execution and delivery of this Agreement by Shareholder is a material inducement to Parent and Alternate Holdco to enter into the Merger Agreement; and
D. Shareholder has been advised that Shareholder may be deemed to be an
"affiliate" of the Company, as such term is used (i) for purposes of paragraphs
(c) and (d) of Rule 145 of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. Acknowledgments by Shareholder. Shareholder acknowledges and understands that the representations, warranties and covenants made by Shareholder set forth in this Agreement will be relied upon by Parent, Alternate Holdco, the Company, and their respective affiliates and counsel, and that substantial losses and damages may be incurred by such persons if Shareholder's representations, warranties or covenants are breached. Shareholder has carefully read this Agreement and the Merger Agreement and has consulted with such legal counsel and financial advisers as Shareholder has deemed appropriate in connection with the execution of this Agreement.
2. Compliance with Rule 145 and the Act.
(a) Shareholder has been advised that (i) the issuance of shares of Parent Common Stock in connection with the Merger (or, if an Alternate Structure Event occurs, the issuance of shares of Alternate Holdco common stock in connection with the Mitchell Merger) is expected to be effected pursuant to a Registration Statement filed by Parent and Alternate Holdco on Form S-4, and the resale of such shares will be subject to the restrictions set forth in Rule 145 under the Act unless such shares are otherwise transferred pursuant to an effective registration statement under the Act or an appropriate exemption from registration, and (ii) Shareholder may be deemed to be an affiliate of the Company. Shareholder accordingly agrees not to sell, pledge, transfer or otherwise dispose of any shares of Parent Common Stock issued to Shareholder in the Merger or shares of Alternate Holdco common stock issued to Shareholder in the Mitchell Merger, as the case may be, unless (i) such sale, pledge, transfer or other disposition is made in conformity with the requirements of Rule 145 under the Act, (ii) such sale, pledge,
transfer or other disposition is made pursuant to an effective registration statement under the Act, or (iii) Shareholder delivers to Parent or Alternate Holdco, as the case may be, a written opinion of counsel, in form and substance reasonably acceptable to Parent or Alternate Holdco, as the case may be, to the effect that such sale, pledge, transfer or other disposition is otherwise exempt from registration under the Act.
(b) Parent or Alternate Holdco, as the case may be, will give stop transfer instructions to its transfer agent with respect to any Parent Common Stock received by Shareholder pursuant to the Merger or Alternate Holdco common stock received by Shareholder pursuant to the Mitchell Merger, and there will be placed on the certificates representing such Parent Common Stock or Alternate Holdco common stock, or any substitutions therefor, legends stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES, AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE 145, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933."
The legend set forth above shall be removed (by delivery of a substitute certificate without such legend), and Parent or Alternate Holdco, as the case may be, shall so instruct its transfer agent, if a registration statement respecting the sale of the shares has been declared effective under the Act or if Shareholder delivers to Parent or Alternate Holdco, as the case may be, (i) satisfactory written evidence that the shares have been sold in compliance with Rule 145 (in which case, the substitute certificate will be issued in the name of the transferee), or (ii) an opinion of counsel, in form and substance reasonably acceptable to Parent or Alternate Holdco, as the case may be, to the effect that sale of the shares by the holder thereof is no longer subject to Rule 145.
3. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. Delivery of an executed counterpart of this Agreement by facsimile shall be effective to the fullest extent permitted by applicable law.
(b) This Agreement shall be enforceable by, and shall inure to the benefit of and be binding upon, the parties and their respective successors and assigns. As used in this Agreement, the term "successors and assigns" means, where the context to permits, heirs, executors, administrators, trustees and successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the laws of the State of Texas. The parties irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Texas and of the United States of America, in either case located in Dallas County, Texas (the "Texas Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated by this Agreement (and agree not to commence any litigation relating thereto except in such Texas Courts), waive any objection to the laying of venue of any such litigation in the Texas Courts and agree not to plead or claim in any Texas Court that such litigation brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants, and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated.
(e) Counsel to the parties to the Merger Agreement shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right waived or any obligations excused, except by a written agreement signed by both parties.
(g) Notwithstanding any other provision contained in this Agreement, this Agreement and all obligations under this Agreement shall terminate upon the termination of the Merger Agreement in accordance with its terms.
(h) From and after the Effective Time of the Merger or, if the Alternate Mergers are consummated, the Mitchell Merger Effective Time and as long as is necessary in order to permit Shareholder to sell Parent Common Stock or Alternate Holdco common stock, as the case may be, held by Shareholder pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Act, Parent or Alternate Holdco, as the case may be, will file on a timely basis all reports required to be filed by it pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as the same shall be in effect at the time, and shall otherwise make available adequate public information regarding Parent or Alternate Holdco, as the case may be, in such manner as may be required to satisfy the requirements of paragraph (c) of Rule 144 under the Act.
IN WITNESS WHEREOF, this Agreement is executed as of the date first stated above.
DEVON ENERGY CORPORATION,
a Delaware corporation
Title:
DEVON HOLDCO CORPORATION,
a Delaware corporation
By:
Title:
SHAREHOLDER
Name:
Number of Shares Owned:
Number of Shares Issuable upon
Exercise of Stock Options:
EXHIBIT B
AMENDMENTS TO BECOME EFFECTIVE
UPON ALTERNATE STRUCTURE EVENT
1. Article 1 (other than Section 1.7, which shall remain in full force and effect) shall be deleted in its entirety and replaced with the following:
ARTICLE 1
THE ALTERNATE STRUCTURE
SECTION 1.1 The Alternate Mergers.
(a) Alternate Mergers Corporations. As promptly as practicable after occurrence of an Alternate Structure Event, Parent shall cause (1) Alternate Holdco to amend its certificate of incorporation and bylaws to be substantially identical in form and substance to the certificate of incorporation and bylaws of Parent at that time; and (2) Alternate Holdco's board of directors to adopt a shareholder rights plan substantially identical in form and substance to the Parent Rights Agreement, as it existed on October 1, 2001. Prior to the Effective Time (as defined below), Parent shall ensure that Alternate Holdco, Mitchell Merger Sub and Devon Merger Sub take no actions and undertake no operations except as may be necessary in connection with the consummation of the Alternate Mergers. Parent shall cause Alternate Holdco's corporate name, as of the Effective Time, to be changed to "Devon Energy Corporation" or such other name as shall be selected by Parent.
(b) The Mitchell Merger. Subject to the terms and conditions of this Agreement, at the Mitchell Merger Effective Time (as defined in Section 1.3), Mitchell Merger Sub shall be merged with and into the Company (the "Mitchell Merger") in accordance with this Agreement, and the separate corporate existence of Mitchell Merger Sub shall thereupon cease. The Company shall be the surviving corporation in the Mitchell Merger and shall be a wholly owned subsidiary of Alternate Holdco. The Mitchell Merger shall have the effects specified in the Texas Business Corporation Act (the "TBCA").
(c) The Devon Merger. Subject to the terms and conditions of this Agreement, at the Devon Merger Effective Time (as defined in Section 1.3), Devon Merger Sub shall be merged with and into Parent (the "Devon Merger") in accordance with this Agreement, and the separate existence of Devon Merger Sub shall thereupon cease. Parent shall be the surviving corporation in the Devon Merger and shall be a wholly owned subsidiary of Alternate Holdco. The Devon Merger shall have the effects specified in the Delaware General Corporation Law (the "DGCL").
SECTION 1.2 The Closing. Subject to the terms and conditions of this Agreement, the closing of the Alternate Mergers (the "Closing") shall take place (a) at the offices of Mayer, Brown & Platt, 700 Louisiana Street, Houston, Texas 77002, at 9:00 a.m., local time, on the first business day immediately following the day on which the last to be fulfilled or waived of the conditions set forth in Article 7 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to fulfillment or waiver of those conditions) shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as Parent and the Company may agree in writing. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." The parties shall cause the Mitchell Merger Effective Time and the Devon Merger Effective Time to occur concurrently or, if not concurrently, as close in time as possible. In any event, the parties shall cause both the Mitchell Merger Effective Time and the Devon Merger Effective Time to occur during the Closing.
SECTION 1.3 Effective Times. If all the conditions to the Alternate Mergers set forth in Article 7 shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in Article 8, on the Closing Date, articles of merger (the "Articles of Merger") meeting the requirements of Article 5.04 of the TBCA (with respect to the Mitchell Merger) shall be filed with the Secretary of State of the State of Texas and a certificate of merger (the "Certificate of Merger") meeting the requirements of Section 251 of the DGCL (with respect to the Devon Merger)
shall be properly executed and filed with the Secretary of State of the State of Delaware. The Mitchell Merger shall become effective upon the issuance of a certificate of merger by the Secretary of State of the State of Texas in accordance with the TBCA, or at such later time that the parties hereto shall have agreed upon and designated in such filing as the effective time of the Mitchell Merger (the "Mitchell Merger Effective Time"). The Devon Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or at such later time that the parties hereto shall have agreed upon and designated in such filing as the effective time of the Devon Merger (the "Devon Merger Effective Time"). Except as otherwise provided in the amendments to this Agreement contemplated by Exhibit B, references to the "Effective Time" in this Agreement shall be deemed to be references to the earlier to occur of the Mitchell Merger Effective Time and the Devon Merger Effective Time.
SECTION 1.4 Charters.
(a) At the Mitchell Merger Effective Time, the articles of incorporation of the Company in effect immediately prior to the Mitchell Merger Effective Time shall be amended as set forth in Annex A and, as so amended, shall be the articles of incorporation of the surviving corporation of the Mitchell Merger, until duly amended in accordance with applicable law.
(b) At the Devon Merger Effective Time, the certificate of incorporation of Parent in effect immediately prior to the Devon Merger Effective Time shall be amended as set forth in Annex B and, as so amended, shall be the certificate of incorporation of the surviving corporation of the Devon Merger, until duly amended in accordance with applicable law.
SECTION 1.5 Bylaws.
(a) The bylaws of the Company in effect immediately prior to the Mitchell Merger Effective Time shall be the bylaws of the surviving corporation of the Mitchell Merger, until duly amended in accordance with applicable law.
(b) The bylaws of Parent in effect immediately prior to the Devon Merger Effective Time shall be the bylaws of the surviving corporation of the Devon Merger, until duly amended in accordance with applicable law.
SECTION 1.6 Boards of Directors.
(a) The Board of Directors of the surviving corporation of the Mitchell Merger shall consist of the Board of Directors of Mitchell Merger Sub, as it existed immediately prior to the Mitchell Merger Effective Time.
(b) The Board of Directors of the surviving corporation of the Devon Merger shall consist of the Board of Directors of Devon Merger Sub, as it existed immediately prior to the Devon Merger Effective Time.
2. Articles 2 and 3 shall be deleted in their entirety and replaced with the following:
ARTICLE 2
DIRECTORS OF ALTERNATE HOLDCO
SECTION 2.1 Directors of Alternate Holdco. Immediately prior to the Effective Time, Parent shall cause the Board of Directors of Alternate Holdco to be identical to the Board of Directors of Parent at that time, except that J. Todd Mitchell (the "Company Designee") shall also be appointed to the Board of Directors of Alternate Holdco. If, prior to the Effective Time, the Company Designee becomes unavailable or unwilling to serve, the Company shall designate a substitute designee acceptable to Parent.
ARTICLE 3
CONVERSION OF COMPANY SHARES
SECTION 3.1 Effect on Capital Stock.
(a) The Mitchell Merger. At the Mitchell Merger Effective Time, the Mitchell Merger shall have the following effects on the capital stock of the Company and Mitchell Merger Sub, without any action on the part of the holder of any capital stock of the Company or Mitchell Merger Sub:
(i) Conversion of the Company Common Stock. Subject to the provisions of this Section 3.1 and Section 3.3, each share of Class A common stock, $0.10 par value per share, of the Company (each a "Company Share" and collectively the "Company Shares" issued and outstanding immediately prior to the Mitchell Merger Effective Time (but not including any Dissenting Shares (as defined below) and any Company Shares that are (A) owned (1) by Alternate Holdco, Parent, Mitchell Merger Sub or any other direct or indirect Subsidiary of Alternate Holdco or Parent or (2) by the Company or any direct or indirect Subsidiary of the Company and (B) are not held on behalf of third parties (collectively, the "Excluded Company Shares")) shall, by virtue of the Mitchell Merger and without any action on the part of the holder thereof, be converted into (A) the right to receive $31.00 in cash (the "Cash Consideration") and (B) 0.585 of a share (the "Exchange Ratio") of the common stock of Alternate Holdco (the "Stock Consideration" and, together with the Cash Consideration, the "Merger Consideration").
(ii) Cancellation of Excluded Company Shares. Each Excluded Company Share issued and outstanding immediately prior to the Mitchell Merger Effective Time shall, by virtue of the Mitchell Merger and without any action on the part of the holder thereof, no longer be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist.
(iii) Mitchell Merger Sub. At the Mitchell Merger Effective Time, each share of common stock of Mitchell Merger Sub issued and outstanding immediately prior to the Mitchell Merger Effective Time shall be converted into one share of common stock of the surviving corporation of the Mitchell Merger, and the surviving corporation of the Mitchell Merger shall thereby become a wholly owned subsidiary of Alternate Holdco.
(b) The Devon Merger.
(i) Conversion of the Capital Stock of Parent. At the Devon Merger Effective Time, the Devon Merger shall have the following effects on the capital stock of Parent and Devon Merger Sub, without any action on the part of the holder of any capital stock of Parent or Devon Merger Sub:
(A) Each share of common stock, par value $0.10 per share, of Parent (each a "Parent Share" and collectively the "Parent Common Stock") issued and outstanding immediately prior to the Devon Merger Effective Time (other than Excluded Parent Shares (as defined below)) shall be converted into one share of Alternate Holdco common stock.
(B) Each share of 6.49% Cumulative Preferred Stock, Series A, par value $1.00 per share, of Parent (the "Parent 6.49% Preferred Stock") issued and outstanding immediately prior to the Devon Merger Effective Time (other than Excluded Parent Shares and Dissenting Parent Preferred Shares (as defined below)) shall remain outstanding as one share of preferred stock of the surviving corporation of the Devon Merger having the same preferences and rights with respect to the surviving corporation of the Devon Merger as those that the Parent 6.49% Preferred Stock had with respect to Parent.
(C) The one share of Parent Special Voting Stock issued and outstanding immediately prior to the Devon Merger Effective Time shall be converted into one share of special voting stock of Alternate Holdco having the same preferences and rights with respect to Alternate Holdco as those that the Parent Special Voting Stock had with respect to Parent.
(ii) Cancellation of Excluded Parent Shares. Shares of Parent Common Stock or Parent 6.49% Preferred Stock that are (A) owned (1) by Alternate Holdco, Parent, Devon Merger Sub or any other direct or indirect Subsidiary of Alternate Holdco or Parent or (2) by the Company or any direct or indirect Subsidiary of the Company and (B) are not held on behalf of third parties (collectively, the "Excluded Parent Shares"), immediately prior to the Devon Merger Effective Time shall, by virtue of the Devon Merger and without any action on the part of the holder thereof, no longer be outstanding, shall be cancelled and retired without payment of consideration therefor and shall cease to exist.
(iii) Devon Merger Sub. At the Devon Merger Effective Time, each share of common stock of Devon Merger Sub issued and outstanding immediately prior to the Devon Merger Effective Time shall be converted into one share of common stock of the surviving corporation of the Devon Merger, and the surviving corporation of the Devon Merger shall thereby become a wholly owned subsidiary of Alternate Holdco.
(iv) Devon Options. Alternate Holdco and Parent shall take such actions, including (with respect to Parent) the amendment of the options ("Devon Stock Options") to purchase Parent Shares issued pursuant to Parent's stock option plans ("Devon Option Plans"), and the Devon Option Plans, to permit Alternate Holdco to assume, and Alternate Holdco shall assume, effective at the Devon Merger Effective Time, each Devon Option Plan and each Devon Stock Option that remains unexercised in whole or in part as of the Devon Merger Effective Time and substitute shares of Alternate Holdco common stock for the Parent Shares purchasable under each such assumed option ("Devon Assumed Option"), which assumption and substitution shall be effected as follows:
(A) the number of shares of Alternate Holdco common stock purchasable under the Devon Assumed Option shall be equal to the number of shares of Parent Common Stock underlying the Devon Assumed Option (without regard to any vesting schedule);
(B) the per share exercise price of such Devon Assumed Option shall be equal to the per share exercise price of the Devon Stock Option being assumed; and
(C) any other provisions of each Devon Assumed Option shall remain in effect.
(v) Other Actions. Alternate Holdco shall take such action as may be necessary to provide for (A) succession of Alternate Holdco for Parent under the Support Agreement dated as of December 10, 1998 between Parent and Northstar, as amended, and the Voting and Exchange Trust Agreement dated as of December 10, 1998 between Parent and CIBC Mellon Trust Company, as amended; (B) the making of changes to, or in the rights of holders of, the Northstar Exchangeable Shares as are economically equivalent to the changes to, or in the rights of holders of Parent Common Stock, that are a result of the exchange of Alternate Holdco common stock for Parent Common Stock in the Devon Merger and (C) the convertibility of the Zero Coupon Convertible Debentures (as defined below) into Alternate Holdco common stock, subject to the terms of the Indenture (as defined below). "Indenture" means the Indenture, dated as of June 27,2000, between Parent and The Bank of New York, as trustee. "Zero Coupon Convertible Debentures" means Parent's Zero Coupon Convertible Senior Debentures due 2020 issued pursuant to the Indenture.
(vi) Post-Devon Merger Sale of Alternate Holdco Common Stock to Alternate Holdco. Immediately after the Devon Merger Effective Time, the surviving corporation of the Devon Merger shall sell to Alternate Holdco, and Alternate Holdco shall purchase from such surviving corporation, all of the shares of Alternate Holdco common stock then held by such surviving corporation for an amount in cash equal to the aggregate par value of all such shares of Alternate Holdco common stock.
SECTION 3.2 Exchange of Certificates for Shares.
(a) Exchange Procedures. At or prior to the Effective Time, Alternate Holdco shall deposit with an exchange agent (the "Exchange Agent"), selected by Parent with the Company's prior approval, which shall not be unreasonably withheld, in trust for the benefit of the holders of Company Shares and Parent Shares, an amount in cash and certificates representing shares of Alternate Holdco common stock required
to effect (i) the conversion of the Company Shares into the Merger Consideration
pursuant to Section 3.1(a)(i) and (ii) the conversion of the Parent Shares into
shares of Alternate Holdco common stock pursuant to Section 3.1(b)(i)(A).
Alternate Holdco shall make sufficient funds available to the Exchange Agent
from time to time as needed to pay cash in respect of dividends or other
distributions in accordance with Section 3.2(b). To the extent that Alternate
Holdco lacks funds sufficient to pay the full amount of the Cash Consideration,
Parent shall advance Alternate Holdco such funds. Promptly after the Effective
Time, but in no event later than three business days following the Closing Date,
Alternate Holdco shall cause the Exchange Agent to mail to each holder of record
as of the Mitchell Merger Effective Time of a certificate representing Company
Shares and to each holder of record as of the Devon Merger Effective Time of a
certificate representing Parent Shares (each a "Certificate") (other than
holders of a Certificate in respect of Excluded Company Shares or Excluded
Parent Shares) (i) a letter of transmittal specifying that delivery of the
Certificates shall be effected, and that risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or, in lieu of
such Certificates, affidavits of loss together with either a reasonable
undertaking to indemnify Alternate Holdco, Parent or the Company, if Alternate
Holdco believes that the person providing the indemnity is sufficiently
creditworthy, or, if Alternate Holdco does not so believe, indemnity bonds) to
the Exchange Agent, such letter of transmittal to be in such form and have such
other provisions as Parent and the Company may reasonably agree, and (ii)
instructions for exchanging the Certificates and receiving the Merger
Consideration to which such holder shall be entitled therefore pursuant to
Section 3.1(a)(i) or the shares of Alternate Holdco common stock to which such
holder shall be entitled therefore pursuant to Section 3.1(b)(i)(A), as the case
may be. Subject to Section 3.2(g), upon surrender of a Certificate formerly
representing Company Shares for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of Alternate Holdco common stock that such holder is
entitled to receive pursuant to Section 3.1(a)(i) and (ii) a check in the
aggregate amount (after giving effect to any required tax withholdings) of (A)
the cash that such holder is entitled to receive pursuant to Section 3.1(a)(i)
plus (B) any cash in lieu of fractional shares determined in accordance with
Section 3.2(d) plus (C) any cash dividends and any other dividends or other
distributions that such holder has the right to receive pursuant to the
provisions of this Section 3.2. Upon surrender of a Certificate formerly
representing Parent Shares for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of Alternate Holdco common stock that such holder is
entitled to receive pursuant to Section 3.1(b)(i)(A) and (ii) a check in the
aggregate amount (after giving effect to any required tax withholdings) of any
cash dividends and any other dividends or other distributions that such holder
has the right to receive pursuant to the provisions of this Section 3.2. Each
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on any amount payable upon due surrender of any Certificate. In the
event of a transfer of ownership of Company Shares or Parent Shares that
occurred prior to the Mitchell Merger Effective Time or the Devon Merger
Effective Time, as the case may be, but is not registered in the transfer
records of the Company or Parent, the Merger Consideration may be issued and/or
paid or the shares of Alternate Holdco common stock may be issued, as the case
may be, to such a transferee if the Certificate formerly representing such
Company Shares or Parent Shares is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. If any certificate for
shares of Alternate Holdco common stock is to be issued in a name other than
that in which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Person requesting such exchange
shall pay any transfer or other taxes required by reason of the issuance of
certificates for shares of Alternate Holdco common stock in a name other than
that of the registered holder of the Certificate surrendered, or shall establish
to the satisfaction of Alternate Holdco or the Exchange Agent that such tax has
been paid or is not applicable.
(b) Distributions with Respect to Unexchanged Shares. Whenever a dividend or other distribution is declared by Alternate Holdco in respect of Alternate Holdco common stock, the record date for which is at or after the Mitchell Merger Effective Time (with respect to Certificates formerly representing
Company Shares) or after the Devon Merger Effective Time (with respect to Certificates formerly representing Parent Shares), that declaration shall include dividends or other distributions in respect of all shares of Alternate Holdco common stock issuable pursuant to this Agreement. No dividends or other distributions so declared in respect of such Alternate Holdco common stock shall be paid to any holder of any unsurrendered Certificate until such Certificate is surrendered for exchange in accordance with this Section 3.2. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be issued or paid, less the amount of any withholding taxes that may be required thereon, to the holder of the certificates representing whole shares of Alternate Holdco common stock issued in exchange for such Certificate, without interest, (i) at the time of such surrender, the dividends or other distributions with a record date that is at or after the Mitchell Merger Effective Time or the Devon Merger Effective Time, as the case may be, and a payment date on or prior to the date of surrender of such whole shares of Alternate Holdco common stock and not previously paid and (ii) at the appropriate payment date, the dividends or other distributions payable with respect to such whole shares of Alternate Holdco common stock with a record date at or after the Mitchell Merger Effective Time or the Devon Merger Effective Time, as the case may be, but with a payment date subsequent to surrender. For purposes of dividends or other distributions in respect of shares of Alternate Holdco common stock, (i) all shares of Alternate Holdco common stock to be issued pursuant to the Mitchell Merger shall be deemed issued and outstanding as of the Mitchell Merger Effective Time and (ii) all shares of Alternate Holdco common stock to be issued pursuant to the Devon Merger shall be deemed issued and outstanding as of the Devon Merger Effective Time.
(c) Transfers. After the Mitchell Merger Effective Time, there shall be no transfers on the stock transfer books of the Company of the Company Shares that were outstanding immediately prior to the Mitchell Merger Effective Time. After the Devon Merger Effective Time, there shall be no transfers on the stock transfer books of Parent of the Parent Shares that were outstanding immediately prior to the Devon Merger Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of Alternate Holdco common stock will be issued and any holder of Company Shares entitled to receive a fractional share of Alternate Holdco common stock (after taking into account the aggregate number of shares of Alternate Holdco common stock to be received in exchange for all shares held by such holder) but for this Section 3.2(d) shall be entitled to receive in lieu thereof an amount in cash (without interest) determined by multiplying such fraction (rounded to the nearest one-hundredth of a share) by the average closing price of a share of Parent Common Stock, as reported in The Wall Street Journal, Southwestern edition, on the five trading days immediately prior to the last business day before the Mitchell Merger Effective Time.
(e) Termination of Exchange Period; Unclaimed Merger Consideration or Alternate Holdco Common Stock. Any shares of Alternate Holdco common stock and any portion of the cash, dividends or other distributions with respect to the Alternate Holdco common stock deposited by Alternate Holdco with the Exchange Agent (including the proceeds of any investments thereof) that remain unclaimed by the stockholders of the Company or Parent 180 days after the Effective Time shall be paid to Alternate Holdco. Any stockholders of the Company or Parent who have not theretofore complied with this Article 3 shall thereafter be entitled to look only to Alternate Holdco for payment of their Merger Consideration, issuance of the shares of Alternate Holdco common stock to which they are entitled and any cash, dividends and other distributions in respect thereof issuable and/or payable pursuant to Section 3.1, Section 3.2(b) and Section 3.2(d) upon due surrender of their Certificates (or, in lieu of such Certificates, affidavits of loss together with either a reasonable undertaking to indemnify Alternate Holdco , Parent or the Company, if Alternate Holdco believes that the Person providing the indemnity is sufficiently creditworthy, or, if Alternate Holdco does not so believe, indemnity bonds), in each case, without any interest thereon. Notwithstanding the foregoing, none of Alternate Holdco, Parent, the surviving corporations of the Mitchell Merger or the Devon Merger, the Exchange Agent or any other Person shall be liable to any former holder of Company Shares or Parent Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed, and if Alternate Holdco believes that the Person providing the
indemnity is sufficiently creditworthy, the making of a reasonable undertaking
to indemnify Alternate Holdco, Parent or the Company, or, if Alternate Holdco
does not so believe, the posting by such Person of a bond in the form
customarily required by Alternate Holdco to indemnify against any claim that may
be made against it with respect to such Certificate, Alternate Holdco will issue
the shares of Alternate Holdco common stock and the Exchange Agent will
distribute such Merger Consideration, shares of Alternate Holdco common stock,
dividends and other distributions in respect thereof issuable or payable in
exchange for such lost, stolen or destroyed Certificate pursuant to Section 3.1,
Section 3.2(b) and Section 3.2(d), in each case, without interest.
(g) Affiliates. Notwithstanding anything in this Agreement to the
contrary, Certificates formerly representing Company Shares surrendered for
exchange by any Rule 145 Affiliate (as determined pursuant to Section 6.10) of
the Company shall not be exchanged until Alternate Holdco has received a written
agreement from such Person as provided in Section 6.10. Notwithstanding anything
in this Agreement to the contrary, Certificates formerly representing Parent
Shares surrendered for exchange by any Person who, at the time of the meeting or
meetings of the Parent's stockholders pursuant to Section 6.3, Parent believes
may be deemed to be an "affiliate" (as that term is used in paragraphs (c) and
(d) of Rule 145 of the Securities Act) of Parent shall not be exchanged until
Alternate Holdco has received a written agreement from such Person, in the form
attached hereto as Exhibit C.
SECTION 3.3 Dissenters' Rights.
(a) Dissenting Company Shares. Company Shares that are outstanding immediately prior to the Mitchell Merger Effective Time and that are held by stockholders who shall have not voted in favor of the approval of the Merger Agreement and who shall have made written demand for payment of the fair value for such shares in accordance with Section 5.12 of the TBCA (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration. Such stockholders shall be entitled to receive payment of the fair value of the Company Shares held by them in accordance with the TBCA, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Company Shares under the TBCA shall thereupon be deemed to have been converted into and to be exchangeable, as of the Mitchell Merger Effective Time, for Merger Consideration in the manner provided in Section 3.1(a)(i).
(b) Dissenting Parent Preferred Shares. In accordance with Section 262 of
the DGCL, no appraisal rights shall be available to holders of Parent Common
Stock in connection with the Devon Merger. Holders of shares of Parent 6.49%
Preferred Stock issued and outstanding immediately prior to the Devon Merger
Effective Time who shall have delivered a written demand for appraisal of those
shares in accordance with the DGCL and who, as of the Devon Merger Effective
Time, shall not have effectively withdrawn or lost this right to appraisal (such
shares, "Dissenting Parent Preferred Shares") shall be entitled to those rights
(but only those rights) as are granted by Section 262 of the DGCL. Each holder
of Dissenting Parent Preferred Shares who becomes entitled to payment for those
Dissenting Parent Preferred Shares pursuant to Section 262 of the DGCL shall
receive payment from the surviving corporation of the Devon Merger in accordance
with the DGCL; provided, however, that (A) if any holder of Dissenting Parent
Preferred Shares shall have failed to establish the holder's entitlement to
appraisal rights as provided in Section 262 of the DGCL, (B) if any holder of
Dissenting Parent Preferred Shares shall have effectively withdrawn the holder's
demand for appraisal of the holder's shares or lost the holder's right to
appraisal and payment for the holder's shares under Section 262 of the DGCL or
(C) if neither any holder of Dissenting Parent Preferred Shares nor the
surviving corporation of the Devon Merger shall have filed a petition demanding
a determination of the value of all Dissenting Parent Preferred Shares within
the time provided in Section 262 of the DGCL, the holder shall forfeit the right
to appraisal of those Dissenting Parent Preferred Shares and each Dissenting
Parent Preferred Share shall remain outstanding in accordance with Section
3.1(b)(i)(B).
SECTION 3.4 Adjustments to Prevent Dilution. In the event that, prior to the Mitchell Merger Effective Time or the Devon Merger Effective Time, there shall have been declared or effected a reclassification, stock split (including a reverse split), stock dividend, stock distribution or similar event made with respect to the Company Shares, the Parent Common Stock or the Alternate Holdco common stock, the Merger Consideration shall be equitably adjusted to reflect such event.
3. All references to "Parent" in Section 6.12 shall be deemed to be
references to Alternate Holdco, all references to the "Surviving Corporation" in
Section 6.12 shall be deemed to be references to the surviving corporation of
the Mitchell Merger, all references to the "Merger" in Section 6.12 shall be
deemed to be references to the Mitchell Merger and all references to the
"Effective Time" in Section 6.12 shall be deemed to be references to the
Mitchell Merger Effective Time.
4. All references to "Parent" in Section 6.13 shall be deemed to be references to Alternate Holdco (and, for the avoidance of doubt, all references to "Continuing Employees" in Section 6.13 shall be deemed to be references to officers and employees of the Company and its Subsidiaries who become and remain regular (full-time) employees of Alternate Holdco or any of its Subsidiaries).
5. Sections 6.13(d), (e), (f) and (g) shall be deleted in their entirety and replaced with the following:
(d) Alternate Holdco and the Company shall take such actions, including (with respect to the Company) the amendment of the options ("Stock Options") to purchase Company Shares, and the plans pursuant to which such options have been issued ("Option Plans"), to permit Alternate Holdco to assume, and Alternate Holdco shall assume, effective at the Mitchell Merger Effective Time, each Option Plan and each Stock Option that remains unexercised in whole or in part as of the Mitchell Merger Effective Time and substitute shares of Alternate Holdco common stock for the Company Shares purchasable under each such assumed option ("Assumed Option"), which assumption and substitution shall be effected as follows:
(i) the number of shares of Alternate Holdco common stock purchasable under the Assumed Option shall be equal to 1.20 times the number of shares of Company Common Stock underlying the Assumed Option (without regard to any vesting schedule and with any fractional amount rounded to the next lowest share);
(ii) the per share exercise price of such Assumed Option shall be an amount (with fractional amounts rounded to the next highest cent) equal to the per share exercise price of the Stock Option being assumed divided by 1.20;
(iii) Alternate Holdco will provide each holder of each Stock Option being assumed with a statement showing the converted number of shares, the exercise price, and the expiration date for each Assumed Option; and
(iv) any other provisions of each Assumed Option shall remain in effect, and Alternate Holdco shall not permit the acceleration of the exercisability or require the mandatory surrender of the Assumed Options in connection with the Mitchell Merger pursuant to applicable provisions of the Option Plans.
(e) Alternate Holdco shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Alternate Holdco common stock for delivery upon exercise of the Assumed Options and, as soon as practicable after the Effective Time, Alternate Holdco shall file a registration statement on Form S-8 (or other appropriate form) with respect to the shares of Alternate Holdco common stock subject to the Assumed Options, and shall use its reasonable best efforts to maintain the effectiveness of such registration statement for so long as any of the Assumed Options remain outstanding.
(f) Alternate Holdco and the Company shall take such actions to permit Alternate Holdco to assume, and Alternate Holdco shall assume, effective at the Mitchell Merger Effective Time, each bonus unit ("Bonus Unit") issued under the Mitchell Energy & Development Corp. 1997 Bonus Unit Plan ("Bonus Unit Plan")that remains unredeemed in whole or in part as of the Mitchell Merger Effective Time and substitute the value of shares of Alternate Holdco common stock for the value of the shares of
Company Common Stock that is used to determine the amount payable to an employee upon redemption of the Bonus Unit ("Assumed Bonus Unit"), which assumption and substitution shall be effected as follows:
(i) the number of Bonus Units redeemable under the Assumed Bonus Unit shall be equal to 1.20 times the number of Bonus Units being assumed (without regard to any vesting schedule and with any fractional amount rounded to the next lowest share);
(ii) the value of each Assumed Bonus Unit as of the Redemption Date (as defined in the Bonus Unit Plan) shall be equal to the amount, if any, by which (A) the closing price of a share of Alternate Holdco common stock on such date exceeds (B) the "exercise price" of the Assumed Bonus Unit, which shall be the closing price of Company Common Stock on the Designation Date (as defined in the Bonus Unit Plan) divided by 1.20 (with fractional amounts rounded to the next highest cent);
(iii) Alternate Holdco will provide each holder of Bonus Units being assumed with a statement showing the converted number of units, the exercise price of the Assumed Bonus Units, and the expiration date for each Assumed Bonus Unit; and
(iv) any other provisions of each Assumed Bonus Unit shall remain in effect, and Alternate Holdco shall not permit the acceleration of the exercisability of the Assumed Bonus Units in connection with the Mitchell Merger pursuant to Section VII of the Bonus Unit Plan.
(g) Alternate Holdco agrees that its Board of Directors (or the
Compensation Committee thereof) shall, at or prior to the Mitchell Merger
Effective Time, adopt resolutions specifically approving, for purposes of Rule
16b-3 under the Securities Exchange Act of 1934, the receipt, pursuant to this
Section 6.13, of Assumed Options and Assumed Bonus Units.
6. Section 7.1(e) shall be deleted in its entirety and replaced with the following:
(e) The shares of Alternate Holdco common stock to be issued pursuant to the Alternate Mergers and shares issuable pursuant to Assumed Options shall have been authorized for listing on the AMEX, subject to official notice of issuance.
7. Section 7.2(b) shall be deleted in its entirety and replaced with the following:
(b) The Company shall have received the opinion of Vinson & Elkins L.L.P., counsel to the Company, in form and substance reasonably satisfactory to the Company, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which shall be furnished to Parent, to the effect that the receipt by the stockholders of the Company of Alternate Holdco common stock and cash in exchange for Company Shares pursuant to the Mitchell Merger will qualify for federal income tax purposes as a nonrecognition transaction described in section 351 of the Code, except to the extent that the stockholders of the Company receive cash in exchange for their Company Shares in the Mitchell Merger. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations of officers of Alternate Holdco, the Company, Mitchell Merger Sub and Parent as to such matters as such counsel may reasonably request.
8. Section 7.3(b) shall be deleted in its entirety and replaced with the following:
(b) Parent shall have received the opinion of Mayer, Brown & Platt, counsel to Parent, in form and substance reasonably satisfactory to Parent, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which will be furnished to the Company, to the effect that the receipt by Parent stockholders of Alternate Holdco common stock in exchange for Parent Shares pursuant to the Devon Merger will qualify for federal income tax purposes as a nonrecognition transaction described in section 351 of the Code. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations of officers of Alternate Holdco, the Company, Devon Merger Sub and Parent as to such matters as such counsel may reasonably request.
EXHIBIT C
FORM OF PARENT AFFILIATE'S LETTER
This SHAREHOLDER AGREEMENT, dated as of , 2001 (this "Agreement") is between Devon Holdco Corporation, a Delaware corporation ("Alternate Holdco"), and the undersigned shareholder ("Shareholder") of Devon Energy Corporation, a Delaware corporation ("Parent"). Capitalized terms not otherwise defined in this Agreement have the meanings ascribed to them in the Merger Agreement.
RECITALS
A. Parent, Devon NewCo Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), Alternate Holdco, Devon Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Alternate Holdco, Mitchell Merger Corporation, a Texas corporation and a wholly owned subsidiary of Alternate Holdco, and Mitchell Energy & Development Corp., a Texas corporation (the "Company"), have entered into an Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001 (the "Merger Agreement"), pursuant to which the Company will merge (the "Merger") with and into Merger Sub, with Merger Sub surviving the Merger (or, if an Alternate Structure Event occurs, the parties will consummate the Alternate Mergers);
B. Pursuant to the Merger Agreement, if an Alternate Structure Event occurs, at the Devon Merger Effective Time, outstanding Parent Shares will be converted into shares of Alternate Holdco common stock;
C. The execution and delivery of this Agreement by Shareholder is a material inducement to Parent and Alternate Holdco to enter into the Merger Agreement; and
D. Shareholder has been advised that Shareholder may be deemed to be an "affiliate" of Parent, as such term is used (i) for purposes of paragraphs (c) and (d) of Rule 145 of the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. Acknowledgments by Shareholder. Shareholder acknowledges and understands that the representations, warranties and covenants made by Shareholder set forth in this Agreement will be relied upon by Parent, Alternate Holdco, the Company, and their respective affiliates and counsel, and that substantial losses and damages may be incurred by such persons if Shareholder's representations, warranties or covenants are breached. Shareholder has carefully read this Agreement and the Merger Agreement and has consulted with such legal counsel and financial advisers as Shareholder has deemed appropriate in connection with the execution of this Agreement.
2. Compliance with Rule 145 and the Act.
(a) Shareholder has been advised that (i) the issuance of shares of Alternate Holdco common stock in connection with the Devon Merger is expected to be effected pursuant to a Registration Statement filed by Parent and Alternate Holdco on Form S-4, and the resale of such shares will be subject to the restrictions set forth in Rule 145 under the Act unless such shares are otherwise transferred pursuant to an effective registration statement under the Act or an appropriate exemption from registration, and (ii) Shareholder may be deemed to be an affiliate of Parent. Shareholder accordingly agrees not to sell, pledge, transfer or otherwise dispose of any shares of Alternate Holdco common stock issued to Shareholder in the Merger, unless (i) such sale, pledge, transfer or other disposition is made in conformity with the requirements of Rule 145 under the Act, (ii) such sale, pledge, transfer or other disposition is made pursuant to an effective registration statement under the Act, or (iii) Shareholder delivers to Alternate Holdco a written opinion of counsel, in form and substance reasonably acceptable to Alternate Holdco to the effect that such sale, pledge, transfer or other disposition is otherwise exempt from registration under the Act.
(b) Alternate Holdco will give stop transfer instructions to its transfer agent with respect to any Alternate Holdco common stock received by Shareholder pursuant to the Devon Merger, and there will be placed on the certificates representing such Alternate Holdco common stock, or any substitutions therefor, legends stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES, AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE 145, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933."
The legend set forth above shall be removed (by delivery of a substitute certificate without such legend), and Alternate Holdco shall so instruct its transfer agent, if a registration statement respecting the sale of the shares has been declared effective under the Act or if Shareholder delivers to Alternate Holdco (i) satisfactory written evidence that the shares have been sold in compliance with Rule 145 (in which case, the substitute certificate will be issued in the name of the transferee), or (ii) an opinion of counsel, in form and substance reasonably acceptable to Alternate Holdco to the effect that sale of the shares by the holder thereof is no longer subject to Rule 145.
3. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. Delivery of an executed counterpart of this Agreement by facsimile shall be effective to the fullest extent permitted by applicable law.
(b) This Agreement shall be enforceable by, and shall inure to the benefit of and be binding upon, the parties and their respective successors and assigns. As used in this Agreement, the term "successors and assigns" means, where the context to permits, heirs, executors, administrators, trustees and successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the laws of the State of Delaware. The parties irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America, in either case located in Wilmington, Delaware (the "Delaware Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated by this Agreement (and agree not to commence any litigation relating thereto except in such Delaware Courts), waive any objection to the laying of venue of any such litigation in the Delaware Courts and agree not to plead or claim in any Delaware Court that such litigation brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants, and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated.
(e) Counsel to the parties to the Merger Agreement shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right waived or any obligations excused, except by a written agreement signed by both parties.
(g) Notwithstanding any other provision contained in this Agreement, this Agreement and all obligations under this Agreement shall terminate upon the termination of the Merger Agreement in accordance with its terms.
(h) From and after the Devon Merger Effective Time and as long as is necessary in order to permit Shareholder to sell Alternate Holdco common stock held by Shareholder pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Act, Alternate Holdco will file on a timely basis all reports required to be filed by it pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as the same shall be in effect at the time, and shall otherwise make available adequate public information regarding Alternate Holdco in such manner as may be required to satisfy the requirements of paragraph (c) of Rule 144 under the Act.
IN WITNESS WHEREOF, this Agreement is executed as of the date first stated above.
DEVON HOLDCO CORPORATION,
a Delaware corporation
By:
Name:
Title:
SHAREHOLDER
Name:
Number of Shares Owned:
Number of Shares Issuable upon
Exercise of Stock Options:
ANNEX A
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
Article Four shall be deleted in its entirety and replaced with the following:
"The total authorized capital stock of the corporation shall consist of 1,000 shares of common stock having a par value of $0.10 per share."
ANNEX B
AMENDMENTS TO PARENT'S CERTIFICATE OF INCORPORATION
1. Article I shall be deleted in its entirety and replaced with the following:
"The name of this corporation (the "Corporation") is Devon Intermediate Holding Corporation."
2. Section A of Article IV shall be deleted in its entirety and replaced with the following:
"A. The Corporation shall be authorized to issue a total of 4,501,001 shares of capital stock divided into classes as follows:
(1) 1,000 shares of Common Stock, par value $0.10 per share ("Common Stock"),
(2) 4,500,000 shares of Preferred Stock, par value $1.00 per share ("Preferred Stock"), and
(3) 1 share of Special Voting Stock, par value $0.10 per share."
3. All provisions of Section A of Article VI shall be deleted in their entirety, except for the first sentence thereof, which shall remain unchanged.
4. Article V (Election of Directors), Article VII (Stockholder Consent) and Article XI (Amendment of Corporate Documents) shall be deleted in their entirety and the remaining Articles shall be renumbered to be in sequential order.
ANNEX B
PRINCIPAL SHAREHOLDERS AGREEMENT
CONTAINING A VOTING AGREEMENT AND
AN IRREVOCABLE PROXY
(AS AMENDED AND RESTATED)
BY AND AMONG
DEVON ENERGY CORPORATION
GEORGE P. MITCHELL
AND
CYNTHIA WOODS MITCHELL
DATED AS OF AUGUST 13, 2001
TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS...................................................... B-2 Section 1.1 Definitions................................................. B-2 ARTICLE II VOTING AGREEMENT AND IRREVOCABLE PROXY.......................... B-2 Section 2.1 Agreement to Vote the Subject Shares........................ B-2 Section 2.2 Grant of Irrevocable Proxy.................................. B-3 Section 2.3 Nature of Irrevocable Proxy................................. B-3 Section 2.4 Legend...................................................... B-4 ARTICLE III COVENANTS...................................................... B-4 Section 3.1 Generally................................................... B-4 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.................. B-4 Section 4.1 Due Authority............................................... B-4 Section 4.2 Ownership of Shares......................................... B-4 Section 4.3 No Conflicts................................................ B-4 Section 4.4 Title to Purchased Shares................................... B-5 Section 4.5 Reliance by Parent.......................................... B-5 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT......................... B-5 Section 5.1 Due Organization, etc. ..................................... B-5 Section 5.2 Conflicts................................................... B-5 Section 5.3 Reliance by Shareholder..................................... B-5 ARTICLE VI MISCELLANEOUS................................................... B-5 Section 6.1 Shareholder Capacity........................................ B-5 Section 6.2 Publication................................................. B-5 Section 6.3 Further Actions............................................. B-6 Section 6.4 Entire Agreement............................................ B-6 Section 6.5 Binding Effect; Benefit; Assignment......................... B-6 Section 6.6 Amendments, Waivers, etc.................................... B-6 Section 6.7 Notices..................................................... B-6 Section 6.8 Specific Enforcement........................................ B-7 Section 6.9 Remedies Cumulative......................................... B-7 Section 6.10 No Waiver................................................... B-7 Section 6.11 Governing Law; Jurisdiction; Waiver of Jury Trial........... B-7 Section 6.12 Headings.................................................... B-7 Section 6.13 Counterparts; Facsimiles.................................... B-7 Section 6.14 Termination................................................. B-7 |
PRINCIPAL SHAREHOLDERS AGREEMENT
(AS AMENDED AND RESTATED)
This PRINCIPAL SHAREHOLDERS AGREEMENT, as amended and restated (this"Agreement"), dated as of August 13, 2001, by and among Devon Energy Corporation, a Delaware corporation ("Parent"), George P. Mitchell and Cynthia Woods Mitchell each being shareholders (each, a "Shareholder") of Mitchell Energy & Development Corp., a Texas corporation (the "Company").
WITNESSETH:
WHEREAS, this Agreement (entered into as of October 5, 2001) amends and restates in its entirety the Principal Shareholders Agreement, dated as of August 13, 2001 (which shall be deemed to be the date of this Agreement), by and among Parent and the Shareholders;
WHEREAS, Parent, Devon NewCo Corporation, a Delaware corporation and a wholly owned subsidiary of Parent, and the Company are parties to an Agreement and Plan of Merger dated as of the date hereof and, together with certain other parties, propose to enter into an Amended and Restated Agreement and Plan of Merger, to be dated as of the date hereof (as so amended and restated, the"Merger Agreement");
WHEREAS, as of the date hereof, each Shareholder "beneficially owns" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) and each Shareholder is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of Class A Common Stock, par value $0.10 per share of the Company (the "Common Stock") set forth opposite the Shareholder's name on Annex A hereto, as such shares may be adjusted by stock dividend, stock split, recapitalization, combination, merger, consolidation, reorganization or other change in the capital structure of the Company affecting the Common Stock (such shares of Common Stock, together with any other shares of Common Stock the voting power over which is acquired by the Shareholders during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the Shareholder's "Subject Shares");
WHEREAS, prior to the execution and delivery of this Agreement by any party hereto, Parent has purchased from George P. Mitchell 100 shares of Common Stock (the "Purchased Shares"); and
WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and as an inducement and in consideration therefor, Parent has required that each Shareholder agrees, and each Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
ARTICLE II
VOTING AGREEMENT AND IRREVOCABLE PROXY
SECTION 2.1 Agreement to Vote the Subject Shares. Each Shareholder, in its capacity as such, hereby agrees that during the period commencing on the date hereof and continuing until the termination of this Agreement (such period, the "Voting Period"), at any meeting (or any adjournment or
postponement thereof) of the holders of any class or classes of the capital stock of the Company, however called, or in connection with any written consent of the holders of any class or classes of the capital stock of the Company, the Shareholders shall vote (or cause to be voted) their Subject Shares (x) in favor of the approval of the terms of the Merger Agreement and each of the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof) at every meeting of the shareholders of the Company (or in connection with any written consent) at which such matters are considered and at every adjournment thereof, (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company or any of its subsidiaries under the Merger Agreement or of the Shareholders under this Agreement, and (z) except as otherwise agreed to in writing in advance by Parent, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries and any Company Acquisition Proposal; (ii) a sale, lease or transfer of a significant part of the assets of the Company or any of its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or any of its subsidiaries (each of the actions in clauses (i) or (ii), a "Business Combination"); and (iii)(A) any change in the persons who constitute the board of directors of the Company that is not approved in advance by at least a majority of the persons who were directors of the Company as of the date of this Agreement (or their successors who were so approved); (B) any change in the present capitalization of the Company or any amendment of the Company's articles of incorporation or bylaws; (C) any other material change in the Company's corporate structure or business; or (D) any other action or proposal involving the Company or any of its subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone, or adversely affect the transactions contemplated by the Merger Agreement. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto as shall ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Each of the Shareholders agrees not to enter into any agreement, letter of intent, agreement in principle or understanding with any person that violates or conflicts with or could reasonably be expected to violate or conflict with the provisions and agreements contained in this Agreement or the Merger Agreement. For the avoidance of doubt, this Agreement is intended to constitute a voting agreement entered into under Section B, Article 2.30 of the TBCA for the duration of the Voting Period.
SECTION 2.2 Grant of Irrevocable Proxy. Each Shareholder hereby appoints
Parent and any designee of Parent, and each of them individually, such
Shareholder's proxy and attorney-in-fact, with full power of substitution and
resubstitution, to vote or act by written consent during the Voting Period with
respect to each of the Shareholders' Subject Shares in accordance with Section
2.1. This proxy is given to secure the performance of the duties of each of the
Shareholders under this Agreement. The Shareholders shall promptly cause a copy
of this Agreement to be deposited with the Company at its principal place of
business. Each Shareholder shall take such further action or execute such other
instruments as may be necessary to effectuate the intent of this proxy.
SECTION 2.3 Nature of Irrevocable Proxy. The proxy and power of attorney granted pursuant to Section 2.2 by each Shareholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke all prior proxies granted by the Shareholders. The power of attorney granted herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of each Shareholder. For the avoidance of doubt, the proxy and power of attorney is granted pursuant to Section C, Article 2.29 of the TBCA, is coupled with an interest and is granted to Parent as a shareholder of the Company and a party to this voting agreement which is created under Section B, Article 2.30 of the TBCA and is intended to be valid during the Voting Period, which the parties understand and agree may be more than eleven months from the date hereof.
SECTION 2.4 Legend. Each Shareholder shall promptly cause the following legend to be conspicuously noted on each certificate representing its Subject Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A PRINCIPAL SHAREHOLDERS AGREEMENT DATED AS OF AUGUST 13, 2001. THE PRINCIPAL SHAREHOLDERS AGREEMENT RESTRICTS THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS CERTIFICATE AND INCLUDES A VOTING AGREEMENT AND AN IRREVOCABLE PROXY TO VOTE THE SHARES REPRESENTED BY THIS CERTIFICATE."
ARTICLE III
COVENANTS
SECTION 3.1 Generally. Except for pledges in existence as of the date hereof, each Shareholder agrees that, except as contemplated by the terms of this Agreement, it shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other agreement with respect to, or consent to, the sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of its Subject Shares; (ii) grant any proxies or powers of attorney in respect of the Subject Shares, deposit any of its Subject Shares into a voting trust or enter into a voting agreement with respect to any of its Subject Shares; and (iii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its respective obligations under this Agreement. Notwithstanding the foregoing, nothing herein shall prevent the Shareholders from assigning or transferring any Subject Shares beneficially owned by either of them to any trust, estate, family partnership, foundation (whether family, private or public) or other charitable organization (a "Permitted Transferee")if such Permitted Transferee agrees in writing to be bound by all of the provisions of this Agreement as a Shareholder hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each of the Shareholders hereby represents and warrants to Parent as follows:
SECTION 4.1 Due Authority. Each Shareholder has the capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby.
SECTION 4.2 Ownership of Shares. Each Shareholder legally or beneficially
owns the number of shares of Common Stock set forth opposite their name on Annex
A hereto. The number of shares of Common Stock set forth opposite their name on
Annex A hereto are all of the shares of Common Stock legally or beneficially
owned by them. Each Shareholder has sole voting power and sole power of
disposition, in each case with respect to all of shares of Common Stock set
forth opposite his or her name on Annex A hereto, with no limitations,
qualifications or restrictions on such rights, subject only to applicable
securities laws and the terms of this Agreement and as otherwise noted on Annex
A.
SECTION 4.3 No Conflicts. (i) No filing with any governmental authority,
and no authorization, consent or approval of any other person is necessary for
the execution of this Agreement by the Shareholders and the consummation by the
Shareholders of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by the Shareholders, the consummation
by the Shareholders of the transactions contemplated hereby or compliance by the
Shareholders with any of the provisions hereof shall (A) result in, or give rise
to, a violation or breach of or a default under any of the terms of any material
contract, understanding, agreement or other instrument or obligation to which
either Shareholder is a party or by which either Shareholder or any of his or
her Subject Shares or assets may be bound, or (B) violate any applicable order,
writ, injunction, decree, judgment, statute, rule or regulation which could
reasonably be expected to adversely affect the Shareholder's ability to perform
its obligations under this Agreement.
SECTION 4.4 Title to Purchased Shares. The transfer by George P. Mitchell of the Purchased Shares to Parent has passed to and unconditionally vested in Parent good and valid title to all of the Purchased Shares, free and clear of all claims, Liens, restrictions, limitations and encumbrances whatsoever, other than any such encumbrances created by Parent.
SECTION 4.5 Reliance by Parent. Each Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by such Shareholder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to each Shareholder as follows:
SECTION 5.1 Due Organization, etc. Parent is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Parent has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent has been duly authorized by all necessary action on the part of Parent and, assuming its due authorization, execution and delivery by each Shareholder constitutes a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles.
SECTION 5.2 Conflicts. (i) No filing with any governmental authority, and no authorization, consent or approval of any other person is necessary for the execution of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Parent, the consummation by Parent of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Parent, (B) result in a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Parent is a party or by which Parent or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation which could reasonably be expected to adversely affect Parent's ability to perform its obligations under this Agreement.
SECTION 5.3 Reliance by Shareholder. Parent understands and acknowledges that each Shareholder is entering into this Agreement in reliance upon the execution and delivery of the Merger Agreement by Parent.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Shareholder Capacity. No Shareholder executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such director or officer. Each Shareholder executes this Agreement solely in his or her capacity as the record holder or beneficial owner of his or her Subject Shares and nothing herein shall limit or affect any actions taken by a Shareholder in his or her capacity as an officer or director of the Company.
SECTION 6.2 Publication. Each Shareholder hereby permits Parent to publish and disclose in the Proxy Statement/Prospectus (including all documents and schedules filed with the Securities and Exchange Commission) its identity and ownership of shares of Common Stock and the nature of its commitments, arrangements, and understandings pursuant to this Agreement.
SECTION 6.3 Further Actions. Each of the parties hereto agrees that it will use its best efforts to do all things necessary to effectuate this Agreement.
SECTION 6.4 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and supersedes all prior agreements and understandings, oral and written, with respect thereto.
SECTION 6.5 Binding Effect; Benefit; Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their Permitted Transferees, heirs, estates and successors. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, except by will or by the laws of descent and distribution, without the prior written consent of each of the other parties, except that Parent may assign and transfer its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent. Nothing in this Agreement, expressed or implied, is intended to confer on any person, other than the parties hereto, any rights or remedies.
SECTION 6.6 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by all of the relevant parties hereto.
SECTION 6.7 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or mailed, certified or registered mail with postage prepaid, or sent by facsimile (upon confirmation of receipt), as follows:
(i) If to any Shareholder, to such Shareholder at the address set forth immediately beneath such Shareholder's name on Annex A:
with a copy (which shall not constitute notice) to:
Bracewell & Patterson L.L.P.
711 Louisiana Street, Suite 2900
Houston, Texas 77002
Attention: Edgar J. Marston III Fax: (713) 221-1188
(ii) If to Parent, to it at:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attention: J. Larry Nichols
Fax: (405) 552-7602
and
Duke R. Ligon
Fax: (405) 552-4648
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Scott J. Davis
James T. Lidbury
Fax: (312) 701-7711
or to such other person or address as any party shall specify by notice in writing to each of the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been
received on the date of delivery, except for a notice of a change of address, which shall be effective only upon receipt thereof.
SECTION 6.8 Specific Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.
SECTION 6.9 Remedies Cumulative. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.
SECTION 6.10 No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.
SECTION 6.11 Governing Law; Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. EACH OF THE SHAREHOLDERS AND PARENT HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA, IN EITHER CASE LOCATED IN DALLAS COUNTY, TEXAS (THE "TEXAS COURTS") FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE TEXAS COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY TEXAS COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
SECTION 6.12 Headings. The descriptive headings of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 6.13 Counterparts; Facsimiles. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. A signature transmitted by facsimile shall be treated for all purposes by the parties hereto as an original, shall be binding upon the party transmitting such signature without limitation.
SECTION 6.14 Termination. This Agreement shall terminate, and none of Parent or any Shareholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earliest to occur of (a) the mutual consent of Parent and the Shareholders, (b) the second anniversary of the date of this Agreement, (c) the Effective Time or (d) the termination of the Merger Agreement (i) by Parent for any reason or (ii) by the Company because of the failure of the conditions contained in Sections 7.1(a)(ii), 7.1(b), 7.1(c), 7.1(d), 7.1(e) or 7.2 to have been satisfied; provided, further, that termination of this Agreement shall not prevent any party hereunder from
seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement. Notwithstanding the foregoing, Sections 6.4, 6.5, 6.7, 6.9 and 6.11 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, Parent and each Shareholder have caused this Agreement to be duly executed as of the day and year first above written.
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- Name: J. Larry Nichols Title: Chairman, President and Chief Executive Officer |
THE SHAREHOLDERS
/s/ GEORGE P. MITCHELL ---------------------------------- George P. Mitchell /s/ CYNTHIA WOODS MITCHELL ---------------------------------- Cynthia Woods Mitchell |
ANNEX A
LIST OF SHAREHOLDERS AND OWNERSHIP
OF COMMON STOCK
NUMBER OF SHARES OF COMMON STOCK SHAREHOLDER ADDRESS AS OF AUGUST 10, 2001 ----------- ------- --------------------- George P. Mitchell.......................... c/o J. Todd Mitchell 23,380,811(1)(2)(3)(4) 600 Travis Street Suite 3600 Houston, Texas 77002 Cynthia Woods Mitchell...................... c/o J. Todd Mitchell 1,022,506(1) 600 Travis Street Suite 3600 Houston, Texas 77002 |
(1) Subject to shared power of spouse under applicable Texas marital property laws.
(2) Includes 404,666 shares of Common Stock which George P. Mitchell has the right to acquire within 60 days on the exercise of stock options.
(3) Includes 1,022,506 shares of Common Stock owned of record by Cynthia Woods Mitchell. George P. Mitchell disclaims beneficial ownership of these shares.
(4) Includes 5,888,998 shares of Common Stock which George P. Mitchell has
pledged with lenders to secure existing credit facilities. The certificates
representing these shares will not be stamped with the legend referred to in
Section 2.4.
ANNEX C
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
BETWEEN
DEVON ENERGY CORPORATION,
DEVON HOLDCO CORPORATION
AND
GEORGE P. MITCHELL
AND
CYNTHIA WOODS MITCHELL
DATED AS OF AUGUST 13, 2001
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (this "Agreement") is made as of August 13, 2001 by and between Devon Energy Corporation, a Delaware corporation ("Parent"), Devon Holdco Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Alternate Holdco"), George P. Mitchell and Cynthia Woods Mitchell ("Investors").
RECITALS
WHEREAS, this Agreement (entered into as of October 5, 2001) amends and restates in its entirety the Investor Rights Agreement, dated as of August 13, 2001 (which shall be deemed to be the date of this Agreement), by and among Parent and Investors;
WHEREAS, pursuant to the merger contemplated by the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001 (the "Merger Agreement"), by and among Parent, Devon NewCo Corporation, Alternate Holdco, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. (the "Company"), Investors may acquire shares (the "Shares") of Parent's common stock, par value $0.10 per share ("Parent Common Stock"),or, if an Alternate Structure Event (as defined in the Merger Agreement) occurs, of Alternate Holdco common stock, in exchange for their shares of common stock, par value $0.10 per share, of the Company; and
WHEREAS, Investors are receiving certain demand and piggyback registration rights in connection with Investors' receipt of such shares pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:
"Affiliate" shall mean, with respect to any person, each of such person's officers, directors, employees and agents, and each other person controlling such person within the meaning of the Securities Act.
"Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.
"Registrable Securities" shall mean the Shares and any shares of Parent Common Stock issued or issuable in respect of the Shares upon any stock split, stock dividend, recapitalization, or similar event and held by Investors until such time as (i) a registration statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective registration statement, or (ii) such securities cease to be Eligible (as defined below), or (iii) such securities have been transferred and may be sold by the transferee without registration under the Securities Act, after which such securities shall no longer be Registrable Securities. Such securities shall be "Eligible" unless (A) at any time prior to the second anniversary of the Closing Date (as defined in the Merger Agreement) the Investors cease to be the beneficial owners of at least 1 million Shares or (B) at any time on or after the second anniversary of the Closing Date such securities may be sold pursuant to Rule 145 or Rule 144 (or any successor or similar rule) under the Securities Act without regard to the volume of sale restrictions referred to therein and Parent has notified the Investors in
writing that it has irrevocably waived the applicability of Section 11 of this Agreement with respect to such securities.
"Registration Expenses" shall mean all expenses incurred by Parent in complying with Sections 2 and 3 hereof, including all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel and of the accountants for Parent, blue sky fees and expenses and the expense of any special audits incident to or required by any such compliance.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the Registrable Securities registered by Investors and all fees and disbursements of counsel for Investors.
Capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
2. Requested Registration.
a. Request for Registration. In case Parent shall receive from Investors a written request that Parent effect any registration with respect to any of the Registrable Securities, Parent shall, as soon as practicable, use reasonable best efforts to effect such registration (including appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) on Form S-3 or, if Form S-3 is not available, then on Form S-1 (or any successor forms of registration statements to such Forms S-3 or S-1 or other available registration statements) and as would permit or facilitate the sale and distribution of the Registrable Securities for which registration is requested. The registration statement filed pursuant to the request of Investors under this Section 2(a) may include securities of Parent held by other securityholders of Parent who, by virtue of agreements with Parent, are entitled to include their securities in any such registration, but Parent shall have no absolute right to include securities for its own account in any such registration.
b. Notwithstanding the foregoing, Parent shall not be obligated to file a registration statement to effect any such registration pursuant to this Section 2:
i. unless the amount of Registrable Securities for which registration is requested is at least 5,000,000 shares (as adjusted for any stock split, stock dividend, recapitalization or similar event); provided, however, that if the total number of Registrable Securities held by Investors (but not a transferee of Investors) is less than 5,000,000 shares (as adjusted to give effect to any stock split, reverse stock split, stock dividend, recapitalization or any similar event or transaction), then Investors (but not a transferee of Investors) may request registration under this Section 2 as to all but not less than all of such Registrable Securities as may then be held by Investors; and
ii. after Parent has initiated two such registrations pursuant to this Section 2 (counting for these purposes only registrations that have been declared effective).
c. Underwriting. Any offering of securities made under this
Section 2 shall be pursuant to a "firm commitment" underwriting. Parent
(together with Investors) shall enter into an underwriting agreement in
customary form with the managing underwriter selected for such
underwriting by Investors with the consent of Parent, which consent
shall not be unreasonably withheld. Notwithstanding any other provision
of this Section 2, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten,
the managing underwriter may limit the number of Registrable Securities
to be
included in such registration to the extent required by such limitation. If the managing underwriter has not limited the number of Registrable Securities to be included in such registration, Parent may include securities for its own account or for the account of others in such registration if the number of Registrable Securities to be included in such registration will not thereby be limited.
3. Parent Registration.
a. Notice of Registration. If Parent shall determine to register any of its securities, either for its own account or the account of a security holder or holders exercising their respective registration rights, other than (i) a registration relating solely to employee benefit plans on Form S-8 (or similar successor form), or (ii) a registration on Form S-4 (or similar successor form) relating solely to a Commission Rule 145 transaction, Parent will:
i. promptly give Investors written notice thereof; and
ii. use its reasonable best efforts to include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all Registrable Securities specified in a written request to Parent made within 15 business days after receipt of such written notice by Investors.
b. Underwriting. If the registration of securities pursuant to this Section 3 is underwritten, Parent shall so advise Investors as a part of the written notice given under Section 3(a). In such event, Investors' right to registration pursuant to this Section 3 shall be conditioned upon Investors' participation in such underwriting and the inclusion of Registrable Securities in the underwriting shall be subject to the limitations provided herein. Parent (together with Investors) shall enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by Parent. Notwithstanding any other provision of this Section 3, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, Parent shall so advise the holders of securities who have requested to include their securities in such registration, and the number of shares to be included in such registration shall be reduced by such minimum number of shares as is necessary to comply with such limitation, as follows:
i. if the registration was initiated for the account of any security holder or holders other than Investors (the "Initiating Holders"), the number of shares reduced shall be (A) first, any shares sought to be registered by Parent for its own account, (B) second, if further reductions are required, any shares sought to be registered by holders of securities other than the Initiating Holders who have requested to include their securities in such registration, pro rata based on the number of shares requested to be included in such registration, and (C) third, if still further reductions are required, any securities sought to be registered by the Initiating Holders.
ii. if the registration was initiated by Parent for its own account, the number of shares reduced shall be (A) first, any shares sought to be registered by holders of securities who have requested to include their securities in such registration, pro rata based on the number of shares requested to be included in such registration and (B) second, if further reductions are required, shares sought to be registered by Parent for its own account.
4. Black Out. In the event Parent determines, after a request for registration has been received from an Investor and prior to the completion of such registered offering, that it may be in possession of material undisclosed information with respect to Parent or its securities, (i) Parent shall notify Investors and request that Investors refrain from selling any Registrable Securities, and Investors shall refrain from selling any Registrable Securities, and (ii) Parent shall not be obligated to file a registration statement or effect any registration, qualification or compliance of Registrable Securities under Section 2 for a period of not more than 120 days from the date of such notice (the "Black Out Period"). A Black Out Period shall end upon the earlier to occur of (i) the full public disclosure of
the material information giving rise to such Black Out Period, (ii) Parent
notifying Investors in writing that the Black Out Period is terminated and
(iii) the 120th day after the date of Parent's notice of the commencement
of the Black Out Period. Notwithstanding the foregoing, Parent shall not be
entitled to declare a Black Out Period prior to twelve months from the end
of a previous Black Out Period if more than 180 days of the immediately
preceding 365 days have been subject to a Black Out Period, and Parent
shall only exercise its rights under this Section 4 in good faith and shall
not exercise such rights in an effort to frustrate Investors' ability to
offer to sell and sell their Registrable Securities.
5. Expenses of Registration. All Registration Expenses incurred in connection with a registration pursuant to Sections 2 and 3 shall be borne by Parent. All Selling Expenses relating to the Registrable Securities which are registered shall be borne by Investors.
6. Registration Procedures. In the case of each registration effected by Parent pursuant to this Agreement, Parent will keep Investors advised in writing, if Investors are participating in such registration, as to the initiation of each registration and as to the completion thereof. At its expense, Parent will:
a. prepare and file with the Commission a registration statement with respect to such securities and use reasonable best efforts to cause such registration statement to become and remain effective for at least 60 days (not including Black Out Periods) or until the distribution described in the registration statement has been completed, whichever first occurs;
b. furnish to Investors, if Investors are participating in such registration, such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as Investors may reasonably request, including correspondence with the Commission and any exchanges on which Registrable Securities are listed; and
c. notify Investors, if Investors are participating in such registration, of any updates or amendments to the prospectus and furnish to Investors any such updated and/or amended prospectuses.
7. Indemnification.
a. Parent will indemnify Investors with respect to any registration, qualification or compliance which has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of the Securities Act (the "Underwriters"), against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation commenced or threatened arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by Parent of the Securities Act or any state securities law, or any rule or regulation promulgated thereunder, applicable to Parent in connection with any such registration, and Parent will reimburse Investors and the Underwriters for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action; provided, however, that Parent will not be liable in any such case to the extent that any such expense, claim, loss, damage or liability arises out of or is based on any untrue statement or omission, or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to Parent by Investors specifically for use therein.
b. Investors will, if Registrable Securities are included in a registration being effected, indemnify Parent and each of its Affiliates and the Underwriters, if any, of Parent's securities covered by such a registration against all expenses, claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in settlement of any litigation commenced or threatened arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by Investors of the Securities Act or any state securities law, or any rule or regulation promulgated thereunder, applicable in connection with any such registration, and Investors will reimburse Parent, such Affiliates and the Underwriters for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent that such untrue statement or omission, or alleged untrue statement or omission, is made in such registration statement, prospectus, offering circular or other document incident to any such registration in reliance upon and in conformity with written information furnished to Parent by Investors specifically for use therein. Notwithstanding the foregoing, the liability of Investors under this subsection (b) or subsection (d) shall be limited in an amount equal to the public offering price of the Shares sold by Investors, unless such liability arises out of or is based on willful misconduct by Investors.
c. Each party entitled to indemnification under this Section 7 (the"Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnifying Party shall have the option to assume the defense of any such claim or any litigation resulting therefrom; provided, however, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld); and provided, further, that the Indemnified Party may participate in such defense at such party's own expense. The failure of an Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action. The Indemnifying Party shall not assume such defense for matters as to which there is a conflict of interest or separate and different defenses. In the event of a conflict of interest or separate or different defenses, as determined in the reasonable opinion of counsel to the Indemnified Party, the Indemnifying Party will pay the reasonable legal fees and expenses of one counsel to the Indemnified Party. No claim may be settled without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
d. If the indemnification provided for in Section 7.a. or 7.b. is unavailable to or insufficient to hold harmless an indemnified party under Section 7.a. or 7.b. in respect of any expenses, claims, losses, damages or liabilities (or actions in respect thereof), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such expenses, claims, losses, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with the statements or omissions which resulted in such expenses, claims, losses, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.
8. Information from Investors. Investors shall furnish to Parent such information regarding Registrable Securities being included in any registration and the distribution proposed by Investors as
Parent may request in writing and as shall be required in connection with any registration referred to in this Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of Registrable Securities to the public without registration, Parent agrees to use its best efforts to:
a. make and keep public information available, as those terms are understood and defined in Rule 144 (or any successor or similar rule) promulgated by the Securities and Exchange Commission under the Securities Act;
b. file with the Commission in a timely manner all reports and other documents required of Parent under the Securities Act and the Exchange Act; and
c. so long as Investors own any Registrable Securities, promptly furnish to Investors upon request (i) a statement by Parent as to its compliance with the reporting requirements of Rule 144 (or any successor or similar rule), the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of Parent, and such other publicly filed reports and documents of Parent, and (iii) such other information in the possession of Parent as Investors may reasonably request in availing themselves of any rule or regulation of the Commission allowing Investors to sell any Shares without registration.
10. Amendment. Any provision of this Agreement may be amended or the observance thereof may be waived (either generally or in particular instance and either retroactively or prospectively) only with the written consent of each of the parties hereto.
11. Lockup. Investors agree that they will not, prior to the date which is nine months from the Closing Date (as defined in the Merger Agreement) (the "Lockup Date"), directly or indirectly sell, offer to sell, grant any option for the sale of, or otherwise dispose of any Shares other than pursuant to an underwritten registered offering made pursuant hereto or to a Permitted Transferee (as defined in the Principal Shareholders Agreement of even date among the Company and Investors) if such Permitted Transferee agrees in writing to be bound by all of the provisions of this Agreement as an Investor hereunder (in which case such Permitted Transferee shall be entitled to all of the rights and benefits of an Investor hereunder); provided, however, that following the Merger (or, if applicable, the Mitchell Merger) Investors may give or dispose of up to 2 million Shares to foundations (whether family, private or public) or other charitable organizations even if those foundations or other charitable organizations do not agree to be bound by the provisions of this Agreement, and thereafter such Shares shall not be subject to this Agreement. From and after the Lockup Date, Investors shall not dispose of Shares in amounts exceeding 1,000,000 Shares per calendar quarter, except pursuant to a registration statement or to a Permitted Transferee. In addition to all dispositions permitted above, beginning in the first calendar quarter of 2002, Investors may dispose of up to 500,000 Shares per calendar quarter to foundations (whether family, private or public) or other charitable organizations even if those foundations or other charitable organizations do not agree to be bound by this Agreement, and thereafter such Shares shall not be subject to this Agreement.
12. Termination. This Agreement shall terminate (i) prior to the second anniversary of the Closing Date (as defined in the Merger Agreement) at such time as Investors are the beneficial owners of less than one million Shares and (ii) on or after the second anniversary of the Closing Date at such time as Investors are the beneficial owners of Registrable Securities aggregating less than the greater of (A) one percent of the Parent Common Stock outstanding as shown by the most recent report or statement published by Parent, and (B) the average weekly reported volume of trading in Parent Common Stock on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four immediately preceding calendar weeks.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. PARENT
AND INVESTORS EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA, IN EITHER CASE LOCATED IN DALLAS COUNTY, TEXAS (THE "TEXAS COURTS") FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE TEXAS COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY TEXAS COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY.
14. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties regarding the subject matter hereof. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the successors and assigns of the parties hereto.
15. Notices and Dates. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission or by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:
if to Parent or Alternate Holdco, to:
Devon Energy Corporation
20 North Broadway
Suite 1500
Oklahoma City, OK 73102
Attention: J. Larry Nichols
Facsimile: (405) 552-8171
and
Duke R. Ligon
Facsimile: (405) 552-4550
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attention: Scott J. Davis
if to Investors, to:
George P. Mitchell
Cynthia Woods Mitchell
c/o J. Todd Mitchell
600 Travis Street
Suite 3600
Houston, TX 77002
Facsimile: (713) 221-3406
with a copy to:
Bracewell & Patterson LLP
711 Louisiana, 27th Floor
South Tower Pennzoil Place
Houston, TX 77002
Attention: Edgar J. Marston III
Facsimile: (713) 221-1188
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered, if delivered personally, by messenger or by courier, or upon confirmation of receipt if sent by facsimile.
16. Counterparts; Facsimiles. This Agreement may be executed in several counterparts (by facsimile or original signature), each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same instrument. A signature transmitted by facsimile shall be treated for all purposes by the parties hereto as an original and shall be binding upon the party transmitting such signature without limitation.
17. Further Assurances. The parties hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments or documents as any other party may reasonably request from time to time in order to carry out the intent and purposes of this Agreement and the consummation of the transactions contemplated thereby. Neither Parent nor Investors shall voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to them set forth in this Agreement, and each shall promptly do all such acts and take all such measures as may be appropriate to enable them to perform as early as practicable the obligations herein and therein required to be performed by them.
18. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
19. Interpretation. When a reference is made in this Agreement to Sections, such references shall be to a Section to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." Use of any gender herein to refer to any person shall be deemed to comprehend masculine, feminine, and neuter unless the context clearly requires otherwise.
20. Mutual Drafting. This Agreement is the joint product of Investors and Parent, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of Investors and Parent and their respective legal counsel and advisers and any rule of construction that a document shall be interpreted or construed against the drafting party shall not be applicable.
21. Alternate Structure Event. If an Alternate Structure Event occurs, (a) all references to the term "Parent" in Sections 1 through 20 of this Agreement shall be deemed references to Alternate Holdco, (b) all references to the term "Parent Common Stock" in Sections 1 through 20 of this Agreement shall be deemed references to shares of common stock of Alternate Holdco, and (c) all references to the term "Shares" in Sections 1 through 20 of this Agreement shall be deemed references to shares of Alternate Holdco common stock received in the Mitchell Merger (as defined in the Merger Agreement).
IN WITNESS WHEREOF, the undersigned have executed this Investor Rights Agreement as of the date set forth above.
DEVON ENERGY CORPORATION
By:
/s/ J. LARRY NICHOLS ---------------------------------- J. Larry Nichols Chairman, President and Chief Executive Officer |
DEVON ENERGY CORPORATION
By:
/s/ J. LARRY NICHOLS ---------------------------------- |
J. Larry Nichols
President
/s/ GEORGE P. MITCHELL ------------------------------------ George P. Mitchell /s/ CYNTHIA WOODS MITCHELL ------------------------------------ Cynthia Woods Mitchell |
ANNEX D
PERSONAL AND CONFIDENTIAL
August 13, 2001
Board of Directors
Mitchell Energy & Development Corp.
2001 Timberloch Place
The Woodlands, Texas 77380
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view to the holders of the outstanding shares of Class A Common Stock, par value $0.10 per share (the "Shares"), of Mitchell Energy & Development Corp., a Texas corporation (the "Company"), of the Merger Consideration (as defined below) to be received for the Shares pursuant to the Agreement and Plan of Merger, dated as of August 13, 2001 ("the Agreement"), by and among Devon Energy Corporation, a Delaware corporation ("Parent"), Devon NewCo Corporation, a wholly owned subsidiary of Parent ("Merger Sub"), and the Company. Pursuant to the Agreement, Merger Sub will be merged with the Company ("Merger") and each Share (other than Excluded Company Shares, as defined in the Agreement) will be converted into the right to receive $31.00 in cash (the "Cash Consideration") and 0.585 of a share of Common Stock, par value $0.10 per share ("Parent Common Stock"), of Parent (the "Common Stock Consideration"; together with the Cash Consideration, the "Merger Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company having provided certain investment banking services to the Company from time to time, including having acted as a co-managing underwriter with respect to a public offering of 5,175,000 Shares in May 2001 and having acted as its financial advisor in connection with, and having participated in certain of the negotiations leading to, the Agreement. We also have provided from time to time (and may provide in the future) investment banking services to Parent. Goldman, Sachs & Co. provides a full range of financial advisory and securities services and, in the normal course of its trading activities, may from time to time effect transactions and hold securities, including derivative securities, of the Company or Parent for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company for the year ended December 31, 2000 and for the four fiscal years ended January 31, 2000 and of Parent for the five years ended December 31, 2000; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Parent, including a draft Report on Form 10-Q of Parent for the six-month period ended June 30, 2001; certain other communications from the Company and Parent to their respective stockholders; certain reports of the Company with respect to the estimated oil and gas reserves of the Company (the "Company Appraisals"); certain reports of Parent with respect to the estimated oil and gas reserves of Parent (the "Parent Appraisals"; together with the Company Appraisals, the "Appraisals"); and certain internal financial analyses and forecasts for the Company and Parent prepared by their respective managements, including certain cost savings and operating synergies projected by the managements of the Company and Parent to result from the transaction contemplated by the Agreement. We also have held discussions with members of the senior management of the Company and Parent regarding their assessment of the strategic rationale for, and the potential benefits of, the transaction contemplated by the Agreement and the past and current business operations, financial condition and future prospects of their respective companies. In addition, we have reviewed the reported price and trading activity for the Shares and the Parent Common Stock, compared certain financial and stock
market information for the Company and Parent with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the oil and gas industry specifically and other industries generally and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial, accounting and other information discussed with or reviewed by us and have assumed such accuracy and completeness for purposes of rendering this opinion. In that regard, we have assumed with your consent that the internal financial forecasts prepared by management of the Company and Parent have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company and Parent. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities of the Company or Parent or any of their subsidiaries and, except for the Appraisals referred to in the third paragraph of this opinion, we have not been furnished with any such evaluation or appraisal. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the transaction contemplated by the Agreement and such opinion does not constitute a recommendation as to how any holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Merger Consideration to be received by the holders of Shares pursuant to the Agreement is fair from a financial point of view to such holders.
Very truly yours,
ANNEX E
[J.P. MORGAN SECURITIES, INC. LETTERHEAD]
September 7, 2001
The Board of Directors
Mitchell Energy & Development Corp.
2001 Timberloch Place
The Woodlands, Texas 77387-4000
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of Class A common stock, par value $0.10 per share (the "Company Common Stock"), of Mitchell Energy & Development Corp. (the "Company") of the consideration to be received by such holders in the proposed merger (the "Merger") of the Company with a wholly-owned subsidiary ("Merger Subsidiary") of Devon Energy Corporation (the "Merger Partner"). Pursuant to the Agreement and Plan of Merger dated August 13, 2001 (the "Agreement") among the Company, the Merger Partner and Merger Subsidiary, the Company will become a wholly-owned subsidiary of the Merger Partner, and each outstanding share of Company Common Stock, other than shares of Company Common Stock owned by the Company, the Merger Partner or any of their respective direct or indirect subsidiaries, and other than dissenting shares, will be converted into the right to receive consideration equal to $31.00 per share in cash and 0.585 shares of the Merger Partner's common stock, par value $0.10 per share (the "Merger Partner Common Stock").
In arriving at our opinion, we have (i) reviewed the Agreement, the Principal Shareholders Agreement Containing a Voting Agreement and an Irrevocable Proxy by and among the Merger Partner, George P. Mitchell and Cynthia Woods Mitchell dated August 13, 2001 (the "Principal Shareholders Agreement"), (ii) reviewed the Pre-Acquisition Agreement between the Merger Partner and Anderson Exploration Ltd. ("Anderson") dated as of August 31, 2001 (the "Acquisition Agreement"); (iii) reviewed certain publicly available business and financial information concerning the Company, the Merger Partner, and Anderson and the industries in which they operate; (iv) compared the proposed financial terms of the Merger and Devon's acquisition of Anderson (the "Acquisition") with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration received for such companies; (v) compared the financial and operating performance of the Company, the Merger Partner, and Anderson with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock, the Merger Partner Common Stock, and Anderson's common stock and certain publicly traded securities of such other companies; (vi) reviewed certain internal financial analyses and forecasts prepared by the managements of the Company and the Merger Partner relating to their respective businesses, and certain financial analyses and forecasts prepared and provided by the management of the Merger Partner relating to Anderson's business; (vii) reviewed certain internal financial analyses and forecasts prepared by each of LaRoche Petroleum Consultants, Ryder Scott Company Petroleum Consultants and Paddock Lindstrom & Associates (collectively, the "Engineering Consultants") relating to the oil, gas and natural gas liquids reserves of the Merger Partner as of December 31, 2000 (the "Reserve Reports") and (viii) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
[JP MORGAN SECURITIES LETTERHEAD FOOTER]
[J.P. MORGAN SECURITIES, INC. LETTERHEAD]
In addition, we have held discussions with certain members of the management of the Company and the Merger Partner with respect to certain aspects of the Merger, and the past and current business operations of the Company and the Merger Partner, the financial condition and future prospects and operations of the Company and the Merger Partner, the effects of the Merger on the financial condition and future prospects of the Company and the Merger Partner, and certain other matters we believed necessary or appropriate to our inquiry. We also held discussions with certain members of the management of the Merger Partner with respect to certain aspects of the Acquisition, and the past and current business operations of Anderson, the financial condition and future prospects and operations of Anderson, the effects of the Acquisition on the financial condition and future prospects of the Merger Partner, and certain other matters we believed necessary or appropriate to our inquiry. As you know, we have relied solely upon these discussions and other materials, including financial forecasts, furnished to us by the Merger Partner in connection with our review of Anderson, and we did not receive any financial forecasts or other non-public information from Anderson.
In giving our opinion, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or was furnished to us by the Company, the Engineering Consultants and the Merger Partner or otherwise reviewed by us, and we have not assumed any responsibility or liability therefor. We have not conducted any valuation or appraisal of any assets or liabilities, nor have any such valuations or appraisals (other than the Reserve Reports) been provided to us. In relying on financial analyses and forecasts provided to us, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company, the Merger Partner, and Anderson to which such analyses or forecasts relate. We have also assumed that the Merger will qualify as a tax-free reorganization for United States federal income tax purposes, and that the Merger and the other transactions contemplated by the Agreement will be consummated as described in the Agreement and the parties to the Principal Shareholders Agreement shall perform their obligations thereunder necessary for the Merger to be so effected. We have also assumed that the Acquisition and the other transactions contemplated by the Acquisition Agreement will be consummated as described in the Acquisition Agreement. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Merger and the Acquisition will be obtained without any adverse effect on the Company, the Merger Partner, or Anderson or on the contemplated benefits of the Merger or the Acquisition.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, of the consideration to be received by the holders of the Company Common Stock in the proposed Merger and we express no opinion as to the underlying decision by the Company to engage in the Merger. We are expressing no opinion herein as to the price at which the Merger Partner Common Stock will trade at any future time.
We note that although we worked for the Company from August 1999 through April 2000, that engagement did not result in the consummation of a transaction. Since that time, we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction. Consequently, we have assumed that such terms are the most beneficial terms from the Company's perspective that could under the circumstances be negotiated among the parties to such transactions, and no opinion is expressed whether any alternative transaction might produce consideration for the Company's shareholders in an amount in excess of that contemplated in the Merger.
[J.P. MORGAN SECURITIES, INC. LETTERHEAD]
We have acted as financial advisor to the Company with respect to the proposed Merger and will receive a fee from the Company for our services. We will also receive an additional fee if the proposed Merger is consummated. Please be advised that we and our affiliates have, from time to time, provided various investment banking and commercial banking services to each of the Company, George P. Mitchell and the Merger Partner, for which we have received customary compensation. In May 2001, we acted as lead manager for a secondary offering of shares of Company Common Stock of George P. Mitchell. In addition, one of our affiliates has a commitment under the Company's revolving credit facility, and a commitment under the Merger Partner's revolving credit facility that currently has not been drawn upon; that affiliate is also the documentation agent with regard to this facility and was selected to be one of the Merger Partner's commercial paper dealers. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company, the Merger Partner or Anderson for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the consideration to be received by the holders of the Company Common Stock in the proposed Merger is fair, from a financial point of view, to such holders.
This letter is provided to the Board of Directors of the Company in connection with and for the purposes of its evaluation of the Merger. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Merger or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
ANNEX F
[UBS WARBURG LETTERHEAD]
August 13, 2001
The Board of Directors
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Dear Members of the Board:
We understand that Devon Energy Corporation, a Delaware corporation ("Devon" or the "Company"), is considering a transaction whereby a wholly owned subsidiary of the Company will merge (the "Transaction") with Mitchell Energy & Development Corp., a Texas corporation ("Mitchell" or the "Target"). Pursuant to the terms of a draft Agreement and Plan of Merger (the "Merger Agreement"), each issued and outstanding share of Class A Common Stock ("Mitchell Common Stock"), par value $.10 per share, of Mitchell, other than Excluded Company Shares (as defined in the Merger Agreement), will be converted through a merger into the right to receive $31.00 in cash and 0.585 shares of Common Stock, par value $.01 per share, of Devon ("Devon Common Stock") (the "Merger Consideration"). The terms and conditions of the Transaction are more fully set forth in the Merger Agreement.
You have requested our opinion as to the fairness to the Company from a financial point of view of the Merger Consideration to be paid by the Company in the Transaction.
UBS Warburg LLC ("UBS Warburg") will receive fees upon the issuance of this opinion. UBS Warburg and its predecessors have provided, and may in the future provide, investment banking services to the Company, and received, and may in the future receive, compensation for the rendering of such services. In the ordinary course of business, UBS Warburg, its successors and affiliates may trade securities of the Company or Mitchell for their own accounts and, accordingly, may at any time hold a long or short position in such securities.
Our opinion does not address the Company's underlying business decision to effect the Transaction or constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Transaction. At your direction, we have not been asked to, nor do we, offer any opinion as to the material terms of the Merger Agreement or the form of the Transaction. We express no opinion as to what the value of Mitchell Common Stock or Devon Common Stock will be at the time of the merger or the prices at which either will trade at any time in the future. In rendering this opinion, we have assumed, with your consent, that the final form of the Merger Agreement will not differ in any material respect from the draft that we have examined, and that the Company and the Target will comply with all the material terms of the Merger Agreement.
In arriving at our opinion, we have, among other things (i) reviewed the
August 13, 2001 draft of the Merger Agreement, (ii) reviewed certain publicly
available business and historical financial information relating to Devon and
Mitchell, (iii) reviewed certain information and other data provided to us by
Devon that is not publicly available relating to the business and prospects of
Devon that was prepared by the management of the Company, including operating
estimates and financial forecasts, (iv) reviewed certain information and other
data provided to us by Devon and Mitchell that is not publicly available
relating to the business and prospects of Mitchell that was prepared by the
management of Devon and Mitchell, including operating estimates and financial
forecasts, (v) considered estimates, prepared by the management of the Company
and not publicly available, of the amounts and timing of the synergies expected
to result from the Transaction, (vi) considered the pro forma financial effects
of the Transaction on the Company, (vii) reviewed publicly available financial
and stock market data with respect to certain other companies in lines of
business we believe to be generally comparable to those of Devon and Mitchell,
(viii) compared the financial terms of the Transaction with the financial terms
of certain other
selected transactions that we deemed to be relevant, (ix) reviewed the historical market prices and trading volumes of both Devon and Mitchell Common Stock, (x) conducted discussions regarding Devon and Mitchell with selected members of the senior management of the Company, (xi) conducted discussions regarding Mitchell with selected members of the senior management of Mitchell, and (xii) conducted such other financial studies, analyses and investigations, and considered such other information, as we deemed necessary or appropriate.
In connection with our review, and at your direction, we have not assumed any responsibility for independent verification for any of the information reviewed by us for the purpose of this opinion and have, at your direction, relied on its being complete and accurate in all material respects. In addition, at your direction, we have not made any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of Mitchell, nor have we been furnished with any such evaluation or appraisal. With respect to the projected operating and financial information, estimates, pro forma effects and calculations of synergies referred to above, we have assumed, at your direction, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of each company as to the future performance of their respective companies. Moreover, we have assumed that all governmental, regulatory and other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or Target. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as the date hereof, the Merger Consideration to be paid by the Company in the Transaction is fair, from a financial point of view, to the Company.
Very truly yours,
UBS WARBURG LLC
By: /s/ J. RICHARD LEAMAN III By: /s/ JAMES BRENNAN ------------------------------------------- ----------------------------------------------------- J. Richard Leaman III James Brennan Managing Director Managing Director |
ANNEX G
ARTICLES 5.11, 5.12 AND 5.13
OF THE
TEXAS BUSINESS CORPORATION ACT
(DISSENTERS' RIGHTS OF APPRAISAL)
ARTICLE 5.11. Rights of Dissenting Shareholders in the Event of Certain Corporate Actions
A. Any shareholder of a domestic corporation shall have the right to dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder approval is required by Article 5.03 or 5.16 of this Act and the shareholder holds shares of a class or series that was entitled to vote thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any pledge, mortgage, deed of trust or trust indenture unless otherwise provided in the articles of incorporation) of all, or substantially all, the property and assets, with or without good will, of a corporation if special authorization of the shareholders is required by this Act and the shareholders hold shares of a class or series that was entitled to vote thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the shares of the corporation of the class or series held by the shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a shareholder shall not have the right to dissent from any plan of merger in which there is a single surviving or new domestic or foreign corporation, or from any plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series, shares of which are on the record date fixed to determine the shareholders entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation system) or designated as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger or plan of exchange to accept for the shareholder's shares any consideration that is different than the consideration (other than cash in lieu of fractional shares that the shareholder would otherwise be entitled to receive) to be provided to any other holder of shares of the same class or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger or the plan of exchange to accept for the shareholder's shares any consideration other than:
(a) shares of a domestic or foreign corporation that, immediately after the effective time of the merger or exchange, will be part of a class or series, shares of which are:
(i) listed, or authorized for listing upon official notice of issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be received; or
(c) any combination of the securities and cash described in Subdivisions (a) and (b) of this subsection.
ARTICLE 5.12. Procedure for Dissent by Shareholders as to Said Corporate Actions
A. Any shareholder of any domestic corporation who has the right to dissent from any of the corporate actions referred to in Article 5.11 of this Act may exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to a vote of shareholders at a meeting, the shareholder shall file with the corporation, prior to the meeting, a written objection to the action, setting out that the shareholder's right to dissent will be exercised if the action is effective and giving the shareholder's address, to which notice thereof shall be delivered or mailed in that event. If the action is effected and the shareholder shall not have voted in favor of the action, the corporation, in the case of action other than a merger, or the surviving or new corporation (foreign or domestic) or other entity that is liable to discharge the shareholder's right of dissent, in the case of a merger, shall, within ten (10) days after the action is effected, deliver or mail to the shareholder written notice that the action has been effected, and the shareholder may, within ten (10) days from the delivery or mailing of the notice, make written demand on the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, for payment of the fair value of the shareholder's shares. The fair value of the shares shall be the value thereof as of the day immediately preceding the meeting, excluding any appreciation or depreciation in anticipation of the proposed action. The demand shall state the number and class of the shares owned by the shareholder and the fair value of the shares as estimated by the shareholder. Any shareholder failing to make demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the fact and
date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy
of this Article and any articles or documents filed by the corporation with
the Secretary of State to effect the action. If the shareholder shall not
have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of a demand for payment made by a dissenting shareholder in accordance with Subsection (1) of this Section, the corporation (foreign or domestic) or other entity shall deliver or mail to the shareholder a written notice that shall either set out that the corporation (foreign or domestic) or other entity accepts the amount claimed in the demand and agrees to pay that amount within ninety (90) days after the date on which the action was effected, and, in the case of shares represented by certificates, upon the surrender of the certificates duly endorsed, or shall contain an estimate by the corporation (foreign or domestic) or other entity of the fair value of the shares, together with an offer to pay the amount of that estimate within ninety (90) days after the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to accept that amount and, in the case of shares represented by certificates, upon the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action was effected, the value of the shares is agreed upon between the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, payment for the shares shall be made within ninety (90) days after the date on which the action was effected and, in the case of shares represented by certificates, upon surrender of the certificates duly endorsed. Upon payment of the agreed value, the shareholder shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the corporation action was effected, the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, do not so agree, then the shareholder or the corporation (foreign or domestic) or other entity may, within sixty (60) days after the expiration of the sixty (60) day period, file a petition in any court of competent jurisdiction in the county in which the principal office of the domestic corporation is located, asking for a finding and determination of the fair value of the shareholder's shares. Upon the filing of any such petition by the shareholder, service of a copy thereof shall be made upon the corporation (foreign or domestic) or other entity, which shall, within ten (10) days after service, file in the office of the clerk of the court in which the petition was filed a list containing the names and addresses of all shareholders of the domestic corporation who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the corporation (foreign or domestic) or other entity. If the petition shall be filed by the corporation (foreign or domestic) or other entity, the petition shall be accompanied by such a list. The clerk of the court shall give notice of the time and place fixed for the hearing of the petition by registered mail to the corporation (foreign or domestic) or other entity and to the shareholders named on the list at the addresses therein stated. The forms of the notices by mail shall be approved by the court. All shareholders thus notified and the corporation (foreign or domestic) or other entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the shareholders who have complied with the provisions of this Article and have become entitled to the valuation of and payment for their shares, and shall appoint one or more qualified appraisers to determine that value. The appraisers shall have power to examine any of the books and records of the corporation the shares of which they are charged with the duty of valuing, and they shall make a determination of the fair value of shares upon such investigation as to them may seem proper. The appraisers shall also afford a reasonable opportunity to the parties interested to submit to them pertinent evidence as to the value of the shares. The appraisers shall also have such power and authority as may be conferred on Masters in Chancery by the Rules of Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the shareholders adjudged by the court to be entitled to payment for their shares and shall file their report of that value in the office of the clerk of the court. Notice of the filing of the report shall be given by the clerk to the parties in interest. The report shall be subject to exceptions to be heard before the court both upon the law and the facts. The court shall by its judgment determine the fair value of the shares of the shareholders entitled to payment for their shares and shall direct the payment of that value by the existing, surviving, or new corporation (foreign or domestic) or other entity, together with interest thereon, beginning 91 days after the date on which the applicable corporate action from which the shareholder elected to dissent was effected to the date such judgment, to the shareholders entitled to payment. The judgment shall be payable to the holders of uncertificated shares immediately but to the holders of shares represented by certificates only upon, and simultaneously with, the surrender to the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of duly endorsed certificates for those shares. Upon payment of the judgment, the dissenting shareholders shall cease to have any interest in those shares or in the corporation. The court shall allow the appraisers a reasonable fee as court costs, and all court costs shall be allotted between the parties in the manner that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, pursuant to the payment of the agreed value of the shares or pursuant to payment of the judgment entered for the value of the shares, as in this Article provided, shall, in the case of a merger, be treated as provided in the plan of merger and, in all other cases, may be held and disposed of by the corporation as in the case of other treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the date of the filing of the articles of merger, the surviving corporation is the owner of all the outstanding shares of the other corporations, domestic or foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this Article to a shareholder objecting to any corporate action referred to in Article 5.11 of this Act is the exclusive remedy for the recovery of the value of his shares or money damages to the shareholder with respect to the action. If the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, complies with the requirements of this Article, any shareholder who fails to comply with the requirements of this Article shall not be entitled to bring suit for the recovery of the value of his shares or money damages to the shareholder with respect to the action.
ARTICLE 5.13. Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to vote or exercise any other rights of a shareholder except the right to receive payment for his shares pursuant to the provisions of those articles and the right to maintain an appropriate action to obtain relief on the ground that the corporate action would be or was fraudulent, and the respective shares for which payment has been demanded shall not thereafter be considered outstanding for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the corporation shall make an appropriate notation thereof in its shareholder records. Within twenty (20) days after demanding payment for his shares in accordance with either Article 5.12 or 5.16 of this Act, each holder of certificates representing shares so demanding payment shall submit such certificates to the corporation for notation thereon that such demand has been made. The failure of holders of certificated shares to do so shall, at the option of the corporation, terminate such shareholder's rights under Articles 5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and sufficient cause shown shall otherwise direct. If uncertificated shares for which payment has been demanded or shares represented by a certificate on which notation has been so made shall be transferred, any new certificate issued therefore shall bear similar notation together with the name of the original dissenting holder of such shares and a transferee of such shares shall acquire by such transfer no rights in the corporation other than those which the original dissenting shareholder had after making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand at any time before payment for his shares or before any petition has been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding and determination of the fair value of such shares, but no such demand may be withdrawn after such payment has been made or, unless the corporation shall consent thereto, after any such petition has been filed. If, however, such demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B of this Article the corporation shall terminate the shareholder's rights under Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking for a finding and determination of fair value of such shares by a court shall have been filed within the time provided in Article 5.12 or 5.16 of this Act, as the case may be, or if after the hearing of a petition filed pursuant to Article 5.12 or 5.16, the court shall determine that such shareholder is not entitled to the relief provided by those articles, then, in any such case, such shareholder and all persons claiming under him shall be conclusively presumed to have approved and ratified the corporate action from which he dissented and shall be bound thereby, the right of such shareholder to be paid the fair value of his shares shall cease, and his status as a shareholder shall be restored without prejudice to any corporate proceedings which may have been taken during the interim, and such shareholder shall be entitled to receive any dividends or other distributions made to shareholders in the interim.
[DEVON ENERGY CORPORATION]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except to the extent indicated below, there is no charter provision, bylaw, contract, arrangement or statute under which any director or officer of Devon or Devon Holdco is insured or indemnified in any manner against any liability that he or she may incur in his or her capacity as such.
Devon Energy Corporation
Article VIII of Devon's restated certificate of incorporation, as amended, contains a provision, permitted by Section 102(b)(7) of the Delaware General Corporation Law, limiting the personal monetary liability of directors for breach of fiduciary duty as a director. This provision and Delaware law provide that the provision does not eliminate or limit liability:
- for any breach of the director's duty of loyalty to Devon or its stockholders;
- for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
- for unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided in Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper benefit.
Section 145 of the Delaware General Corporation Law permits indemnification against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with actions, suits or proceedings in which a director, officer, employee or agent is a party by reason of the fact that he or she is or was such a director, officer, employee or agent, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. However, in connection with actions by or in the right of the corporation, such indemnification is not permitted if such person has been adjudged liable to the corporation unless the court determines that, under all of the circumstances, such person is nonetheless fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Article X of Devon's restated certificate of incorporation, as amended, provides for such indemnification.
Section 145 of the Delaware General Corporation Law also permits a corporation to purchase and maintain insurance on behalf of its directors and officers against any liability that may be asserted against, or incurred by, such persons in their capacities as directors or officers of the corporation whether or not the corporation would have the power to indemnify such persons against such liabilities under the provisions of such sections. Devon has purchased such insurance.
Section 145 of the Delaware General Corporation Law further provides that the statutory provision is not exclusive of any other right to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or independent directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office.
Article XIII of Devon's bylaws contains provisions regarding indemnification that parallel those described above.
The amended and restated merger agreement, dated as of May 19, 1999, between Devon and PennzEnergy Company provides that for seven years after the effective time of the merger contemplated by that agreement, Devon will indemnify and hold harmless each person who was a director or officer of Devon or PennzEnergy prior to the effective time of that merger from their acts or omissions in those capacities occurring prior to the effective time of that merger to the fullest extent permitted by applicable law.
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The merger agreement, dated as of May 25, 2000, as amended, between Devon and Santa Fe Snyder Corporation provides that for six years after the effective time of the merger contemplated by that agreement, Devon will indemnify and hold harmless each person who was a director or officer of Santa Fe Snyder prior to the effective time of that merger from their acts or omissions in those capacities occurring prior to the effective time of that merger to the fullest extent permitted by applicable law.
The amended and restated agreement and plan of merger, dated as of August 13, 2001, by and among Devon, Devon NewCo Corporation, Devon Holdco, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. provides that for six years after the effective time of the merger contemplated by that agreement, Devon will cause the surviving corporation of the merger to indemnify and hold harmless to the fullest extent permitted under applicable law each person who was a director or officer of Mitchell prior to the effective time of that merger.
Devon Holdco Corporation
If the alternate structure described in this registration statement must be used to complete the transaction, Devon Holdco's certificate of incorporation and bylaws will be amended to be substantially identical in form and substance to the certificate of incorporation and bylaws of Devon, except that Devon Holdco would not have a series of preferred stock designated as 6.49% cumulative preferred stock, Series A, because that series of preferred stock would be converted into preferred stock of the surviving corporation of the merger involving Devon under the alternate structure. Accordingly, Devon Holdco's certificate of incorporation and bylaws will include the same provisions regarding indemnification as those contained in Devon's restated certificate of incorporation, as amended, and bylaws.
As a Delaware corporation, Devon Holdco is subject to the Delaware General Corporation Law, including the same provisions regarding indemnification as those discussed above with respect to Devon.
The amended and restated agreement and plan of merger, dated as of August 13, 2001, by and among Devon, Devon NewCo Corporation, Devon Holdco, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. provides that, for six years after the effective time of the merger involving Mitchell under the alternate structure, if effected, Devon Holdco will cause the surviving corporation of that merger to indemnify and hold harmless to the fullest extent permitted under applicable law each person who was a director or officer of Mitchell prior to the effective time of that merger.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See Index to Exhibits, which is incorporated by reference in this item.
(b) Financial Statement Schedule
Not applicable.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was
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registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by Devon pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of Devon's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That, prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 20, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Oklahoma City, state of Oklahoma, on October 30, 2001.
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS ---------------------------------- J. Larry Nichols Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ J. LARRY NICHOLS Chairman, President and October 30, 2001 ----------------------------------------------------- Chief Executive Officer J. Larry Nichols * Senior Vice President -- October 30, 2001 ----------------------------------------------------- Finance William T. Vaughn /s/ DANNY J. HEATLY Vice October 30, 2001 ----------------------------------------------------- President -- Accounting Danny J. Heatly * Director October 30, 2001 ----------------------------------------------------- Thomas F. Ferguson * Director October 30, 2001 ----------------------------------------------------- David M. Gavrin * Director October 30, 2001 ----------------------------------------------------- Michael E. Gellert * Director October 30, 2001 ----------------------------------------------------- John A. Hill * Director October 30, 2001 ----------------------------------------------------- William J. Johnson * Director October 30, 2001 ----------------------------------------------------- Michael M. Kanovsky |
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SIGNATURE TITLE DATE --------- ----- ---- * Director October 30, 2001 ----------------------------------------------------- Robert A. Mosbacher, Jr. * Director October 30, 2001 ----------------------------------------------------- Robert B. Weaver |
* An asterisk denotes execution by J. Larry Nichols or Danny J. Heatly, as attorney-in-fact.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Oklahoma City, state of Oklahoma, on October 30, 2001.
DEVON HOLDCO CORPORATION
By: /s/ J. LARRY NICHOLS ------------------------------------ |
J. Larry Nichols
President
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints J. Larry Nichols and Danny J. Heatly, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form S-4 Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ J. LARRY NICHOLS President (Principal Executive October 30, 2001 ----------------------------------------------------- Officer) J. Larry Nichols /s/ WILLIAM T. VAUGHN Director and Senior Vice President October 30, 2001 ----------------------------------------------------- (Principal Financial Officer) William T. Vaughn /s/ DANNY J. HEATLY Vice President (Principal October 30, 2001 ----------------------------------------------------- Accounting Officer) Danny J. Heatly /s/ J. M. LACEY Director October 30, 2001 ----------------------------------------------------- J. M. Lacey /s/ DARRYL G. SMETTE Director October 30, 2001 ----------------------------------------------------- Darryl G. Smette |
II-7
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. (attached as Annex A to the Joint Proxy Statement/Prospectus contained in this Registration Statement) **2.2 -- Pre-Acquisition Agreement, dated as of August 31, 2001, between Devon Energy Corporation and Anderson Exploration Ltd. 3.1 -- Restated Certificate of Incorporation of Devon Energy Corporation (incorporated by reference to Exhibit 3 to Devon Energy Corporation's Form 8-K filed on August 18, 1999) 3.2 -- Amended and Restated By-laws of Devon Energy Corporation (incorporated by reference to Exhibit 3.2 to Devon Energy Corporation's definitive proxy statement for a special meeting of shareholders filed on July 21, 2000) 3.3 -- Certificate of Incorporation of Devon Holdco Corporation 3.4 -- Bylaws of Devon Holdco Corporation 4.1 -- Form of Common Stock certificate of Devon Energy Corporation (incorporated by reference to the description of Devon Energy Corporation capital stock set forth in the registration statement on Form S-3 filed on December 15, 2000) 4.2 -- Form of Common Stock certificate of Devon Holdco Corporation 4.3 -- Rights Agreement, dated as of August 17, 1999, by and between Devon Energy Corporation and BankBoston, N.A. (incorporated by reference to Exhibit 4.2 to Devon Energy Corporation's Form 8-K filed on August 18, 1999) 4.4 -- Amendment to Rights Agreement, dated as of May 25, 2000, by and between Devon Energy Corporation and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated by reference to Exhibit 4.2 to Devon Energy Corporation's definitive proxy statement for a special meeting of shareholders filed on July 21, 2000) 4.5 -- Amendment to Rights Agreement, dated as of October 4, 2001, by and between Devon Energy Corporation and Fleet National Bank (f/k/a Bank Boston, N.A.) (incorporated by reference to Exhibit 99.1 to Devon Energy Corporation's Form 8-K filed on October 11, 2001) 4.6 -- Description of Capital Stock of Devon Energy Corporation (incorporated by reference to Exhibit 4.9 to Devon Energy Corporation's Form 8-K filed on August 18, 1999) 4.7 -- Indenture, dated as of October 3, 2001, by and among Devon Financing Corporation, U.L.C. (as issuer), Devon Energy Corporation (as guarantor) and The Chase Manhattan Bank (as trustee) 4.8 -- Registration Rights Agreement dated as of October 3, 2001 by and among Devon Financing Corporation, U.L.C., as Issuer, Devon Energy Corporation, as Guarantor and UBS Warburg LLC, Banc of America Securities LLC, ABN AMRO Incorporated, BMO Nesbitt Burns Corp., Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., J.P. Morgan Securities Inc., RBC Dominion Securities Corporation, Salomon Smith Barney Inc., as Initial Purchasers (6.875% Notes due 2011, 7.875% Debentures due 2031) |
EXHIBIT NUMBER DESCRIPTION ------- ----------- 5.1 -- Opinion of Mayer, Brown & Platt regarding the legality of the shares of Devon Energy Corporation common stock and Devon Holdco Corporation common stock to be registered under this Registration Statement 8.1 -- Opinion of Mayer, Brown & Platt regarding the United States federal income tax consequences of the merger and the alternate mergers to Devon stockholders 8.2 -- Opinion of Vinson & Elkins L.L.P. regarding the United States federal income tax consequences of the merger and the alternate mergers to Mitchell stockholders 10.1 -- Amended and Restated Principal Shareholders Agreement Containing a Voting Agreement and an Irrevocable Proxy, dated as of August 13, 2001, by and among Devon Energy Corporation, George P. Mitchell and Cynthia Woods Mitchell (attached as Annex B to the Joint Proxy Statement/Prospectus contained in this Registration Statement) 10.2 -- Amended and Restated Investor Rights Agreement, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon Holdco Corporation, George P. Mitchell and Cynthia Woods Mitchell (attached as Annex C to the Joint Proxy Statement/Prospectus contained in this Registration Statement) 10.3 -- Credit Agreement, dated as of October 12, 2001, by and among Devon Energy Corporation, Devon Financing Corporation, U.L.C., UBS AG, Stamford Branch (as Administrative Agent), and the lenders signatory thereto 10.4 -- Third Amendment to U.S. Credit Agreement dated as of July 31, 2001, among Registrant, Bank of America, N.A., individually and as administrative agent, and the U.S. Lenders party to the Original Agreement 10.5 -- Fourth Amendment to U.S. Credit Agreement dated as of August 13, 2001, among Registrant, Bank of America, N.A., individually and as administrative agent, and the U.S. Lenders party to the Original Agreement 10.6 -- Fifth Amendment to U.S. Credit Agreement dated as of September 21, 2001, among Registrant, Bank of America, N.A., individually and as administrative agent, and the U.S. Lenders party to the Original Agreement 10.7 -- Sixth Amendment to U.S. Credit Agreement dated as of October 5, 2001, among Registrant, Bank of America, N.A., individually and as administrative agent, and the U.S. Lenders party to the Original Agreement 10.8 -- Third Amendment to Canadian Credit Agreement dated as of July 31, 2001, among Northstar Energy Corporation, Bank of America Canada, individually and as administrative agent, and the Canadian Lenders party to the Original Agreement 10.9 -- Fourth Amendment to Canadian Credit Agreement dated as of August 13, 2001, among Northstar Energy Corporation, Bank of America Canada, individually and as administrative agent, and the Canadian Lenders party to the Original Agreement 10.10 -- Fifth Amendment to Canadian Credit Agreement dated as of September 21, 2001, among Northstar Energy Corporation, Bank of America Canada, individually and as administrative agent, and the Canadian Lenders party to the Original Agreement 10.11 -- Sixth Amendment to Canadian Credit Agreement dated as of October 5, 2001, among Northstar Energy Corporation, Bank of America Canada, individually and as administrative agent, and the Canadian Lenders party to the Original Agreement 21.1 -- List of Significant Subsidiaries of Devon Energy Corporation |
EXHIBIT NUMBER DESCRIPTION ------- ----------- 23.1 -- Consent of Mayer, Brown & Platt (contained in its opinions in Exhibits 5.1 and 8.1) 23.2 -- Consent of Vinson & Elkins L.L.P. (contained in its opinion in Exhibit 8.2) 23.3 -- Consent of Arthur Andersen LLP 23.4 -- Consent of Deloitte & Touche LLP 23.5 -- Consent of KPMG LLP (as to certain financial information of the Devon Energy Corporation and Devon Holdco Corporation) 23.6 -- Consent of PricewaterhouseCoopers LLP 23.7 -- Consent of KPMG LLP (as to certain financial information of Anderson Exploration Ltd.) 23.8 -- Consent of AMH Group, Ltd. 23.9 -- Consent of LaRoche Petroleum Consultants, Ltd. 23.10 -- Consent of Paddock Lindstrom & Associates, Ltd. 23.11 -- Consent of Ryder Scott Company, L.P. 23.12 -- Consent of Gilbert Laustsen Jung Associates Ltd. 23.13 -- Consent of Goldman, Sachs & Co. 23.14 -- Consent of J.P. Morgan Securities Inc. 23.15 -- Consent of UBS Warburg LLC *24.1 -- Powers of Attorney of Devon Energy Corporation's directors 24.2 -- Powers of Attorney of Devon Holdco Corporation's directors (contained in the signature page to this registration statement) 99.1 -- Form of Proxy Card for holders of Devon Energy Corporation's common stock 99.2 -- Form of Proxy Card for holders of Northstar Energy Corporation's exchangeable shares 99.3 -- Form of Proxy Card for holders of Mitchell Energy & Development Corp.'s common stock 99.4 -- Consent of Nominee (J. Todd Mitchell) |
* Included with the original filing of Devon Energy Corporation's registration statement (Registration No. 333-68694) on August 30, 2001.
**Included with the filing of Amendment No. 1 to Devon Energy Corporation's registration statement (Registration No. 333-68694) on September 14, 2001.
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
DEVON HOLDCO CORPORATION
1. The name of the corporation is:
Devon Holdco Corporation
2. The address of its registered office in the State of Delaware is 2711 Centerville Road, Wilmington, Delaware 19808. The name of its registered agent at such address is Corporation Service Company (CSC).
3. The nature of the business or purpose to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
4. The total number of shares of stock which the corporation shall have authority to issue is one thousand (1,000) common shares, at $0.01 par value per share.
5. The name and mailing address of the incorporator is as follows:
Michael J. Perlowski 190 South LaSalle Street Chicago, Illinois 60603
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter or repeal the By-laws of the corporation.
8. Meetings of the stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the By-laws of the corporation. Elections of directors need not be by written ballot unless the By-laws of the corporation shall so provide.
9. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
10. (A) Directors of the corporation shall have no personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing
violations of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which a director derived an improper personal benefit.
(B) The corporation shall indemnify, in accordance with and to the full extent now or hereafter permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the corporation), by reason of his acting as a director or officer of the corporation (and the corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the corporation or is or was serving at the request of the corporation in any other capacity for or on behalf of the corporation) against any liability or expense actually and reasonably incurred by such person in respect thereof; provided, however, the corporation shall be required to indemnify an officer or director in connection with an action, suit or proceeding initiated by such person only if such action, suit or proceeding was authorized by the Board of Directors of the corporation. Such indemnification is not exclusive of any other right to indemnification provided by law or otherwise. The right to indemnification conferred by this Section (B) shall be deemed to be a contract between the corporation and each person referred to herein.
(C) No amendment to or repeal of these provisions shall apply to or have any effect on the liability or alleged liability of any person for or with respect to any acts or omissions of such person occurring prior to such amendments.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Delaware General Corporation Law, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts stated herein are true, and accordingly, have hereunto set my hand this 4th day of October 2001.
/s/ MICHAEL J. PERLOWSKI -------------------------------- Michael J. Perlowski |
EXHIBIT 3.4
DEVON HOLDCO CORPORATION
BY-LAWS
ARTICLE I
OFFICES
SECTION 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of directors shall be held in the City of Oklahoma City, State of Oklahoma, at such place as may be fixed from time to time by the board of directors, or at such other place within or without the State of Delaware as may be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual meetings of stockholders shall be held on the second Thursday of March if not a legal holiday, and if a legal holiday, then on the next secular day following, at 3:00 P.M. or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly come before the meeting.
SECTION 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.
SECTION 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or the secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
SECTION 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than fifty days before the date of the meeting, to each stockholder entitled to vote at such meeting.
SECTION 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise required by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.
SECTION 10. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
SECTION 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole board shall be not less than two nor more than 15. The first board shall consist of three directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
SECTION 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.
SECTION 5. The first meeting of each newly elected board of directors shall be held at such time and as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum is present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
SECTION 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
SECTION 7. Special meetings of the board may be called by the president on one day's notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors.
SECTION 8. At all meetings of the board, one-third of the total number of directors, but not less than two directors, shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
SECTION 10. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.
SECTION 11. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
SECTION 12. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as a director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
INTERESTED DIRECTORS
SECTION 13. (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have any financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or a committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the board of directors or committee, and the board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or
(2) the material facts as to his interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified, by the board of directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be
given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.
SECTION 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be a chosen by the board of directors and shall be a president, a secretary, and a treasurer. The board of directors may also choose a chairman of the board, one or more vice presidents, a general manager and other managers and a comptroller, each of whom shall exercise powers and perform such duties as the board of directors may from time to time determine or as may be set forth in these by-laws. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide.
SECTION 2. The board of directors at its first meeting after each annual meeting of the stockholders shall choose a president, a secretary and a treasurer and may choose additional officers, including without limitation one or more vice presidents and managers.
SECTION 3. The board of directors or the president may appoint such subordinate officers, assistant secretaries, assistant treasurers and agents as it or he may deem necessary or advisable; each of whom shall hold office for such term and shall exercise such powers and perform such duties as shall be determined from time to time by the appointing authority. The board of directors may delegate to any officer the power to appoint and remove subordinate officers, assistant secretaries, assistant treasurers or agents.
SECTION 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors or a committee thereof.
SECTION 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer or agent elected or appointed by the board of directors or by the president may be removed at any time by the board of directors, and any officer or agent appointed by the president may be removed at any time by the president. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
THE CHAIRMAN OF THE BOARD AND THE PRESIDENT
SECTION 6. The chairman of the board, if any, or the president shall, as designated by the board, be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and shall have, subject to the control of the board, general and active management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect. The chairman of the board, if present, shall preside at all meetings of the board and shall have such powers and perform such duties as may be assigned to him by these by-laws or the board. The president shall perform all duties customarily incident to the office of president and such other duties as may be assigned to him by the board. In case of the absence or inability to act of the chairman of the board, the president shall have the powers and perform the duties of the chairman of the board and, if a director, preside at meetings of the board.
THE VICE PRESIDENTS
SECTION 7. In the absence of the president or in the event of his inability to or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting shall have all the powers of and be subject to all the restrictions upon the president. The vice president shall perform such other duties and have such other powers as the board of directors or the President may from time to time prescribe. No vice president who is not a citizen of the United States, in the event he shall assume the office of president or chief executive officer or act in the president's or chief executive officer's absence or inability or refusal to act, be empowered to take any action with respect to matters arising under, or related to, the United States Merchant Marine Act of 1936, as amended.
THE SECRETARY AND ASSISTANT SECRETARY
SECTION 8. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or the president. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
SECTION 9. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
SECTION 10. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts or receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors, or a committee thereof.
SECTION 11. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
SECTION 12. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
SECTION 13. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors or the president may from time to time prescribe.
EXECUTION OF CONTRACTS
SECTION 14. The president, any vice president or the general manager shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
SECTION 2. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. To the extent that a present or former director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. Any indemnification under Sections 1 and 2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 and 2. Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) by a committee of such directors designated by majority vote of such directors, or (3) if such quorum is not obtainable or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (4) by the stockholders.
SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the manner provided in Section 4 upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article.
SECTION 6. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any provision in the corporation's certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and legal representatives of such a person.
SECTION 7. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the corporation shall be entitled to have a certificates, signed by or in the name of the corporation by the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation
SECTION 2. Where a certificate is countersigned (1) by a transfer agent other than the corporation or its employee, or (2) by a registrar other than the corporation or its employee, the signatures of the officers of the corporation may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue.
LOST CERTIFICATES
SECTION 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretobefore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.
TRANSFERS OF STOCK
SECTION 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
SECTION 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or to distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, the board of directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conductive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
SECTION 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
CHECKS
SECTION 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
FISCAL YEAR
SECTION 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
SEAL
SECTION 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting.
EXHIBIT 4.2 NUMBER SHARES XX XX DEVON HOLDCO CORPORATION THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF DEVON HOLDCO CORPORATION TRANSFERABLE ON THE BOOKS OF THE CORPORATION IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE SIGNED BY ITS DULY AUTHORIZED OFFICERS AND SEALED WITH THE SEAL OF THE CORPORATION THIS DAY OF A.D. . --------------------------- -------------------------- Secretary President |
EXHIBIT 4.7
DEVON FINANCING CORPORATION, U.L.C.,
as Issuer
DEVON ENERGY CORPORATION,
as Guarantor
and
THE CHASE MANHATTAN BANK,
as Trustee
INDENTURE
Dated as of October 3, 2001
SERIES A and SERIES B
$1,750,000,000
6.875% NOTES DUE 2011
$1,250,000,000
7.875% DEBENTURES DUE 2031
CROSS-REFERENCE TABLE*
TIA Section Indenture Section ----------- ----------------- 310(a)(1).............................................................................6.10 (a)(2).............................................................................6.10 (a)(3).............................................................................N.A. (a)(4).............................................................................N.A. (a)(5).............................................................................6.10 (b)................................................................................6.10; 7.01(b) (c)................................................................................N.A. 311(a)................................................................................6.11 (b)................................................................................6.11 (c)................................................................................N.A. 312(a)................................................................................2.05 (b)................................................................................11.03 (c)................................................................................11.03 313(a)................................................................................6.06 (b)................................................................................6.06 (c)................................................................................6.06 (d)................................................................................6.06 314(a)................................................................................3.03 (b)................................................................................N.A. (c)(1).............................................................................11.04 (c)(2).............................................................................11.04 (c)(3).............................................................................N.A. (d)................................................................................N.A. (e)................................................................................11.05 (f)................................................................................N.A. 315(a)................................................................................6.01(b) (b)................................................................................6.05 (c)................................................................................6.01(a) (d)................................................................................6.01(c) (e)................................................................................5.11 316(a)(last sentence).................................................................2.09 (a)(1)(A)..........................................................................5.05 (a)(1)(B)..........................................................................5.04 (a)(2).............................................................................N.A. (b)................................................................................5.07 (c)................................................................................8.04 317(a)(1).............................................................................5.08 (a)(2).............................................................................5.09 (b)................................................................................2.04 318(a)................................................................................11.01 |
N.A. means not applicable
* This Cross-Reference Table is not part of this Indenture
TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions............................................................................1 SECTION 1.02. Other Definitions.....................................................................11 SECTION 1.03. Incorporation by Reference of Trust Indenture Act.....................................11 SECTION 1.04. Rules of Construction.................................................................12 ARTICLE II THE SECURITIES SECTION 2.01. Form and Dating.......................................................................12 SECTION 2.02. Execution and Authentication..........................................................14 SECTION 2.03. Registrar and Paying Agent............................................................15 SECTION 2.04. Paying Agent to Hold Money in Trust...................................................16 SECTION 2.05. Holder Lists..........................................................................16 SECTION 2.06. Transfer and Exchange.................................................................16 SECTION 2.07. Replacement Securities................................................................32 SECTION 2.08. Outstanding Securities................................................................32 SECTION 2.09. Treasury Securities...................................................................33 SECTION 2.10. Temporary Securities..................................................................33 SECTION 2.11. Cancellation..........................................................................33 SECTION 2.12. Defaulted Interest....................................................................34 SECTION 2.13. Persons Deemed Owners.................................................................34 SECTION 2.14. CUSIP Numbers.........................................................................34 ARTICLE III COVENANTS SECTION 3.01. Payment of Securities.................................................................34 SECTION 3.02. Maintenance of Office or Agency.......................................................35 SECTION 3.03. SEC Reports; Financial Statements.....................................................36 SECTION 3.04. Compliance Certificate................................................................36 SECTION 3.05. Corporate Existence...................................................................37 SECTION 3.06. Waiver of Stay, Extension or Usury Laws...............................................37 SECTION 3.07. Limitation on Liens...................................................................38 SECTION 3.08. Payment of Additional Amounts.........................................................40 |
Page ---- ARTICLE IV CONSOLIDATION, MERGER AND SALE SECTION 4.01. Limitation on Mergers and Consolidations..............................................42 SECTION 4.02. Successors Substituted................................................................43 SECTION 4.03. Assignment of Company's Obligations...................................................43 ARTICLE V DEFAULTS AND REMEDIES SECTION 5.01. Events of Default.....................................................................44 SECTION 5.02. Acceleration..........................................................................46 SECTION 5.03. Other Remedies........................................................................47 SECTION 5.04. Waiver of Existing Defaults...........................................................48 SECTION 5.05. Control by Majority...................................................................48 SECTION 5.06. Limitations on Suits..................................................................49 SECTION 5.07. Rights of Holders to Receive Payment..................................................49 SECTION 5.08. Collection Suit by Trustee............................................................49 SECTION 5.09. Trustee May File Proofs of Claim......................................................50 SECTION 5.10. Priorities............................................................................50 SECTION 5.11. Undertaking for Costs.................................................................51 ARTICLE VI TRUSTEE SECTION 6.01. Duties of Trustee.....................................................................51 SECTION 6.02. Rights of Trustee.....................................................................52 SECTION 6.03. Individual Rights of Trustee..........................................................54 SECTION 6.04. Trustee's Disclaimer..................................................................54 SECTION 6.05. Notice of Defaults....................................................................54 SECTION 6.06. Reports by Trustee to Holders.........................................................54 SECTION 6.07. Compensation and Indemnity............................................................55 SECTION 6.08. Replacement of Trustee................................................................56 SECTION 6.09. Successor Trustee by Merger, etc......................................................57 SECTION 6.10. Eligibility; Disqualification.........................................................57 SECTION 6.11. Preferential Collection of Claims Against Company.....................................57 |
Page ---- ARTICLE VII DISCHARGE OF INDENTURE SECTION 7.01. Termination of Company's Obligations..................................................58 SECTION 7.02. Application of Trust Money............................................................62 SECTION 7.03. Repayment to Company..................................................................62 SECTION 7.04. Reinstatement.........................................................................62 ARTICLE VIII AMENDMENTS SECTION 8.01. Without Consent of Holders............................................................63 SECTION 8.02. With Consent of Holders...............................................................65 SECTION 8.03. Compliance with Trust Indenture Act...................................................66 SECTION 8.04. Revocation and Effect of Consents.....................................................66 SECTION 8.05. Notation on or Exchange of Securities.................................................67 SECTION 8.06. Trustee to Sign Amendments, etc.......................................................67 ARTICLE IX GUARANTEES OF SECURITIES SECTION 9.01. Unconditional Guarantees..............................................................68 SECTION 9.02. Execution and Delivery of Notation of Guarantees......................................71 ARTICLE X REDEMPTION SECTION 10.01. Notices to Trustee....................................................................71 SECTION 10.02. Selection of Securities to be Redeemed................................................71 SECTION 10.03. Notices to Holders....................................................................72 SECTION 10.04. Effect of Notices of Redemption.......................................................73 SECTION 10.05. Deposit of Redemption Price...........................................................73 SECTION 10.06. Securities Redeemed in Part...........................................................73 SECTION 10.07. Optional Redemption...................................................................73 |
Page ---- ARTICLE XI MISCELLANEOUS SECTION 11.01. Trust Indenture Act Controls..........................................................74 SECTION 11.02. Notices...............................................................................74 SECTION 11.03. Communication by Holders with Other Holders...........................................76 SECTION 11.04. Certificate and Opinion as to Conditions Precedent....................................76 SECTION 11.05. Statements Required in Certificate or Opinion.........................................76 SECTION 11.06. Rules by Trustee and Agents...........................................................77 SECTION 11.07. Legal Holidays........................................................................77 SECTION 11.08. No Recourse Against Others............................................................77 SECTION 11.09. Governing Law.........................................................................77 SECTION 11.10. Consent to Jurisdiction and Service of Process........................................77 SECTION 11.11. Waiver of Immunity....................................................................78 SECTION 11.12. Judgment Currency.....................................................................78 SECTION 11.13. No Adverse Interpretation of Other Agreements.........................................79 SECTION 11.14. Successors............................................................................79 SECTION 11.15. Severability..........................................................................79 SECTION 11.16. Counterpart Originals.................................................................79 SECTION 11.17. Table of Contents, Headings, etc......................................................79 SECTION 11.18. Mitchell Restructuring Event..........................................................79 |
EXHIBITS
EXHIBIT A - Form of 10-Year Security................................................................A-1 EXHIBIT B - Form of 30-Year Security................................................................B-1 EXHIBIT C - Form of Certificate of Transfer.........................................................C-1 EXHIBIT D - Form of Certificate of Exchange.........................................................D-1 |
INDENTURE dated as of October 3, 2001 among Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of the province of Nova Scotia, Canada (the "Company"), Devon Energy Corporation, a Delaware corporation (the "Guarantor"), and The Chase Manhattan Bank, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
(i) 6.875% Series A Notes due 2011 (the "Series A 10-Year Securities") and
6.875% Series B Notes due 2011 (the "Series B 10-Year Securities" and together
with the Series A 10-Year Securities, the "10-Year Securities") and (ii) 7.875%
Series A Debentures due 2031 (the "Series A 30-Year Securities") and 7.875%
Series B Debentures due 2031 (the "Series B 30-Year Securities" and together
with the Series A 30-Year Securities, the "30-Year Securities"). The Series A
10-Year Securities and the Series A 30-Year Securities are collectively referred
to herein as the "Series A Securities," and the Series B 10-Year Securities and
the Series B 30-Year Securities are collectively referred to herein as the
"Series B Securities."
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, "control" of a Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. The Trustee may request and may conclusively rely upon an Officers' Certificate to determine whether any Person is an Affiliate of any specified Person.
"Agent" means any Registrar or Paying Agent.
"Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Security, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
"Bankruptcy Law" means Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or any similar U.S. or Canadian Federal, State, provincial or foreign law for the relief of debtors.
"Board of Directors" of any Person means the board of directors, board of managers (or other comparable governing body) of such Person or any committee thereof duly authorized, with respect to any particular matter, to act by or on behalf of the board of directors of such Person.
"Business Day" means any day that is not a Legal Holiday.
"Capital Interests" means, with respect to any Person, any and
all shares, interests, participations, rights or other equivalents (however
designated) of such Person's equity, including, without limitation (i) with
respect to partnerships, partnership interests (whether general or limited),
(ii) with respect to limited liability companies, member interests, and (iii)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such Person.
"Clearstream" means Clearstream Banking, S.A.
"Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person.
"Consolidated Net Tangible Assets" means, calculated as of the date of the financial statements for the most recently ended fiscal quarter or fiscal year, as applicable, prior to the date of determination, the aggregate amount of assets of the Parent and its consolidated Subsidiaries, less applicable reserves and other properly deductible items but including investments in non-consolidated entities, after deducting therefrom:
(1) all current liabilities, excluding any portion thereof constituting Funded Debt by reason of being renewable or extendible at the option of the obligor beyond 12 months from the date of determination; and
(2) all goodwill, trade names, trademarks, patents, unamortized debt discount and expenses and other like intangibles, all as set forth on a consolidated balance sheet of the Parent and its consolidated Subsidiaries and computed in accordance with GAAP.
"Corporate Trust Office of the Trustee" means the office of the Trustee at which the corporate trust business of the Trustee shall be principally administered, which office shall initially be located at the address of the Trustee specified in Section 11.02 and may be located at such other address as the Trustee may give notice to the Company and the Holders or such other address as a successor Trustee may designate from time to time by notice to the Company and the Holders.
"Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default.
"Definitive Security" means a certificated Security registered in the name of the Holder thereof and issued in accordance with Section 2.06, in the form of Exhibit A or B, except that such Security shall not bear the Global Security Legend and shall not have the "Schedule of Exchanges of Securities" attached thereto.
"Depositary" means The Depository Trust Company, its nominees and their respective successors.
"Distribution Compliance Period" means the "distribution compliance period" as defined in Regulation S.
"Euroclear" means Euroclear Bank, S.A.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor statute.
"Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange each series of the Series B Securities for the corresponding series of Series A Securities.
"Exchange Offer Registration Statement" means a registration statement under the Securities Act relating to an Exchange Offer, including the related prospectus.
"Funded Debt" means all Debt of the Parent or any of its Subsidiaries for money borrowed which is not by its terms subordinated in right of payment to the prior payment in full of the Securities or to the Guarantor's full and unconditional guarantee in respect thereof, as applicable, having a maturity of more than 12 months from the date as of which the amount thereof is to be determined or having a maturity of fewer than 12 months but by its terms being (1) renewable or extendible beyond 12 months from such date at the option of the obligor; or (2) issued in connection with a commitment by a bank or other financial institution to lend so that the indebtedness is treated as though it had a maturity in excess of 12 months pursuant to GAAP.
"GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time.
"Global Securities" means, individually and collectively, each of the Restricted Global Securities and the Unrestricted Global Securities, in the form of Exhibit A or B, respectively, issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f).
"Global Security Legend" means the legend set forth in Section 2.06(g)(ii) which is required to be placed on all Global Securities issued under this Indenture.
"Guarantor" means the Person named as the "Guarantor" in the first paragraph of this instrument and such other Person as may become a "Guarantor" hereunder pursuant to Section 11.18, in each case until a successor Person shall have assumed the obligations of such Person pursuant to the applicable provisions of this Indenture, and thereafter "Guarantor" shall mean such successor Person(s).
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" means any indebtedness for money borrowed or representing the deferred purchase price of property or assets purchased.
"Indenture" means this Indenture as amended or supplemented from time to time.
"Indirect Participant" means a Person who holds a beneficial interest in a Global Security through a Participant.
"Initial Purchasers" means the initial purchasers named in the Purchase Agreement, as initial purchasers of the Series A Securities in the Offering.
"Interest Payment Date" has the meaning assigned to such term in the Securities.
"Issue Date" means the first date on which the Series A Securities are issued under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in any of New York, New York, Oklahoma City, Oklahoma, Houston, Texas or a place of payment are authorized or obligated by law, regulation or executive order to remain closed.
"Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Securities for use by such Holders in connection with the Exchange Offer.
"Liquidated Damages" has the meaning given to such term in the Registration Rights Agreement.
"Maturity," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity, by declaration of acceleration, call for redemption or otherwise.
"Mortgage" means and includes any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Offering" means the offering of the Original Securities pursuant to the Offering Memorandum.
"Offering Memorandum" means the Confidential Offering Memorandum of the Company, dated September 28, 2001, relating to the Offering.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the President, any Vice Chairman of the Board, any Vice President, the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Assistant Secretary of a Person.
"Officers' Certificate" means a certificate signed by two Officers of a Person, one of whom must be the Person's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Senior Vice President or Vice President.
"Offshore" means the lands beneath the navigable waters of the United States or Canada, or the continental shelf of the United States or Canada.
"144A Global Security" means a global Security in the form of Exhibit A or B hereto bearing the Global Security Legend, the Private Placement Legend and the 144A Security Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Securities sold in reliance on Rule 144A.
"144A Security Legend" means the legend set forth in Section 2.06(g)(iv) which is required to be placed on all Series A Securities that are 144A Global Securities or Definitive Securities sold to QIBs pursuant to Rule 144A.
"Parent" means Devon Energy Corporation, a Delaware corporation, or such other Person as may become the "Parent" hereunder pursuant to Section 4.01, 4.02 or 11.18.
"Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. Such counsel may be an employee of or counsel to the Company, the Guarantor or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
"Participating Broker-Dealer" means any broker-dealer that is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Series B Securities received by such broker-dealer in the Exchange Offer.
"Person" means any individual, corporation, partnership, limited liability company, limited or general partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.
"Principal Property" means any oil, gas or mineral producing property, or any refining, processing, smelting or manufacturing facility located in the United States, Canada or Offshore, other than: (1) property employed in transportation, distribution or marketing; (2) information and electronic data processing equipment; or (3) any property that, in the opinion of the Board of Directors of the Parent, is not materially important to the total business conducted by the Parent and its Subsidiaries as an entirety.
"Private Exchange" means the offer by the Company, pursuant to the Registration Rights Agreement, to the Initial Purchasers to issue and deliver to the Initial Purchasers, in exchange for the Original Securities held by the Initial Purchasers, as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities.
"Private Exchange Securities" means the Series B Securities to be issued pursuant to this Indenture to the Initial Purchasers in a Private Exchange.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) which is required to be placed on all Series A Securities
issued under this Indenture except where otherwise permitted by the provisions
of this Indenture.
"Purchase Agreement" means the Purchase Agreement, dated as of September 28, 2001, among the Company, the Devon Energy Corporation, a Delaware corporation, and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means the price at which the Securities may be redeemed, as set forth in paragraphs 4 and 5 of the form of Securities, as applicable.
"Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of October 3, 2001, among the Company, Devon Energy Corporation, a Delaware Corporation, and the Initial Purchasers relating to the Securities.
"Regulation S" means Regulation S promulgated under the Securities Act, as such may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"Regulation S Global Security" means a Regulation S Temporary Global Security or Regulation S Permanent Global Security, as appropriate.
"Regulation S Permanent Global Security" means a permanent global Security in the form of Exhibit A or B hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Security upon expiration of the Distribution Compliance Period.
"Regulation S Temporary Global Security" means a temporary global Security in the form of Exhibit A or B hereto bearing the Global Security Legend, the Private Placement Legend and the Regulation S Temporary Global Security Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 903 of Regulation S.
"Regulation S Temporary Global Security Legend" means the legend set forth in Section 2.06(g)(iii) which is required to be placed on all Regulation S Temporary Global Securities issued under this Indenture.
"Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
"Restricted Definitive Security" means a Definitive Security bearing the Private Placement Legend.
"Restricted Global Security" means a Global Security bearing the Private Placement Legend.
"Restricted Securities" means "restricted securities" as defined in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" means the Company and any other Subsidiary of the Guarantor: (1) a substantial portion of the property of which is located, or a substantial portion of the business of which is carried on, within the United States, Canada or Offshore; (2) that owns or leases under a capital lease any Principal Property; and (3) that has a Stockholders' Equity exceeding 2% of Consolidated Net Tangible Assets.
"Rule 144" means Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of the issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC.
"Rule 903" means Rule 903 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"Rule 904" means Rule 904 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities.
"Securities Act" means the Securities Act of 1933, as amended, and any successor statute.
"Securities Custodian" means the Trustee, as custodian with respect to the Securities in global form, or any successor entity thereto.
"Series A Securities" has the meaning set forth in the second paragraph of this instrument.
"Series B Securities" has the meaning set forth in the second paragraph of this instrument.
"Shelf Registration" means the shelf registration pursuant to a Shelf Registration Statement.
"Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.
"Stated Maturity" means, with respect to any Security, the date specified in such Security as the fixed date on which the principal of such Security is due and payable.
"Stockholders' Equity" means, with respect to any corporation, partnership, joint venture, association, joint stock company, limited liability company, unlimited liability company, trust, unincorporated organization or government, or any agency or political subdivision thereof, stockholders' equity, as computed in accordance with GAAP.
"Subsidiary" of any Person means any corporation, association or other business entity of which more than 50% of the total voting power of the Capital Interests of such Person entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof or, in the case of a partnership, more than 50% of the partners' Capital Interests (considering all partners' Capital Interests as a single class), is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof.
"Taxes" means any tax, duty, levy, impost, assessment or other governmental charge of whatever nature imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by an authority or agency therein or thereof having the power to tax, including any interest, penalties or other charges in respect thereof.
"10-Year Securities" has the meaning set forth in the second paragraph of this instrument.
"30-Year Securities" has the meaning set forth in the second paragraph of this instrument.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the Issue Date.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean the successor serving hereunder.
"U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged.
"U.S. Person" means a "U.S. person" as defined in Rule 902(k) under the Securities Act.
"Unrestricted Definitive Security" means a Definitive Security that does not bear and is not required to bear the Private Placement Legend.
"Unrestricted Global Security" means a permanent global Security in the form of Exhibit A or B attached hereto that bears the Global Security Legend and that has the "Schedule of Exchanges of Securities" attached thereto and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Securities that do not bear the Private Placement Legend.
SECTION 1.02. Other Definitions.
Defined in Term Section ---- ---------- "Additional Amounts".................................................... 3.08 "Agent Members"......................................................... 2.01(b) "Authorized Agent" ..................................................... 11.10 "Covenant Defeasance" .................................................. 7.01(c) "Devon HoldCo" ......................................................... 11.18 "Debt".................................................................. 3.07 "DTC"................................................................... 2.03 "Event of Default"...................................................... 5.01 "Excluded Holder"....................................................... 3.08 "Guarantees"............................................................ 9.01(a) "Indenture Obligations"................................................. 9.01(a) "Judgment Currency"..................................................... 11.12 "Mitchell Restructuring Event" ......................................... 11.18 "Original Securities"................................................... 2.02 "Paying Agent".......................................................... 2.03 "Registrar"............................................................. 2.03 |
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:
"commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and the Guarantor.
All other terms used in this Indenture, and not otherwise defined herein, that are defined by the TIA, defined by a TIA reference to another statute or defined by an SEC rule under the TIA have the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) words implying any gender shall apply to all genders and (6) provisions apply to successive events and transactions.
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating.
(a) General. The 10-Year Securities and the 30-Year Securities, any notations thereon relating to the Guarantees and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A and B, respectively, to this Indenture, the terms of which are hereby incorporated into this Indenture. The Securities may have notations, legends or endorsements required by law, securities exchange rule, the Company's certificate of incorporation, memorandum of association, articles of association, other organizational documents, agreements to which the Company is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form acceptable to the Company. Each Security shall be dated the date of its authentication. The Securities shall be in registered form without coupons and only in denominations of $1,000 and any integral multiples thereof. The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantor and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.
(b) Global Securities. Original Securities of any series offered and sold (1) to QIBs in reliance on Rule 144A or (2) to Non-U.S. Persons in reliance on Regulation S, in each case as provided in the Purchase Agreement, shall be issued initially in the form of one or more Global Securities in definitive, fully registered form without interest coupons and bearing the Global Security Legend and Private Placement Legend, which shall be deposited on behalf of the purchasers of the Original Securities represented thereby with the Trustee, at its Houston, Texas office, as custodian for the Depositary (or with such other custodian as the Depositary may direct), and registered in the name of the Depositary or
a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Trustee or the Securities Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06.
Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security.
(c) Temporary Global Securities. Securities offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Security and bearing the Regulation S Temporary Global Security Legend, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Houston, Texas office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Distribution Compliance Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-U.S. beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Security (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Security bearing a Private Placement Legend, all as contemplated by Section 2.06(g)(i)), and (ii) an Officers' Certificate from the Company. Following the termination of the Distribution Compliance Period, beneficial interests in the Regulation S Temporary Global Security shall be exchanged for beneficial interests in Regulation S Permanent Global Securities pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Securities, the Trustee shall cancel the Regulation S Temporary Global Security. The aggregate principal amount of the Regulation S Temporary Global Security and the Regulation S Permanent Global Securities may from time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Cedel Bank (as adopted by Clearstream) and any successor, alternative or additional procedures from time to time adopted by Euroclear or Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Security and the Regulation S Permanent Global Securities that are held by Participants through Euroclear or Clearstream.
(e) Certificated Securities. Except as provided in this
Section 2.01 or Section 2.06, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of Definitive
Securities.
SECTION 2.02. Execution and Authentication.
One Officer of the Company shall sign the Securities on behalf of the Company by manual or facsimile signature. The Company's seal may be (but shall not be required to be) impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form.
If an Officer of the Company whose signature is on this Indenture or a Security no longer holds that office at the time the Trustee authenticates such Security or at any time thereafter, the Security shall be valid nevertheless.
A Security shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of an authorized signatory of the Trustee, which signature shall be conclusive evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate (i) for original issue on the Issue Date each of (A) the Series A 10-Year Securities in the aggregate principal amount of $1,750,000,000 and (B) the Series A 30-Year Securities in the aggregate principal amount of $1,250,000,000 (collectively, the "Original Securities"), (ii) the Series B Securities for original issue, pursuant to an Exchange Offer or Private Exchange, for a like principal amount of Series A Securities and (iii) any amount of additional Securities specified by the Company, in each case, upon a written order of the Company signed by one Officer of the Company; provided, however, that no additional Securities may be issued or guaranteed if a Default or Event of Default shall have occurred and be continuing with respect to any series of the Securities. Such order shall specify (a) the amount of the Securities of each series to be authenticated and the date of
original issue thereof, and (b) whether the Securities are Series A Securities or Series B Securities. The aggregate principal amount of Securities of any series outstanding at any time may not exceed the aggregate principal amount of Securities of such series authorized for issuance by the Company pursuant to one or more written orders of the Company, except as provided in Section 2.07. Subject to the foregoing, the aggregate principal amount of Securities of any series that may be issued under this Indenture shall not be limited.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, the Guarantor or any of their respective Affiliates.
The 10-Year Securities and the 30-Year Securities shall each be a single series for all purposes of this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be presented for registration of transfer or exchange ("Registrar") and an office or agency where Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. The Company may change any Paying Agent or Registrar without notice to any Holder. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Guarantor or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Trustee as Registrar and Paying Agent.
The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to each Global Security.
SECTION 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on the Securities, whether such money shall have been paid to it by the Company or the Guarantor, and will notify the Trustee of any default by the Company or the Guarantor in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon payment over to the Trustee and upon accounting for any funds disbursed, the Paying Agent (if other than the Company or a Subsidiary of the Company) shall have no further liability for the money. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. A Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Securities will be exchanged by the Company for Definitive Securities if (i) the Trustee receives notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Securities (in whole but not in part) should be exchanged for Definitive Securities and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Security be exchanged by the Company for Definitive Securities prior to (x) the expiration of the Distribution Compliance Period and
(y) the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Securities shall be issued in
such names as the Depositary shall instruct the Trustee. Global Securities also
may be exchanged or replaced, in whole or in part, as provided in Sections 2.07
and 2.10. Except as provided in this Section 2.06(a) and in Section 2.06(b)(ii)
and Section 2.06(c) for the exchange or transfer of Global Securities for
Definitive Securities, every Security authenticated and delivered in exchange
for, or in lieu of, a Global Security or any portion thereof, pursuant to this
Section 2.06 or Section 2.07 or 2.10, shall be authenticated and delivered in
the form of, and shall be, a Global Security. A Global Security may not be
exchanged for another Security other than as provided in this Section 2.06(a);
however, beneficial interests in a Global Security may be transferred and
exchanged as provided in Section 2.06(b), (c) or (f).
(b) Transfer and Exchange of Beneficial Interests in the Global Securities. The transfer and exchange of beneficial interests in the Global Securities shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Securities shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Securities also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Security. Beneficial interests in any Restricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Security in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Temporary Regulation S Global Security may not be made to a U.S. Person or for the account or benefit of a U.S. Person. Beneficial interests in any Unrestricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Securities. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Depositary either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Security in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Security shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Securities be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Security prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f), the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Securities. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Securities contained in this Indenture and the Securities or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Security(s) pursuant to Section 2.06(h).
(iii) Transfer of Beneficial Interests to Another Restricted Global Security. A beneficial interest in any Restricted Global Security may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Security if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Security, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Security or the Regulation S Permanent Global Security, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Security for Beneficial Interests in the Unrestricted Global Security. A beneficial interest in any Restricted Global Security may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Security or transferred to a Person
who
takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary's book-entry system that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit D, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Security proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global
Security, a certificate from such holder in the form
of Exhibit C, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall
issue and, upon receipt of a written authentication order in accordance with Section 2.02, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Security cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Security.
(c) Transfer or Exchange of Beneficial Interests for Definitive Securities.
(i) Beneficial Interests in Restricted Global Securities to Restricted Definitive Securities. If any holder of a beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Security, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security, a certificate from such holder in the form of Exhibit D, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the Parent or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C, including the certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Security to be reduced accordingly pursuant to
Section 2.06(h), and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Security in the appropriate principal amount. Any Definitive
Security issued in exchange for a beneficial interest in a Restricted
Global Security pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive
Securities to the Persons in whose names such Securities are so
registered. Any Definitive Security issued in exchange for a beneficial
interest in a Restricted Global Security pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject
to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C), a beneficial interest in the Regulation S Temporary Global Security may not be exchanged for a Definitive Security or transferred to a Person who takes delivery thereof in the form of a Definitive Security prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Securities to Unrestricted Definitive Securities. A holder of a beneficial interest in a Restricted Global Security may exchange such beneficial interest for an Unrestricted Definitive Security or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Security proposes to
exchange such beneficial interest for a Definitive
Security that does not bear the Private Placement
Legend, a certificate from such holder in the form of
Exhibit D, including the certifications in item
(1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Security that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Securities to Unrestricted Definitive Securities. If any holder of a beneficial interest in an Unrestricted Global Security proposes to exchange such beneficial interest for a Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Security, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii), the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.06(h), and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Security in the appropriate principal amount. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant
or Indirect Participant. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Securities for Beneficial Interests.
(i) Restricted Definitive Securities to Beneficial Interests in Restricted Global Securities. If any Holder of a Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security or to transfer such Restricted Definitive Securities to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Security, then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security, a certificate from such Holder in the form of Exhibit D, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Security is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit C, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Security is being transferred to the Parent or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C, including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Security is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit C, including the certifications in item
(3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Security, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Security, in the case of clause (B) above, the 144A Global Security, and in the case of clause (C) above, the Regulation S Global Security.
(ii) Restricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of a Restricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Security proposes to exchange such Security for a
beneficial interest in the Unrestricted Global
Security, a certificate from such Holder in the form
of Exhibit D, including the certifications in item
(1)(c) thereof; or
(2) if the Holder of such Definitive
Security proposes to transfer such Security to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Security, a certificate from such Holder in the form
of Exhibit C, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Security and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security.
(iii) Unrestricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of an Unrestricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Unrestricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Security and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Securities.
If any such exchange or transfer from a Definitive Security to
a beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Security
has not yet been issued, the Company shall issue and, upon receipt of a
written authentication order in accordance with Section 2.02, the
Trustee shall authenticate one or more Unrestricted Global Securities
in an aggregate principal amount equal to the principal amount of
Definitive Securities so transferred.
(e) Transfer and Exchange of Definitive Securities for Definitive Securities. Upon request by a Holder of Definitive Securities and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Securities. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Securities duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Securities to Restricted Definitive Securities. Any Restricted Definitive Security may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Security if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit C, including the certifications in item
(2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Securities to Unrestricted Definitive Securities. Any Restricted Definitive Security may be exchanged by the Holder thereof for an Unrestricted Definitive Security or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Security if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Security proposes to exchange such Security for an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit D, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Security proposes to transfer such Security to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit C, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Securities to Unrestricted Definitive Securities. A Holder of Unrestricted Definitive Securities may transfer such Securities to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Securities pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Securities tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Series B Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Securities in an aggregate principal amount equal to the principal amount of the Restricted Definitive Securities tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Series B Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Securities, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Securities to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Securities so accepted Definitive Securities in the appropriate principal amounts.
(g) Legends. The following legends shall appear on the face of all Global Securities and Definitive Securities issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Security and each Definitive Security (and all Securities issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
1. REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), OR (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATIONS");
2. AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH EITHER DEVON FINANCING CORPORATION, U.L.C. OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO DEVON ENERGY CORPORATION, DEVON FINANCING CORPORATION, U.L.C. OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH OF THE CASES ABOVE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;
3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; AND
4. AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY, DEVON FINANCING CORPORATION, U.L.C., MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED IN THIS SECURITY, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.
(B) Notwithstanding the foregoing, any Global
Security or Definitive Security issued pursuant to
subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii),
(e)(ii), (e)(iii) or (f) of this Section 2.06 (and all
Securities issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Security Legend. Each Global Security shall bear a legend in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(iii) Regulation S Temporary Global Security Legend. The Regulation S Temporary Global Security shall bear a legend in substantially the following form:
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
(iv) 144A Security Legend. Any Series A Security that is a 144A Global Security or a Definitive Security sold to QIBs pursuant to Rule 144A shall bear a legend in substantially the following form:
EACH PURCHASER OF THE SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
(h) Cancellation and/or Adjustment of Global Securities. At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or canceled in whole and not in part, each such Global Security shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Securities and Definitive Securities upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest in a Global Security or to a Holder of a Definitive Security for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 8.05 and 10.06).
(iii) The Registrar shall not be required (A) to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 10.03 and ending at the close of business on such day, or (B) to register the transfer of or exchange any Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
(iv) All Global Securities and Definitive Securities issued upon any registration of transfer or exchange of Global Securities or Definitive Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Securities or Definitive Securities surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 10.03 and ending at the close of business on such day, or (B) to register the transfer of or to exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
(vi) The Trustee shall authenticate Global Securities and Definitive Securities in accordance with the provisions of Section 2.02.
(vii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.
SECTION 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the Company and the Guarantor and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, the Company shall issue and the Trustee shall authenticate a replacement Security, in the same form as that of the destroyed, lost or stolen Security but only if the Trustee's requirements are met. If required by the Trustee, the Company or the Guarantor, such Holder must furnish an indemnity bond that is sufficient in the judgment of the Trustee, the Company and the Guarantor to protect the Company, the Guarantor, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Company, the Trustee and the Guarantor may charge for their expenses in replacing a Security. If, after the delivery of such replacement Security, a bona fide purchaser of the original Security in lieu of which such replacement Security was issued presents for payment or registration such original Security, the Trustee shall be entitled to recover such replacement Security from the Person to whom it was delivered or any Person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Trustee, the Company or the Guarantor in connection therewith.
Every replacement Security is a contractual obligation of the Company.
SECTION 2.08. Outstanding Securities.
The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Security effected by the Trustee hereunder and those described in this Section 2.08 as not outstanding; provided, however, that in determining whether the Holders of the requisite principal amount of outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, Securities held for the account of the Company, the Guarantor or any of their Affiliates shall be disregarded and deemed not to be outstanding, except that in determining whether the Trustee shall be protected in making such a determination or relying upon any such quorum, consent or vote, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.
If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section 3.01, it ceases to be outstanding and interest on it ceases to accrue.
A Security does not cease to be outstanding because the Company, the Guarantor or any of their respective Affiliates holds the Security.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of Securities of any series have concurred in any direction, waiver or consent, Securities owned by the Company, the Guarantor or any of their respective Affiliates shall be disregarded, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities, but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until so exchanged, temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.11. Cancellation.
The Company or the Guarantor at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation. All canceled Securities held by the Trustee shall be disposed of in accordance with the usual disposal procedures of the Trustee. The Company may not issue new Securities to replace Securities that have been paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest on the defaulted interest, in each case at the rate provided in the Securities and in the manner provided in Section 3.01. The Company may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. At least 15 days before any special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.
SECTION 2.13. Persons Deemed Owners.
The Company, the Guarantor, the Trustee, any Agent and any authenticating agent may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payments of principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on such Security and for all other purposes. None of the Company, the Guarantor, the Trustee, any Agent or any authenticating agent shall be affected by any notice to the contrary.
SECTION 2.14. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Securities.
The Company shall pay the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, premium, if any,
Liquidated Damages, if any, Additional Amounts, if any, and interest shall be considered paid on the date due if the Paying Agent, other than the Company or a Subsidiary of the Company, holds by 11:00 a.m., Eastern time, on that date money deposited by or on behalf of the Company designated for and sufficient to pay all principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest then due.
To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest (without regard to any applicable grace period) at a rate equal to the then applicable interest rate on the Securities.
Solely for purposes of disclosure pursuant to the Interest Act (Canada) (and for no other purpose), the annual interest rate applicable to any series of Securities, for any portion of any period of less than one year will be the percentage interest rate per annum stipulated in the Securities as to which the calculation must be made, multiplied by the number of days in the calendar year in which the applicable interest is paid, divided by 360.
SECTION 3.02. Maintenance of Office or Agency.
The Company will maintain, in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee, the Registrar or the Paying Agent) where Securities may be presented for registration of transfer or exchange, where Securities may be presented for payment and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. Unless otherwise designated by the Company by written notice to the Trustee, such office or agency shall be the principal office of the Trustee in the Borough of Manhattan, The City of New York at 55 Water Street, Room 234 North, New York, New York 10041. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03.
SECTION 3.03. SEC Reports; Financial Statements.
(a) The Parent covenants and agrees to file with the Trustee copies, within 15 days after the Parent is required to file the same with the SEC, of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Parent may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Parent is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents and reports, if any, which may be required pursuant to Section 13 of the Exchange Act, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations.
(b) The Parent covenants and agrees to file with the Trustee and the SEC, in accordance with the rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports, if any, with respect to compliance by the Parent with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations.
(c) The Parent covenants and agrees to transmit by mail to all Holders, as the name and addresses of such Holders appear upon the register kept by the Registrar, within 30 days after the filing thereof with the Trustee, such summaries or information, documents and reports required to be filed by the Parent, if any, pursuant to subsections (a) and (b) of this Section 3.03 as may be required by rules and regulations prescribed from time to time by the SEC.
(d) At any time when neither the Parent nor the Company is subject to Section 13 or 15(d) of the Exchange Act and the Securities are freely transferrable under the Securities Act as contemplated by the Registration Rights Agreement, upon the request of a Holder, the Parent and the Company will promptly furnish or cause to be furnished the information specified under Rule 144A(d)(4) of the Securities Act to such Holder, or to a prospective purchaser of a Security designed by such Holder, in order to permit compliance with Rule 144A under the Securities Act.
SECTION 3.04. Compliance Certificate.
The Company and the Guarantor shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, a statement signed by two Officers of the Company (one of whom shall be the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer of the Company) and two Officers of the Guarantor (one of whom shall be the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer of the
Guarantor), which statement need not constitute an Officers' Certificate, complying with TIA Section 314(a)(4) and stating that in the course of performance by the signing Officers of the Company and Officers of the Guarantor of their duties as such Officers, they would normally obtain knowledge of the keeping, observing, performing and fulfilling by the Company and the Guarantor, respectively, of its obligations under this Indenture, and further stating, as to each such Officer signing such statement, that to the best of his knowledge, each of the Company and the Guarantor has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which such Officer may have knowledge and what action the Company or the Guarantor, as the case may be, is taking or proposes to take with respect thereto).
SECTION 3.05. Corporate Existence.
Subject to Article IV, each of the Company and the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, under the laws of its respective jurisdiction of incorporation and formation and all its rights (charter and statutory) thereunder; provided, however, that neither the Company nor the Guarantor shall be required to preserve any such right if the Board of Directors of the Parent shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or the Parent and that the loss thereof is not disadvantageous in any material respect to the Holders of Securities.
SECTION 3.06. Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantor covenant (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law, which would prohibit or forgive the Company or the Guarantor from paying all or any portion of the principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that they may lawfully do so) each of the Company and the Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
SECTION 3.07. Limitation on Liens.
The Parent will not itself, nor will the Parent permit any
Restricted Subsidiary to, incur, issue, assume or guarantee any indebtedness for
money borrowed (all such indebtedness for money borrowed being hereinafter in
this Article III called "Debt") secured by a Mortgage on any Principal Property
or on any shares of stock or Indebtedness of any Restricted Subsidiary, without
first effectively providing that the Securities of any series (together with, if
the Parent shall so determine, any other indebtedness of the Guarantor or any
Restricted Subsidiary which is not subordinate in right of payment to the prior
right of payment in full of the Securities of any series) shall be secured
equally and ratably with (or prior to) such secured Debt, for so long as such
secured Debt shall be so secured, unless, after giving effect thereto, the
principal amount of all Debt so secured would not exceed 10% of Consolidated Net
Tangible Assets; provided, however, that this Section 3.07 shall not apply to,
and there shall be excluded from secured Debt in any computation under this
Section 3.07, Debt secured by:
(1) Mortgages existing at the date of this Indenture;
(2) Mortgages on property of, or on any shares of stock or Indebtedness of, any entity existing at the time such entity is merged into or consolidated with the Company or the Guarantor or becomes a Restricted Subsidiary;
(3) Mortgages in favor of the Guarantor or any Restricted Subsidiary;
(4) Mortgages on property, shares of stock or Indebtedness existing at the time of acquisition thereof (including acquisitions through merger, consolidation or other reorganization) or to secure the payment of all or any part of the purchase price thereof or construction thereon or to secure any Debt incurred prior to, at the time of, or within one year after the later of the acquisition, the completion of construction or the commencement of full operation of such property or within one year after the acquisition of such shares or Indebtedness for the purpose of financing all or any part of the purchase price thereof or construction thereon, it being understood that if a commitment for such financing is obtained prior to or within such one-year period, the applicable Mortgage shall be deemed to be included in this clause (4) whether or not such Mortgage is created within such one-year period;
(5) Mortgages in favor of the United States of America, any State thereof, Canada, or any province thereof, or any department, agency or instrumentality or political subdivision of the United States of America, any State thereof, Canada, or any province thereof, or in favor of any other country or any political subdivision thereof;
(6) Mortgages on minerals or geothermal resources in place, or on related leasehold or other property interests, that are incurred to finance development, production or acquisition costs (including, but not limited to, Mortgages securing advance sale obligations);
(7) Mortgages on equipment used or usable for drilling, servicing or operating oil, gas, coal or other mineral properties or geothermal properties;
(8) Mortgages required by any contract or statute in order to permit the Parent or any of its Subsidiaries to perform any contract or subcontract made with or at the request of, the United States of America, any State thereof, Canada, any province thereof, or in favor of any other country or any political subdivision thereof or any department, agency or instrumentality of the United States, any State thereof, Canada, any province thereof or any other country or political subdivision thereof;
(9) any Mortgage resulting from the deposit of moneys or evidence of indebtedness in trust for the purpose of defeasing Debt of the Guarantor or any Restricted Subsidiary or secured Debt of the Guarantor or any Restricted Subsidiary the net proceeds of which are used, substantially concurrent with the funding thereof, and taking into consideration, among other things, required notices to be given to the holders of the outstanding securities in connection with the refunding, refinancing or repurchase thereof, and the required corresponding durations thereof, to refund, refinance or repurchase all of the outstanding securities, including the amount of all accrued interest thereon and reasonable fees and expenses and premiums, if any, incurred by the Guarantor or any Restricted Subsidiary in connection therewith; and
(10) any extension, renewal or replacement (or successive extensions, renewals or replacements) of any Mortgage referred to in the foregoing clauses (1) to (9) of this Section 3.07, inclusive; provided, however, that such extension, renewal or replacement Mortgage shall be limited to all or a part of the same property (including any improvements on such property), shares of stock or Indebtedness that secured the Mortgage so extended, renewed or replaced.
The following transactions shall not be deemed to create Debt secured by a Mortgage;
(i) the sale or other transfer of oil, gas, coal or other minerals in place for a period of time until, or in an amount such that, the transferee will realize therefrom a specified amount of money (however determined) or a specified amount of oil, gas, coal or other minerals, or the sale or other transfer of any other interest in property of the character commonly referred to as an oil, gas, coal or other mineral payment or a production payment, and including in any case, overriding royalty interests, net profit
interests, reversionary interests and carried interests and other similar burdens on production; and
(ii) the sale or other transfer by the Guarantor or a Restricted Subsidiary of properties to a partnership, joint venture or other entity whereby the Guarantor or such Restricted Subsidiary would retain partial ownership of such properties.
SECTION 3.08. Payment of Additional Amounts.
Unless otherwise required by Canadian law, neither the Company nor the Guarantor will deduct or withhold from payments made with respect to the Securities and the Guarantees on account of any present or future Taxes. In the event that either the Company or the Guarantor is required to withhold or deduct on account of any Taxes due from any payment made under or with respect to the Securities or the Guarantees, as the case may be, the Company or the Guarantor, as the case may be, will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder of Securities will equal the amount that the Holder would have received if the Taxes had not been required to be withheld or deducted; provided that no Additional Amounts will be payable with respect to a payment made to a Holder (an "Excluded Holder") to the extent: (i) that any Taxes would not have been so imposed but for the existence of any present or former connection between the Holder and Canada or any provincial or territory therein, other than the mere receipt of the payment, acquisition, ownership or disposition of such Securities or the exercise or enforcement of rights under the Securities, the Guarantees or this Indenture; (ii) of any estate, inheritance, gift, sales, transfer or personal property Taxes imposed with respect to the Securities, except described below or as otherwise provided in this Indenture; (iii) that any such Taxes would not have been imposed but for the presentation of the Securities, where presentation is required, for payment on a date more than 30 days after the date on which the payment became due and payable or the date on which payment thereof is duly provided for, whichever is later, except to the extent that the beneficiary or Holder thereof would have been entitled to Additional Amounts had the Securities been presented for payment on any date during such 30-day period; or (iv) that the Holder would not be liable or subject to such withholding or deduction of Taxes but for the failure to make a valid declaration of non-residence or other similar claim for exemption, if: (a) the making of the declaration or claim is required or imposed by statute, treaty, regulation, ruling or administrative practice of the relevant taxing authority as a precondition to an exemption from, or reduction in, the relevant Taxes; and (b) at least 60 days prior to the first payment with respect to which the Company or the Guarantor shall apply this clause (iv), the Company or the Guarantor shall have notified all Holders of the Securities in writing that they shall be required to provide this declaration or claim. The Company and the Guarantor shall also (i) withhold or deduct such Taxes as required, (ii) remit the full amount of Taxes deducted or withheld to the relevant taxing authority in accordance with all applicable laws; (iii) use reasonable efforts to obtain from each relevant taxing
authority imposing the Taxes certified copies of tax receipts evidencing the payment of any Taxes deducted or withheld; and (iv) upon request, make available to the Holders of the Securities, within 60 days after the date the payment of any Taxes deducted or withheld is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Company or the Guarantor and, notwithstanding the Company's or the Guarantor's efforts to obtain the receipts, if the same are not obtainable, other evidence of such payments.
In addition, the Company or the Guarantor will pay any stamp, issue, registration, documentary or other similar taxes and duties, including interest, penalties and additional amounts with respect thereto, payable in Canada or the United States, or any political subdivision or taxing authority of or in the foregoing with respect to the creation, issue, offering, enforcement, redemption or retirement of the Securities or Guarantees.
At least 30 days prior to each date on which any payment under or with respect to the Securities is due and payable, if the Company becomes obligated to pay Additional Amounts with respect to such payment, the Company (or in respect of the Guarantees, the Guarantor) shall deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable, and the amounts so payable and will set forth such other information as is necessary to enable the Trustee to pay such Additional Amounts to the Holders on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest (including defaulted interest) or any other amount payable on or with respect to any of the Securities, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 3.08 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 3.08 and express mention of the payment of Additional Amounts in those provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable).
The obligations of the Company and the Guarantor under this
Section 3.08 shall survive the termination of this Indenture and the payment of
all amounts under or with respect to this Indenture and the Securities.
ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.01. Limitation on Mergers and Consolidations.
The Company shall not consolidate or amalgamate with or merge into any other entity or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless:
(1) the entity formed by such consolidation or amalgamation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be an entity organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, Canada or any province thereof and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed;
(2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, amalgamation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article IV and that all conditions precedent herein provided for relating to such transaction have been complied with.
Except as expressly contemplated in Section 11.18, the Guarantor shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless:
(1) (A) the entity formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Guarantor substantially as an entirety shall be an entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of all obligations in respect of the Guarantees
and the performance of every covenant of this Indenture on the part of the Guarantor to be performed or observed;
(2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and
(3) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article IV and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 4.02. Successors Substituted.
Upon any consolidation or amalgamation of the Company or the Guarantor with, or merger of the Company or the Guarantor into, any other Person, or any conveyance, transfer or lease of the properties and assets of the Company or the Guarantor substantially as an entirety in accordance with Section 4.01, the successor Person formed by such consolidation or amalgamation or into which the Company or the Guarantor is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or the Guarantor, as the case may be, herein, and thereafter, except in the case of an amalgamation or a lease to another Person, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.
SECTION 4.03. Assignment of Company's Obligations.
The Company may assign its obligations under the Securities and this Indenture to the Parent or any other wholly owned Subsidiary of the Parent organized under the laws of the United States, any State thereof, the District of Columbia, Canada or any province thereof, at any time without the consent of the Trustee or any Holder; provided that the assignee agrees to be bound by the terms of this Indenture and the Securities and the Guarantees remain in full force and effect if the assignee is not the Guarantor; provided, however, that no such assignment may be made if a Default or Event of Default shall have occurred and be continuing with respect to any series of the Securities. Upon any such assignment by the Company, the Person to whom such assignment is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Securities, with the same effect as if such Person had been named as the Company herein and therein, and thereafter, the assignor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. A copy of the agreement evidencing such assignment
shall be provided to the Trustee by the Company, promptly after the effective date of such assignment.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Events of Default.
"Event of Default," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if any, on any Security of that series at its Maturity; or
(2) default in the payment of interest, Liquidated Damages, if any, or Additional Amounts, if any, upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or
(3) default in the observance or performance, or breach, of any covenant of the Company or the Guarantor in any Security of that series or this Indenture (other than a covenant a default in whose performance or whose breach is elsewhere in this Section 5.01 specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company and the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Securities of such series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(4) default by the Company or the Guarantor in the payment of any principal of any Funded Debt of the Company or the Guarantor outstanding in an aggregate principal amount in excess of $50,000,000 at the final stated maturity thereof or the occurrence of any other default thereunder, the effect of which default is to cause such Funded Debt to become, or to be declared, due prior to its final stated maturity unless (A) such default shall be cured, by payment or otherwise, within 60 days after there has been given, by registered or certified mail, to the Company and the Guarantor by
the Trustee or to the Company, the Guarantor and the Trustee by the Holders of at least 25% in principal amount of the outstanding Securities of that series a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder, and the receipt by the Company and Guarantor of such written notice or (B) the acceleration is not rescinded or annulled or the default that caused the acceleration is not cured within 60 days after the receipt by the Company and the Guarantor of such written notice; or
(5) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company or the Guarantor in an involuntary case or proceeding under any applicable U.S. or Canadian Federal or State or provincial bankruptcy, insolvency, reorganization, arrangement, dissolution, winding-up or other similar law or (B) a decree or order adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or the Guarantor under any applicable U.S. or Canadian Federal or State or provincial law, or appointing a custodian, receiver, receiver and manager, interim receiver, administrator, monitor, liquidator, assignee, trustee, sequestrator or other similar official of the Company or the Guarantor or of any substantial part of the property of the Company or the Guarantor, or ordering the winding up or liquidation of the affairs of the Company or the Guarantor, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days;
(6) the commencement by the Company or the Guarantor of a voluntary case or proceeding under any applicable U.S. or Canadian Federal or State or provincial bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by either of them to the entry of a decree or order for relief in respect of the Company or the Guarantor in an involuntary case or proceeding under any applicable U.S. or Canadian Federal or State or provincial bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against either of them, or the filing by either of them of a petition or answer or consent seeking reorganization or relief under any applicable U.S. or Canadian Federal or State or provincial law, or the consent by either of them to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, receiver and manager, interim receiver, administrator, monitor, liquidator, assignee, trustee, sequestrator or similar official of the Company or the Guarantor or of any substantial part of the property of the Company or the Guarantor, or the making by either of them of an assignment for the benefit of creditors, or the admission by either of them in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or the Guarantor in furtherance of any such action; or
(7) the Guarantees in respect of Securities of that series cease to be in full force and effect or become unenforceable or invalid or are declared null and void (other than in accordance with the terms of such Guarantees) or the Guarantor denies or disaffirms its obligations under such Guarantees; or
(8) any Mitchell Restructuring Event is consummated as contemplated in Section 11.18 and, thereafter, Devon HoldCo fails to become a "Guarantor" hereunder in accordance with Section 11.18.
provided, however, that the occurrence of any of the events described in the foregoing clause (3) shall not constitute an Event of Default if such occurrence is the result of changes in GAAP at the date as of which this Indenture is executed and a certificate to such effect is delivered to the Trustee by the Parent's independent public accountants.
The Trustee shall not be deemed to know of a Default or Event of Default unless a Responsible Officer at the Corporate Trust Office of the Trustee has actual knowledge of such Default or Event of Default or the Trustee receives written notice at the Corporate Trust Office of the Trustee of such Default or Event of Default with specific reference to such Default.
When a Default is cured, or when an Event of Default is deemed cured pursuant to Section 5.04, such Default, or Event of Default, as the case may be, ceases.
SECTION 5.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (5) or (6) of Section 5.01) with respect to any series of
Securities occurs and is continuing, the Trustee by notice to the Company and
the Guarantor, or by the Holders of at least 25% in aggregate principal amount
of the then outstanding Securities of such series by written notice to the
Company, the Guarantor and the Trustee, may declare the principal of and
Liquidated Damages, if any, Additional Amounts, if any, and interest on all then
outstanding Securities of such series to be due and payable immediately. Upon
any such declaration the amounts due and payable on the Securities of such
series, as determined in accordance with the next succeeding paragraph, shall be
due and payable immediately. If an Event of Default specified in clause (5) or
(6) of Section 5.01 with respect to the Company or the Guarantor occurs, the
principal of Liquidated Damages, if any, Additional Amounts, if any, and
interest on all Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment for payment of the money due has been obtained by the Trustee as hereinafter in this Article V provided, the Holders of a majority in
principal amount of the outstanding Securities of that series, by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay:
(A) the principal of and premium, if any, on any Securities of that series which have become due otherwise than by such declaration of acceleration and Liquidated Damages, if any, and Additional Amounts, if any, and any interest thereon at the rate or rates prescribed therefor in such Securities or in this Indenture,
(B) all overdue interest, Liquidated Damages, if any, and Additional Amounts, if any, on all Securities of that series,
(C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue Liquidated Damages, if any, and overdue Additional Amounts, if any, at the rate or rates prescribed therefor in such Securities or in this Indenture, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.04.
No such rescission shall affect any subsequent Default or impair any right consequent thereon.
If the maturity of the Securities of any series is accelerated pursuant to this Section 5.02, 100% of the principal amount thereof shall become due and payable plus Liquidated Damages, if any, Additional Amounts, if any, and interest to the date of payment.
SECTION 5.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and Liquidated Damages, if any,
Additional Amounts, if any, and interest on the Securities or to enforce the performance of any provision of the Securities, the Guarantees, or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 5.04. Waiver of Existing Defaults.
Subject to Sections 5.07 and 8.02, the Holders of a majority
in principal amount of the Securities of any series then outstanding by notice
to the Trustee may waive an existing Default or Event of Default and its
consequences (including waivers obtained in connection with a tender offer or
exchange offer for the Securities of such series or a solicitation of consents
in respect of the Securities of such series, provided that in each case such
offer or solicitation is made to all Holders of the Securities of such series
then outstanding on equal terms), except (1) a continuing Default or Event of
Default in the payment of the principal of or premium, if any, Liquidated
Damages, if any, Additional Amounts, if any, or interest on the Securities of
any series or (2) a continuing Default in respect of a provision that under
Section 8.02 cannot be amended without the consent of each Holder affected. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 5.05. Control by Majority.
The Holders of a majority in principal amount of the Securities of any series then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it hereunder with respect to such series. The Trustee, however, may refuse to follow any direction that conflicts with applicable law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to receive reasonable indemnification satisfactory to it against all losses and expenses caused by taking or not taking such action subject to the Trustee's duty to act with the required standard of care during a default.
SECTION 5.06. Limitations on Suits.
Subject to Section 5.07, a Holder may pursue a remedy with respect to this Indenture (including the Guarantees) or the Securities of any series only if:
(1) such Holder gives to the Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the Securities of such series then outstanding make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders furnish to the Trustee reasonable indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the furnishing of indemnity; and
(5) during such 60-day period the Holders of a majority in principal amount of the Securities of such series do not give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.
SECTION 5.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit against the Company and/or the Guarantor for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder.
SECTION 5.08. Collection Suit by Trustee.
If an Event of Default specified in clause (1) or (2) of
Section 5.01 occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against the Company
and the Guarantor (i) for the amount of principal of and premium, if any,
Liquidated Damages, if any, Additional Amounts, if any, and interest remaining
unpaid on any series of Securities and (ii) interest on overdue principal,
premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and, to
the extent lawful, interest on overdue interest, and such further amount as
shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 5.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents and to take such actions, including participating as a
member, voting or otherwise, of any committee of creditors, as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to the Company and the Guarantor or their respective
creditors or properties and shall be entitled and empowered to collect, receive
and distribute any money or other property payable or deliverable on any such
claims and any Custodian in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 6.07. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07 out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, money, securities and other properties
which the Holders of the Securities of any series may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities of any series or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 5.10. Priorities.
If the Trustee collects any money pursuant to this Article V, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for amounts due and unpaid on the Securities for principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest, respectively; and
Third: to the Company and the Guarantor.
The Trustee, upon prior written notice to the Company and the Guarantor, may fix a record date and payment date for any payment to Holders pursuant to this Article V.
SECTION 5.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 5.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.07, or a suit by a Holder or Holders of more than 10% in principal amount of the Securities of any series then outstanding.
ARTICLE VI
TRUSTEE
SECTION 6.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in such exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine such certificates and opinions to determine whether or not, on their face, they appear to conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this Section 6.01;
(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.05.
(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 6.01.
(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. All money received by the Trustee shall, until applied as herein provided, be held in trust for the payment of the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on the Securities.
SECTION 6.02. Rights of Trustee.
(a) The Trustee may rely conclusively on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate and/or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or the Guarantor shall be sufficient if signed by an Officer of the Company or the Guarantor, as the case may be.
(f) The Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture.
(g) In the event the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders of Securities of a series, each representing less than a majority in aggregate principal amount of the Securities outstanding of such series, pursuant to the provisions of this Indenture, the Trustee may determine what action, if any, shall be taken.
(h) The Trustee's immunities and protections from liability and its right to indemnification in connection with the performance of its duties under this Indenture shall extend and be enforceable by the Trustee in each of its capacities hereunder and shall extend to the Trustee's officers, directors, agents, attorneys and employees. Such immunities and protections and right to indemnity, together with the Trustee's right to compensation, shall survive the Trustee's resignation or removal, the discharge of this Indenture and final payment of the Securities.
(i) The permissive right of the Trustee to take the actions permitted by this Indenture shall not be construed as an obligation or duty to do so.
(j) Except for information provided by the Trustee concerning the Trustee, the Trustee shall have no responsibility for any information in the Offering Memorandum or other disclosure material distributed with respect to the Securities, and the Trustee shall have no responsibility for compliance with any U.S. or Canadian Federal or State or provincial securities laws in connection with the Securities.
(k) The Trustee may request that the Company or the Guarantor, as the case may be, deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate,
including any person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 6.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, the Parent or any of their Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 6.10 and 6.11.
SECTION 6.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this Indenture, the Securities or the Guarantees, it shall not be accountable for the Company's use of the proceeds from the Securities or any money paid to the Company or upon the Company's direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Securities other than its certificate of authentication.
SECTION 6.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and it is actually known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders.
SECTION 6.06. Reports by Trustee to Holders.
Within 60 days after May 1 of each year, beginning with May 1, 2002, the Trustee shall mail to Holders a brief report dated as of May 1 of such year that complies with TIA Section 313(a); provided, however, that if no event described in TIA Section 313(a) has occurred within the 12 months preceding the reporting date, no report need be transmitted. The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Sections 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee if and when the Securities are listed on any securities exchange.
SECTION 6.07. Compensation and Indemnity.
The Company and the Guarantor jointly and severally agree to pay to the Trustee from time to time such compensation as agreed to by the Company, the Guarantor and the Trustee, for its acceptance of this Indenture and its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantor jointly and severally agree to reimburse the Trustee upon request for all reasonable disbursements, advances and expenses incurred by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company and the Guarantor jointly and severally agree to indemnify the Trustee or any predecessor Trustee and their agents for and to hold them harmless against any and all loss, liability, damage, claim, or expense (including taxes, other than taxes based upon, measured by or determined by the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of defending itself against any claim (whether asserted by the Company, the Guarantor, any Holder or any other Person), except as set forth in the next paragraph. The Trustee shall notify the Company and the Guarantor promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel, and the Company and the Guarantor shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent.
Neither the Company nor the Guarantor shall be obligated to reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith.
To secure the payment obligations of the Company and the Guarantor in this Section 6.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of and premium, if any, Liquidated Damages, if any, and Additional Amounts, if any, and interest on the Securities. Such lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.01(5) or (6) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 6.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 6.08.
The Trustee may resign and be discharged from the trust hereby created by so notifying the Company and the Guarantor. The Holders of a majority in principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company and the Guarantor shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities then outstanding may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the Securities then outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company and the Guarantor. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 6.07. Notwithstanding replacement of the Trustee pursuant to this
Section 6.08, the obligations of the Company and the Guarantor under Section
6.07 shall continue for the benefit of the retiring Trustee.
SECTION 6.09. Successor Trustee by Merger, etc.
Subject to Section 6.10, if the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee; provided, however, that in the case of a transfer of all or substantially all of its corporate trust business to another corporation, the transferee corporation expressly assumes all of the Trustee's liabilities hereunder.
In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia and authorized under such laws to exercise corporate trust power, shall be subject to supervision or examination by Federal or State (or the District of Columbia) authority and shall have, or be a Subsidiary of a bank or bank holding company having, a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee that satisfies the requirements of TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is subject to and shall comply with the provisions of TIA Section 310(b) during the period of time required by this Indenture. Nothing in this Indenture shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b).
SECTION 6.11. Preferential Collection of Claims Against Company.
The Trustee is subject to and shall comply with the provisions
of TIA Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE VII
DISCHARGE OF INDENTURE
SECTION 7.01. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect with respect to Securities of a series (except that the Company's and the Guarantor's obligations under Section 6.07 and the Trustee's and Paying Agent's obligations under Section 7.03 shall survive), and the Trustee, on demand of the Company, shall execute proper instruments acknowledging the satisfaction and discharge of this Indenture with respect to such series, when:
(1) either
(A) all outstanding Securities of such series theretofore authenticated and issued (other than destroyed, lost or stolen Securities that have been replaced or paid) have been delivered to the Trustee for cancellation; or
(B) all outstanding Securities of such series not theretofore delivered to the Trustee for cancellation:
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) will be scheduled for redemption by their terms within one-year,
and the Company, in the case of clause (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as funds (immediately available to the Holders in the case of clause (i)) in trust for such purpose an amount which, together with earnings thereon, will be sufficient to pay and discharge the entire indebtedness on such Securities of such series for principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity, as the case may be;
(2) the Company has paid all other sums payable by it hereunder with respect to such series; and
(3) the Company has delivered to the Trustee an Officers' Certificate stating that all conditions precedent to satisfaction and discharge of this Indenture with respect to such series have been complied with, together with an Opinion of Counsel to the same effect.
(b) The Company and the Guarantor may, subject as provided herein, terminate all of their obligations under this Indenture with respect to Securities of a series (and the Guarantees thereof) if:
(1) the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for the purpose of making the following payments dedicated solely to the benefit of the Holders (i) cash in an amount, or (ii) U.S. Government Obligations or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay, without consideration of the reinvestment of any such amounts and after payment of all taxes or other charges or assessments in respect thereof payable by the Trustee, the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any and interest on all Securities of such series on each date that such principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest is due and payable and to pay all other sums payable by it hereunder; provided that the Trustee shall have been irrevocably instructed to apply such money and/or the proceeds of such U.S. Government Obligations to the payment of said principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest with respect to the Securities of such series as the same shall become due;
(2) the Company has delivered to the Trustee an Officers' Certificate stating that all conditions precedent to satisfaction and discharge of this Indenture with respect to Securities of such series have been complied with, and an Opinion of Counsel to the same effect;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as clauses (5) and
(6) of Section 5.01 are concerned, at any time during the period ending
on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration
of such period);
(4) the Company shall have delivered to the Trustee Opinions of Counsel from nationally recognized counsel acceptable to the Trustee or a tax ruling to the
effect that the Holders of Securities of such series will not recognize income, gain or loss for U.S. or Canadian Federal income tax purposes as a result of the Company's exercise of its option under this Section 7.01(b) and will be subject to U.S. or Canadian Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such option had not been exercised;
(5) such deposit and discharge will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or the Guarantor is a party or by which it is bound;
(6) such deposit and discharge shall not cause the Trustee to have a conflicting interest as defined in TIA Section 310(b); and
(7) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the passage of 91 days following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.
In such event, this Indenture shall cease to be of further effect with respect to Securities of such series (except as provided in the next succeeding paragraph), and the Trustee, on demand of the Company, shall execute proper instruments acknowledging satisfaction and discharge under this Indenture.
However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 3.01, 3.02, 3.08, 6.08 and 7.01 the Company's and the Guarantor' obligations in Sections 4.01, 6.07, 7.04 and 9.01 and the Trustee's and Paying Agent's obligations in Section 7.03 shall survive until the Securities of such series are no longer outstanding. Thereafter, only the Company's and the Guarantor's obligations in Section 6.07 and the Trustee's and Paying Agent's obligations in Section 7.03 shall survive.
After such irrevocable deposit made pursuant to this Section 7.01(b) and satisfaction of the other conditions set forth herein, the Trustee, on demand of the Company, shall execute proper instruments acknowledging satisfaction and discharge under this Indenture.
(c) The Company and the Guarantor may, subject as provided herein, be released from their respective obligations to comply with, and shall have no liability in respect of any term, condition or limitation, set forth in Sections 3.07 and 4.01 with respect to the Securities of any series, and such omission to comply with Sections 3.07 and 4.01 shall not constitute an Event of Default under Section 5.01 ("Covenant Defeasance"), with the remainder of this Indenture and such Securities unaffected thereby if:
(1) the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for the purpose of making the following payments dedicated solely to the benefit of the Holders (i) cash in an amount, or (ii) U.S. Government Obligations or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay, without consideration of the reinvestment of any such amounts and after payment of all taxes or other charges or assessments in respect thereof payable by the Trustee, the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any and interest on all Securities of such series on each date that such principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest is due and payable and to pay all other sums payable by it hereunder; provided that the Trustee shall have been irrevocably instructed to apply such money and/or the proceeds of such U.S. Government Obligations to the payment of said principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest with respect to the Securities of such series as the same shall become due;
(2) the Company has delivered to the Trustee an Officers' Certificate stating that all conditions precedent to the Covenant Defeasance contemplated by this provision with respect to Securities of such series have been complied with, and an Opinion of Counsel to the same effect;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as clauses (5) and
(6) of Section 5.01 are concerned, at any time during the period ending
on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration
of such period);
(4) the Company shall have delivered to the Trustee Opinions of Counsel from nationally recognized counsel acceptable to the Trustee or a tax ruling to the effect that the Holders of Securities of such series will not recognize income, gain or loss for U.S. or Canadian Federal income tax purposes as a result of the Company's exercise of its option under this Section 7.01(c) and will be subject to U.S. or Canadian Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such option had not been exercised;
(5) such Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or the Guarantor is a party or by which it is bound;
(6) such Covenant Defeasance shall not cause the Trustee to have a conflicting interest as defined in TIA Section 310(b); and
(7) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the passage of 91 days following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.
In order to have money available on a payment date to pay principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on the Securities of such series, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option.
SECTION 7.02. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 7.01. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on Securities of the series with respect to which the deposit was made.
SECTION 7.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money or securities held by them at any time.
Subject to the requirements of any applicable abandoned property laws, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have either caused notice of such payment to be mailed to each Holder entitled thereto no less than 30 days prior to such repayment or within such period shall have published such notice in a financial newspaper of widespread circulation published in The City of New York. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and the Paying Agent with respect to such money shall cease.
SECTION 7.04. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 7.01 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company and the Guarantor under this Indenture and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to Section 7.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 7.01; provided, however, that if the Company or the Guarantor has made any payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Company or the Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE VIII
AMENDMENTS
SECTION 8.01. Without Consent of Holders.
The Company, the Guarantor and the Trustee may amend or supplement this Indenture or any of the Securities or waive any provision hereof or thereof without the consent of any Holder:
(1) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets;
(2) to evidence the succession of another entity to the Company or the Guarantor, or successive successions, and the assumption by the successor entity of the covenants, agreements and obligations of the Company or the Guarantor pursuant to Section 4.01 or 4.02;
(3) to add to the covenants of the Company or the Guarantor such further covenants, restrictions, conditions or provisions as the Company or the Guarantor and the Trustee shall consider to be for the protection of the Holders of Securities of one or more series, to surrender any right or power herein conferred upon the Company or the Guarantor, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions of an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth, provided that in respect of any such additional covenant, restriction, condition or provision such amendment or supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default;
(4) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, provided that no such action shall adversely affect the interests of the Holders of the Securities;
(5) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.08 or 6.09.
(6) to provide for uncertificated Securities in addition to or in place of certificated Securities;
(7) to comply with any requirements, including the requirement of the SEC, in order to effect or maintain the qualification of this Indenture under the TIA;
(8) to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Securities may be listed or traded; and
(9) to make any change that does not adversely affect the rights of any Holder; and
(10) to effect the substitution of Devon HoldCo as the Parent hereunder and the addition of Devon HoldCo as a "Guarantor" hereunder, in each case as contemplated in connection with a Mitchell Restructuring Event pursuant to Section 11.18, and to make all such other modifications as are necessary or desirable in light of such Mitchell Restructuring Event to accomplish the transactions described in Section 11.18 or as are not inconsistent herewith and do not adversely affect the rights of any Holder.
Upon the request of the Company and the Guarantor accompanied by a resolution of the Board of Directors of each of the Company and of the Guarantor authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 8.06, the Trustee shall join with the Company and the Guarantor in the execution of any supplemental indenture authorized or permitted by the terms of this
Indenture and make any further appropriate agreements and stipulations that may
be therein contained. After an amendment, supplement or waiver under this
Section 8.01 becomes effective, the Company shall mail to the Holders of each
Security affected thereby a notice briefly describing the amendment, supplement
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 8.02. With Consent of Holders.
Except as provided below in this Section 8.02, the Company, the Guarantor and the Trustee may amend or supplement this Indenture with respect to the Securities of any series with the written consent (including consents obtained in connection with a tender offer or exchange offer for the Securities of such series or a solicitation of consents in respect of the Securities of such series, provided that in each case such offer or solicitation is made to all Holders of the Securities of such series then outstanding on equal terms) of the Holders of at least a majority in principal amount of the Securities of such series then outstanding affected thereby.
Upon the request of the Company and the Guarantor accompanied by a resolution of the Board of Directors of each of the Company and of the Guarantor authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 8.06, the Trustee shall join with the Company and the Guarantor in the execution of such supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section 8.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.
The Holders of a majority in principal amount of the Securities of any series then outstanding may waive compliance in a particular instance by the Company or the Guarantor with any provision of this Indenture or the Securities of such series (including waivers obtained in connection with a tender offer or exchange offer for the Securities of such series or a solicitation of consents in respect of the Securities of such series, provided that in each case such offer or solicitation is made to all Holders of the Securities of such series then outstanding on equal terms).
Without the consent of each Holder affected, an amendment, supplement or waiver under this Section 8.02 may not:
(1) extend the final maturity of the principal of any of the Securities;
(2) reduce the principal amount of any of the Securities;
(3) reduce the rate or extend the time of payment of interest, including default interest, or Additional Amounts, if any, on any of the Securities;
(4) reduce any amount payable on redemption of any of the Securities;
(5) change the currency in which the principal of or premium, if any, Additional Amounts, if any, or interest on any of the Securities is payable;
(6) impair the right to institute suit for the enforcement of any payment of principal of or premium, if any, Additional Amounts, if any, or interest on any Security pursuant to Sections 5.07 and 5.08, except as limited by Section 5.06;
(7) make any change in the percentage of principal amount of the Securities of any series necessary to waive compliance with or to modify certain provisions of this Indenture pursuant to Section 5.04 or 5.07 or this clause of this Section 8.02; or
(8) waive a continuing Default or Event of Default in the payment of principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest, including default interest, on the Securities of any series.
The right of any Holder to participate in any consent required or sought pursuant to any provision of this Indenture (and the obligation of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirement that such Holder shall have been the Holder of record of the Securities with respect to which such consent is required or sought as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of this Indenture.
SECTION 8.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities of any series shall comply in form and substance with the TIA as then in effect.
SECTION 8.04. Revocation and Effect of Consents.
A consent to an amendment (which includes a supplement) or waiver by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security of any series or portion of a Security of such series that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives written notice of revocation at any time prior to (but not after) the date the Trustee receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver or to take any other action with respect to the Securities of any series under this Indenture. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of the Securities of such series required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it is of the type described in any of clauses
(1) through (8) of Section 8.02. In such case, the amendment, supplement or
waiver shall bind each Holder who has consented to it and every subsequent
Holder that evidences the same debt as the consenting Holder's Security.
SECTION 8.05. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.
SECTION 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, waiver or supplemental indenture authorized pursuant to this Article VIII if the amendment, waiver or supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, waiver or supplemental indenture, the Trustee shall receive, and subject to Section 6.01, shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate, as conclusive evidence that such amendment, waiver or supplemental indenture is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company and the Guarantor in accordance with its terms.
ARTICLE IX
GUARANTEES OF SECURITIES
SECTION 9.01. Unconditional Guarantees.
(a) For value received, the Guarantor hereby fully, irrevocably, unconditionally and absolutely guarantees to the Holders and to the Trustee the due and punctual payment of the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on the Securities and all other amounts due and payable under this Indenture and the Securities by the Company (including, without limitation, all costs and expenses (including reasonable legal fees and disbursements) incurred by the Trustee or the Holders in connection with the enforcement of this Indenture, the Securities and the Guarantees) (collectively, the "Indenture Obligations"), when and as such principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest and such other amounts shall become due and payable, whether at the Stated Maturity, upon redemption or by declaration of acceleration or otherwise, according to the terms of the Securities and this Indenture. The guarantees by the Guarantor set forth in this Article IX are referred to herein as the "Guarantees." Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts that constitute part of the Indenture Obligations and would be owed by the Company under this Indenture and the Securities but for the fact that they are unenforceable, reduced, limited, impaired, suspended or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company.
(b) Failing payment when due of any amount guaranteed pursuant to the Guarantees, for whatever reason, the Guarantor will be obligated to pay the same immediately to the Trustee, without set-off or counterclaim or other reduction whatsoever (whether for taxes, withholding or otherwise). Each Guarantee hereunder is intended to be a general, unsecured, senior obligation of the Guarantor and will rank pari passu in right of payment with all Indebtedness of the Guarantor that is not, by its terms, expressly subordinated in right of payment to the Guarantees of the Guarantor. The Guarantor hereby agrees that its obligations hereunder shall be full, irrevocable, unconditional and absolute, irrespective of the validity, regularity or enforceability of the obligations and liabilities of any other obligor with respect to the Securities, the Guarantees or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof with respect to the same, the recovery of any judgment against the Company, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of the Guarantor.
The Guarantor hereby agrees that in the event of a default in payment of the principal of or premium, if any, Liquidated Damages, if any, Additional Amounts, if any, or interest on the Securities of any series or any other amounts payable under this Indenture and the Securities by the Company, whether at the Stated Maturity, upon redemption or by declaration of acceleration or otherwise, legal proceedings may be instituted by the Trustee on behalf of the Holders or, subject to Section 5.06, by the Holders, on the terms and conditions set forth in this Indenture, directly against the Guarantor to enforce the Guarantees without first proceeding against the Company.
(c) To the fullest extent permitted by applicable law, the obligations of the Guarantor under this Article IX shall be as aforesaid full, irrevocable, unconditional and absolute and shall not be impaired, modified, discharged, released or limited by any occurrence or condition whatsoever, including, without limitation, (i) any compromise, settlement, release, waiver, renewal, extension, indulgence or modification of, or any change in, any of the obligations and liabilities of any other obligor with respect to the Securities contained in any of the Securities or this Indenture, (ii) any impairment, modification, release or limitation of the liability of the Company, the Guarantor or any of their respective estates in bankruptcy, or any remedy for the enforcement thereof, resulting from the operation of any present or future provision of any applicable Bankruptcy Law, as amended, or other statute or from the decision of any court, (iii) the assertion or exercise by the Company, the Guarantor or the Trustee of any rights or remedies under any of the Securities or this Indenture or its delay in or failure to assert or exercise any such rights or remedies, (iv) the assignment or the purported assignment of any property as security for any of the Securities, including all or any part of the rights of the Company or the Guarantor under this Indenture, (v) the extension of the time for payment by the Company or the Guarantor of any payments or other sums or any part thereof owing or payable under any of the terms and provisions of any of the Securities or this Indenture or of the time for performance by the Company or the Guarantor of any other obligations under or arising out of any such terms and provisions or the extension or the renewal of any thereof, (vi) the modification or amendment (whether material or otherwise) of any duty, agreement or obligation set forth in this Indenture of any other obligor with respect to the Securities, (vii) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting, the Company or any of the Guarantor or any of their respective assets, or the disaffirmance of any of the Securities, the Guarantees or this Indenture in any such proceeding, (viii) the release or discharge of the Company or the Guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of such instruments by operation of law, (ix) the unenforceability of any of the obligations of any of the other obligors under the Securities, the Guarantees or this Indenture, (x) any change in the name, business, capital structure, corporate existence, or ownership
of the Company or the Guarantor, or (xi) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a surety or the Guarantor.
(d) The Guarantor hereby (i) waives diligence, presentment, demand of payment, notice of acceptance, filing of claims with a court in the event of the merger, insolvency or bankruptcy of the Company or the Guarantor, and all demands and notices whatsoever, (ii) acknowledges that any agreement, instrument or document evidencing the Guarantees may be transferred and that the benefit of its obligations hereunder shall extend to each holder of any agreement, instrument or document evidencing the Guarantees without notice to them and (iii) covenants that its Guarantees will not be discharged except by complete performance of the Guarantees or of the obligations guaranteed thereby. The Guarantor further agrees that if at any time all or any part of any payment theretofore applied by any Person to any Guarantee is, or must be, rescinded or returned for any reason whatsoever, including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor, such Guarantee shall, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence notwithstanding such application, and the Guarantees shall continue to be effective or be reinstated, as the case may be, as though such application had not been made.
(e) The Guarantor shall be subrogated to all rights of the Holders and the Trustee against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Indenture; provided, however, that the Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation with respect to any of the Securities until all of the Securities and the Guarantees thereof shall have been paid in full or discharged.
(f) A director, officer, employee or stockholder, as such, of the Guarantor shall not have any liability for any obligations of the Guarantor under this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation.
(g) No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, power, privilege or remedy under this Article IX and the Guarantees shall operate as a waiver thereof, nor shall any single or partial exercise of any rights, power, privilege or remedy preclude any other or further exercise thereof, or the exercise of any other rights, powers, privileges or remedies. The rights and remedies herein provided for are cumulative and not exclusive of any rights or remedies provided in law or equity. Nothing contained in this Article IX shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Securities pursuant to Article V or to pursue any rights or remedies hereunder or under applicable law.
SECTION 9.02. Execution and Delivery of Notation of Guarantees.
To further evidence the Guarantees, the Guarantor hereby agrees that on the date of this Indenture a notation of such Guarantees shall be endorsed on each Security authenticated and delivered by the Trustee and executed by either manual or facsimile signature of an Officer of Devon Energy Corporation.
The Guarantor hereby agrees that its Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation relating to the Guarantee thereof.
If an Officer of the Guarantor whose signature is on this
Indenture or a Security no longer holds that office, or if any other or
additional Person shall have become a "Guarantor" hereunder in accordance with
Section 4.01, 4.02 and/or 11.18 hereof, at the time the Trustee authenticates
such Security or at any time thereafter, the Guarantor's Guarantee of such
Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of the Guarantor and each other Person which may at such time constitute the "Guarantor" hereunder.
ARTICLE X
REDEMPTION
SECTION 10.01. Notices to Trustee.
If the Company elects to redeem the Securities of any series pursuant to the redemption provisions of Section 10.07, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a Redemption Date, an Officers' Certificate setting forth the Redemption Date, the principal amount of such Securities to be redeemed and the Redemption Price (or the method of calculating the Redemption Price).
SECTION 10.02. Selection of Securities to be Redeemed.
If less than all of the Securities of a series are to be redeemed, the Trustee shall select the Securities of such series to be redeemed by such method as the Trustee in its sole discretion shall deem fair and appropriate. The particular Securities of such series to be redeemed shall be selected, unless otherwise provided herein, not less than 30 days nor more
than 60 days prior to the Redemption Date by the Trustee from the outstanding Securities of such series not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Securities of such series selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities and portions of them selected shall be in amounts of $1,000 or integral multiples thereof. Except as provided in the preceding sentence, provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption.
SECTION 10.03. Notices to Holders.
(a) At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail in conformity with Section 11.02 a notice of redemption to each Holder whose Securities are to be redeemed. The notice shall identify the Securities to be redeemed (including CUSIP numbers, if any) and shall state:
(i) the Redemption Date;
(ii) the Redemption Price (or the method of calculating the Redemption Price);
(iii) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to the Paying Agent at the address specified in such notice to collect the Redemption Price;
(vi) that unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities; and
(vii) the aggregate principal amount of Securities of each series being redeemed.
If any of the Securities to be redeemed is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions.
(b) At the Company's request, the Trustee shall give the notice required in Section 10.03(a) in the Company's name; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date (unless the Trustee consents in writing to a shorter period at least 30 days prior to the Redemption Date), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in Section 10.03(a).
SECTION 10.04. Effect of Notices of Redemption.
Once notice of redemption is mailed pursuant to Section 10.03, Securities called for redemption become due and payable on the Redemption Date at the Redemption Price. Upon surrender to the Paying Agent, such Securities shall be paid out at the Redemption Price.
SECTION 10.05. Deposit of Redemption Price.
At or prior to 10:00 a.m. New York City time on the Redemption Date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the Redemption Price of all Securities to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose less the expenses of the Trustee as provided herein.
If the Company complies with the preceding paragraph, interest on the Securities or portions thereof to be redeemed (whether or not such Securities are presented for payment) will cease to accrue on the applicable Redemption Date. If any Security called for redemption shall not be so paid upon surrender because of the failure of the Company to comply with the preceding paragraph, then interest will be paid on the unpaid principal and premium, if any, from the Redemption Date until such principal and premium are paid and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the rate provided in the Securities and in Section 3.01.
SECTION 10.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder, at the expense of the Company, a new Security equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION 10.07. Optional Redemption.
The Securities of any series may be redeemed at any time on such terms and subject to such conditions as are specified in such Securities.
Any redemption pursuant to this Section 10.07 shall be made, to the extent applicable, pursuant to the provisions of Sections 10.01 through 10.06.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. If this Indenture excludes any provision of the TIA that is required to be included, such provision shall be deemed included herein.
SECTION 11.02. Notices.
Any notice or communication by the Company, the Guarantor or the Trustee to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Devon Financing Corporation, U.L.C.
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel
Telephone No.: (405) 235-3611
Telecopier No.: (405) 552-4550
If to the Guarantor:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel
Telephone No.: (405) 235-3611
Telecopier No.: (405) 552-4550
If to the Trustee:
The Chase Manhattan Bank
600 Travis Street, Suite 1150
Houston, Texas 77002
Telephone No.: (713) 216-5087
Telecopier No. (713) 577-5200
Attention: Corporate Trust Department
Each of the Company, the Guarantor and the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Notwithstanding the foregoing, notices to the Trustee shall be effective only upon receipt.
Any notice or communication to a Holder shall be mailed by first-class mail, postage prepaid, to the Holder's address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company or the Guarantor mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications, including, without limitation, notices to the Trustee or the Company or the Guarantor by Holders, shall be in writing, except as set forth below, and in the English language.
In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 11.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture, the Securities or the Guarantees. The Company, the Guarantor, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall, if requested by the Trustee, furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.
Notwithstanding the foregoing, no such Opinion of Counsel shall be required in connection with the issuance of the Original Securities pursuant to the Offering.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or the Paying Agent may make reasonable rules and set reasonable requirements for its functions.
SECTION 11.07. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 11.08. No Recourse Against Others.
A director, officer, employee or stockholder of the Company or the Guarantor, as such, shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantees or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.
SECTION 11.09. Governing Law.
This Indenture, the Securities and the Guarantees shall be governed by and constructed in accordance with the laws of the State of New York.
SECTION 11.10. Consent to Jurisdiction and Service of Process.
The Company is not organized under the laws the United States (including the States thereof and the District of Columbia) and therefore hereby appoints the principal office of Corporation Service Company in The City of New York which, on the date hereof, is located at 80 State Street, Albany, New York 12207-2543, as the authorized agent thereof (the "Authorized Agent") upon whom process may be served in any action, suit or proceeding arising out of or based on this Indenture or the Securities which may be instituted in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York, in either case in the Borough of Manhattan, The City of New York, by the Holder of any Security, and to the fullest extent permitted by applicable law, the Company hereby waives any objection which it may now or hereafter have to the laying of venue of any such proceeding and expressly and irrevocably accepts and submits, for the benefit of the Holders from time to time of the Securities, to the nonexclusive jurisdiction of any such court in respect of any such action, suit or proceeding, for itself and with respect to its properties, revenues and assets. Such appointment shall be irrevocable unless and until the appointment
of a successor authorized agent for such purpose, and such successor's acceptance of such appointment, shall have occurred. The Company agrees to take any and all actions, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent with respect to any such action shall be deemed, in every respect, effective service of process upon the Company. Notwithstanding the foregoing, any action against the Company arising out of or based on any Security may also be instituted by the Holder of such Security in any court in the jurisdiction of organization of the Company, and the Company expressly accepts the jurisdiction of any such court in any such action. The Company shall require the Authorized Agent to agree in writing to accept the foregoing appointment as agent for service of process.
SECTION 11.11. Waiver of Immunity.
To the extent that the Company or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any thereof, from set-off or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution of judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Indenture or the Securities, the Company, to the maximum extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.
SECTION 11.12. Judgment Currency.
The Company agrees to indemnify the Trustee and each Holder against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than U.S. dollars and as a result of any variation as between (i) the rate of exchange at which the U.S. dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the Trustee or such Holder on the date of payment of such judgment or order is able to purchase U.S. dollars with the amount of the Judgment Currency actually received by the Trustee or such Holder. The foregoing indemnity shall constitute a separate and independent obligation of the Company and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, U.S. dollars.
SECTION 11.13. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company, the Parent or any other Subsidiary of the Parent. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.14. Successors.
All agreements of the Company and the Guarantor in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor.
SECTION 11.15. Severability.
In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.16. Counterpart Originals.
The parties may sign any number of copies of this Indenture by manual or facsimile signature. Each signed copy shall be an original, but all of them together represent the same agreement.
SECTION 11.17. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 11.18. Mitchell Restructuring Event.
The parties hereto acknowledge and agree that Devon Energy Corporation may, in connection with its proposed acquisition of Mitchell Energy & Development Corp., consummate one or more transactions (collectively, a "Mitchell Restructuring Event") pursuant to which:
(i) Devon Energy Corporation would cause a new holding company ("Devon HoldCo") to be formed under the laws of the United States or any State thereof or the District of Columbia; and
(ii) pursuant to one or more mergers or other transactions, Devon HoldCo would acquire, directly or indirectly, all of the issued and outstanding common stock of each of Devon Energy Corporation and Mitchell Energy & Development Corp.
In the event a Mitchell Restructuring Event occurs:
(i) each reference to the "Parent" herein and in the Securities shall be deemed to refer to Devon Holdco, and Devon HoldCo shall succeed to, be substituted for and assume every obligation of, and may exercise every right and power of, the "Parent" under this Indenture with the same effect as if it had been named as the "Parent" herein;
(ii) each reference to the "Guarantor" herein, in the Guarantees and in the Securities shall be deemed to refer equally to both Devon Energy Corporation and Devon HoldCo, and Devon HoldCo shall have the right to exercise every right and power of, and shall be subject to every obligation of, the "Guarantor" under this Indenture with the same effect as if both Devon Energy Corporation and Devon HoldCo had been named as the "Guarantor" herein;
(iii) each reference to "Devon Energy Corporation" contained in the Private Placement Legend and set forth in the Securities shall be deemed to refer to Devon HoldCo;
(iv) each reference to "Restricted Subsidiary" herein shall be deemed to refer, in addition, to Devon Energy Corporation; and
(v) Devon Energy Corporation shall, and shall cause Devon
HoldCo, to execute and deliver to the Trustee an indenture supplemental
hereto evidencing the foregoing modifications and containing such other
matters as may be permitted to be set forth therein in accordance with
Section 8.01(10).
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
Company:
DEVON FINANCING CORPORATION, U.L.C.
By /s/ WILLIAM T. VAUGHN --------------------------------------- Name: William T. Vaughn Title: Senior Vice President |
Guarantor:
DEVON ENERGY CORPORATION
By /s/ WILLIAM T. VAUGHN --------------------------------------- Name: William T. Vaughn Title: Senior Vice President-Finance |
Trustee:
THE CHASE MANHATTAN BANK
By: /s/ LETHA GLOVER -------------------------------------- Name: Letha Glover, CCTS, as Trustee Title: Vice President & Trust Officer |
EXHIBIT A
FACE OF 10-YEAR SECURITY
GLOBAL SECURITY LEGEND
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.*
PRIVATE PLACEMENT LEGEND
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
1. REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), OR (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S");
2. AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH EITHER DEVON FINANCING CORPORATION, U.L.C. OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO DEVON ENERGY CORPORATION, DEVON FINANCING CORPORATION, U.L.C. OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH OF THE CASES ABOVE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;
3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND; AND
4. AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY, DEVON FINANCING CORPORATION, U.L.C., MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED IN THIS SECURITY, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.**
REGULATION S TEMPORARY GLOBAL SECURITY LEGEND
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.***
144A SECURITY LEGEND
EACH PURCHASER OF THE SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.****
* This paragraph should be included only if the Security is a Global Security.
** These paragraphs should be included only if the Security is a Restricted Definitive Security or a Restricted Global Security.
*** This paragraph should be included only if the Security is a Regulation S Temporary Global Security.
**** This paragraph should be included only if the Security is a Series A Security that is a 144A Global Security or a Definitive Security sold to QIBs pursuant to Rule 144A.
DEVON FINANCING CORPORATION, U.L.C.
6.875% SERIES [A/B] NOTE DUE 2011
CUSIP No. $__________
Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of the province of Nova Scotia, Canada (the "Company"), for value received promises to pay to __________________ or registered assigns, the principal sum of $_________ Dollars [or such greater or lesser amount as is indicated on the Schedule of Exchanges of Securities on the other side of this Security*] on September 30, 2011.
Interest Payment Dates: March 30 and September 30
Record Dates: March 15 and September 15
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by one of its duly authorized officers.
Dated:
DEVON FINANCING CORPORATION, U.L.C.
Certificate of Authentication:
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
the Securities referred to in the within-
mentioned Indenture.
* This phrase should be included only if the Security is a Global Security.
REVERSE OF 10-YEAR SECURITY
DEVON FINANCING CORPORATION, U.L.C.
6.875% SERIES A/B NOTE DUE 2011
This Security is one of a duly authorized issue of 6.875% Series A/B Notes due 2011 (the "Securities") of Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of the province of Nova Scotia, Canada (the "Company").
1. Interest. The Company promises to pay interest on the principal amount of this Security at 6.875% per annum from October 3, 2001 until maturity. The Company will pay interest semiannually on March 30 and September 30 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on this Security will accrue from the most recent Interest Payment Date on which interest has been paid or, if no interest has been paid, from October 3, 2001; provided that if there is no existing Default in the payment of interest, and if this Security is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. Further, the Company shall pay interest on overdue principal, premium, if any, Liquidated Damages, if any, and Additional Amounts, if any, from time to time on demand at a rate equal to the interest rate then in effect; it shall pay interest, Liquidated Damages, if any, and Additional Amounts, if any, on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on this Security (except defaulted interest) to the Persons who are registered Holders of this Security at the close of business on the record date next preceding the Interest Payment Date, even if this Security is canceled after such record date and on or before such Interest Payment Date. The Holder must surrender this Security to a Paying Agent to collect payments of principal, premium, if any, Liquidated Damages, if any, and Additional Amounts, if any. The Company will pay the principal of and premium, if any, Liquidated Damages, if any, and Additional Amounts, if any, and interest on this Security in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company; provided that if no account is specified, the Company may choose to make payment at the Corporate Trust Office of the Trustee or by mailing a check to the Holder's registered address. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that
payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
3. Ranking and Guarantees. This Security is a senior unsecured obligation of the Company and is guaranteed pursuant to a guarantee (the "Guarantee") by Devon Energy Corporation, a Delaware corporation, and each other Person, if any, named as the Guarantor in the Indenture (together, the "Guarantor"). The Guarantee is a senior unsecured obligation of the Guarantor. References herein to the Indenture or the Securities shall be deemed also to refer to the Guarantees set forth in the Indenture except where the context otherwise requires.
4. Optional Redemption. This Security will be redeemable, in whole or in part, at any time, at the Company's option, at a redemption price equal to the greater of (1) 100% of the principal amount of this Security then outstanding to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the Redemption Date) computed by discounting such payments to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the sum of 30 basis points plus the Adjusted Treasury Rate on the third Business Day prior to the Redemption Date, as calculated by an Independent Investment Banker, plus accrued and unpaid interest, up to, but not including the Redemption Date.
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities" for the maturity corresponding to the Optional Redemption Comparable Treasury Issue (if no maturity is within three months before or after the remaining term of this Security, yields for the two published maturities most closely corresponding to the Optional Redemption Comparable Treasury Issue will be determined and the Adjusted Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Optional Redemption Comparable Treasury Issue, calculated using a price for the Optional Redemption Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Optional Redemption Comparable Treasury Price for such redemption date.
"Independent Investment Banker" means UBS Warburg LLC, or if such firm is unwilling or unable to serve as such, an independent investment and banking institution of national standing appointed by the Trustee.
"Optional Redemption Reference Treasury Dealer" means each of up to five dealers to be selected by the Company and the Guarantor, and their respective successors; provided that if any of the foregoing ceases to be, and has no affiliate that is, a primary U.S. governmental securities dealer (a "Primary Treasury Dealer"), the Company and the Guarantor will substitute for it another Primary Treasury Dealer.
"Optional Redemption Comparable Treasury Issue" means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of this Security, or, if, in the reasonable judgment of the Independent Investment Banker, there is no such security, then the Optional Redemption Comparable Treasury Issue will mean the U.S. Treasury security or securities selected by the Independent Investment Banker as having an actual or interpolated maturity or maturities comparable to the remaining term of this Security.
"Optional Redemption Comparable Treasury Price" means (1) the average of five Optional Redemption Reference Treasury Dealer Quotations for the applicable redemption date, after excluding the highest and lowest Optional Redemption Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than five such Optional Redemption Reference Treasury Dealer Quotations, the average of all such quotations.
"Optional Redemption Reference Treasury Dealer Quotations" means, with respect to each Optional Redemption Reference Treasury Dealer and any Redemption Date for this Security, the average, as determined by the Independent Investment Banker of the bid and asked prices for the Optional Redemption Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker and the Trustee at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
5. Optional Redemption for Changes In Canadian Withholding Taxes. The Securities will be subject to redemption in whole, but not in part, at the Company's option and at any time, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, and Liquidated Damages, if any, up to, but not including, the Redemption Date, in the event that either the Company, the Guarantor or any other obligor under the Securities, as the case may be, has become, or would become, obligated to pay, on the next date on which any amount would be payable with respect to these Securities, any Additional Amounts relating to any present or future Taxes, and provided that the obligation to pay
Additional Amounts results from a change in the taxing laws and/or regulations of Canada that is announced or becomes effective on or after the Issue Date; provided, however; (1) no notice of redemption will be given earlier than 60 days prior to the earliest date on which the Company, the Guarantor or any other obligor under the Securities, as the case may be, would be obligated to pay any of these Additional Amounts if a payment with respect to this Security were then due; (2) at the time any redemption notice is given, the obligation to pay these Additional Amounts must remain in effect through the Redemption Date; and (3) such obligation to pay Additional Amounts cannot be avoided by the Company by taking reasonable measures available to it that it determines would not have an adverse impact on it. Prior to any redemption of these Securities under these provisions, the Company will deliver to the Trustee or any Paying Agent an Officers' Certificate stating that the Company is entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to the right of redemption have occurred.
6. Paying Agent and Registrar. Initially, The Chase Manhattan Bank (the "Trustee"), the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar, co-registrar or additional paying agent without notice to any Holder. The Guarantor or any of its Subsidiaries may act in any such capacity.
7. Indenture. The Company issued this Security under an Indenture dated as of October 3, 2001 (as amended, supplemented or otherwise modified from time to time, the "Indenture") among the Company, Devon Energy Corporation and the Trustee. The terms of this Security include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the date of execution of the Indenture. This Security and the Guarantee are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. Capitalized terms used but not defined in this Security have the respective meanings given to such terms in the Indenture.
8. Denominations, Transfer, Exchange. This Security is in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of this Security may be registered and this Security may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of this Security during the period between a record date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Security shall be treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or this Security may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Securities, and compliance in a particular instance by the
Company or the Guarantor with any provision of the Indenture with respect to the
Securities may be waived (other than certain provisions, including any
continuing Default or Event of Default in the payment of the principal of or
premium, if any, Additional Amounts, if any, or interest on these Securities) by
the Holders of at least a majority in principal amount of the Securities then
outstanding in accordance with the terms of the Indenture. Without the consent
of any Holder, the Company, the Guarantor and the Trustee may amend or
supplement the Indenture or this Security to convey, transfer, assign, mortgage
or pledge to the Trustee as security for this Security any property or assets;
to evidence the succession of another entity to the Company or the Guarantor, or
successive successions, and the assumption by the successor entity of the
covenants, agreements and obligations of the Company or the Guarantor pursuant
to Section 4.01 or 4.02 of the Indenture; to add to the covenants of the Company
or the Guarantor such further covenants, restrictions, conditions or provisions
as the Company or the Guarantor and the Trustee shall consider to be for the
protection of the Holders of Securities of one or more series, to surrender any
right or power herein conferred upon the Company or the Guarantor, and to make
the occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions of an Event of
Default permitting the enforcement of all or any of the several remedies
provided in the Indenture, provided that in respect of any such additional
covenant, restriction, condition or provision such amendment or supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an Event of Default or may
limit the right of the Holders of a majority in aggregate principal amount of
the Securities of such series to waive such an Event of Default; to cure any
ambiguity or to correct or supplement any provision contained in the Indenture
or in any supplemental indenture which may be defective or inconsistent with any
other provision contained in the Indenture or in any supplemental indenture,
provided that no such action shall adversely affect the interests of the Holders
of this Security; to evidence and provide for the acceptance of appointment
under the Indenture by a successor trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of the Indenture as
shall be necessary to provide for or facilitate the administration of the trusts
under the Indenture by more than one trustee, pursuant to the requirements of
Section 6.08 or Section 6.09 of the Indenture; to provide for uncertificated
Securities in addition to or in place of certificated Securities; to comply with
any requirements, including the requirements of the SEC, in order to effect or
maintain the qualification of the Indenture under the TIA; to comply with the
rules or regulations of any securities exchange or automated quotations system
on which any of the Securities may be listed or traded; to make any change that
does not adversely affect the rights under the Indenture of any Holder; and to
effect the substitution of Devon HoldCo as the Parent under the Indenture and
the addition of Devon HoldCo as a "Guarantor" under the Indenture, in
each case as contemplated in connection with a Mitchell Restructuring Event pursuant to Section 11.18 of the Indenture, and to make all such other modifications as are necessary or desirable in light of such Mitchell Restructuring Event to accomplish the transactions described in Section 11.18 of the Indenture or as are not inconsistent with the Indenture and do not adversely affect the rights of any Holder.
The right of any Holder to participate in any consent required or sought pursuant to any provision of the Indenture (and the obligation of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirement that such Holder shall have been the Holder of record of this Security as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of the Indenture.
11. Defaults and Remedies. Events of Default include: (i)
default in the payment of the principal of or premium, if any, on any Security
at its Maturity; or (ii) default in the payment of interest, Liquidated Damages,
if any, or Additional Amounts, if any, upon any of the Securities when it
becomes due and payable, and continuance of such default for a period of 30
days; or (iii) default in the performance or observance, or breach, of any
covenant of the Company or the Guarantor in any Security or the Indenture (other
than a covenant a default in whose performance or whose breach is elsewhere in
Section 5.01 of the Indenture specifically dealt with), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company and the Guarantor by the Trustee or
to the Company, the Guarantor and the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Indenture; or (iv) default
by the Company or the Guarantor in the payment of any principal of any Funded
Debt of the Company or the Guarantor outstanding in an aggregate principal
amount in excess of $50,000,000 at the final stated maturity thereof or the
occurrence of any other default thereunder, the effect of which default is to
cause such Funded Debt to become, or to be declared, due prior to its final
stated maturity, and there has been given, by registered or certified mail, to
the Company and the Guarantor by the Trustee or to the Company, the Guarantor
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the outstanding Securities a written notice specifying such default and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder unless (A) such default shall be cured, by payment or
otherwise, within 60 days after the receipt of such notice or (B) the
acceleration is not rescinded or annulled or the default that caused the
acceleration is not cured within 60 days after the receipt of such notice; or
(v) the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Company or the Guarantor in an involuntary
case or proceeding under any applicable U.S. or Canadian Federal or State or
provincial bankruptcy, insolvency, reorganization, arrangement, dissolution,
winding-up or other similar law or (B) a decree or order adjudging the Company
or the Guarantor a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company or the Guarantor under any applicable U.S. or Canadian
Federal or State or provincial law, or
appointing a custodian, receiver, receiver and manager, interim receiver,
administrator, monitor, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or the Guarantor or of any substantial part of
the property of the Company or the Guarantor, or ordering the winding up or
liquidation of the affairs of the Company or the Guarantor, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 90 consecutive days; (vi) the
commencement by the Company or the Guarantor of a voluntary case or proceeding
under any applicable U.S. or Canadian Federal or State or provincial bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by either
of them to the entry of a decree or order for relief in respect of the Company
or the Guarantor in an involuntary case or proceeding under any applicable U.S.
or Canadian Federal or State or provincial bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against either of them, or the filing by either of
them of a petition or answer or consent seeking reorganization or relief under
any applicable U.S. or Canadian Federal or State or provincial law, or the
consent by either of them to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, receiver and manager, interim
receiver, administrator, monitor, liquidator, assignee, trustee, sequestrator or
similar official of the Company or the Guarantor or of any substantial part of
the property of the Company or the Guarantor, or the making by either of them of
an assignment for the benefit of creditors, or the admission by either of them
in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or the Guarantor in furtherance of
any such action; or (vii) the Guarantees in respect of the Securities cease to
be in full force and effect or become unenforceable or invalid or are declared
null and void (other than in accordance with the terms of such Guarantees) or
the Guarantor denies or disaffirms its obligations under such Guarantees; or
(viii) any Mitchell Restructuring Event is consummated as contemplated in
Section 11.18 of the Indenture and, thereafter, Devon HoldCo fails to become a
"Guarantor" under the Indenture in accordance with Section 11.18 of the
Indenture.
If an Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 5.01 of the Indenture) with respect to this Security occurs and is continuing, the Trustee by notice to the Company and the Guarantor, or by the Holders of at least 25% in aggregate principal amount of the then outstanding Securities by written notice to the Company, the Guarantor and the Trustee, may declare the principal of and Liquidated Damages, if any, Additional Amounts, if any, and interest on all then outstanding Securities to be due and payable immediately. The amount due and payable upon the acceleration of any Security is equal to 100% of the principal amount thereof plus Liquidated Damages, if any, Additional Amounts, if any, and accrued interest to the date of payment. Holders may not enforce the Indenture or this Security except as provided in the Indenture. The Trustee does require indemnity reasonably satisfactory to it before it enforces the Indenture or this Security. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or
premium, if any, or interest) if it determines that withholding notice is in their interests. The Company and the Guarantor each must furnish an annual compliance certificate to the Trustee.
12. Additional Amounts. If the Company is required to withhold or deduct any amount for or on account of any Taxes for any payment made under or with respect to this Security, the Company will pay any Additional Amounts.
13. Discharge Prior to Maturity. The Indenture shall be discharged and canceled upon the payment of all of the Securities and shall be discharged except for certain obligations upon the irrevocable deposit with the Trustee of cash, or U.S. Government Obligations or a combination thereof sufficient for such payment.
14. Trustee Dealings with the Company and the Guarantor. The Trustee in its individual or any other capacity may become the owner or pledgee of this Security and may otherwise deal with the Company, the Parent or any of their Affiliates with the same rights it would have if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee or stockholder of the Company or the Guarantor, as such, shall not have any liability for any obligations of the Company or the Guarantor under this Security, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting this Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Security.
16. Authentication. This Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of an authorized signatory of the Trustee, which signature shall be conclusive evidence that this Security has been authenticated under the Indenture.
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused a CUSIP number to be printed on this Security as a convenience to the Holders of this Security. No representation is made as to the correctness of such number either as printed on this Security or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on this Security.
18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. Governing Law. The Indenture, this Security and the Guarantee shall be governed by and constructed in accordance with, the laws of the State of New York. The
Company agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding relating to this Security and the Guarantee.
20. Additional Rights and Obligations of Holders. In addition to the rights provided to Holders of Securities under the Indenture, this Security and the Guarantee, Holders shall have all the rights set forth in the Registration Rights Agreement, dated as of the Issue Date (the "Registration Rights Agreement"), among the Company, Devon Energy Corporation and the Initial Purchasers. Each Holder, by his acceptance thereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including without limitation the obligations of the Holders with respect to a registration and the indemnification of the Company and the Guarantor to the extent provided therein.*
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to:
Devon Financing Corporation, U.L.C.
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel Telephone No.: (405) 235-3611 Telecopier No.: (405) 552-4550
* This paragraph should be included only if the Security is a Series A Security.
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEE
The Guarantor (which term includes any successor Person in such capacity under the Indenture), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of and premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest on these Securities and all other amounts due and payable under the Indenture and these Securities by the Company.
The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantees and the Indenture are expressly set forth in Article IX of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.
Guarantor:
DEVON ENERGY CORPORATION
Title:
ASSIGNMENT FORM
and irrevocably appoint ________________________________________________________ as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
SCHEDULE OF EXCHANGES OF SECURITIES**
The following exchanges, redemptions or repurchases of a part of this Global Security have been made:
PRINCIPAL AMOUNT OF AMOUNT OF DECREASE AMOUNT OF INCREASE GLOBAL SECURITY SIGNATURE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH AUTHORIZED OFFICER, DATE OF OF GLOBAL OF GLOBAL DECREASE (OR TRUSTEE OR TRANSACTION SECURITY SECURITY INCREASE) SECURITIES CUSTODIAN ----------- ------------------- ------------------- ------------------- -------------------- |
** This Schedule should be included only if the Security is a Global Security.
EXHIBIT B
FACE OF 30-YEAR SECURITY
GLOBAL SECURITY LEGEND
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.*
PRIVATE PLACEMENT LEGEND
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
1. REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), OR (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S");
2. AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH EITHER DEVON FINANCING CORPORATION, U.L.C. OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO DEVON ENERGY CORPORATION, DEVON FINANCING CORPORATION, U.L.C. OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH OF THE CASES ABOVE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;
3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND; AND
4. AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY, DEVON FINANCING CORPORATION, U.L.C., MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED IN THIS SECURITY, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.**
REGULATION S TEMPORARY GLOBAL SECURITY LEGEND
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.***
144A SECURITY LEGEND
EACH PURCHASER OF THE SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.****
* This paragraph should be included only if the Security is a Global Security.
** These paragraphs should be included only if the Security is a Restricted Definitive Security or a Restricted Global Security.
*** This paragraph should be included only if the Security is a Regulation S Temporary Global Security.
**** This paragraph should be included only if the Security is a Series A Security that is a 144A Global Security or a Definitive Security sold to QIBs pursuant to Rule 144A.
DEVON FINANCING CORPORATION, U.L.C.
7.875% SERIES [A/B] DEBENTURE DUE 2031
CUSIP No. $__________
Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of the province of Nova Scotia, Canada (the "Company"), for value received promises to pay to ___________________________ or registered assigns, the principal sum of $_________ Dollars [or such greater or lesser amount as is indicated on the Schedule of Exchanges of Securities on the other side of this Security*] on September 30, 2031.
Interest Payment Dates: March 30 and September 30
Record Dates: March 15 and September 15
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by one of its duly authorized officers.
Dated:
DEVON FINANCING CORPORATION, U.L.C.
Certificate of Authentication:
THE CHASE MANHATTAN BANK,
as Trustee, certifies that this is one of
this Security referred to in the within-
mentioned Indenture.
* This phrase should be included only if the Security is a Global Security.
REVERSE OF 30-YEAR SECURITY
DEVON FINANCING CORPORATION, U.L.C.
7.875% SERIES A/B DEBENTURE DUE 2031
This Security is one of a duly authorized issue of 7.875% Series A/B Debenture due 2031 (the "Securities") of Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of the province of Nova Scotia, Canada (the "Company").
1. Interest. The Company promises to pay interest on the principal amount of this Security at 7.875% per annum from October 3, 2001 until maturity. The Company will pay interest semiannually on March 30 and September 30 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on this Security will accrue from the most recent Interest Payment Date on which interest has been paid or, if no interest has been paid, from October 3, 2001; provided that if there is no existing Default in the payment of interest, and if this Security is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. Further, the Company shall pay interest on overdue principal, premium, if any, Liquidated Damages, if any, and Additional Amounts, if any, from time to time on demand at a rate equal to the interest rate then in effect; it shall pay interest, Liquidated Damages, if any, and Additional Amounts, if any, on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on this Security (except defaulted interest) to the Persons who are registered Holders of this Security at the close of business on the record date next preceding the Interest Payment Date, even if this Security is canceled after such record date and on or before such Interest Payment Date. The Holder must surrender this Security to a Paying Agent to collect payments of principal, premium, if any, Liquidated Damages, if any, and Additional Amounts, if any. The Company will pay the principal of and premium, if any, Liquidated Damages, if any, and Additional Amounts, if any, and interest on this Security in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company; provided that if no account is specified, the Company may choose to make payment at the Corporate Trust Office of the Trustee or by mailing a check to the Holder's registered address. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, Liquidated Damages, if any, Additional Amounts, if any, and interest) by
mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
3. Ranking and Guarantees. This Security is a senior unsecured obligation of the Company and is guaranteed pursuant to a guarantee (the "Guarantee") by Devon Energy Corporation, a Delaware corporation, and each other Person, if any, named as the Guarantor in the Indenture (together, the "Guarantor"). The Guarantee is a senior unsecured obligation of the Guarantor. References herein to the Indenture or the Securities shall be deemed also to refer to the Guarantees set forth in the Indenture except where the context otherwise requires.
4. Optional Redemption. This Security will be redeemable, in whole or in part, at any time, at the Company's option, at a redemption price equal to the greater of (1) 100% of the principal amount of this Security then outstanding to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the Redemption Date) computed by discounting such payments to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the sum of 30 basis points plus the Adjusted Treasury Rate on the third Business Day prior to the Redemption Date, as calculated by an Independent Investment Banker, plus accrued and unpaid interest, up to, but not including the Redemption Date.
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities" for the maturity corresponding to the Optional Redemption Comparable Treasury Issue (if no maturity is within three months before or after the remaining term of this Security, yields for the two published maturities most closely corresponding to the Optional Redemption Comparable Treasury Issue will be determined and the Adjusted Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Optional Redemption Comparable Treasury Issue, calculated using a price for the Optional Redemption Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Optional Redemption Comparable Treasury Price for such redemption date.
"Independent Investment Banker" means UBS Warburg LLC, or if such firm is unwilling or unable to serve as such, an independent investment and banking institution of national standing appointed by the Trustee.
"Optional Redemption Reference Treasury Dealer" means each of up to five dealers to be selected by the Company and the Guarantor, and their respective successors; provided that if any of the foregoing ceases to be, and has no affiliate that is, a primary U.S. governmental securities dealer (a "Primary Treasury Dealer"), the Company and the Guarantor will substitute for it another Primary Treasury Dealer.
"Optional Redemption Comparable Treasury Issue" means the U.S. Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of this Security, or, if, in the reasonable judgment of the Independent Investment Banker, there is no such security, then the Optional Redemption Comparable Treasury Issue will mean the U.S. Treasury security or securities selected by the Independent Investment Banker as having an actual or interpolated maturity or maturities comparable to the remaining term of this Security.
"Optional Redemption Comparable Treasury Price" means (1) the average of five Optional Redemption Reference Treasury Dealer Quotations for the applicable redemption date, after excluding the highest and lowest Optional Redemption Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than five such Optional Redemption Reference Treasury Dealer Quotations, the average of all such quotations.
"Optional Redemption Reference Treasury Dealer Quotations" means, with respect to each Optional Redemption Reference Treasury Dealer and any Redemption Date for this Security, the average, as determined by the Independent Investment Banker of the bid and asked prices for the Optional Redemption Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker and the Trustee at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
5. Optional Redemption for Changes In Canadian Withholding Taxes. The Securities will be subject to redemption in whole, but not in part, at the Company's option and at any time, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, and Liquidated Damages, if any, up to, but not including, the Redemption Date, in the event that either the Company, the Guarantor or any other obligor under the Securities, as the case may be, has become, or would become, obligated to pay, on the next date on which any amount would be payable with respect to these Securities, any Additional Amounts relating to any present or future Taxes, and provided that the obligation to pay
Additional Amounts results from a change in the taxing laws and/or regulations of Canada that is announced or becomes effective on or after the Issue Date; provided, however; (1) no notice of redemption will be given earlier than 60 days prior to the earliest date on which the Company, the Guarantor or any other obligor under the Securities, as the case may be, would be obligated to pay any of these Additional Amounts if a payment with respect to this Security were then due; (2) at the time any redemption notice is given, the obligation to pay these Additional Amounts must remain in effect through the Redemption Date; and (3) such obligation to pay Additional Amounts cannot be avoided by the Company by taking reasonable measures available to it that it determines would not have an adverse impact on it. Prior to any redemption of these Securities under these provisions, the Company will deliver to the Trustee or any Paying Agent an Officers' Certificate stating that the Company is entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to the right of redemption have occurred.
6. Paying Agent and Registrar. Initially, The Chase Manhattan Bank (the "Trustee"), the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar, co-registrar or additional paying agent without notice to any Holder. The Guarantor or any of its Subsidiaries may act in any such capacity.
7. Indenture. The Company issued this Security under an Indenture dated as of October 3, 2001 (as amended, supplemented or otherwise modified from time to time, the "Indenture") among the Company, Devon Energy Corporation and the Trustee. The terms of this Security include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the date of execution of the Indenture. This Security and the Guarantee are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. Capitalized terms used but not defined in this Security have the respective meanings given to such terms in the Indenture.
8. Denominations, Transfer, Exchange. This Security is in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of this Security may be registered and this Security may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of this Security during the period between a record date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Security shall be treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or this Security may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Securities, and compliance in a particular instance by the
Company or the Guarantor with any provision of the Indenture with respect to the
Securities may be waived (other than certain provisions, including any
continuing Default or Event of Default in the payment of the principal of or
premium, if any, Additional Amounts, if any, or interest on these Securities) by
the Holders of at least a majority in principal amount of the Securities then
outstanding in accordance with the terms of the Indenture. Without the consent
of any Holder, the Company, the Guarantor and the Trustee may amend or
supplement the Indenture or this Security to convey, transfer, assign, mortgage
or pledge to the Trustee as security for this Security any property or assets;
to evidence the succession of another entity to the Company or the Guarantor, or
successive successions, and the assumption by the successor entity of the
covenants, agreements and obligations of the Company or the Guarantor pursuant
to Section 4.01 or 4.02 of the Indenture; to add to the covenants of the Company
or the Guarantor such further covenants, restrictions, conditions or provisions
as the Company or the Guarantor and the Trustee shall consider to be for the
protection of the Holders of Securities of one or more series, to surrender any
right or power herein conferred upon the Company or the Guarantor, and to make
the occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions of an Event of
Default permitting the enforcement of all or any of the several remedies
provided in the Indenture, provided that in respect of any such additional
covenant, restriction, condition or provision such amendment or supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an Event of Default or may
limit the right of the Holders of a majority in aggregate principal amount of
the Securities of such series to waive such an Event of Default; to cure any
ambiguity or to correct or supplement any provision contained in the Indenture
or in any supplemental indenture which may be defective or inconsistent with any
other provision contained in the Indenture or in any supplemental indenture,
provided that no such action shall adversely affect the interests of the Holders
of this Security; to evidence and provide for the acceptance of appointment
under the Indenture by a successor trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of the Indenture as
shall be necessary to provide for or facilitate the administration of the trusts
under the Indenture by more than one trustee, pursuant to the requirements of
Section 6.08 or Section 6.09 of the Indenture; to provide for uncertificated
Securities in addition to or in place of certificated Securities; to comply with
any requirements, including the requirements of the SEC, in order to effect or
maintain the qualification of the Indenture under the TIA; to comply with the
rules or regulations of any securities exchange or automated quotations system
on which any of the Securities may be listed or traded; to make any change that
does not adversely affect the rights under the Indenture of any Holder; and to
effect the substitution of Devon HoldCo as the Parent under the Indenture and
the addition of Devon HoldCo as a "Guarantor" under the Indenture, in
each case as contemplated in connection with a Mitchell Restructuring Event pursuant to Section 11.18 of the Indenture, and to make all such other modifications as are necessary or desirable in light of such Mitchell Restructuring Event to accomplish the transactions described in Section 11.18 of the Indenture or as are not inconsistent with the Indenture and do not adversely affect the rights of any Holder.
The right of any Holder to participate in any consent required or sought pursuant to any provision of the Indenture (and the obligation of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirement that such Holder shall have been the Holder of record of this Security as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of the Indenture.
11. Defaults and Remedies. Events of Default include: (i)
default in the payment of the principal of or premium, if any, on any Security
at its Maturity; or (ii) default in the payment of interest, Liquidated Damages,
if any, or Additional Amounts, if any, upon any of the Securities when it
becomes due and payable, and continuance of such default for a period of 30
days; or (iii) default in the performance or observance, or breach, of any
covenant of the Company or the Guarantor in any Security or the Indenture (other
than a covenant a default in whose performance or whose breach is elsewhere in
Section 5.01 of the Indenture specifically dealt with), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company and the Guarantor by the Trustee or
to the Company, the Guarantor and the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the Indenture; or (iv) default
by the Company or the Guarantor in the payment of any principal of any Funded
Debt of the Company or the Guarantor outstanding in an aggregate principal
amount in excess of $50,000,000 at the final stated maturity thereof or the
occurrence of any other default thereunder, the effect of which default is to
cause such Funded Debt to become, or to be declared, due prior to its final
stated maturity, and there has been given, by registered or certified mail, to
the Company and the Guarantor by the Trustee or to the Company, the Guarantor
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the outstanding Securities a written notice specifying such default and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder unless (A) such default shall be cured, by payment or
otherwise, within 60 days after the receipt of such notice or (B) the
acceleration is not rescinded or annulled or the default that caused the
acceleration is not cured within 60 days after the receipt of such notice; or
(v) the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Company or the Guarantor in an involuntary
case or proceeding under any applicable U.S. or Canadian Federal or State or
provincial bankruptcy, insolvency, reorganization, arrangement, dissolution,
winding-up or other similar law or (B) a decree or order adjudging the Company
or the Guarantor a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company or the Guarantor under any applicable U.S. or Canadian
Federal or State or provincial law, or
appointing a custodian, receiver, receiver and manager, interim receiver,
administrator, monitor, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or the Guarantor or of any substantial part of
the property of the Company or the Guarantor, or ordering the winding up or
liquidation of the affairs of the Company or the Guarantor, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 90 consecutive days; (vi) the
commencement by the Company or the Guarantor of a voluntary case or proceeding
under any applicable U.S. or Canadian Federal or State or provincial bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by either
of them to the entry of a decree or order for relief in respect of the Company
or the Guarantor in an involuntary case or proceeding under any applicable U.S.
or Canadian Federal or State or provincial bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against either of them, or the filing by either of
them of a petition or answer or consent seeking reorganization or relief under
any applicable U.S. or Canadian Federal or State or provincial law, or the
consent by either of them to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, receiver and manager, interim
receiver, administrator, monitor, liquidator, assignee, trustee, sequestrator or
similar official of the Company or the Guarantor or of any substantial part of
the property of the Company or the Guarantor, or the making by either of them of
an assignment for the benefit of creditors, or the admission by either of them
in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or the Guarantor in furtherance of
any such action; or (vii) the Guarantees in respect of the Securities cease to
be in full force and effect or become unenforceable or invalid or are declared
null and void (other than in accordance with the terms of such Guarantees) or
the Guarantor denies or disaffirms its obligations under such Guarantees; or
(viii) any Mitchell Restructuring Event is consummated as contemplated in
Section 11.18 of the Indenture and, thereafter, Devon HoldCo fails to become a
"Guarantor" under the Indenture in accordance with Section 11.18 of the
Indenture.
If an Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 5.01 of the Indenture) with respect to this Security occurs and is continuing, the Trustee by notice to the Company and the Guarantor, or by the Holders of at least 25% in aggregate principal amount of the then outstanding Securities by written notice to the Company, the Guarantor and the Trustee, may declare the principal of and Liquidated Damages, if any, Additional Amounts, if any, and interest on all then outstanding Securities to be due and payable immediately. The amount due and payable upon the acceleration of any Security is equal to 100% of the principal amount thereof plus Liquidated Damages, if any, Additional Amounts, if any, and accrued interest to the date of payment. Holders may not enforce the Indenture or this Security except as provided in the Indenture. The Trustee does require indemnity reasonably satisfactory to it before it enforces the Indenture or this Security. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or
premium, if any, or interest) if it determines that withholding notice is in their interests. The Company and the Guarantor each must furnish an annual compliance certificate to the Trustee.
12. Additional Amounts. If the Company is required to withhold or deduct any amount for or on account of any Taxes for any payment made under or with respect to this Security, the Company will pay any Additional Amounts.
13. Discharge Prior to Maturity. The Indenture shall be discharged and canceled upon the payment of all of the Securities and shall be discharged except for certain obligations upon the irrevocable deposit with the Trustee of cash, or U.S. Government Obligations or a combination thereof sufficient for such payment.
14. Trustee Dealings with the Company and the Guarantor. The Trustee in its individual or any other capacity may become the owner or pledgee of this Security and may otherwise deal with the Company, the Parent or any of their Affiliates with the same rights it would have if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee or stockholder of the Company or the Guarantor, as such, shall not have any liability for any obligations of the Company or the Guarantor under this Security, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting this Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Security.
16. Authentication. This Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of an authorized signatory of the Trustee, which signature shall be conclusive evidence that this Security has been authenticated under the Indenture.
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused a CUSIP number to be printed on this Security as a convenience to the Holders of this Security. No representation is made as to the correctness of such number either as printed on this Security or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on this Security.
18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. Governing Law. The Indenture, this Security and the Guarantee shall be governed by and constructed in accordance with, the laws of the State of New York. The
Company agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding relating to this Security and the Guarantee.
20. Additional Rights and Obligations of Holders. In addition to the rights provided to Holders of Securities under the Indenture, this Security and the Guarantee, Holders shall have all the rights set forth in the Registration Rights Agreement, dated as of the Issue Date (the "Registration Rights Agreement"), among the Company, Devon Energy Corporation and the Initial Purchasers. Each Holder, by his acceptance thereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including without limitation the obligations of the Holders with respect to a registration and the indemnification of the Company and the Guarantor to the extent provided therein.*
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to:
Devon Financing Corporation, U.L.C.
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel Telephone No.: (405) 235-3611 Telecopier No.: (405) 552-4550
* This paragraph should be included only if the Security is a Series A Security.
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEE
The Guarantor (which term includes any successor Person in such capacity under the Indenture), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of and premium, if any, Additional Amounts, if any, and interest on these Securities and all other amounts due and payable under the Indenture and these Securities by the Company.
The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantees and the Indenture are expressly set forth in Article IX of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.
Guarantor:
DEVON ENERGY CORPORATION
Title:
ASSIGNMENT FORM
and irrevocably appoint ________________________________________________________ as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
SCHEDULE OF EXCHANGES OF SECURITIES**
The following exchanges, redemptions or repurchases of a part of this Global Security have been made:
PRINCIPAL AMOUNT OF AMOUNT OF DECREASE AMOUNT OF INCREASE GLOBAL SECURITY SIGNATURE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH AUTHORIZED OFFICER, DATE OF OF GLOBAL OF GLOBAL DECREASE (OR TRUSTEE OR TRANSACTION SECURITY SECURITY INCREASE) SECURITIES CUSTODIAN ----------- ------------------- ------------------- ------------------- -------------------- |
** This Schedule should be included only if the Security is a Global Security.
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Devon Financing Corporation, U.L.C.
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel
The Chase Manhattan Bank
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust Administration
Re: 6.875% Notes due 2011/7.875% Debentures due 2031
Reference is hereby made to the Indenture, dated as of October 3, 2001 (the "Indenture"), among Devon Financing Corporation, U.L.C., as issuer (the "Company"), Devon Energy Corporation, as guarantor (the "Guarantor"), and The Chase Manhattan Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the Security[s] or interest in such Security[s] specified in Annex A hereto, in the principal amount of $___________ in such Security[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE IS A QIB IN ACCORDANCE WITH RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Security is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Security for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Global Security and/or the Definitive Security and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Regulation S under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Global Security and/or the Definitive Security and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Securities and Restricted Definitive Securities and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any State of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Parent, the Company, or any of their respective Subsidiaries;
or
(c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE SECURITY.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, or Restricted Definitive Securities and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144 or Regulation S and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities or Restricted Definitive Securities and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
[Insert Name of Transferor]
Title:
Dated: ___________, ____
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the Global Security (CUSIP [ ]), or
(b) [ ] a Restricted Definitive Security.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the Global Security (CUSIP [ ]); or
(b) [ ] a Restricted Definitive Security; or
(c) [ ] an Unrestricted Definitive Security,
in accordance with the terms of the Indenture.
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
Devon Financing Corporation, U.L.C.
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: General Counsel
The Chase Manhattan Bank
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust Administration
Re: 6.875% Notes due 2011/7.875% Debentures due 2031
Reference is hereby made to the Indenture, dated as of October 3, 2001 (the "Indenture"), among Devon Financing Corporation, U.L.C., as issuer (the "Company"), Devon Energy Corporation, as guarantor (the "Guarantor"), and The Chase Manhattan Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Security[s] or interest in such Security[s] specified herein, in the principal amount of $____________ in such Security[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY:
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a beneficial interest in an Unrestricted Global Security in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Securities and pursuant to and in accordance with the U.S. Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Security is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for a beneficial interest in an Unrestricted Global Security, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Unrestricted Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any State of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a Restricted Definitive Security with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Security is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Security issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Security and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's Restricted Definitive Security for a beneficial interest in the [CHECK ONE] 144A Global Security, Regulation S Global Security with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Security and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
Title:
Dated: __________, ____
REGISTRATION RIGHTS AGREEMENT
Dated as of October 3, 2001
by and among
DEVON FINANCING CORPORATION, U.L.C.,
as Issuer
DEVON ENERGY CORPORATION,
as Guarantor
and
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
ABN AMRO INCORPORATED
BMO NESBITT BURNS CORP.
CREDIT SUISSE FIRST BOSTON CORPORATION
DEUTSCHE BANC ALEX. BROWN INC.
FIRST UNION SECURITIES, INC.
J.P. MORGAN SECURITIES INC.
RBC DOMINION SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.,
as Initial Purchasers
6.875% Notes due 2011
7.875% Debentures due 2031
TABLE OF CONTENTS
Page ---- Section 1. Definitions.................................................................................1 Section 2. Exchange Offer..............................................................................5 Section 3. Shelf Registration Statement................................................................8 (a) Shelf Registration Statement.......................................................8 (b) Subsequent Shelf Registration Statements...........................................9 (c) Supplements and Amendments........................................................10 Section 4. Liquidated Damages.........................................................................10 Section 5. Registration Procedures....................................................................11 Section 6. Registration Expenses......................................................................21 Section 7. Indemnification............................................................................22 Section 8. Rules 144 and 144A.........................................................................25 Section 9. Underwritten Registrations.................................................................26 Section 10. Miscellaneous..............................................................................26 (a) No Inconsistent Agreements........................................................26 (b) Adjustments Affecting Registrable Securities......................................26 (c) Amendments and Waivers............................................................26 (d) Notices...........................................................................27 (e) Successors and Assigns............................................................28 (f) Counterparts......................................................................29 (g) Headings..........................................................................29 (h) Governing Law.....................................................................29 (i) Consent to Jurisdiction; Appointment of Agent to Accept Service of Process........29 (j) Severability......................................................................30 (k) Securities Held by the Issuers or Their Affiliates................................31 (l) Joint and Several Obligations of the Guarantor and the Company....................31 (m) Third-Party Beneficiaries.........................................................31 (n) Attorneys' Fees...................................................................31 (o) Entire Agreement..................................................................31 SIGNATURES S-1 |
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of October 3, 2001, by and among Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of Nova Scotia, Canada (the "Company"), Devon Energy Corporation, a Delaware corporation (the "Guarantor" and, together with the Company, the "Issuers"), on the one hand, and UBS Warburg LLC, Banc of America Securities LLC, ABN AMRO Incorporated, BMO Nesbitt Burns Corp., Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., J.P. Morgan Securities Inc., RBC Dominion Securities Corporation and Salomon Smith Barney Inc. (the "Initial Purchasers") on the other hand.
This Agreement is entered into in connection with the Purchase Agreement, dated as of September 28, 2001, by and among the Issuers and the Initial Purchasers (the "Purchase Agreement"), relating to the offering of $1,750,000,000 aggregate principal amount of 6.875% notes due 2011 and $1,250,000,000 aggregate principal amount of 7.875% debentures due 2031 (collectively, the "Debentures" and, together with the guarantee of the Guarantor thereon, the "Securities"). The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Securities under the Purchase Agreement.
The parties hereby agree as follows:
Section 1. Definitions
As used in this Agreement, the following terms shall have the following meanings:
"action" shall have the meaning set forth in Section 7(c) hereof.
"Advice" shall have the meaning set forth in Section 5 hereof.
"Agreement" shall have the meaning set forth in the first introductory paragraph hereof.
"Applicable Period" shall have the meaning set forth in Section 2(b) hereof.
"Boards of Directors" shall have the meaning set forth in Section 5 hereof.
"Business Day" shall mean a day that is not a Legal Holiday.
"Company" shall have the meaning set forth in the introductory paragraph hereof and shall also include the Company's permitted successors and assigns.
"Commission" shall mean the Securities and Exchange Commission.
"day" shall mean a calendar day.
"Debentures" shall have the meaning set forth in the second introductory paragraph hereof.
"Delay Period" shall have the meaning set forth in Section 5 hereof.
"Effectiveness Period" shall have the meaning set forth in the second paragraph of Section 3(a) hereof.
"Event Date" shall have the meaning set forth in Section 4(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Securities" shall have the meaning set forth in Section 2(a) hereof.
"Exchange Offer" shall have the meaning set forth in Section 2(a) hereof.
"Exchange Offer Registration Statement" shall have the meaning set forth in Section 2(a) hereof.
"Guarantor" shall have the meaning set forth in the introductory paragraph hereof and shall also include the Guarantor's permitted successors and assigns.
"Holder" shall mean any holder of a Registrable Security or Registrable Securities.
"Indenture" shall mean the Indenture, dated as of October 3, 2001, by and among the Issuers and The Chase Manhattan Bank, as trustee, pursuant to which the Securities are being issued, as amended or supplemented from time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the first introductory paragraph hereof.
"Initial Shelf Registration Statement" shall have the meaning set forth in Section 3(a) hereof.
"Inspectors" shall have the meaning set forth in Section 5(n) hereof.
"Issue Date" shall mean October 3, 2001, the date of original issuance of the Securities.
"Issuers" shall have the meaning set forth in the introductory paragraph hereof.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which banking institutions in New York, New York are required by law, regulation or executive order to remain closed.
"Liquidated Damages" shall have the meaning set forth in Section 4(a) hereof.
"Losses" shall have the meaning set forth in Section 7(a) hereof.
"NASD" shall have the meaning set forth in Section 5(s) hereof.
"Participant" shall have the meaning set forth in Section 7(a) hereof.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 2(b) hereof.
"Person" shall mean an individual, corporation, partnership, joint venture association, joint stock company, trust, unincorporated limited liability company, government or any agency or political subdivision thereof or any other entity.
"Private Exchange" shall have the meaning set forth in Section 2(b) hereof.
"Private Exchange Securities" shall have the meaning set forth in
Section 2(b) hereof.
"Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
"Purchase Agreement" shall have the meaning set forth in the second introductory paragraph hereof.
"Records" shall have the meaning set forth in Section 5(n) hereof.
"Registrable Securities" shall mean each Security upon its original
issuance and at all times subsequent thereto, each Exchange Security as to which
Section 2(c)(iv) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Security upon original issuance
thereof and at all times subsequent thereto, in each case until (i) a
Registration Statement (other than, with respect to any Exchange Security as to
which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration
Statement) covering such Security, Exchange Security or Private Exchange
Security has been declared effective by the Commission and such Security,
Exchange Security or such Private Exchange Security, as the case may be, has
been disposed of in accordance with such effective Registration Statement, (ii)
such Security has been exchanged pursuant to the Exchange Offer for an Exchange
Security or Exchange Securities that may be resold without restriction under
state and federal securities laws, (iii) such Security, Exchange Security or
Private Exchange Security, as the case may be, ceases to be outstanding for
purposes of the Indenture or (iv) such Security, Exchange Security or Private
Exchange Security has been sold in compliance with Rule 144 or is salable
pursuant to Rule 144(k).
"Registration Default" shall have the meaning set forth in Section 4(a) hereof.
"Registration Statement" shall mean any appropriate registration statement of the Issuer covering any of the Registrable Securities filed with the Commission under the Securities Act, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
"Requesting Participating Broker-Dealer" shall have the meaning set forth in Section 2(b) hereof.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission.
"Rule 415" shall mean Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Securities" shall have the meaning set forth in the second introductory paragraph hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Shelf Filing Event" shall have the meaning set forth in Section 2(c) hereof.
"Shelf Registration Statement" shall have the meaning set forth in
Section 3(b) hereof.
"Subsequent Shelf Registration Statement" shall have the meaning set forth in Section 3(b) hereof.
"TIA" shall mean the Trust Indenture Act of 1939, as amended.
"Trustee" shall mean the trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Securities and Private Exchange Securities.
"underwritten registration or underwritten offering" shall mean a registration in which securities of the Company are sold to an underwriter for reoffering to the public.
Section 2. Exchange Offer
(a) The Issuers shall (i) file a Registration Statement (the "Exchange Offer Registration Statement") within 75 days after the Issue Date with the Commission on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Securities for a like aggregate principal amount of Securities (including the guarantees with respect thereto, the "Exchange Securities") that are identical in all material respects to the Securities (except that the Exchange Securities shall not contain terms with respect to transfer restrictions or Liquidated Damages upon a Registration Default), (ii) use their respective commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 210 days after the Issue Date and (iii) complete the Exchange Offer within 270 days after the Issue Date. Upon the Exchange Offer Registration Statement being declared effective by the Commission, the Issuers will offer the Exchange Securities in exchange for surrender of the Securities. The Issuers shall keep the Exchange Offer open for not less than 20 Business Days (or longer if required by applicable law) after the date notice of the Exchange Offer is first mailed to Holders.
Each Holder that participates in the Exchange Offer will be required to represent to the Issuers in writing that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the Exchange Offer, it has no
arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an affiliate (as defined in Rule 405 under the Securities Act) of either Issuer, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities and (v) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities.
(b) The Issuers and the Initial Purchasers acknowledge that the staff of the Commission has taken the position that any broker-dealer that elects to exchange Securities that were acquired by such broker-dealer for its own account as a result of market-making or other trading activities for Exchange Securities in the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities (other than a resale of an unsold allotment resulting from the original offering of the Securities).
The Issuers and the Initial Purchasers also acknowledge that the staff of the Commission has taken the position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer (a "Requesting Participating Broker-Dealer"), the Issuers agree to
use their respective commercially reasonable efforts to keep the Exchange Offer
Registration Statement continuously effective for a period of up to 180 days
after the date on which the Exchange Offer Registration Statement is declared
effective, or such longer period if extended pursuant to the last paragraph of
Section 5 hereof (such period, the "Applicable Period"), or such earlier date as
all Requesting Participating Broker-Dealers shall have notified the Issuers in
writing that such Requesting Participating Broker-Dealers have resold all
Exchange Securities acquired in the Exchange Offer. The Issuers shall include a
plan of distribution in such Exchange Offer Registration Statement that meets
the requirements set forth in the preceding paragraph.
If, prior to consummation of the Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or if any Holder is not entitled to participate in the Exchange Offer, the Issuers upon the request of any such Holder shall simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to any such Holder, in exchange (the "Private Exchange") for such Securities held by any such Holder, a like principal amount of securities (the "Private Exchange Securities") of the Issuers that are identical in all material respects to the Exchange Securities, except for the placement of a restrictive legend on such Private Exchange Securities. The Private Exchange Securities shall be issued pursuant to the same indenture as the Exchange Securities and bear the same CUSIP number as the Exchange Securities.
In connection with the Exchange Offer, the Issuers shall:
(1) mail or cause to be mailed to each Holder entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Securities validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange;
(2) deliver or cause to be delivered to the Trustee for cancellation all Securities so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each Holder of Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture (in either case, with such changes as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such other indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter.
(c) In the event that (i) applicable law or interpretations of the
staff of the Commission do not permit the Issuers to effect the Exchange Offer,
(ii) for any other reason the Exchange Offer is not completed within 270 days
after the Issue Date, (iii) at the request of any Holder (other than an Initial
Purchaser) who is prohibited by applicable law or interpretations of the staff
of the Commission from participating in the Exchange Offer, (iv) at the request
of any Initial Purchaser in the event that such Initial Purchaser (or any
affiliate thereof) participates in the Exchange Offer and does not receive
Exchange Securities on the date of the exchange that may be sold without
restriction under applicable law or interpretations of the staff of the
Commission (other than due solely to the status of such holder as an affiliate
of the Issuers), (v) the Initial Purchasers so request with respect to
Securities that have, or that are reasonably likely to be determined to have,
the status of unsold allotments in an initial distribution or (vi) any Holder of
Private Exchange Securities so requests (each such event referred to in clauses
(i) through (vi) of this sentence, a "Shelf Filing Event"), then the Issuers
shall file a Shelf Registration Statement pursuant to Section 3 hereof.
Section 3. Shelf Registration Statement
If at any time a Shelf Filing Event shall occur, then:
(a) Shelf Registration Statement. The Issuers shall file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to
Rule 415 covering all of the Registrable Securities not exchanged in the
Exchange Offer, Private Exchange Securities and Exchange Securities as to which
Section 2(c)(iv) is applicable (the "Initial Shelf Registration Statement"). The
Issuers shall file with the Commission the Initial Shelf Registration Statement
as promptly as practicable and in any event on or prior to 45 days after such
Shelf Filing Event occurs. The Initial Shelf Registration Statement shall be on
Form S-3 or another appropriate form permitting registration of such Registrable
Securities for resale by Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Issuers
shall not permit any securities other than the Registrable Securities to be
included in the Initial Shelf Registration Statement or in any Subsequent Shelf
Registration Statement (as defined below).
The Issuers shall use their respective commercially reasonable efforts
(x) to cause the Initial Shelf Registration Statement to be declared effective
under the Securities Act on or prior to the 150th day after such Shelf Filing
Event occurs and (y) to keep the Initial Shelf Registration Statement
continuously effective under the Securities Act for the period ending on the
date which is two years from the date it becomes effective (or one year if the
Initial Shelf Registration Statement is filed at the request of an Initial
Purchaser), subject to extension pursuant to the penultimate paragraph of
Section 5 hereof (the "Effectiveness Period"), or such shorter period ending
when (i) all Registrable Securities covered by the Initial Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration
Statement covering all of the Registrable Securities covered by and not sold
under the Initial Shelf Registration Statement or an earlier Subsequent Shelf
Registration Statement has been declared effective under the Securities Act;
provided, however, that (i) the Effectiveness Period in respect of the Initial
Shelf Registration Statement shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery requirements of Rule
174 under the Securities Act and as otherwise provided herein and (ii) the
Issuers may suspend the effectiveness of the Initial Shelf Registration
Statement by written notice to the Holders solely as a result of the filing of a
post-effective amendment to the Initial Shelf Registration Statement to
incorporate annual audited financial information with respect to the Issuers
where such post-effective amendment is not yet effective and needs to be
declared effective to permit holders to use the related Prospectus.
(b) Subsequent Shelf Registration Statements. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their respective commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall as soon as practicable after such cessation amend the Initial Shelf Registration Statement or such Subsequent Shelf Registration Statement, as the case may be, in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities covered by and not sold under the Initial Shelf Registration Statement or such earlier Subsequent Shelf Registration Statement (each, a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Issuers shall use their respective commercially reasonable efforts to cause the Subsequent Shelf Registration Statement to be declared effective under the Securities Act as soon as practicable after such filing and to keep such Subsequent Shelf Registration Statement continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement was previously continuously effective. As used herein, the term "Shelf Registration Statement" means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement.
(c) Supplements and Amendments. The Issuers agree to supplement or make amendments to the Shelf Registration Statement as and when required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement or by any underwriter of such Registrable Securities.
Section 4. Liquidated Damages
(a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree that if:
(i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to the 75th day following the Issue Date, or, if that day is not a Business Day, then the next day that is a Business Day,
(ii) the Exchange Offer Registration Statement is not declared effective on or prior to the 210th day following the Issue Date, or, if that day is not a Business Day, then the next day that is a Business Day,
(iii) the Exchange Offer is not completed on or prior to the 270th day following the Issue Date, or, if that day is not a Business Day, then the next day that is a Business Day, or
(iv) the Shelf Registration Statement is required to be filed but is not filed or declared effective within the time periods set forth herein or is declared effective
but thereafter ceases to be effective or usable prior to the expiration of the Effectiveness Period, except if the Shelf Registration Statement ceases to be effective or usable as specifically permitted by the penultimate paragraph of Section 5 hereof,
(each such event referred to in clauses (i) through (iv) a "Registration Default"), their liquidated damages in the form of additional cash interest ("Liquidated Damages") will accrue on the affected Securities and the affected Exchange Securities, as applicable. The rate of Liquidated Damages will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default, increasing by an additional 0.25% per annum with respect to the subsequent 90-day period up to a maximum amount of additional interest of 0.50% per annum, from and including the date on which any such Registration Default shall occur to, but excluding, the earlier of (1) the date on which all Registration Defaults have been cured or (2) the date on which all the Securities and Exchange Securities otherwise become freely transferable by Holders other than affiliates of the Issuers without further registration under the Securities Act.
Notwithstanding the foregoing, (1) the amount of Liquidated Damages payable shall not increase because more than one Registration Default has occurred and is pending and (2) a Holder of Securities or Exchange Securities who is not entitled to the benefits of the Shelf Registration Statement (i.e., such Holder has not elected to include information) shall not be entitled to Liquidated Damages with respect to a Registration Default that pertains to the Shelf Registration Statement.
(b) The Issuers shall notify the Trustee within one Business Day after each and every date on which an event occurs in respect of which Liquidated Damages are required to be paid (an "Event Date"). Any amounts of Liquidated Damages due pursuant to this Section 4 will be payable in addition to any other interest payable from time to time with respect to the Registrable Securities in cash semi-annually on the interest payment dates specified in the Indenture (to the applicable holders of record as specified in the Indenture), commencing with the first such interest payment date occurring after any such Liquidated Damages commence to accrue. The amount of Liquidated Damages will be determined in a manner consistent with the calculation of interest under the Indenture.
Section 5. Registration Procedures
In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall:
(a) Prepare and file with the Commission the Registration Statement or Registration Statements prescribed by Section 2 or 3 hereof, and use their respective commercially reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Securities covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five Business Days prior to such filing). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the Commission such amendments and post-effective amendments to each Initial Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus, in each case, in accordance with the intended methods of distribution set forth in such Registration Statement or Prospectus, as so amended.
(c) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period relating thereto, notify the selling Holders of Registrable Securities,
or each such Participating Broker-Dealer, as the case may be, their counsel
and the managing underwriters, if any, as promptly as possible, and, if
requested by any such Person, confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Issuers, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities or resales of Exchange Securities by Participating
Broker-Dealers, the representations and warranties of the Issuers contained
in any agreement (including any underwriting agreement) contemplated by
Section 5(m) hereof cease to be true and correct in all material respects,
(iv) of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities or the Exchange
Securities for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known to
the Issuers that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (vi)
of the Issuers' determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use their respective commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction, and, if any such order is issued, to use their respective commercial reasonable efforts to obtain the withdrawal of any such order at the earliest practicable moment.
(e) If (1) a Shelf Registration Statement is filed pursuant to Section 3 or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement or any Participating Broker-Dealer, as the case may be, (i) promptly incorporate in such Registration Statement or Prospectus a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders or any Participating Broker-Dealer, as the case may be (based upon advice of counsel), determine is reasonably necessary to be included therein and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that the Issuers shall not be required to take any action hereunder that would, in the written opinion of counsel to the Issuers, violate applicable laws.
(f) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, furnish to each selling Holder of Registrable Securities or each such Participating Broker-Dealer, as the case may be, who so requests, their counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, deliver to each selling Holder of Registrable Securities or each
such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Securities or the sale by Participating Broker-Dealers of the Exchange Securities.
(h) Prior to any public offering of Registrable Securities or Exchange Securities or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use commercially reasonable efforts to register or qualify, and to cooperate with the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or Exchange Securities, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States or similar laws within Canada or any province thereof as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request; provided, however, that where Exchange Securities or Registrable Securities are offered other than through an underwritten offering, the Issuers agree to cause the Issuers' counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Exchange Securities or Registrable Securities covered by the applicable Registration Statement; provided, however, that the Issuers shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Securities and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear
any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may request at least two Business Days prior to any sale of such Registrable Securities or Exchange Securities.
(j) Use their commercially reasonable efforts to cause the Registrable Securities or Exchange Securities covered by any Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities or Exchange Securities, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, upon the occurrence of any event contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) and the penultimate paragraph of this Section 5) file with the Commission, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder or to the purchasers of the Exchange Securities to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Securities.
(m) In connection with any underwritten offering of Registrable Securities pursuant to a Shelf Registration Statement, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Securities and take all such other actions as are reasonably requested by the managing underwriter or underwriters
in order to expedite or facilitate the registration or the disposition of such Registrable Securities and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Guarantor and its subsidiaries (including any acquired business, properties or entity, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Securities, and confirm the same in writing if and when requested; (ii) use their commercially reasonable efforts to obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) use their commercially reasonable efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Guarantor or of any business acquired by the Guarantor for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments
of the Guarantor and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Guarantor and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will not disclose any records that the Issuers determine, in good faith, to be confidential and that it notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or the Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the information in such Records has been made generally available to the public; provided, however, that such Inspector shall, in the case of clauses (ii) and (iii), to the extent reasonably possible, have previously promptly provided the Issuers an opportunity to obtain a protective order therefor, and, in the case of clauses (i) through (iv), take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector.
(o) Provide an indenture trustee for the Registrable Securities or the Exchange Securities, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(b) hereof to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Securities or Exchange Securities, as applicable, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use commercially reasonable efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the Commission and make generally available to the Guarantor's and the Company's securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act, in accordance with Rule 158 thereunder (or any similar rule promulgated under the Securities Act) or otherwise.
(q) Upon the request of a Holder, upon consummation of the Exchange Offer or a Private Exchange, use their commercially reasonable efforts to obtain an opinion of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Securities or Private Exchange Securities, as the case may be, and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against the Issuers in accordance with its respective terms, subject to customary exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, mark, or cause to be marked, on such Registrable Securities that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD").
(t) Use their commercially reasonable efforts to take all other steps necessary or advisable to effect the registration of the Exchange Securities and/or Registrable Securities covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities or Exchange Securities as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Securities or Exchange Securities as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Securities or Exchange Securities of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make any information previously furnished to the Issuers by such seller not materially misleading.
If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Guarantor or the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Issuers, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities that, upon actual receipt of any notice from the Issuers (x) of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv),
5(c)(v), or 5(c)(vi) hereof, or (y) that the Board of Directors of each of the
Guarantor and the Company (the "Boards of Directors") has resolved that the
Issuers have a bona fide business purpose for doing so, then the Issuers may
delay the filing or the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement (if not then filed or effective,
as applicable) and shall not be required to maintain the effectiveness thereof
or amend or supplement the Exchange Offer Registration Statement or the Shelf
Registration Statement, in all cases, for a period (a "Delay Period") expiring
upon the earlier to occur of (i) in the case of the immediately preceding clause
(x), such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or until
it is advised in writing (the "Advice") by the Issuers that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto or (ii) in the case of the immediately preceding clause
(y), the date which is the earlier of (A) the date on which such business
purpose ceases to interfere with the Issuers' obligations to file or maintain
the effectiveness of any such Registration Statement pursuant to this Agreement
or (B) 60 days after the Issuers notify the Holders of such good faith
determination. In the case of any Delay Period, the Issuers shall use their
commercially reasonable efforts to cause the expiration of such Delay Period at
the earliest possible date; provided, there shall not be more than 60 days of
Delay Periods during any 12-month period with respect to clause (y) above. Each
of the Effectiveness Period and the Applicable Period, if applicable, shall be
extended by the number of days during any Delay Period. Any Delay Period will
not alter the obligations of the Issuers to pay Liquidated Damages under the
circumstances set forth in Section 4 hereof.
In the event of any Delay Period pursuant to clause (y) of the preceding paragraph, notice shall be given as soon as practicable after the Boards of Directors make such a determination of the need for a Delay Period and shall state, to the extent practicable, an estimate of the duration of such Delay Period and shall advise the recipient thereof of the agreement of such Holder provided in the next succeeding sentence. Each Holder, by his acceptance of any Registrable Security, agrees that during any Delay Period, each Holder will discontinue disposition of such Securities or Exchange Securities covered by such Registration
Statement or Prospectus or Exchange Securities to be sold by such Holder or Participating Broker-Dealer, as the case may be.
Section 6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, whether or not
the Exchange Offer Registration Statement or the Shelf Registration Statement is
filed or becomes effective or the Exchange Offer is consummated, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of one special counsel (in each of
the United States and Canada) as described below in connection with Blue Sky
qualifications of the Registrable Securities or Exchange Securities and
determination of the eligibility of the Registrable Securities or Exchange
Securities for investment under the laws of such jurisdictions (x) where the
holders of Registrable Securities are located, in the case of an Exchange Offer,
or (y) as provided in Section 5(h) hereof, in the case of a Shelf Registration
Statement or in the case of Exchange Securities to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Securities
or Exchange Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriter or underwriters, if any, or by the Holders
of a majority in aggregate principal amount of the Registrable Securities
included in any Registration Statement or in respect of Exchange Securities to
be sold by any Participating Broker-Dealer during the Applicable Period, as the
case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers and reasonable fees and disbursements
of one special counsel for all of the sellers of Registrable Securities
(exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Issuers desire
such insurance, (vii) fees and expenses of all other Persons retained by and of
the Issuers, (viii) internal expenses of the Issuers (including, without
limitation, all salaries and expenses of officers and employees by and of the
Issuers performing legal or accounting duties), (ix) the expense of any audit
requested by the Issuers or necessary under the rules and regulations of the
Securities Act or the Exchange Act in order to comply with the Issuers'
obligations under this Agreement, (x) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this
Agreement. Notwithstanding the foregoing or anything to the contrary, each Holder shall pay all underwriting discounts and commissions of any underwriters with respect to any Registrable Securities sold by or on behalf of it.
Section 7. Indemnification
(a) The Issuers, jointly and severally, agree to indemnify and hold harmless each Holder of Registrable Securities and each Participating Broker-Dealer selling Exchange Securities during the Applicable Period, each Person, if any, who controls any such Person within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, the agents, employees, officers and directors of each Holder and each such Participating Broker-Dealer and the agents, employees, officers and directors of any such controlling Person (each, a "Participant") from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including, but not limited to, reasonable attorneys' fees and any and all reasonable expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in settlement of any claim or litigation) (collectively, "Losses") to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, provided that the foregoing indemnity shall not be available to any Participant insofar as such Losses are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to such Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use therein. This indemnity agreement will be in addition to any liability that the Issuer may otherwise have, including, but not limited to, liability under this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless each Issuer, each Person, if any, who controls either Issuer within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and each of their respective agents, employees, officers and directors and the agents, employees, officers and directors of any such controlling Person from and against any Losses to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have
furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to such Participant furnished in writing to the Issuers by or on behalf of such Participant expressly for use therein.
(c) Promptly after receipt by an indemnified party under subsection 7(a) or 7(b) above of notice of the commencement of any action, suit or proceeding (collectively, an "action"), such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement of such action (but the failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability that it may have under this Section 7 except to the extent that it has been prejudiced in any material respect by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such action, the indemnifying party will be entitled to participate in such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense of such action with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such action, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the named parties to such action (including any impleaded parties) include such indemnified party and the indemnifying party or parties (or such indemnifying parties have assumed the defense of such action), and such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them that are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such reasonable fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) designated by the indemnified party or parties at any time for all indemnified parties in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. An indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent may not be unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by paragraph (a) or (b) of this Section 7, then the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 business days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days' prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
(d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 7 is for any reason held to be unavailable from the indemnifying party, or is insufficient to hold harmless a party indemnified under this Section 7, each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such aggregate Losses (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party, on the one hand, and each indemnified party, on the other hand, from the sale of the Securities to the Initial Purchasers or the resale of the Registrable Securities by such Holder, as applicable, or (ii) if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of each indemnified party, on the one hand, and each indemnifying party, on the other hand, in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers, on the one hand, and each Participant, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the sale of the Securities to the Initial Purchasers (net of discounts and commissions but before deducting expenses) received by the Issuer are to (y) the total net proceeds received by such Participant in connection with the sale of the Registrable Securities. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or such Participant and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission.
(e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall any Participant be required to contribute any amount in excess of the amount by which the net proceeds received by such Participant in connection with the sale of the Registrable Securities exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each Person, if any, who controls any Participant within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each director, officer, employee and agent of such Participant shall have the same rights to contribution as such Participant, and each Person, if any, who controls either Issuer within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each director, officer, employee and agent of either Issuer shall have the same rights to contribution as such Issuer. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise, except to the extent that it has been prejudiced in any material respect by such failure; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under this Section 7 for purposes of indemnification. Anything in this section to the contrary notwithstanding, no party shall be liable for contribution with respect to any action or claim settled without its written consent; provided, however, that such written consent was not unreasonably withheld.
Section 8. Rules 144 and 144A
The Issuers covenant that they will file the reports required to be
filed by them under the Securities Act and the Exchange Act in accordance with
Section 3.03 of the Indenture and the rules and regulations adopted by the
Commission thereunder in a timely manner in accordance with the requirements of
the Securities Act and the Exchange Act and, if at any time either Issuer is not
required to file such reports, it will, upon the request of any Holder or
beneficial owner of Registrable Securities, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act. The
Issuers further covenant that they will take such further action as any Holder
of Registrable Securities may reasonably request from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144(k) and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
Commission.
Section 9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Securities included in such offering and shall be reasonably acceptable to the Issuers.
No Holder of Registrable Securities may participate in any underwritten registration hereunder if such Holder does not (a) agree to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
Section 10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not entered, as of the date hereof, and shall not enter, after the date of this Agreement, into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not conflict with and are not inconsistent with, in any material respect, the rights granted to the holders of any of the Issuers' other issued and outstanding securities under any such agreements. The Issuers have not entered and will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Securities. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given except pursuant to a written agreement
duly signed and delivered by (I) the Issuers and (II)(A) the Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Securities and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Securities held by
all Participating Broker-Dealers; provided, however, that Section 7 and this
Section 10(c) may not be amended, modified or supplemented except pursuant to a
written agreement duly signed and delivered by each Holder and each
Participating Broker-Dealer (including any Person who
was a Holder or Participating Broker-Dealer of Registrable Securities or Exchange Securities, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification, supplement or waiver. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being sold pursuant to such Registration Statement. Each Holder at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 10(c), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities, Private Exchange Securities or Exchange Securities or is delivered to such Holder.
(d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of the Registrable Securities or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture.
(ii) if to the Issuers, at the address as follows:
Devon Energy Corporation 20 North Broadway Suite 1500 Oklahoma City, Oklahoma 73102 Telephone: (405) 235-3611 Fax: (405) 552-4550 Attention: General Counsel
With a copy to:
Mayer, Brown & Platt
700 Louisiana
Suite 3600
Houston, Texas 77002
Telephone: (713) 221-1651
Fax: (713) 224-6410
Attention: David L. Ronn, Esq.
(iii) if to the Initial Purchasers, at the address as follows:
UBS Warburg LLC 677 Washington Blvd.
Stamford, Connecticut 06901
Telephone: (203) 719-1088
Fax number: (203) 719-0495
Attention: Syndicate Department
With a copy to:
Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Telephone: (212) 701-3000 Fax: (212) 269-5420 Attention: Michael E. Michetti, Esq.
All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by the recipient's telecopier machine, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Securities; and provided, further, that nothing herein shall be deemed to permit any transfer of Registrable Securities in violation of this Agreement, the Indenture or applicable law. In the event that any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Agreement. If
the Issuers shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof.
(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
(i) Consent to Jurisdiction; Appointment of Agent to Accept Service of Process.
(I) The Company irrevocably consents and agrees that any legal action, suit or proceeding against it with respect to its obligations, liabilities or any other matter arising out of or in connection with this Agreement or the Securities may be brought in the courts of the State of New York, or the courts of the United States of America in each case located in the Borough of Manhattan in The City and State of New York and, until all amounts due and to become due in respect of the Securities have been paid, or until any such legal action, suit or proceeding commenced prior to such payment has been concluded, hereby irrevocably consents and submits to the non-exclusive jurisdiction of each such court in person, generally and for itself and in respect of its properties, assets and revenues.
(II) The Company hereby irrevocably designates, appoints, and empowers
Corporation Service Company, 80 State Street, Albany, NY 12207-2543, as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf service of any and all legal process, summons, notices and
documents that may be served in any action, suit or proceeding brought
against the Company in any such United States federal or state court with
respect to its obligations, liabilities or any other matter arising out of
or in connection with this Agreement, the Indenture or the Securities and
that may be made on such designee, appointee and agent in accordance with
legal procedures prescribed for such courts. If for any reason such
designee, appointee and agent hereunder shall cease to be available to act
as such, the Company agrees to designate a new designee, appointee and
agent in The City of New York on the terms and for the purposes of this
Section 10(i) reasonably satisfactory to each of
the Initial Purchasers. The Company further hereby irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any such action, suit or proceeding against the Company by serving a copy thereof upon the relevant agent for service of process referred to in this Section 10(i) (whether or not the appointment of such agent shall for any reason prove to be ineffective or such agent shall accept or acknowledge such service) or by mailing copies thereof by registered or certified air mail, postage prepaid, to the Company at its address specified in or designated pursuant to this Agreement, with a copy (similarly mailed) to Corporation Service Company, 80 State Street, Albany, NY 12207-2543. The Company agrees that the failure of any such designee, appointee and agent to give any notice of such service to it shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon. Nothing herein shall in any way be deemed to limit the ability of the holders of the Securities or the Initial Purchasers to serve any such legal process, summons, notices and documents in any other manner permitted by applicable law or to obtain jurisdiction over the Company or bring actions, suits or proceedings against the Company in such other jurisdictions, and in such manner, as may be permitted by applicable law. The Company hereby irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this Agreement brought in the United States federal courts located in the Borough of Manhattan in The City of New York or the courts of the State of New York located in the Borough of Manhattan in The City and State of New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
(III) The provisions of this Section 10(i) shall survive any termination of this Agreement, in whole or in part.
(j) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(k) Securities Held by the Issuers or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Issuers or any of their respective affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
(l) Joint and Several Obligations of the Guarantor and the Company. The obligations of the Guarantor and the Company under this Agreement are joint and several.
(m) Third-Party Beneficiaries. Holders and beneficial owners of Registrable Securities and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. No other Person is intended to be, or shall be construed as, a third-party beneficiary of this Agreement.
(n) Attorneys' Fees. As between the parties to this Agreement, in any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees actually incurred in addition to its costs and expenses and any other available remedy.
(o) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuer on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
DEVON FINANCING CORPORATION, U.L.C
By: /s/ William T. Vaughn --------------------------------------------- Name: William T. Vaughn Title: Senior Vice President |
DEVON ENERGY CORPORATION
By: /s/ William T. Vaughn --------------------------------------------- Name: William T. Vaughn Title: Senior Vice President - Finance |
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
ABN AMRO INCORPORATED
BMO NESBITT BURNS CORP.
CREDIT SUISSE FIRST BOSTON
CORPORATION
DEUTSCHE BANC ALEX. BROWN INC.
FIRST UNION SECURITIES, INC.
J.P. MORGAN SECURITIES INC.
RBC DOMINION SECURITIES
CORPORATION
SALOMON SMITH BARNEY INC.
By: UBS WARBURG LLC
Acting on behalf of itself and
the several Initial Purchasers
By: /s/ Kimberly Blue --------------------------------------------- Name: Kimberly Blue Title: Managing Director By: /s/ Scott D. Whitney --------------------------------------------- Name: Scott D. Whitney Title: Associate Director |
EXHIBIT 5.1
[MAYER, BROWN & PLATT LETTERHEAD]
October 30, 2001
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Devon Holdco Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
RE: DEVON ENERGY CORPORATION AND DEVON HOLDCO CORPORATION
REGISTRATION STATEMENTS ON FORM S-4
Ladies and Gentlemen:
We have acted as special counsel to Devon Energy Corporation, a Delaware corporation ("Devon"), and Devon Holdco Corporation, a Delaware corporation and a wholly owned subsidiary of Devon ("Devon Holdco"), in connection with the corporate proceedings taken and to be taken relating to the transactions contemplated by the Amended and Restated Merger Agreement, dated as of August 13, 2001 (the "Merger Agreement"), by and among Devon; Devon NewCo Corporation, a wholly owned subsidiary of Devon ("Merger Sub"); Devon Holdco; Devon Merger Corporation, a wholly owned subsidiary of Devon Holdco ("Devon Merger Sub"); Mitchell Merger Corporation, a wholly owned subsidiary of Devon Holdco ("Mitchell Merger Sub"); and Mitchell Energy & Development Corp. ("Mitchell"). We have also participated in the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended, of a registration statement on Form S-4, as amended (the "Registration Statement"), filed by Devon and Devon Holdco in connection with the registration of shares of Devon common stock, par value $0.10 per share ("Devon Common Stock"), and Devon Holdco common stock, par value $0.01 per share ("Devon Holdco Common Stock"). In this connection, we have examined such corporate and other records, instruments, certificates and documents as we considered necessary to enable us to express this opinion.
The Merger Agreement contemplates, among other things, (1) the merger
(the "Merger") of Mitchell with and into Merger Sub, with Merger Sub being the
surviving corporation of the Merger and a wholly owned subsidiary of Devon, or
(2) if an Alternate Structure Event (as defined in the Merger Agreement) occurs,
(A) the merger (the "Devon Merger") of Devon Merger Sub with and into Devon,
with Devon being the surviving corporation of the Devon Merger and (B) the
merger (the "Mitchell Merger" and, together with the Devon Merger, the
"Alternate Mergers") of Mitchell Merger Sub with and into Mitchell, with
Mitchell being the surviving corporation of the Mitchell Merger. In the Merger,
each share of Mitchell Class A common stock, par value $0.10 per share
("Mitchell Common Stock"), issued and outstanding at the effective time of the
Merger (other than Excluded Company Shares (as defined in the Merger Agreement))
will be converted into the right to receive $31.00 in cash and 0.585 of a share
of
Devon Common Stock. In the Alternate Mergers, (1) each share of Mitchell Common Stock (other than Excluded Company Shares) issued and outstanding at the effective time of the Mitchell Merger will be converted into the right to receive $31.00 in cash and 0.585 of a share of Devon Holdco Common Stock and (2) each share of Devon Common Stock (other than Excluded Parent Shares (as defined in the Merger Agreement)) issued and outstanding at the effective time of the Devon Merger will be converted into the right to receive one share of Devon Holdco Common Stock.
Based on the foregoing, it is our opinion that (1) the shares of Devon Common Stock being registered have been duly and validly authorized by all necessary action on the part of Devon and, when issued pursuant to the terms of the Merger Agreement, will be validly issued, fully paid and non-assessable by Devon and (2) the shares of Devon Holdco Common Stock being registered have been duly and validly authorized by all necessary action on the part of Devon Holdco and, when issued pursuant to the terms of the Merger Agreement (upon the occurrence of an Alternate Structure Event (as defined in the Merger Agreement)), will be validly issued, fully paid and non-assessable by Devon Holdco.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Additional Information--Legal Matters" in the Registration Statement.
Sincerely,
/s/ MAYER, BROWN & PLATT |
EXHIBIT 8.1
[Mayer, Brown & Platt Letterhead]
October 30, 2001
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Devon Holdco Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Ladies and Gentlemen:
In connection with the registration statement on Form S-4, as amended (the "Registration Statement"), filed by Devon Energy Corporation ("Devon") and Devon Holdco Corporation, a wholly owned subsidiary of Devon ("Devon Holdco"), relating to the transactions contemplated by the Amended and Restated Merger Agreement, dated as of August 13, 2001 (the "Merger Agreement"), by and among Devon, Devon NewCo Corporation, Devon Holdco, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp., you have requested our opinion regarding the description of material tax consequences related to the Merger and the Alternate Mergers (in each case, as defined in the Merger Agreement) as described in the Registration Statement.
In formulating our opinion, we have examined the Merger Agreement and the Registration Statement, including the joint proxy statement/prospectus that forms a part of the Registration Statement. In addition, we have examined such other documents, instruments and information as we considered necessary to enable us to express this opinion. Our opinion is also based on (1) the accuracy of the statements and facts concerning the Merger and the Alternate Mergers set forth in the Merger Agreement (including, without limitation, the exhibits thereto) and the Registration Statement, (2) the consummation of the Merger or the Alternate Mergers, as the case may be, in the manner contemplated by, and in accordance with the terms set forth in, the Merger Agreement and the Registration Statement and (3) currently applicable provisions of the federal income tax laws, including the Internal Revenue Code of 1986, as amended, applicable Treasury Regulations promulgated thereunder, judicial authority and current administrative rulings and practice.
Based on the foregoing, as of the date hereof, we adopt and confirm the statements under the caption "Certain Federal Income Tax Considerations" in the Registration Statement as our opinion of the material tax consequences of the Merger and the Alternate Mergers, to the extent that such statements constitute legal conclusions. We know that we are referred to in the Registration Statement and we hereby consent to the use of our name therein and to the filing of this opinion as part of the Registration Statement, without admitting that we are "experts" within the meaning of the Securities and Exchange Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement.
Sincerely,
/s/ MAYER, BROWN & PLATT |
EXHIBIT 8.2
[VINSON & ELKINS L.L.P. LETTERHEAD]
October 25, 2001
Mitchell Energy & Development Corp.
2001 Timberloch Place
P. O. Box 4000
The Woodlands, Texas 77387-4000
Ladies and Gentlemen:
We have acted as counsel for Mitchell Energy & Development Corp., a Texas corporation ("Mitchell"), in connection with the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001 (the "Merger Agreement"), by and among Mitchell, Devon Energy Corporation, a Delaware corporation ("Devon"), Devon NewCo Corporation, a Delaware corporation and wholly-owned subsidiary of Devon, Devon Holdco Corporation, a Delaware corporation and wholly-owned subsidiary of Devon ("Alternate Holdco"), Devon Merger Corporation, a Delaware corporation and wholly-owned subsidiary of Alternate Holdco and Mitchell Merger Corporation, a Delaware corporation and wholly-owned subsidiary of Alternate Holdco. At your request, in connection with the filing of the registration statement on Form S-4, as amended, with the Securities and Exchange Commission on or about the date hereof (the "Registration Statement"), we have reviewed the description set forth therein under the caption "Material Federal Income Tax Considerations" and have concluded that the statements of legal conclusions set forth in that description constitute our opinion as to the anticipated United States federal income tax consequences of the Merger and the Alternate Merger (in each case, as defined in the Merger Agreement).
In connection with rendering our opinion, we have reviewed the Merger Agreement, the Registration Statement and such other documents and corporate records as we have deemed necessary or appropriate. We have also assumed that the representations and warranties contained in the Merger Agreement were true, correct and complete when made and will continue to be true, correct and complete through the effective time of the Merger or the Alternate Mergers, as the case may be, and that the parties have complied with and, if applicable, will continue to comply with the covenants contained in the Merger Agreement. Our opinion is based upon the existing provisions of the Internal Revenue Code of 1986, as amended, regulations (and administrative pronouncements) promulgated or proposed thereunder, and interpretations thereof by the Internal Revenue Service and the courts, all as of the date hereof, all of which are subject to change with prospective or retroactive effect, and our opinion could be adversely affected or rendered obsolete by such change.
Mitchell Energy & Development Corp.
October 25, 2001
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm included in the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P. |
EXECUTION COPY
EXHIBIT 10.3
CREDIT AGREEMENT
DEVON ENERGY CORPORATION
AND
DEVON FINANCING CORPORATION, U.L.C.
as Borrowers
UBS AG, STAMFORD BRANCH
as Administrative Agent
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
as Arrangers
BANK OF AMERICA, N.A.
as Syndication Agent
AND CERTAIN FINANCIAL INSTITUTIONS
as Lenders
$3,032,000,000
October 12, 2001
TABLE OF CONTENTS
Page ---- ARTICLE I THE LOANS Section 1.1. Commitments to Lend; Notes..................................................................1 Section 1.2. Requests for New Loans......................................................................3 Section 1.3. Continuations and Conversions of Existing Loans.............................................4 Section 1.4. Use of Proceeds.............................................................................5 Section 1.5. Interest Rates and Fees.....................................................................5 Section 1.6. Prepayments of Loans........................................................................6 ARTICLE II DEFINED TERMS Section 2.1. Defined Terms...............................................................................7 ARTICLE III PAYMENTS TO LENDERS Section 3.1. General Procedures.........................................................................31 Section 3.2. Increased Cost and Reduced Return..........................................................32 Section 3.3. Limitation on Types of Loans...............................................................33 Section 3.4. Illegality.................................................................................33 Section 3.5. Treatment of Affected Loans................................................................34 Section 3.6. Compensation...............................................................................34 Section 3.7. Change of Applicable Lending Office........................................................35 Section 3.8. Replacement of Lenders.....................................................................35 Section 3.9. Taxes......................................................................................35 ARTICLE IV CONDITIONS PRECEDENT TO LENDING Section 4.1. Documents to be Delivered..................................................................38 Section 4.2. Additional Conditions Precedent to First Loan..............................................39 Section 4.3. Conditions to Initial Mitchell Loans.......................................................39 Section 4.4. Conditions to Initial Anderson Loans.......................................................40 Section 4.5. Conditions Precedent to General Purpose Loans..............................................42 Section 4.6. Additional Conditions Precedent to All Loans...............................................42 |
Page ---- ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1. No Default.................................................................................42 Section 5.2. Organization and Good Standing.............................................................42 Section 5.3. Authorization..............................................................................43 Section 5.4. No Conflicts or Consents...................................................................43 Section 5.5. Enforceable Obligations....................................................................43 Section 5.6. Full Disclosure............................................................................43 Section 5.7. Litigation.................................................................................43 Section 5.8. [Reserved].................................................................................44 Section 5.9. [Reserved].................................................................................44 Section 5.10. US Borrower's Subsidiaries.................................................................44 Section 5.11. Title to Properties; Licenses..............................................................44 Section 5.12. Government Regulation......................................................................44 Section 5.13. Solvency...................................................................................44 ARTICLE VI AFFIRMATIVE COVENANTS OF BORROWERS Section 6.1. Payment and Performance....................................................................45 Section 6.2. Books, Financial Statements and Reports....................................................45 Section 6.3. Other Information and Inspections..........................................................46 Section 6.4. Notice of Material Events and Change of Address............................................46 Section 6.5. Maintenance of Properties..................................................................47 Section 6.6. Maintenance of Existence and Qualifications................................................47 Section 6.7. Payment of Trade Liabilities, Taxes, etc...................................................47 Section 6.8. Insurance..................................................................................47 Section 6.9. Performance on Borrower's Behalf...........................................................47 Section 6.10. Interest...................................................................................48 Section 6.11. Compliance with Law........................................................................48 Section 6.12. Environmental Matters......................................................................48 Section 6.13. Bank Accounts; Offset......................................................................48 ARTICLE VII NEGATIVE COVENANTS OF BORROWERS Section 7.1. Indebtedness...............................................................................49 Section 7.2. Limitation on Liens........................................................................50 Section 7.3. Limitation on Mergers......................................................................50 Section 7.4. Limitation on Issuance of Securities by Subsidiaries of US Borrower; Ownership of Certain Restricted Subsidiaries by US Borrower.............................51 Section 7.5. Transactions with Affiliates...............................................................51 |
Page ---- Section 7.6. Prohibited Contracts.......................................................................51 Section 7.7. Funded Debt to Total Capitalization........................................................51 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section 8.1. Events of Default..........................................................................52 Section 8.2. Remedies...................................................................................54 ARTICLE IX AGENTS Section 9.1. Appointment, Powers, and Immunities........................................................54 Section 9.2. Reliance by Agent..........................................................................55 Section 9.3. Defaults...................................................................................55 Section 9.4. Rights as Lender...........................................................................56 Section 9.5. Indemnification............................................................................56 Section 9.6. Non-Reliance on Administrative Agent and Other Lenders.....................................56 Section 9.7. [Reserved].................................................................................57 Section 9.8. Sharing of Set-Offs and Other Payments.....................................................57 Section 9.9. Investments................................................................................57 Section 9.10. Benefit of Article IX......................................................................58 Section 9.11. Resignation................................................................................58 Section 9.12. [Reserved].................................................................................58 Section 9.13. Other Agents...............................................................................58 ARTICLE X MISCELLANEOUS Section 10.1. Waivers and Amendments; Acknowledgments....................................................58 Section 10.2. Survival of Agreements; Cumulative Nature..................................................61 Section 10.3. Notices....................................................................................62 Section 10.4. Payment of Expenses; Indemnity.............................................................62 Section 10.5. Parties in Interest........................................................................63 Section 10.6. Assignments and Participations.............................................................63 Section 10.7. Confidentiality............................................................................65 Section 10.8. Governing Law; Submission to Process.......................................................66 Section 10.9. Limitation on Interest.....................................................................66 Section 10.10. Termination; Limited Survival..............................................................67 Section 10.11. Severability...............................................................................67 Section 10.12. Counterparts; Fax..........................................................................67 Section 10.13. Waiver of Jury Trial, Punitive Damages, etc................................................67 Section 10.14. Defined Terms..............................................................................68 Section 10.15. Annexes, Exhibits and Schedules............................................................68 |
Page ---- Section 10.16. Amendment of Defined Instruments...........................................................68 Section 10.17. References and Titles......................................................................68 Section 10.18. Calculations and Determinations............................................................69 Section 10.19. Construction of Indemnities and Releases...................................................69 Signatures......................................................................................................S-1 |
Schedules and Exhibits:
Annex I - Lenders Schedule Schedule 1 - Disclosure Schedule Schedule 2 - Surety Bond and Letter of Credit Obligations Schedule 7.1 - Existing Indebtedness Exhibit A - Promissory Note Exhibit B - Borrowing Notice Exhibit C - Continuation/Conversion Notice Exhibit D - Certificate Accompanying Financial Statements Exhibit E-1 - Opinion of Counsel for US Borrower Exhibit E-2 - Opinion of Counsel for Canadian Borrower Exhibit F - Assignment and Acceptance Agreement Exhibit G-1 - Form of Parent Guaranty Exhibit G-2 - Form of Subsidiary Guaranty Exhibit G-3 - Form of Devon HoldCo Guaranty Exhibit H - Form of Amended and Restated Agreement |
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made as of October 12, 2001, by and among Devon Energy Corporation, a Delaware corporation ("US Borrower"), Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of Nova Scotia, Canada ("Canadian Borrower" and, together with US Borrower, the "Borrowers"), UBS AG, Stamford Branch, as administrative agent ("Administrative Agent"), and the undersigned Lenders. In consideration of the mutual covenants and agreements contained herein the parties hereto agree as follows:
ARTICLE I
THE LOANS
Section 1.1. Commitments to Lend; Notes.
(a) Subject to the terms and conditions hereof, each Lender agrees to make loans to each Borrower in the amounts and at the times set forth in Section 1.1(b) below, (all loans are to be denominated in US Dollars and are referred to herein collectively as the "Loans" and the commitments to provide such Loans are referred to collectively as the "Commitments") upon the Applicable Borrower's request from time to time during the Facility Commitment Period, provided, that (i) subject to Sections 3.3, 3.4 and 3.5, all Lenders are requested to make Loans of the same Type in accordance with their respective Percentage Shares and as part of the same Borrowing and (ii) each Lender's Percentage Share of the Facility Usage shall never exceed such Lender's Percentage Share of the Maximum Credit Amount. The aggregate amount of all Loans in any Borrowing must be in an integral multiple of $1,000,000 which (i) with respect to new Loans which at the time requested pursuant to Section 1.2 constitute a Borrowing of a Type not then outstanding, equals or exceeds $10,000,000 and (ii) with respect to new Loans which at the time requested constitute a Borrowing of a Type then outstanding equals or exceeds, when taken together with then outstanding, Loans of such Type, $20,000,000 or (iii) must equal the unadvanced portion of the Maximum Credit Amount. If requested by such Lender, the obligation of each Borrower to repay to each Lender the aggregate amount of all Loans made to such Borrower by such Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called such Lender's "Note") made by such Borrower payable to the order of such Lender in the form of Exhibit A with appropriate insertions. Each Borrower has guaranteed the other Borrower's obligations hereunder pursuant to a Guaranty substantially in the form of Exhibit G-1 or -2 hereto. The amount of principal owing on each Lender's Note at any given time shall be the aggregate amount of all Loans represented by such Note theretofore made by such Lender minus all payments of principal theretofore received by such Lender on such Note. Interest on the Loans shall accrue and be due and payable as provided herein. Each Loan shall be due and payable as provided herein, and shall be due and payable in full on the Maturity Date. The date, amount, Type and duration of the Interest Period (if applicable) of each Loan made by each Lender to each Borrower and each payment made on account of the principal thereof, shall be recorded by such Lender (or its nominee) on its books and, prior to any transfer of any Loans held by it, such Lender (or its nominee) may endorse such information on the schedule attached to its Note (if any) evidencing such Loans or any continuation thereof; provided, however, that the failure of such Lender (or its nominee) to make any such recordation or endorsement or any error
in such recordation or endorsement shall not affect the obligations of the Applicable Borrower to make a payment when due of any amount owing hereunder.
(b) Loans will be available, subject to the other terms and conditions set forth herein, in up to eight draws, as follows: (i) to fund the cash portion of the consideration with respect to the Mitchell Merger and the payment of related expenses (the "Mitchell Merger Borrowing"); (ii) to (a) refinance indebtedness of Mitchell and pay related fees and expenses and (b) fund up to $51.5 million of a working capital deficit of Mitchell; provided, any borrowing pursuant to this clause (ii) must be made within 90 days of the Mitchell Merger Closing Date (the amount available for the borrowings pursuant to clause (i) above and this clause (ii), the "Mitchell Available Amount", which amount shall not exceed $1.7 billion and shall be borrowed by US Borrower (all such Loans provided in respect of the Mitchell Available Amount, the "Mitchell Loans")); (iii) to fund the consummation of the Anderson Tender Offer and the payment of any related fees and expenses (the "Anderson Tender Offer Borrowing"); (iv) to (a) fund the purchase of Anderson Shares not otherwise acquired pursuant to the Anderson Tender Offer and the consideration paid in respect of the Anderson Merger and pay related fees and expenses and (b) fund up to $130.0 million of a working capital deficit of Anderson; provided, no such borrowing may be made unless the Anderson Tender Offer shall have been consummated; (v) to refinance indebtedness of Anderson and pay related fees and expenses; provided, any borrowing pursuant to this clause (v) must be made within 180 days of the Anderson Tender Offer Closing Date (the amount available for the borrowings pursuant to clauses (iii) and (iv) above and this clause (v), the "Anderson Available Amount," which amount shall not exceed $1,332,000,000 and may be borrowed by either Borrower (all such Loans provided in respect of the Anderson Available Amount, the "Anderson Loans")); and (vi) up to $200,000,000 in the aggregate from the Mitchell Available Amount and/or the Anderson Available Amount (to the extent not applied pursuant to the foregoing clauses (i) through (v)) for general corporate purposes; provided, no drawing may be made pursuant to this clause (vi) unless (x) the transactions and the borrowings contemplated by clauses (i) through (v) above have been consummated (other than clause (b) of each of clauses (ii) and (iv)) or (y) either Acquisition has been abandoned and the transactions and borrowings contemplated by clauses (i) through (v) except as aforesaid in respect of the other Acquisition have been consummated; provided, further, all borrowings pursuant to this clause (vi) must be made prior to September 13, 2002 (all Loans provided in respect of such general corporate purposes, the "General Purpose Loans"; the Anderson Available Amount and the Mitchell Available Amount (including any portion thereof applied to General Purpose Loans) are referred to collectively as the "Available Amount"). Amounts borrowed hereunder that are repaid or prepaid may not be reborrowed.
(c) To the extent any Borrower consummates an Offering on or
after October 4, 2001 but prior to the drawing of the first Loan pursuant to
Section 4.1, the Commitments will be automatically and permanently reduced by an
amount equal to the Net Offering Proceeds thereof, such reduction to be
allocated to the Mitchell Available Amount and the Anderson Available Amount as
directed by the US Borrower, with the consent (which consent shall not be
unreasonably withheld) of the Administrative Agent.
(d) The US Borrower may from time to time terminate in full or permanently reduce the unused portion of the Commitments upon three Business Days' prior written or telecopied notice to the Administrative Agent; provided, however, that any such partial reduction shall be in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof
(or, if less, the full remaining amount of the then applicable Commitments). The
Administrative Agent shall promptly notify each Lender of the receipt by the
Administrative Agent of any notice from the US Borrower pursuant to this Section
1.1(d). Any partial reduction of the Commitments pursuant to this Section 1.1(d)
shall be allocated to the Mitchell Available Amount and the Anderson Available
Amount as directed by the US Borrower, with the consent (which consent shall not
be unreasonably withheld) of the Administrative Agent, and shall be applied to
the Commitments of the Lenders pro-rata based upon their respective Percentage
Shares. The US Borrower shall pay to the Administrative Agent for the account of
the Lenders in accordance with the terms of Section 1.5(b), on the date of each
termination or reduction of the Commitments, any fees accrued through the date
of such termination or reduction on the amount of the Commitments so terminated
or reduced.
(e) The Commitments shall be automatically and permanently terminated to the extent undrawn on the earlier of (A) the date that is six months after the later of the Anderson Tender Offer Closing Date and the Mitchell Merger Closing Date and (B) September 13, 2002 (the "Commitment Termination Date"). The Commitments to provide the Loans will automatically and permanently be terminated on the date of the making of any such Loan by the amount of the Loans made on such date.
Section 1.2. Requests for New Loans. Subject to the provisions of Section 1.1(a), the Applicable Borrower must give to Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify the aggregate amount of any such Borrowing of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, the aggregate amount of any such Borrowing of new Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period; provided, a request for a Interest Period of nine or twelve months shall be deemed by Administrative Agent a request for the longest available Interest Period (which shall be at least six months) if all Lenders are not able to make Loans available for such nine or twelve month period, as the case may be; and
(b) be received by Administrative Agent not later than 11:00
a.m., New York City time, on the Business Day preceding the day on
which any such Base Rate Loans are to be made, or the third Business
Day preceding the day on which any such Eurodollar Loans are to be
made.
Each such written request or confirmation must be made in the form and substance of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by the Applicable Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Lender notice of the terms thereof not later than 2:00 p.m., New York City time, on the day it receives such Borrowing Notice from the Applicable Borrower if it receives such Borrowing Notice by 11:00 a.m., New York City time, otherwise on the next Business Day. If all conditions precedent to such new Loans have been met, each Lender will on the date requested promptly remit to Administrative Agent at Administrative Agent's
office in New York City the amount of such Lender's new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Loans available to the Applicable Borrower. Unless Administrative Agent shall have received prompt notice from a Lender that such Lender will not make available to Administrative Agent such Lender's new Loan, Administrative Agent may in its discretion assume that such Lender has made such Loan available to Administrative Agent in accordance with this section and Administrative Agent may if it chooses, in reliance upon such assumption, make such Loan available to the Applicable Borrower. If and to the extent such Lender shall not so make its new Loan available to Administrative Agent, such Lender and the Applicable Borrower severally agree to pay or repay to Administrative Agent within three days after demand the amount of such Loan together with interest thereon, for each day from the date such amount was made available to the Applicable Borrower until the date such amount is paid or repaid to Administrative Agent, with interest at (1) the Federal Funds Rate, if such Lender is making such payment; provided that Administrative Agent gave notice of the terms of the Borrowing Notice to such Lender in accordance with the terms of this Section 1.2, and (2) the interest rate applicable at the time to the other new Loans made on such date, if the Applicable Borrower is making such repayment. If neither such Lender nor the Applicable Borrower pays or repays to Administrative Agent such amount within such three-day period, Administrative Agent shall in addition to such amount be entitled to recover from such Lender and from the Applicable Borrower, on demand, interest thereon at the Default Rate for Base Rate Loans, calculated from the date such amount was made available to the Applicable Borrower. The failure of any Lender to make any new Loan to be made by it hereunder shall not relieve any other Lender of its obligation hereunder, if any, to make its new Loan, but no Lender shall be responsible for the failure of any other Lender to make any new Loan to be made by such other Lender.
Section 1.3. Continuations and Conversions of Existing Loans. The Applicable Borrower may make the following elections with respect to Loans already outstanding under this Agreement: to convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base Rate Loans on the last day of the Interest Period applicable thereto or to continue Eurodollar Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. To make any such election, the Applicable Borrower must give to Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Borrowing. Each such notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Loans made under this Agreement which are to be continued or converted;
(b) specify the aggregate amount of any Borrowing of Base Rate Loans into which such existing Loans are to be continued or converted and the date on which such Continuation or Conversion is to occur, or the aggregate amount of any Borrowing of Eurodollar Loans into which such existing Eurodollar Loans are to be continued or converted, the date on which such Continuation or Conversion is to occur (which shall be the first day of the Interest Period which is to apply to such Eurodollar Loans), and the length of the applicable Interest Period;
and
(c) be received by Administrative Agent not later than 10:00
a.m., New York City time, on the day on which any such Continuation or
Conversion to Base Rate Loans is to occur, or the third Business Day
preceding the day on which any such Continuation or Conversion to
Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by the Applicable Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Continuation/Conversion Notice, Administrative Agent shall give each Lender prompt notice of the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and binding on the Applicable Borrower. During the continuance of any Default, the Applicable Borrower may not make any election to convert existing Base Rate Loans made under this Agreement into Eurodollar Loans or continue existing Eurodollar Loans made under this Agreement as Eurodollar Loans. If (due to the existence of a Default or for any other reason) the Applicable Borrower fails to timely and properly give any Continuation/Conversion Notice with respect to a Borrowing of existing Eurodollar Loans at least three Business Days prior to the end of the Interest Period applicable thereto, such Eurodollar Loans shall automatically be converted into Base Rate Loans at the end of such Interest Period. No new funds shall be repaid by the Applicable Borrower or advanced by any Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new advance of funds for any purpose; such Continuations and Conversions merely constitute a change in the interest rate applicable to already outstanding Loans.
Section 1.4. Use of Proceeds. Subject to the terms and conditions set forth herein, the Borrowers shall use the Loans for the purposes described in Section 1.1(b). If any Loan is used for a purpose which is governed by Regulation U, the Borrowers shall comply with Regulation U in all respects. In no event shall the funds from any Loan be used directly or indirectly by any Person for personal, family, household or agricultural purposes. Each Borrower represents and warrants that it is not engaged principally, or as one of its important activities, in the business of extending credit to others for the purpose of purchasing or carrying Margin Stock.
Section 1.5. Interest Rates and Fees.
(a) Interest. Each Loan that is a Base Rate Loan shall bear interest on each day outstanding at the Base Rate in effect on such day. Each Loan that is a Eurodollar Loan shall bear interest on each day during the related Interest Period at the related Adjusted Eurodollar Rate in effect on such day.
(b) Availability Fees. In consideration of each Lender's commitment to make Loans under this Agreement, Borrowers will pay to Administrative Agent for the account of each Lender the Availability Fee. The Availability Fee shall be due and payable in arrears on the last day of each Fiscal Quarter and at the end of the Facility Commitment Period.
(c) Reserved.
(d) Administrative Agent's Fees. In addition to all other amounts due to Administrative Agent under the Loan Documents, Borrowers will pay fees in US Dollars to Administrative Agent as described in a letter agreement dated August 31, 2001 between Administrative Agent and US Borrower.
Section 1.6. Prepayments of Loans.
(a) Optional Prepayments. The Applicable Borrower may, upon
giving notice to Administrative Agent by 11:00 a.m., New York City time, on the
Business Day of prepayment, from time to time and without premium or penalty,
prepay the Loans, in whole or in part, so long as all partial prepayments of
principal concurrently paid on the Loans are in increments of $100,000 and in an
aggregate amount greater than or equal to $5,000,000, and so long as the
Applicable Borrower pays all amounts owing in connection with the prepayment of
any Eurodollar Loan owing under Section 3.6. Administrative Agent shall give
each Lender notice thereof by 2:00 p.m., New York City time, on the date such
notice is received from the Applicable Borrower. Optional prepayments under this
Section 1.6(a) will be applied to scheduled payments set forth in Section 1.6(b)
in forward order of maturity or applied to a specific maturity as directed by
the Applicable Borrower, including by directing that such payment be applied to
the Loans of the other Borrower.
(b) Amortization. The Applicable Borrower hereby promises to
pay to Administrative Agent for the account of Lenders on each payment date
specified in the chart below in repayment of the principal of the Loans made to
such Borrower hereunder (i) in the case of Mitchell Loans made to such Borrower,
an amount (subject to adjustment for any prepayments made under Section 1.6(a)
or any reduction in Commitments in respect of Loans under Section 1.1(c))
calculated by multiplying the percentage shown opposite such payment date under
the heading "Percentage of the Amount of Mitchell Loans Outstanding on the
Commitment Termination Date" by the aggregate principal amount of such Mitchell
Loans outstanding on the Commitment Termination Date plus (ii) in the case of
Andersen Loans made to such Borrower, an amount (subject to adjustment for any
prepayments made under Section 1.6(a) or any reduction in Commitments in respect
of Loans under Section 1.1(c)) calculated by multiplying the percentage shown
opposite such payment date under the heading "Percentage of the Amount of
Anderson Loans Outstanding on the Commitment Termination Date" by the aggregate
principal amount of such Anderson Loans outstanding on the Commitment
Termination Date plus (iii) in the case of General Purpose Loans made to such
Borrower, an amount (subject to adjustment for any prepayments made under
Section 1.6(a) or any reduction in Commitments in respect of Loans under Section
1.1(c)) calculated by multiplying the percentage shown opposite such payment
date under the heading "Percentage of the Amount of General Purpose Loans
Outstanding" on the Commitment Termination Date by the aggregate principal
amount of such General Purpose Loans outstanding on the Commitment Termination
Date:
PERCENTAGE OF THE AMOUNT PERCENTAGE OF THE PERCENTAGE OF THE OF AMOUNT OF MITCHELL AMOUNT OF ANDERSON GENERAL PURPOSE LOANS LOANS OUTSTANDING ON LOANS OUTSTANDING ON OUTSTANDING ON THE THE COMMITMENT THE COMMITMENT COMMITMENT TERMINATION TERMINATION TERMINATION PAYMENT DATE DATE DATE DATE ------------ -------------------- -------------------- ------------------------ October 15, 2004 7.651715040% 7.651715040% 7.651715040% April 15, 2005 19.788918206% 19.788918206% 19.788918206% October 15, 2005 19.788918206% 19.788918206% 19.788918206% April 15, 2006 26.385224274% 26.385224274% 26.385224274% October 15, 2006 26.385224274% 26.385224274% 26.385224274% |
If the Commitments in respect of Loans are reduced pursuant to Section 1.1(c), the amount of such reduction shall be deemed an optional prepayment applied in forward order of maturity of the above specified amortization payments.
(c) Procedures. Each prepayment of principal under this
Section 1.6 shall be accompanied by all interest then accrued and unpaid on the
principal so prepaid. Any principal or interest prepaid pursuant to this Section
1.6 shall be in addition to, and not in lieu of, all payments otherwise required
to be paid under the Loan Documents at the time of such prepayment.
ARTICLE II
DEFINED TERMS
Section 2.1. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
"Acquired Debt" means, with respect to any specified Person,
(a) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (b) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person, and any refinancing of
the foregoing indebtedness on similar terms, taking into account current market
conditions.
"Acquisitions" means, collectively, the Mitchell Acquisition and the Anderson Acquisition and the transactions contemplated in connection therewith.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period therefor, the per annum rate equal to the sum of (a) the Applicable Margin plus (b) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the quotient obtained by dividing (i) the Eurodollar Rate for such Eurodollar Loan for such Interest Period by (ii) 1 minus the Reserve Requirement for such Eurodollar Loan for such Interest Period. The Adjusted Eurodollar Rate for any Eurodollar Loan shall change whenever the Applicable Margin or the Reserve Requirement changes. No Adjusted Eurodollar Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Administrative Agent" has the meaning assigned thereto in the preamble to this Agreement.
"Affiliate" means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or
(b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
"Agent-Related Persons" means Administrative Agent and its Affiliates, the Arrangers, any successors to Administrative Agent appointed in accordance with the Loan Documents, and the officers, directors, employees, agents and attorneys-in-fact of such Persons.
"Agreement" means this Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time.
"Anderson" means Anderson Exploration Ltd., a corporation organized under the laws of Canada.
"Anderson Acquisition" means the acquisition by the US Borrower, directly or indirectly, pursuant to the Anderson Tender Offer and the Anderson Merger, of 100% of the Anderson Shares.
"Anderson Acquisition Agreement" means that certain acquisition agreement by and among the US Borrower and Anderson and substantially in the form delivered to the Arrangers on August 31, 2001, as the same may be amended, supplemented or modified from time to time.
"Anderson Available Amount" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Anderson Loans" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Anderson Merger" means one or more transactions, including a Second Stage Transaction, undertaken subsequent to the consummation of the Anderson Tender Offer which results in all of the Anderson Shares being acquired directly or indirectly by the US Borrower.
"Anderson Shares" means all of the outstanding common shares of Anderson.
"Anderson Tender Offer" means the tender offer by a wholly-owned Subsidiary of US Borrower for the Anderson Shares.
"Anderson Tender Offer Borrowing" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Anderson Tender Offer Closing Date" means the date of consummation of the Anderson Tender Offer.
"Anderson Tendered Shares" means all of the shares tendered pursuant to the Anderson Tender Offer.
"Applicable Borrower" means either US Borrower or Canadian Borrower, as the case may be.
"Applicable Lending Office" means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an Affiliate of such Lender) designated for such Type of Loan on Annex I hereof or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to Administrative Agent and Borrowers by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" means on any date, the number of Basis Points per annum set forth below based on the Applicable Rating Level on such date:
APPLICABLE EURODOLLAR RATING LEVEL LOANS BASE RATE LOANS ------------- ---------- --------------- Level I 0.625% 0.000% Level II 0.750% 0.000% Level III 1.000% 0.000% Level IV 1.250% 0.250% Level V 1.500% 0.500% |
Changes in the Applicable Margin will occur automatically without prior notice as changes in the Applicable Rating Level occur. Agent will give notice promptly to Borrowers and the Lenders of changes in the Applicable Margin.
"Applicable Rating Level" means for any day, the highest Rating Level (as such term is defined below in this paragraph) issued by S&P or Moody's (collectively, in this definition called the "Designated Rating Agencies"). As used in this definition, (a) the term "Rating Level" means for any day with respect to any of the Designated Rating Agencies, the rating level described below (or its then equivalent) applicable on such day, issued by such Designated Rating Agency, from time to time, with respect to US Borrower's Long-Term Debt or if such rating is unavailable, equivalents thereof, including counterparty ratings, implied ratings and corporate ratings; (b) "US Borrower's Long-Term Debt" means senior, unsecured, non-credit enhanced (other than by guaranties of
Affiliates of US Borrower) long-term indebtedness for borrowed money of US Borrower; and (c) "greater or = to" means a rating equal to or more favorable than and "<" means a rating less favorable than.
RATING LEVEL S&P MOODY'S ------------ --- ------- Level I greater or = to A- greater or = to A3 Level II BBB+ Baa1 Level III BBB Baa2 Level IV BBB- Baa3 Level V less or = to BB+ less or = to Ba1 |
If the ratings established by Moody's and S&P shall fall within different
levels, the rating in the inferior level (e.g., Level II is inferior to Level I)
shall be disregarded: provided that in the event that the ratings differential
is (i) two levels (e.g., Levels I and III), the intermediate level shall be
used, (ii) three levels (e.g., Levels I and IV), the higher of the two
intermediate levels shall be used (e.g., Level II is higher than Level III) and
(iii) four levels (i.e., Levels I and V), Level III shall be used.
If any of the Designated Rating Agencies shall not have in effect a rating for US Borrower's Long-Term Debt or if the rating system of any of the Designated Rating Agencies shall change, or if either of the Designated Rating Agencies shall cease to be in the business of rating corporate debt obligations, US Borrower and Required Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such Designated Rating Agency, but until such an agreement shall be reached, the Applicable Rating Level shall be based only upon the rating by the remaining Designated Rating Agency.
"Arrangers" means UBS Warburg LLC and Banc of America Securities LLC, in their capacities as joint lead arrangers and book managers.
"Availability Fee" means a per annum fee in an aggregate amount for both Borrowers equal to the Applicable Availability Fee Rate, which shall accrue in US Dollars on the daily average unused amounts of the Commitments in respect of the Loans.
"Availability Fee Rate" means, on any date, the number of Basis Points per annum set forth below based on the Applicable Rating Level on such date:
APPLICABLE AVAILABILITY RATING LEVEL FEE RATE ------------ ------------ Level I 10.0 Level II 12.5 Level III 15.0 Level IV 20.0 Level V 30.0 |
"Base Rate" means, for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the Reference Rate for such day. Any change in the Base Rate due to a change in the Reference Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Reference Rate or Federal Funds Rate. No Base Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Base Rate Loan" means a Loan made in US Dollars which bears interest at the Base Rate.
"Basis Point" means one one-hundredth of one percent (0.01%).
"Borrower" means any of US Borrower and Canadian Borrower.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to Section 1.2 or a Continuation or Conversion of existing Loans into a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 1.3 of this Agreement.
"Borrowing Notice" means a written or telephonic request, or a
written confirmation, made by any Borrower which meets the requirements of
Section 1.2 of this Agreement.
"Business Day" means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York, New York. Any Business Day in any way relating to Eurodollar Loans (such as the day on which an Interest Period begins or ends) must also be a day on which, in the judgment of Administrative Agent, significant transactions in US Dollars are carried out in the interbank eurocurrency market.
"Canadian Borrower" means Devon Financing Corporation, U.L.C., an unlimited liability company organized under the laws of Nova Scotia, Canada which is a wholly-owned Subsidiary of US Borrower.
"Canadian Dollar" or "C$" means the lawful currency of Canada.
"Change in Control" means the occurrence of either of the following events: (a) any Person (or syndicate or group of Persons which is deemed a "person" for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires more than fifty percent (50%) of the voting power of the outstanding stock of US Borrower having ordinary voting power (disregarding changes in voting power based on the occurrence of contingencies) for the election of directors, or (b) during any period of twelve successive months a majority of the Persons who were directors of US Borrower at the beginning of such period cease to be directors of US Borrower, unless such cessation relates to a voluntary reduction by US Borrower of the number of directors that comprise the board of directors of US Borrower.
"Closing Date" means October 12, 2001.
"Commitment" means with respect to each Lender, its commitment to provide its Percentage Share as set forth in Annex I or, if such Lender has entered into one or more Assignment and Acceptances, the commitment set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 10.06(b), as such commitment may be reduced from time to time pursuant to Section 1.1(c), Section 1.1(d) or Section 1.1(e).
"Commitment Letter" means that certain commitment letter by and among the US Borrower, UBS, UBS Warburg LLC, Bank of America, N.A. and Banc of America Securities LLC dated August 31, 2001.
"Commitment Termination Date" has the meaning assigned thereto in Section 1.1(e) of this Agreement.
"Consolidated" refers to the consolidation of any Person, in accordance with US GAAP, with its properly consolidated subsidiaries. References herein to a Person's Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries.
"Consolidated Assets" means the total assets of US Borrower and its Restricted Subsidiaries which would be shown as assets on a Consolidated balance sheet of US Borrower and its Restricted Subsidiaries prepared in accordance with US GAAP, after eliminating all amounts properly attributable to minority interest, if any, in the stock and surplus of the Restricted Subsidiaries.
"Continuation" shall refer to the continuation pursuant to
Section 1.3 of this Agreement of a Eurodollar Loan as a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Continuation/Conversion Notice" means a written or telephonic request, or a written confirmation, made by the Applicable Borrower which meets the requirements of Section 1.3 of this Agreement.
"Conversion" shall refer to a conversion pursuant to Section 1.3 or Article III, as the case may be, of one Type of Loan into another Type of Loan.
"Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.
"Default Rate" means at the time in question (a) with respect to any Eurodollar Loan, the rate two percent (2%) per annum above the Adjusted Eurodollar Rate then in effect for such Loan and (b) with respect to any Base Rate Loan or other Obligations, the rate two percent (2%) per annum above the Base Rate then in effect. No Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Devon Financing Debentures" means (a) the aggregate amount of $1,750,000,000 6.875% Notes due 2011 and (b) the aggregate amount of $1,250,000,000 7.875% Debentures due 2031, issued pursuant to an indenture dated October 3, 2001 by and among Devon Financing Corporation, U.L.C., as issuer, Devon Energy Corporation, as guarantor, and The Chase Manhattan Bank, as trustee.
"Devon Financing Guaranty" means the guaranty of the obligations of the US Borrower under this Agreement by Canadian Borrower.
"Devon Holdco" shall have the meaning assigned thereto in
Section 10.1(d).
"Devon Trust" means Devon Financing Trust II, a statutory business trust formed under the laws of the State of Delaware.
"Devon Trust Registration Statement" means the Registration Statement on Form S-3 filed by US Borrower under the Securities Act of 1933 on November 16, 2000 with respect to the issuance by US Borrower of Common Stock, Preferred Stock, Debt Securities, Stock Purchase Agreements and Stock Purchase Units, and the issuance by Devon Trust of Trust Preferred Securities guaranteed by US Borrower, as amended and supplemented from time to time.
"Devon Trust Securities" means those certain Trust Preferred Securities, which may be issued by Devon Trust pursuant to the Devon Trust Registration Statement in an aggregate face amount not to exceed $447,261,200.
"Disclosure Report" means a written notice given by US
Borrower to all Lender Parties or a certificate given by the Senior Vice
President - Finance or the Treasurer of US Borrower under Sections 6.2(a) and
(b) of this Agreement.
"Disclosure Schedule" means Schedule 1 attached to this Agreement.
"Domestic Lending Office" means (a) with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" below its name on Annex I to this Agreement, or such other office as such Lender may from time to time specify to any Borrower and Administrative Agent; and (b) with respect to Administrative Agent, the office, branch, or agency through which it administers this Agreement.
"Eligible Transferee" means a Person which either (a) is a Lender or an Affiliate of a Lender, (b) is an Approved Fund or (c) is consented to as an Eligible Transferee by Administrative Agent and, so long as no Default or Event of Default is continuing, by US Borrower, in each case which consent will not be unreasonably withheld or delayed; provided that US Borrower's consent shall not be required for a Person to be an "Eligible Transferee" for purposes of Section 10.6(d) of this Agreement. As used in this definition, "Fund" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business, and "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
"Environmental Laws" means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto.
"ERISA Affiliate" means US Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with US Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" below its name on Annex I to this Agreement (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Borrowers and Administrative Agent.
"Eurodollar Loan" means a Loan which bears interest at the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan within a Borrowing and with respect to the related Interest Period therefor, (a) the interest rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3750) for deposits in US Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such
page or service or such page or service shall cease to be available, the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in US Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Administrative Agent as the rate of interest at which deposits in US Dollars (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the applicable Eurodollar Loan and with a term equivalent to such Interest Period would be offered by its London branch to major banks in the offshore U.S. dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.
"Event of Default" has the meaning given to such term in
Section 8.1 of this Agreement.
"Existing Canadian Credit Facility" means that certain $275,000,000 Canadian Credit Agreement dated August 29, 2000 (as amended) by and amongst Northstar Energy, as borrower, Bank of America Canada, as administrative agent, Banc of America Securities LLC, as lead arranger, Banc One Capital Markets, Inc., as syndication agent, The Chase Manhattan Bank and First Union National Bank, as co-documentation agents, and certain financial institutions from time to time party thereto as lenders.
"Existing Credit Facilities" means, collectively, the Existing US Credit Facility and the Existing Canadian Credit Facility.
"Existing US Credit Facility" means that certain $725,000,000 US Credit Agreement dated August 29, 2000 (as amended) by and amongst Devon Energy Corporation, as borrower, Bank of America, N.A., as administrative agent, Banc of America Securities LLC, as lead arranger, Banc One Capital Markets, Inc., as syndication agent, The Chase Manhattan Bank and First Union National Bank, as co-documentation agents, and certain financial institutions from time to time party thereto as lenders.
"Facility" means the Loans to be provided pursuant to the terms of this Agreement.
"Facility Commitment Period" means the period from and including the Closing Date until the Commitment Termination Date.
"Facility Usage" means, at the time in question, the aggregate amount of Loans outstanding at such time under this Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York, New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to Administrative Agent on such day on such transactions as determined by Administrative Agent.
"Fee Letter" means that certain fee letter by and among the US Borrower, UBS, UBS Warburg LLC, Bank of America, N.A. and Banc of America Securities LLC dated August 31, 2001.
"Fiscal Quarter" means a three-month period ending on March 31, June 30, September 30 or December 31 of any year. "Fiscal Year" means a twelve-month period ending on December |
31 of any year.
"General Purpose Loans" has the meaning assigned thereto in
Section 1.1(b) of this Agreement.
"Governmental Authority" means any domestic or foreign, national, federal, provincial, state, municipal or other local government or body and any division, agency, ministry, commission, board or authority or any quasi-governmental or private body exercising any statutory, regulatory, expropriation or taxing authority under the authority of any of the foregoing, and any domestic, foreign or international judicial, quasi-judicial, arbitration or administrative court, tribunal, commission, board or panel acting under the authority of any of the foregoing.
"Guaranty" means any of the guaranty agreements in the form of Exhibit G-1, G-2 and G-3 to this Agreement.
"Hazardous Materials" means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Lender Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Lender Party as appropriate to assure that the Loan Documents are not construed to obligate any Person to pay interest to any Lender Party at a rate in excess of the Highest Lawful Rate applicable to such Lender Party.
"Indebtedness" of any Person means Liabilities in any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase price of property or services, other than customary payment terms taken in the ordinary course of such Person's business,
(c) Liabilities evidenced by a bond, debenture, note or similar instrument;
(d) Liabilities arising under conditional sales or other title retention agreements or under leases capitalized in accordance with US GAAP, but excluding customary oil, gas or mineral leases and operating leases,
(e) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under "take-or-pay" contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment);
(f) Liabilities under Hedging Contracts,
(g) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor, or --
(h) Liabilities under direct or indirect guaranties of Liabilities of any Person or constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Indebtedness of the types described in paragraphs (a) through (g) above of any Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase debt, assets, goods, securities or services, but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection),
provided, however, that the "Indebtedness" of any Person shall not include Liabilities that were incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor. Any Indebtedness owed by a partnership shall be deemed Indebtedness of any partner in such partnership to the extent such partner has any liability of any kind therefor.
"Initial Financial Statements" means (a) the audited annual
Consolidated financial statements of US Borrower dated as of December 31, 2000,
(b) the unaudited quarterly Consolidated financial statements of US Borrower
dated as of June 30, 2001.
"Interest Act (Canada)" means the Interest Act, R.S.C. 1985,
c. I-15, including the regulations made and, from time to time, in force under
that Act.
"Interest Payment Date" means (a) with respect to each Base
Rate Loan and the last day of each March, June, September and December beginning
December 31, 2001, and (b) with respect to each Eurodollar Loan, the last day of
the Interest Period that is applicable thereto or, if such Interest Period is
greater than three months in length, quarterly beginning on the date specified
by Agent which is approximately three months after such Interest Period begins;
provided that the last day of each calendar month shall also be an Interest
Payment Date for each such Loan so long as any Event of Default exists under
Section 8.1(a) or (b).
"Interest Period" means, with respect to each particular Eurodollar Loan in a Borrowing, the period specified in the Borrowing Notice or Continuation/Conversion Notice applicable thereto, beginning on and including the date specified in such Borrowing Notice or Continuation/Conversion Notice (which must be a Business Day), and ending one, two, three, six, nine or twelve months thereafter, as the Applicable Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period which begins on the last Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day in a calendar month; (c) notwithstanding the foregoing, no Interest Period for any Loan may commence before and end after any scheduled amortization payment date set forth in Sections 1.6, unless, after giving effect thereto, the aggregate principal amount of the Loans having Interest Periods that end after such date shall be equal to or less than the aggregate principal amount of the Loans scheduled to be outstanding after giving effect to the payments of principal required to be made on such date; and (d) Administrative Agent shall limit the Interest Period applicable to the Loans to seven days until the 60th day after the Closing Date, unless prior to such 60th day the Arrangers have notified Agent that the syndication of the Facility has been consummated; provided, the Borrowers shall not be permitted to select Interest Periods to be in effect at any time which have expiration dates occurring on more than eight different dates.
"Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes.
"Investment" means any investment made directly or indirectly, in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.
"Law" means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or Canada or any state, province or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof.
"Lender Parties" means Administrative Agent and all Lenders.
"Lenders" means each Lender that provides a Loan and the successors of each such party as a holder of a Note
"Lenders Schedule" means Annex I to this Agreement.
"Liabilities" means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to US GAAP.
"Lien" means, with respect to any property or assets, any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset. "Lien" also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.
"Loan Documents" means this Agreement, the Notes issued under this Agreement, each Guaranty executed in connection therewith, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection therewith.
"Loans" has the meaning given such term in Section 1.1(a) of this Agreement.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Adverse Effect" means, when used in connection with a specified Person, any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) that is materially adverse to the business, properties, assets and liabilities (taken together), financial condition or results of operations of such Person and its subsidiaries taken as a whole; provided, however, that (a) any adverse change, effect or development that is caused by or results from conditions affecting the United States economy generally or the economy of any nation or region in which such Person or its subsidiaries conduct business that is material to the business of such Person and its subsidiaries, taken as whole, shall not be taken into account in determining whether there has been (or whether there could reasonably be foreseen) a "Material Adverse Effect" with respect to such Person, and (b) any adverse change, effect or development that is caused by or results from conditions generally affecting the industries (including the oil and gas industry) in which such Person conducts its business shall not be taken into account in determining whether there has been (or whether there could reasonably be foreseen) a "Material Adverse Effect" with respect to such Person.
"Material Subsidiary" means a Subsidiary of US Borrower which owns assets having a book value that exceeds ten percent (10%) of the book value of US Borrower's Consolidated assets; provided, so long as Canadian Borrower has any outstanding Obligations, it shall be deemed a Material Subsidiary.
"Maturity Date" means October 15, 2006.
"Maximum Credit Amount" means $3,032,000,000, which amount is subject to reduction to the extent of the reduction of any Commitments.
"Mitchell" means Mitchell Energy & Development Corp., a Texas corporation, and its successors and assigns.
"Mitchell Acquisition" means the acquisition by the US Borrower, directly or indirectly, of all of the outstanding common shares of common stock of Mitchell.
"Mitchell Available Amount" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Mitchell Loans" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Mitchell Merger" means that portion of the Mitchell Acquisition pursuant to which Mitchell shall merge with and into Mitchell Newco, with Mitchell Newco as the survivor.
"Mitchell Merger Agreement" means that certain merger agreement by and among the US Borrower and Mitchell dated as of August 13, 2001, as the same may be amended, supplemented or modified from time to time.
"Mitchell Merger Borrowing" has the meaning assigned thereto in Section 1.1(b) of this Agreement.
"Mitchell Merger Closing Date" means the date of consummation of the Mitchell Merger.
"Mitchell Newco" means a new subsidiary of the US Borrower created for the purpose of effecting the Mitchell Merger.
"Mitchell Restructuring Event" shall have the meaning assigned thereto in Section 10.1(d).
"Mitchell Shares" means all of the outstanding common shares of Mitchell.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Multiemployer Plan" mean a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any ERISA Affiliate is making or is obligated to make contributions or, during the five preceding plan years, has made or has been obligated to make contributions.
"Net Offering Proceeds" means with respect to any offering of Indebtedness or equity securities, the gross amount of cash proceeds paid to or received by the US Borrower or the Canadian Borrower, as applicable, in respect of such offering, as the case may be, net of underwriting discounts and commissions or placement fees, investment banking fees, legal fees, consulting fees, accounting
fees and other customary fees and expenses incurred by the US Borrower and its Subsidiaries in connection therewith.
"Northstar Energy" means Northstar Energy Corporation, a corporation organized under the laws of Alberta, Canada.
"Notes" means each Lender's "Note", as defined in Section 1.1(a) of this Agreement.
"Obligations" means all Liabilities from time to time owing by the Borrowers to any Lender Party under or pursuant to any of the Loan Documents. "Obligation" means any part of the Obligations.
"Offering" means a public or private offering by either Borrower of Indebtedness or equity securities the Net Offering Proceeds of which exceed $50,000,000; provided, however, that under no circumstances shall any (i) incurrence of Indebtedness by either Borrower pursuant to this Agreement, the Existing Credit Facilities or any other commitment to lend in effect on the Closing Date, (ii) capital leases or other Indebtedness incurred by either Borrower in the ordinary course of business, (iii) issuance of equity securities by either Borrower as consideration for an Acquisition, (iv) issuance of equity securities by the US Borrower upon the exercise of options, warrants or other rights to acquire equity securities which rights were outstanding on the Closing Date or issued thereafter in the ordinary course of business and consistent with past practices, or (v) issuances of equity by the Canadian Borrower to, or capital contributions to the Canadian Borrower by, the US Borrower or one or more of its wholly-owned subsidiaries constitute or be deemed to constitute an "Offering" for purposes of this Agreement.
"PennzEnergy Exchangeable Debentures" means the following Exchangeable Debentures of PennzEnergy Company, which were issued prior to the merger of PennzEnergy Company with and into US Borrower:
(a) 4.90% Exchangeable Senior Debentures due August 15, 2008 in the aggregate principal amount of $443,807,000; and
(b) 4.95% Exchangeable Senior Debentures due August 15, 2008 in the aggregate principal amount of $316,506,000.
"Percentage Share" means with respect to any Lender (i) when used in Article I of this Agreement, in any Borrowing Notice thereunder or when no Loans are outstanding, the percentage of the Commitments set forth opposite such Lender's name on the Lenders Schedule as modified by assignments of a Lender's rights and obligations under this Agreement made by or to such Lender in accordance with the terms of this Agreement, and (ii) when used otherwise, the percentage obtained by dividing (x) the sum of the unpaid principal balance of such Lender's Loans by (y) the sum of the aggregate unpaid principal balance of all Loans outstanding at such time.
"Permitted Liens" means:
(a) Liens for taxes, assessments or governmental charges which are not due or delinquent, or the validity of which US Borrower or any Restricted Subsidiary shall be
contesting in good faith; provided US Borrower or such Restricted Subsidiary shall have made adequate provision therefor in accordance with US GAAP;
(b) the Lien of any judgment rendered, or claim filed, against US Borrower or any Restricted Subsidiary which does not constitute an Event of Default and which US Borrower or any such Restricted Subsidiary shall be contesting in good faith; provided US Borrower or such Restricted Subsidiary shall have made adequate provision therefor in accordance with US GAAP;
(c) Liens, privileges or other charges imposed or permitted by law such as statutory liens and deemed trusts, carriers' liens, builders' liens, materialmens' liens and other liens, privileges or other charges of a similar nature which relate to obligations not due or delinquent, including any lien or trust arising in connection with workers' compensation, unemployment insurance, pension, employment and similar laws or regulations;
(d) Liens arising in the ordinary course of and incidental to construction, maintenance or current operations which have not been filed pursuant to law against US Borrower or any Restricted Subsidiary or in respect of which no steps or proceedings to enforce such lien have been initiated or which relate to obligations which are not due or delinquent or if due or delinquent, which US Borrower or such Restricted Subsidiary shall be contesting in good faith; provided US Borrower or such Restricted Subsidiary shall have made adequate provision therefor in accordance with US GAAP;
(e) Liens incurred or created in the ordinary course of business and in accordance with sound oil and gas industry practice in respect of the exploration, development or operation of oil and gas properties or related production or processing facilities or the transmission of petroleum substances as security in favor of any other Person conducting the exploration, development, operation or transmission of the property to which such Liens relate, for US Borrower's or any of its Restricted Subsidiaries' portion of the costs and expenses of such exploration, development, operation or transmission, provided that such costs or expenses are not due or delinquent or, if due or delinquent, which US Borrower or such Restricted Subsidiary shall be contesting in good faith; provided US Borrower or such Restricted Subsidiary shall have made adequate provision therefor in accordance with US GAAP;
(f) overriding royalty interests, net profit interests, reversionary interests and carried interests or other similar burdens on production in respect of US Borrower's or any of its Restricted Subsidiaries' oil and gas properties that are entered into with or granted to arm's length third parties in the ordinary course of business and in accordance with sound oil and gas industry practice in the area of operation;
(g) Liens for penalties arising under non-participation provisions of operating agreements in respect of US Borrower's or any of its Restricted Subsidiaries' oil and gas properties if such Liens do not materially detract from the value of any material part of the property of US Borrower and its Subsidiaries taken as a whole;
(h) easements, rights-of-way, servitudes, zoning or other similar rights or restrictions in respect of land held by US Borrower or any Restricted Subsidiary (including, without limitation, rights-of-way and servitudes for railways, sewers, drains, pipe lines, gas and water mains, electric light and power and telephone or telegraph or cable television conduits, poles, wires and cables) which, either alone or in the aggregate, do not materially detract from the value of such land or materially impair its use in the operation of the business of US Borrower and its Restricted Subsidiaries taken as a whole;
(i) security given by US Borrower or any Restricted Subsidiary to a public utility or any Governmental Authority when required by such public utility or Governmental Authority in the ordinary course of the business of US Borrower or any Restricted Subsidiary in connection with operations of US Borrower or any Restricted Subsidiary if such security does not, either alone or in the aggregate, materially detract from the value of any material part of the property of US Borrower and its Restricted Subsidiaries taken as a whole;
(j) the right reserved to or vested in any Governmental Authority by the terms of any lease, license, grant or permit or by any statutory or regulatory provision to terminate any such lease, license, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof;
(k) all reservations in the original grant of any lands and premises or any interests therein and all statutory exceptions, qualifications and reservations in respect of title;
(l) any Lien from time to time disclosed by US Borrower or any Restricted Subsidiary to the Administrative Agent and which is consented to by the Required Lenders;
(m) any right of first refusal in favor of any Person granted in the ordinary course of business with respect to all or any of the oil and gas properties of US Borrower or any Restricted Subsidiary;
(n) Liens on cash or marketable securities of US Borrower or any Restricted Subsidiary granted in connection with any Hedging Contract permitted under this Agreement;
(o) Liens in respect of Indebtedness permitted by Sections 7.1(b), 7.1(f) and 7.1(i) of this Agreement, and Liens in respect of Indebtedness permitted by Section 7.1(c), but only to the extent that such Liens encumber the assets expressly permitted to secure such Indebtedness by the terms of Section 7.1(c);
(p) Liens in favor of Administrative Agent for the benefit of the Lender Parties;
(q) Liens to collateralize moneys held in a cash collateral account by a lender in respect of the prepayment of bankers' acceptances, letters of credit or similar obligations accepted or issued by such lender but only if at the time of such prepayment no default
or event of default has occurred and is continuing under the credit facility pursuant to which the bankers' acceptances or letters of credit have been accepted or issued;
(r) purchase money Liens upon or in any tangible personal property and fixtures (including real property surface rights upon which such fixtures are located and contractual rights and receivables relating to such property) acquired by US Borrower or a Restricted Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such property, including any Liens existing on such property at the time of its acquisition (other than any such Lien created in contemplation of any such acquisition);
(s) the rights of buyers under production sale contracts related to US Borrower's or a Restricted Subsidiary's share of petroleum substances entered into in the ordinary course of business, provided that the contracts create no rights (including any Lien) in favor of the buyer or any other Person in, to or over any reserves of petroleum substances or other assets of US Borrower or a Restricted Subsidiary, other than a dedication of reserves (not by way of Lien or absolute assignment) on usual industry terms;
(t) Liens arising in respect of operating leases of personal property under which US Borrower or any of its Subsidiaries are lessees;
(u) Liens on property of a Person existing at the time such Person becomes a Restricted Subsidiary, is merged into or consolidated with US Borrower or any of its Subsidiaries; provided, such Liens were in existence prior to the contemplation of such stock acquisition, merger or consolidation and do not extend to any assets other than those of the Person so acquired or merged into or consolidated with US Borrower or any of its Subsidiaries;
(v) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Lien referred to in the preceding paragraphs (a) to (u) inclusive of this definition, so long as any such extension, renewal or replacement of such Lien is limited to all or any part of the same property that secured the Lien extended, renewed or replaced (plus improvements on such property), the indebtedness or obligation secured thereby is not increased and such Lien is otherwise permitted by the applicable section above;
(w) Liens on Margin Stock; provided, in the case of Mitchell Shares or Anderson Shares that constitute Margin Stock, only to the extent that the Mitchell Shares or Anderson Shares, as the case may be, exceed 25% of the value of the total assets of US Borrower and its Subsidiaries;
(x) in addition to Liens permitted by clauses (a) through (w) above, Liens on property or assets if the aggregate Indebtedness secured thereby does not exceed two percent (2%) of Consolidated Assets;
provided that nothing in this definition shall in and of itself constitute or be deemed to constitute an agreement or acknowledgment by the Administrative Agent or any Lender that the Indebtedness subject to or secured by any such Permitted Lien ranks (apart from the effect of any Lien included in or inherent in any such Permitted Liens) senior in priority to the Obligations.
"Person" means an individual, corporation, partnership, limited liability company, association, joint stock company, trust or trustee thereof, estate or executor thereof, unincorporated organization or joint venture, Tribunal, or any other legally recognizable entity.
"Rating Agency" means any of S&P or Moody's, or their respective successors.
"Reference Rate" means, for any day, the rate of interest in effect for such day as publicly announced from time to time by UBS as its "prime rate." Such rate is a rate set by UBS based upon various factors including UBS's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by UBS shall take effect at the opening of business on the day specified in the public announcement of such change.
"Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect.
"Regulation U" means Regulation U promulgated by the Board of Governors of the Federal Reserve System.
"Required Lenders" means Lenders whose aggregate Percentage Shares under this Agreement equal or exceed fifty percent (50%).
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including any marginal, special, supplemental, or emergency
reserves) are required to be maintained under regulations issued from time to
time by the Board of Governors of the Federal Reserve System of the United
States of America (or any successor) by member banks of such Federal Reserve
System against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (a) any category of liabilities which includes deposits by reference
to which the Adjusted Eurodollar Rate is to be determined, or (b) any category
of extensions of credit or other assets which include Eurodollar Loans.
"Restricted Person" means any of the Borrowers and each Restricted Subsidiary.
"Restricted Subsidiary" means each Subsidiary of US Borrower that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services (a division of The McGraw Hill Companies, Inc.), or its successor.
"Second Stage Transaction" means an amalgamation, statutory arrangement, consolidation, compulsory acquisition or other type of acquisition transaction in which the remainder of the Anderson Shares are acquired, directly or indirectly, by US Borrower.
"Subsidiary" means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, business trust, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such Person, provided that (a) associations, joint ventures or other relationships (i) which are established pursuant to a standard form operating agreement or similar agreement or which are partnerships for purposes of federal income taxation only, (ii) which are not corporations or partnerships (or subject to the Uniform Partnership Act) under applicable state Law, and (iii) whose businesses are limited to the exploration, development and operation of oil, gas or mineral properties, transportation and related facilities and interests owned directly by the parties in such associations, joint ventures or relationships, shall not be deemed to be "Subsidiaries" of such Person and (b) associations, joint ventures or other relationships (i) which are not corporations or partnerships under applicable provincial Law, and (ii) whose businesses are limited to the exploration, development and operation of oil, gas or mineral properties, transportation and related facilities and interests owned directly by the parties in such associations, joint ventures or relationships, shall not be deemed to be "Subsidiaries" of such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA; or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) a complete or partial withdrawal by any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; or (d) the filing of a notice of intent to terminate any ERISA Plan or Multiemployer Plan or the treatment of any ERISA Plan amendment or Multiemployer Plan amendment as a termination under Section 4041 or 4041A of ERISA; or (e) the institution of proceedings to terminate any ERISA Plan or Multiemployer Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA; or (f) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan or Multiemployer Plan.
"Total Capitalization" means the sum (without duplication) of
(a) US Borrower's Consolidated Total Funded Debt plus (b) US Borrower's
Consolidated shareholder's equity plus (c) 60% of the outstanding balance of the
Devon Trust Securities. Total Capitalization shall be calculated excluding
non-cash write-downs and related charges which are required under Rule 4-10
(Financial Accounting and Reporting for Oil and Gas Producing Activities
Pursuant to the Federal Securities Laws and the Energy Policy and Conservation
Act of 1975) of Regulation S-X promulgated by Securities and Exchange Commission
Regulation, or by US GAAP.
"Total Funded Debt" means (a) Liabilities referred to in clauses (a), (b), (c), (d) and (e) of the definition of "Indebtedness", plus (b) 40% of the outstanding balance of the Devon Trust Securities. Total Funded Debt shall not include the PennzEnergy Exchangeable Debentures.
"Tribunal" means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States of America or Canada or any state, province, commonwealth, nation, territory, possession, county, parish, town, township, village or municipality, whether now or hereafter constituted or existing.
"Type" means the characterization of such Loans as either Base Rate Loans or Eurodollar Loans.
"UBS" means UBS AG, Stamford Branch.
"Unrestricted Subsidiary" means any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization (a) which is listed below in this definition, or (b) in which US Borrower did not own an interest (directly or indirectly) as of the Closing Date, which thereafter became a Subsidiary of US Borrower and which, within 90 days after becoming a Subsidiary of US Borrower, was designated as an Unrestricted Subsidiary by US Borrower to Administrative Agent; provided that in the event any such Subsidiary becomes a Material Subsidiary at any time, such Subsidiary shall cease to be an Unrestricted Subsidiary at such time and shall automatically become a Restricted Subsidiary. The following Subsidiaries of US Borrower shall initially be designated as Unrestricted Subsidiaries:
(1) 167496 Canada Ltd.
(2) 172173 Canada Inc.
(3) 410760 Alberta Ltd.
(4) 655945 Alberta Ltd.
(5) 658387 Alberta Inc.
(6) 659502 Alberta Inc.
(7) 661151 Alberta Ltd.
(8) 728098 Alberta Ltd.
(9) 746481 Alberta Ltd.
(10) 853843 Alberta Ltd.
(11) 892306 Alberta Ltd.
(12) Adobe Offshore Pipeline Company
(13) American Sulphur Export Corporation
(14) Amsulex, Inc.
(15) Azerbaijan International Operating Corporation
(16) B&N Co. A Limited Partnership
(17) Blackwood & Nichols Co. A Limited Partnership
(18) BN Coal, L.L.C.
(19) BN Non-Coal, L.L.C.
(20) Bonito Pipe Line Company
(21) Braemar Shipping Company Limited
(22) Cachuma Gas Processing Company
(23) Canadian Gas Gathering Systems II, Inc.
(24) Canoa Ranch Corporation
(25) Canyon Reef Carriers, Inc.
(26) Capitan Oil Pipeline Company
(27) Caspian International Petroleum Company
(28) Catclaw Pipeline, Inc.
(29) Ceara Star (Malta) Ltd.
(30) David Limited Partnership
(31) DBC, Inc.
(32) Devon Energy Petroleum Pipeline Company
(33) Devon Energy Offshore Pipeline Company
(34) Devon Acquisition Corp.
(35) Devon Energy Sinai, Inc.
(36) Devon Energy Intrastate Pipeline Company
(37) Devon Energy Brasil, Ltda.
(38) Devon Energy Suez, Inc.
(39) Devon Energy Red Sea, Inc.
(40) Devon Energy Egypt, Inc.
(41) Devon Energy International Company
(42) Devon Energy Partners A Limited Partnership
(43) Devon Energy Qatar Production, Inc.
(44) Devon Financing Trust
(45) Devon Energy Insurance Company Limited
(46) Devon Energy Canada, Ltd.
(47) Devon Production Corporation, a Nevada corporation
(48) Devon Energy Exploration Brazil, Inc.
(49) Devon Energy Caspian Corporation
(50) Devon Energy Canada Holding Corporation, an Alberta corporation
(51) Devon Energy Management Company, L.L.C.
(52) Devon Energy Beni Suef Inc.
(53) Devon-Blanco Company, an Oklahoma general partnership
(54) Fanar Petroleum Company
(55) Foothills Partnership
(56) Gulf Coast American Corp.
(57) Mexican Flats Service Company, Inc.
(58) Morrison Petroleums (Alberta) Ltd.
(59) Morrison Petroleums, Ltd.
(60) Morrison Gas Gathering Inc.
(61) Morrison Administration Corporation
(62) Morrison Nuclear Inc.
(63) Morrison Operating Company Ltd.
(64) Mountain Energy Inc.
(65) Northstar Energy Partnership
(66) Northstar Energy Inc.
(67) Northstar Energy Cogeneration Partnership #2
(68) Nueces Intrastate Pipe Line Company
(69) PennzEnergy (U.K.) Company
(70) Pennzoil Caspian Development Corporation
(71) Pennzoil Energy Marketing Company
(72) Pennzoil Qatar Inc.
(73) Pennzoil Gas Marketing Company (74) Pennzoil Asiatic Inc. (75) Pennzoil Petroleums Ltd. (76) Pennzoil Resources Canada Ltd. (77) Pennzoil Venezuela Corporation SA (78) Pepco Partners, L.P. (79) Petrolera Santa Fe (Colombia), Ltd. (80) Polar Energy Marketing Corporation (81) Richland Development Corporation (82) Richland Properties Company, L.L.C. (83) Richland Translation Company (84) Sage Creek Processors, L.L.C. (85) Santa Fe Energy Resources of Malaysia, Ltd. (86) Santa Fe Energy Resources (Thai Holding), Ltd. (87) Santa Fe Energy Resources South East Asia Limited (88) Santa Fe Energy Resources Gabon (Agali), Ltd. (89) Santa Fe Energy Resources (Bermuda) Limited (90) Santa Fe Energy Resources (Brazil Holdings I), Ltd. (91) Santa Fe Energy Resources Port Bouet Ltd. (92) Santa Fe Energy Resources Bangkok Ltd. (93) Santa Fe Energy Resources Kepala Burung Limited (94) Santa Fe Energy Resources of Gabon, Ltd. (95) Santa Fe Platform Management, Inc. (96) Santa Fe Energy Resources (Brazil Holdings II), Ltd. (97) Santa Fe Energy Resources (New Ventures IV), Ltd. (98) Santa Fe Energy Resources (Jabung), Ltd. (99) Santa Fe Energy Company of Argentina (100) Santa Fe Energy Resources of Bolivia, Inc. (101) Santa Fe Energy Resources of Peru, Ltd. (102) Santa Fe Energy Resources of Myanmar, Ltd. (103) Santa Fe Energy Resources of Canada, Inc. (104) Santa Fe Energy Resources (New Ventures III), Ltd. (105) Santa Fe Energy Resources of Gabon (Mondah Bay), Ltd. (106) Santa Fe Energy Resources (Cote D'Ivoire) Ltd. (107) Santa Fe Energy Resources Congo, Ltd. (108) Santa Fe Energy Resources (Thailand), Ltd. (109) Santa Fe Energy Resources Limited (110) Santa Fe Energy Resources (New Ventures II), Ltd. (111) Santa Fe Energy Resources International, Ltd. (112) Santa Fe Energy Resources of Ghana, Ltd. (113) Santa Fe Energy Resources (Delaware), Ltd. (114) Santa Fe Pacific Fuels Company (115) Santa Fe Energy Resources of China, Ltd. (116) Santa Fe Energy Resources of Morocco, Ltd. (117) Santa Fe Energy Resources Pagatan Ltd. (118) Security Purchasing, Inc. |
-30- (119) SFERI, Inc. (120) SFR Petroleo Do Brazil Ltda. (121) SFS (International), Ltd. (122) SFS Malta Holding Company Ltd. (123) SFS (France) SARL (124) SFS Malta One, Inc. (125) SFS (Holdings), Ltd. (126) SFS Malta Two, Inc. (127) SFS Malta International Trading Company Ltd. (128) Sisquoc Gas Pipeline Company (129) Snyder Gas Marketing, Inc. (130) Snyder Fluid Technology, Inc. (131) SOCO International Holdings, Inc. (132) SOCO Louisiana Leasing, Inc. (133) SOCO Gas Systems, Inc. (134) SOCO International, Inc. (135) SOCO Technologies, Inc. (136) Strategic Trust Company (137) Thunder Creek Gas Services, L.L.C. (138) Tiburon Transport Company (139) Trend Exploration (PNG) Party Ltd. (140) Trend Argentina S.A. (141) Vermejo Park Corporation (142) Vermejo Minerals Corporation (143) Wyoming Gathering and Production Company, Inc. (144) Tall Grass Services, L.L.C. (145) Devon Energy Charitable Foundation (146) Canadian Mustang Energy Inc. |
"US Account" means an account established by Administrative Agent in New York into which funds to be advanced to Canadian Borrower by Lenders in US Dollars and funds to be paid by Canadian Borrower to Lenders in US Dollars will be deposited.
"US Dollar" or "$" means the lawful currency of the United States of America.
"US GAAP" means those generally accepted accounting principles and practices which are recognized as such from time to time by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of US Borrower and its Consolidated Subsidiaries, are applied for all periods after the Closing Date in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements.
ARTICLE III
PAYMENTS TO LENDERS
Section 3.1. General Procedures. Each payment in respect of
the Loans or Commitments shall be made by or on behalf of the Applicable
Borrower to Administrative Agent for the account of the Lender Party to whom
such payment is owed, in lawful money of the United States of America, without
set-off, deduction or counterclaim, except as otherwise provided in Section 3.9,
and in immediately available funds. Each such payment must be received by
Administrative Agent not later than 11:00 a.m., New York City time, on the date
such payment becomes due and payable. Any payment received by Administrative
Agent after such time will be deemed to have been made on the next following
Business Day. Should any such payment become due and payable on a day other than
a Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day, and, in the case of a payment of principal or past due
interest, interest shall accrue and be payable thereon for the period of such
extension as provided in the Loan Document under which such payment is due. Each
payment under a Loan Document shall be due and payable at the place provided
therein and, if no specific place of payment is provided, shall be due and
payable at the place of payment of Administrative Agent's Note. When
Administrative Agent collects or receives money on account of the Obligations,
Administrative Agent shall distribute all money so collected or received by 2:00
p.m. New York City time on the Business Day received, if received by 11:00 a.m.,
New York City time, otherwise on the day of deemed receipt, and each Lender
Party shall apply all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Administrative Agent under Section 6.9
or 10.4, then to any reimbursement due any other Lender Party under
Section 10.4, and then to the partial payment of all other Obligations
then due in proportion to the amounts thereof, or as Lender Parties
shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents (other than principal of the Loans) if so specified by the Applicable Borrower;
(c) then for the prepayment of principal of the Loans, together with accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Loan shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Sections 1.6 and 2.1. All distributions of amounts described in any of clauses (b), (c) and (d) of the sentence immediately prior to the preceding sentence shall be made by Administrative Agent pro rata to each Lender Party then owed Obligations described in such clauses in proportion to all amounts owed to all Lender Parties which are described in such clauses.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable Law, rule, or regulation, or any change in any applicable Law, rule, or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender Party (or its Applicable Lending Office) with any request or directive (whether or not having the force of Law) of any such Governmental Authority, central bank, or comparable agency (the occurrence of any of the foregoing events being referred to as a "Change in Law"):
(i) shall subject such Lender Party (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Loans, or its obligation to make Eurodollar Loans, or change the basis of taxation of any amounts payable to such Lender Party (or its Applicable Lending Office) under any Loan Document in respect of any Eurodollar Loans (other than taxes (including franchise taxes) imposed on the overall net income of such Lender Party by the jurisdiction in which such Lender Party has its principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender Party (or its Applicable Lending Office), including the commitment of such Lender Party hereunder; or
(iii) shall impose on such Lender Party (or its Applicable Lending Office) or the London interbank market any other condition affecting any Loan Document or any of such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender Party (or its Applicable Lending Office) of making, converting into, continuing, or maintaining any Eurodollar Loans or to reduce any sum received or receivable by such Lender Party (or its Applicable Lending Office) under this Agreement or its Notes with respect to any Eurodollar Loans, then the Applicable Borrower shall pay to such Lender Party on demand such amount or amounts as will compensate such Lender Party for such increased cost or reduction. If any Lender Party requests compensation by the Applicable Borrower under this Section 3.2(a), such Borrower may, by notice to such Lender Party (with a copy to Administrative Agent), suspend the obligation of such Lender Party to make or continue Loans of the Type with respect to which such compensation is requested, or to convert Loans of any other Type into Loans of such Type, until the condition or event giving rise to such request ceases to be in effect (in which case the provisions of Section 3.5 shall be applicable); provided that such suspension shall not affect the right of such Lender Party to receive the compensation so requested.
(b) If, after the date hereof, any Lender Party shall have determined that the adoption of any applicable Law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of Law) of any such Governmental
Authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender Party or any corporation controlling such Lender Party as a consequence the obligations of such Lender Party hereunder to a level below that which such Lender Party or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand the Applicable Borrower shall pay such Lender Party such additional amount or amounts as will compensate such Lender Party for such reduction, but only to the extent that such Lender Party has not been compensated therefor by any increase in the Adjusted Eurodollar Rate; provided that if such Lender Party fails to give notice to the Applicable Borrower or Borrowers of any additional costs within ninety (90) days after it has actual knowledge thereof, such Lender Party shall not be entitled to compensation for such additional costs incurred more than ninety (90) days prior to the date on which notice is given by such Lender Party.
(c) Each Lender Party shall promptly notify Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender Party to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender Party, be otherwise disadvantageous to it. Any Lender Party claiming compensation under this Section shall furnish to Borrowers and Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender Party shall act in good faith and may use any reasonable averaging and attribution methods.
Section 3.3. Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Eurodollar Loan:
(a) Administrative Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall be conclusive) and notify Administrative Agent that the Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Loans for such Interest Period,
then Administrative Agent shall give the Applicable Borrower prompt notice thereof specifying the relevant amounts or periods, and so long as such condition remains in effect, the Lender Parties shall be under no obligation to make additional Eurodollar Loans, continue Eurodollar Loans or convert Base Rate Loans into Eurodollar Loans, and the Applicable Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or convert such Loans into Base Rate Loans in accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender Party or its Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such Lender Party shall promptly notify the Applicable Borrowers thereof and such Lender Party's obligation to make or continue Eurodollar Loans, as the case may be, and to convert Base Rate Loans into Eurodollar Loans, shall be suspended until such
time as such Lender Party may again make, maintain, and fund the Eurodollar Loans (in which case the provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any Lender Party to make a particular Type of Loan or to continue, or to convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to Section 3.2, 3.3 or 3.4 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender Party's Affected Loans shall be automatically converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 3.4 hereof, on such earlier date as such Lender Party may specify to the Applicable Borrower with a copy to Administrative Agent) and, unless and until such Lender Party gives notice as provided below that the circumstances specified in Section 3.2, 3.3 or 3.4 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender Party's Affected Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender Party's Affected Loans shall be applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such Lender Party as Loans of the Affected Type shall be made or continued instead as Base Rate Loans and all Loans of such Lender Party that would otherwise be converted into Loans of the Affected Type shall be converted instead into (or shall remain as) Base Rate Loans.
If such Lender Party gives notice to the Applicable Borrower (with a copy to Administrative Agent) that the circumstances specified in Section 3.2, 3.3 or 3.4 hereof that gave rise to the Conversion of such Lender Party's Affected Loans pursuant to this Section no longer exist (which such Lender Party agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lender Parties are outstanding, such Lender Party's Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lender Parties holding Loans of the Affected Type and by such Lender Party are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their Percentage Shares.
Section 3.6. Compensation. Upon the request of any Lender Party, the applicable Borrower shall pay to such Lender Party such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender Party) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan, for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 8.1) on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by such Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Article IV to be satisfied) to borrow, convert, continue, or prepay a Eurodollar Loan, on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement.
Section 3.7. Change of Applicable Lending Office. Each Lender Party agrees that, upon the occurrence of any event giving rise to the operation of Sections 3.2 through 3.5 with respect to such Lender Party, it will, if requested by the Applicable Borrower, use reasonable efforts (subject to overall policy considerations of such Lender Party) to designate another Applicable Lending Office, provided that such designation is made on such terms that such Lender Party and its Applicable Lending Office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such section. Nothing in this section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender Party provided in Sections 3.2 through 3.5.
Section 3.8. Replacement of Lenders. If (i) any Lender Party seeks reimbursement for increased costs under Sections 3.2 through 3.5, or if a Borrower is required to increase any such payment under Section 3.9 or (ii) any Lender has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 10.1 requires the consent of all of the Lenders and with respect to which the Required Lenders shall have granted their consent, then within ninety days thereafter, -- provided no Event of Default then exists -- US Borrower shall have the right (unless such Lender Party withdraws its request for additional compensation or grants such consent) to replace such Lender Party by requiring such Lender Party to assign its Loans and Notes, and its Commitments hereunder to an Eligible Transferee reasonably acceptable to all Borrowers, provided that: (a) all Obligations of Borrowers owing to such Lender Party being replaced (including such increased costs, but excluding principal and accrued interest on the Notes being assigned) shall be paid in full to such Lender Party concurrently with such assignment, and (b) the replacement Eligible Transferee shall purchase the foregoing by paying to such Lender Party a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment the applicable Borrower, Administrative Agent, such Lender Party and the replacement Eligible Transferee shall otherwise comply with Section 10.6. Notwithstanding the foregoing rights of Borrowers under this section, however, a Borrower may not replace any Lender Party which seeks reimbursement for increased costs under Sections 3.2 through 3.5 unless such Borrower is at the same time replacing all Lender Parties which are then seeking such compensation. In connection with any such replacement of a Lender Party, Borrowers shall pay all costs that would have been due to such Lender Party pursuant to Section 3.6 if such Lender Party's Loans had been prepaid at the time of such replacement.
Section 3.9. Taxes.
(a) Except as otherwise provided herein, any and all payments by any Borrower to or for the account of any Lender Party or Administrative Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the Laws of which such Lender Party (or its Applicable Lending Office) or the Administrative Agent is organized or is a resident for tax purposes or any political subdivision thereof or by any other jurisdiction, as a result of a
present or former connection between such Lender Party or the Administrative Agent (or any Applicable Lending Office, branch or affiliate of such Lender Party or the Administrative Agent) and such other jurisdiction, other than a connection with such other jurisdiction solely by reason of making the Loans hereunder, the receipt of payments in respect of such Loans or the enforcement of any rights of such Lender Party or the Administrative Agent in respect of such Loans (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter in this Section 3.9 referred to as "Taxes"). Except as otherwise provided herein, if a Borrower shall be required by Law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender Party, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this section) such Lender Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law.
(b) In addition, each Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter in this Section 3.9 referred to as "Other Taxes").
(c) Each Borrower agrees to indemnify each Lender Party and Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this section) paid by such Lender Party or Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses, other than penalties and interest (i) that accrued during any periods of time beginning on the 10th Business Day following the day on which the Lender Party or Administrative Agent, as applicable, has actual knowledge of the imposition or assertion of such Taxes or Other Taxes, and ending on the Business Day on which the Lender Party or Administrative Agent, as applicable, delivers notice thereof to the Borrower and enables the Borrower to make payment thereof on behalf of such Lender Party or the Administrative Agent (including the delivery to the Borrowers of any relevant documentation and consents) or (ii) that are otherwise imposed or asserted on account of the bad faith or willful misconduct of such Lender Party or Administrative Agent) arising therefrom or with respect thereto. For purposes of this Section 3.9(c), "Taxes" and "Other Taxes" shall not include any penalties, interest or expenses described in the third parenthetical of the immediately preceding sentence. Any Lender Party or Administrative Agent claiming such indemnification shall do so by making written demand therefor, accompanied by a calculation in reasonable detail of the amount demanded and evidence of the Taxes or Other Taxes paid by the Administrative Agent or such Lender Party.
(d) Each Lender Party that is, or is treated for U.S. tax purposes as, a Person organized under the Laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender Party listed on the signature pages hereof and on or prior to the date on which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by the Applicable Borrower or Administrative Agent (but only so long as such Lender Party remains lawfully able to do so), shall provide
the Applicable Borrower and Administrative Agent with a properly executed (i) Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is entitled to benefits under an income tax treaty to which the United States is a party which eliminates U.S. withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, or (ii) any other form or certificate required by any United States taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code) or, at the reasonable request of a Borrower, any other form or certificate required by any other taxing authority that such Lender Party is legally entitled to deliver, in each case certifying or establishing that such Lender Party is entitled to an exemption (or in the case of a form or certificate of a non-U.S. taxing authority, a reduced rate of withholding) from tax on payments pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender Party (x) has failed to provide the Applicable Borrower and Administrative Agent with the appropriate form pursuant to Section 3.9(d) (unless such failure is due to a change in treaty, Law, or regulation occurring subsequent to the date on which a form originally was required to be provided), (y) provides the Applicable Borrower and Administrative Agent with forms, certificates, information or documentation that contains any information that is untrue or inaccurate in any material respect as of the date of delivery, or (z) constitutes a "conduit entity" within the meaning of U.S. Treasury Regulations Section 1.881-3 (or any successor provision), such Lender Party shall not be entitled to payments of any additional amounts or indemnification under Section 3.9(a), 3.9(b) or 3.9(c) with respect to Taxes imposed by the United States to the extent resulting from the facts described in clauses (x), (y) and (z); provided, however, that should a Lender Party which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required hereunder, US Borrower shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes, provided, however, that US Borrower shall not be required to take any such steps as it determines, in its reasonable judgment, would be disadvantageous to it. Further, the Applicable Borrower shall not be required to indemnify such Lender Party for such withholding taxes which the Applicable Borrower is required to withhold and remit in respect of any principal, interest or other amount paid or payable by the Applicable Borrower to or for account of any Lender Party hereunder or under any other Loan Document.
(f) If a Borrower is required to pay additional amounts to or for the account of any Lender Party pursuant to this Section 3.9, then such Lender Party will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office or to assign its Commitments and any Loans made thereunder to an Affiliate so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender Party, is not otherwise disadvantageous to such Lender Party and in the event the Lender Party is reimbursed for an amount paid by a Borrower pursuant to this Section 3.9, it shall promptly return such amount to such Borrower.
(g) Each Lender Party agrees to indemnify and hold harmless each Borrower from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Applicable Borrower as a result of the failure of the Applicable Borrower to withhold any Taxes imposed by the United States or any
other jurisdiction at the appropriate rate from any payments made pursuant to this Agreement to such Lender Party or Administrative Agent, which failure resulted from the Applicable Borrower's reliance on any form, statement, certificate or other information provided to it by such Lender Party pursuant to clause (d) of this Section 3.9.
(h) If any Lender Party or Administrative Agent, as the case may be, receives a refund of any Taxes for which a payment or indemnification has been made by the Applicable Borrower, then such Lender Party or Administrative Agent, as the case may be, shall reimburse the Applicable Borrower for such amount as such Lender Party or Administrative Agent, as the case may be, determines to be the portion of the refund as will leave it, after such reimbursement, in no better or worse position than it would have been if the Tax giving rise to the payment or indemnification had not been imposed and the corresponding additional amount or indemnification payment not been made. No Lender Party nor Administrative Agent shall be obligated to disclose the information regarding its tax affairs or computations to a Borrower in connection with its obligations under this clause (h).
(i) Within thirty (30) days after the date of any payment of Taxes, the applicable Borrower shall furnish to Administrative Agent the original or a certified copy of a receipt evidencing such payment.
(j) Without prejudice to the survival of any other agreement of Borrowers hereunder, the agreements and obligations of Borrowers contained in this section shall survive the termination of the Facility Commitment Period and the payment in full of the Loans.
ARTICLE IV
CONDITIONS PRECEDENT TO LENDING
Section 4.1. Documents to be Delivered. No Lender has any obligation to make its first Loan unless Administrative Agent shall have received all of the following, at Administrative Agent's office in Stamford, Connecticut, duly executed and delivered and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to execute in connection herewith.
(b) To the extent requested by a Lender, each Note issuable to such Lender hereunder.
(c) The Guaranties of US Borrower and Canadian Borrower.
(d) The following certificates of each Borrower:
(i) An "Omnibus Certificate" of the Secretary or Assistant Secretary and of the Chairman of the Board, President or Senior Vice President - Finance of such Borrower, which shall contain the names and signatures of the officers of such Borrower authorized to execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors of such Borrower and in full force and effect at the time this Agreement is entered into, authorizing the execution of this Agreement and the other Loan Documents delivered or to be delivered in connection herewith and the consummation of the transactions contemplated herein and therein, (2) a copy of the charter documents of such Borrower and all amendments thereto, certified by the appropriate official of its jurisdiction of organization, and (3) a copy of the bylaws of such Borrower or comparable organizational document; and
(ii) A "Compliance Certificate" of the Senior Vice President - Finance and of the Treasurer or Vice President - Accounting of such Borrower, of even date with such Loan, in which such officers certify to the satisfaction of the conditions set out in subsections (a) and (b) of Section 4.6.
(e) Certificate (or certificates) of the due formation, valid existence and good standing (or equivalent status) of each Borrower in its jurisdiction of organization, issued by the appropriate official of such jurisdiction.
(f) A favorable opinion of Mayer, Brown & Platt, counsel for US Borrower, substantially in the form set forth in Exhibit E-1, and a favorable opinion of Stewart McKelvey Stirling Scales, counsel for Canadian Borrower, substantially in the form of Exhibit E-2.
(g) The Initial Financial Statements.
Section 4.2. Additional Conditions Precedent to First Loan. No Lender has any obligation to make its first Loan unless on the date thereof:
(a) All commitment, facility, agency, legal and other fees required to be paid or reimbursed to any Lender prior to the requested date of such Loan pursuant to any Loan Documents or any commitment agreement heretofore entered into shall have been paid.
(b) US Borrower shall have certified to Administrative Agent and Lenders that the Initial Financial Statements fairly present US Borrower's Consolidated financial position at the respective dates thereof and the Consolidated results of US Borrower's operations and US Borrower's Consolidated cash flows for the respective periods thereof.
(c) All legal matters relating to the Loan Documents and the consummation of the transactions contemplated thereby shall be satisfactory to Cahill Gordon & Reindel, counsel to Administrative Agent.
Section 4.3. Conditions to Initial Mitchell Loans. No Lender has any obligation to make the initial Mitchell Loan unless on the date thereof:
(a) The structure, terms and conditions of the Mitchell Acquisition, the Mitchell Merger Agreement and the Mitchell Merger have not changed from those in the Mitchell Merger Agreement as in effect on the date hereof in any material respect that could reasonably be expected to be adverse to the Lenders.
(b) To the extent reasonably requested by the Arrangers, the Arrangers shall have received copies, certified by US Borrower, of all filings made with any governmental authority in connection with the Mitchell Merger.
(c) The Mitchell Merger Agreement includes, without limitation, conditions to the effect that any "poison pill" or similar security or contractual arrangement of Mitchell or any statutory provisions restricting the ability of the US Borrower to effect the Mitchell Merger and other provisions of law which could reasonably be expected to materially impede or delay the Mitchell Merger or result in a Material Adverse Effect on the US Borrower or Mitchell have been effectively rendered inapplicable to the Mitchell Merger.
(d) The Lenders shall have received an internally prepared, unaudited pro forma Consolidated balance sheet and income statement of the US Borrower and its Consolidated subsidiaries as of June 30, 2001 after giving effect to the Acquisitions and the financings therefor and, if requested by the Arrangers, updates thereof for any quarter that has ended at least 45 days prior to the Mitchell Merger Closing Date.
(e) Simultaneously with the making of the initial Mitchell Loan, the Mitchell Merger shall have been consummated in all material respects in accordance with the terms of the Mitchell Merger Agreement, and all conditions in the Mitchell Merger Agreement and related documents that are to be satisfied at the Mitchell Merger Closing Date shall have been satisfied, and not waived, amended, supplemented or otherwise modified in any material respect except with the consent of the Arrangers (which consent shall not be unreasonably withheld or delayed and which shall be deemed to have been given if after notification of any such waiver, amendment, supplement or modification the Arrangers have not objected to a specific amendment, supplement or modification in writing within one Business Day of such notification to Administrative Agent and Borrowers).
(f) The Mitchell Merger, the Mitchell Acquisition, the making of the Mitchell Loans and the other transactions contemplated hereby with respect to the Mitchell Acquisition are in full compliance with all legal requirements, including without limitation and to the extent applicable Regulations T, U and X of the Board of Governors of the Federal Reserve System, and all necessary governmental and third party approvals in connection with such borrowings and the Mitchell Merger and the Mitchell Acquisition shall have been obtained and remain in effect (other than approvals the failure of which to obtain would not reasonably be expected to have a Material Adverse Effect on the US Borrower or Mitchell or to prevent the consummation of the Mitchell Merger).
Section 4.4. Conditions to Initial Anderson Loans. No Lender has any obligation to make the initial Anderson Loan unless on the date thereof:
(a) The structure, terms and conditions of the Anderson Acquisition, the Anderson Tender Offer and the Anderson Merger shall not have changed from those described in the Anderson Acquisition Agreement as in effect on the date hereof in any material respect that could reasonably be expected to be adverse to the Lenders.
(b) To the extent reasonably requested by the Arrangers, the Arrangers shall have received copies, certified by the US Borrower, of all filings made with any governmental authority in connection with the Anderson Acquisition.
(c) All Anderson Tendered Shares shall have been accepted for payment in accordance with the terms of the Anderson Tender Offer in an amount such that US Borrower shall, directly or indirectly, upon consummation of the Anderson Tender Offer, own and control not less than 66-2/3% of the Anderson Shares (on a fully diluted basis) or such greater amount as shall be necessary to effect a Second Stage Transaction.
(d) The Canadian Lenders shall have received an internally prepared, unaudited pro forma Consolidated balance sheet and income statement of the US Borrower and its Consolidated subsidiaries dated as of the quarter ended as of June 30, 2001 after giving effect to the Acquisitions and the financings therefor and, if requested by the Arrangers, updates thereof for any quarter that has ended at least 45 days prior to the Anderson Tender Offer Closing Date.
(e) The Anderson Tender Offer includes, without limitation, conditions to the effect that any "poison pill" or similar security or contractual arrangement of Anderson or any statutory provisions restricting the ability of the US Borrower to effect the Anderson Merger or other transaction with Anderson and other provisions of law which could reasonably be expected to materially impede or delay the Anderson Merger or result in a Material Adverse Effect on the US Borrower or Anderson have been effectively rendered inapplicable to the Anderson Tender Offer and the Anderson Merger.
(f) Simultaneously with the making of the initial Anderson Loan, the Anderson Tender Offer shall have been consummated in all material respects in accordance with the terms of the Anderson Acquisition Agreement and the other documents therefor, and all conditions that are to be satisfied at the Anderson Tender Offer Closing Date have been satisfied, and not waived, amended, supplemented or otherwise modified in any material respect except with the consent of the Arrangers (which consent shall not be unreasonably withheld or delayed and which shall be deemed to have been given if after notification of any such waiver, amendment, supplement or modification the Arrangers have not objected to a specific amendment, supplement or modification in writing within one Business Day of such notification to Administrative Agent and Borrowers).
(g) The Anderson Tender Offer, the Anderson Merger, the Anderson Acquisition, the making of the Anderson Loans and the other transactions contemplated hereby with respect to the Anderson Acquisition are in full compliance with all legal requirements, including without limitation and to the extent applicable, Regulations T, U and X of the Board of Governors of the Federal Reserve System, and all necessary governmental and third party approvals in connection with such borrowings and the Anderson Tender Offer, the Anderson Merger and the Anderson Acquisition shall have been obtained and remain in effect (other than approvals the failure of which to obtain would not reasonably be expected to have a Material Adverse Effect on any of the US Borrower or Anderson or to prevent the consummation of the Anderson Merger).
Section 4.5. Conditions Precedent to General Purpose Loans. No Lender has any obligation to make the initial General Purpose Loan unless on or before the date thereof an officer of the US Borrower delivers a certificate to Administrative Agent stating either (x) that the transactions and borrowings contemplated in connection with the Mitchell Available Amount and the Anderson Available Amount have been consummated to the extent required by Section 1.1(b) or (y) one of the Acquisitions has been abandoned and the transactions and borrowings in respect of the other Acquisition have been consummated to the extent required by Section 1.1(b).
Section 4.6. Additional Conditions Precedent to All Loans. No Lender has any obligation to make any Loan (including its first), unless the following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person in Sections 5.2 through 5.6, inclusive, and Sections 5.10 through 5.13, inclusive, of this Agreement or in any other Loan Document shall be true in all material respects on and as of the date of such Loan (except to the extent that the facts upon which such representations are based have been changed by the extension of credit hereunder) as if such representations and warranties had been made as of the date of such Loan.
(b) No Default shall exist at the date of such Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To confirm each Lender's understanding concerning Restricted Persons and Restricted Persons' businesses, properties and obligations and to induce each Lender to enter into this Agreement and to extend credit hereunder, each Borrower represents and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Borrower and each Material Subsidiary is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Borrower and each Material Subsidiary is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where failure to so qualify would not have a Material Adverse Effect. Each Borrower and each Material Subsidiary has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable except where failure to so qualify would not have a Material Adverse Effect.
Section 5.3. Authorization. Each Borrower has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder and each Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Loan Documents to which each is a party, the performance by each of its obligations under such Loan Documents, and the consummation of the transactions contemplated by the various Loan Documents, do not and will not (i) conflict with any provision of (A) any Law, (B) the organizational documents of any Restricted Person, or (C) any agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person unless such conflict would not reasonably be expected to have a Material Adverse Effect, or (ii) result in the acceleration of any Indebtedness owed by any Restricted Person which would reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation of any Lien upon any assets or properties of any Restricted Person which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents, no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents to which it is a party, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
Section 5.5. Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors' rights.
Section 5.6. Full Disclosure. No certificate, statement or other information delivered herewith or heretofore by any Restricted Person to any Lender in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact known to any Restricted Person (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein not misleading as of the date made or deemed made (provided that all such certificates, statements and other information is to be viewed in conjunction with the reports, statements, schedules and other information included in filings (collectively, "Securities Filings") made by the US Borrower, the Canadian Borrower, Mitchell or Anderson with the Securities and Exchange Commission or, to the extent publicly available, analogous Canadian Regulatory authorities). There is no fact known to any Restricted Person (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) that has not been disclosed to each Lender in writing or in one or more Securities Filings which would reasonably be expected to have a Material Adverse Effect.
Section 5.7. Litigation. Except as disclosed in the Initial Financial Statements, in the financial statements delivered to Administrative Agent and Lenders pursuant to Section 6.2, in the Disclosure Schedule or in a Disclosure Report, (a) there are no actions, suits or legal, equitable,
arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person before any Tribunal which would reasonably be expected to have a Material Adverse Effect, and (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any Restricted Person which would reasonably be expected to have a Material Adverse Effect.
Section 5.8. [Reserved]
Section 5.9. [Reserved]
Section 5.10. US Borrower's Subsidiaries. As of the date of this Agreement, US Borrower does not have any Material Subsidiaries except those listed in the Disclosure Schedule or in a Disclosure Report (it being understood that inclusion of a Subsidiary on the Disclosure Schedule does not mean that such Subsidiary is a Material Subsidiary). US Borrower owns, directly or indirectly, the equity interest in each of its Subsidiaries which is indicated in the Disclosure Schedule or in a Disclosure Report.
Section 5.11. Title to Properties; Licenses. Each Restricted Person has good and defensible title to all of its material properties and assets, free and clear of all Liens other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person's business except to the extent failure to have such title would not have a Material Adverse Effect. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter except to the extent failure to possess such licenses, permits, franchises, and intellectual property would not have a Material Adverse Effect, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property except to the extent any such violation would not have a Material Adverse Effect.
Section 5.12. Government Regulation. Neither US Borrower nor any other Restricted Person owing Obligations is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940 (as any of the preceding acts have been amended) or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.
Section 5.13. Solvency. Upon giving effect to the issuance of the Notes, the execution of the Loan Documents by each Borrower and the consummation of the transactions contemplated hereby, each Borrower will be solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws).
ARTICLE VI
AFFIRMATIVE COVENANTS OF BORROWERS
To conform with the terms and conditions under which each Lender is willing to have credit outstanding to US Borrower or Canadian Borrower, as the case may be, and to induce each Lender to enter into this Agreement and extend credit hereunder, each Borrower warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Required Lenders have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Borrower will pay all amounts due under the Loan Documents in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition expressed or implied in the Loan Documents. US Borrower will cause each other Restricted Person to observe, perform and comply with every such term, covenant and condition in any Loan Document.
Section 6.2. Books, Financial Statements and Reports. Each Restricted Person will at all times maintain full and accurate books of account and records. US Borrower will maintain and will cause its Subsidiaries to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish the following statements and reports to each Lender Party at US Borrower's expense:
(a) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, complete Consolidated financial
statements of US Borrower and its consolidated Subsidiaries together
with all notes thereto, prepared in reasonable detail in accordance
with US GAAP, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by KPMG Peat Marwick
L.L.P., or other independent certified public accountants selected by
the US Borrower and acceptable to Administrative Agent, stating that
such Consolidated financial statements have been so prepared. These
financial statements shall contain a Consolidated balance sheet as of
the end of such Fiscal Year and Consolidated statements of earnings, of
cash flows, and of changes in owners' equity for such Fiscal Year, each
setting forth in comparative form the corresponding figures for the
preceding Fiscal Year. In addition, within ninety (90) days after the
end of each Fiscal Year US Borrower will furnish to Administrative
Agent and each Lender a certificate in the form of Exhibit D signed by
the President, Senior Vice President - Finance, Treasurer or Vice
President - Accounting of US Borrower, stating that such financial
statements are accurate and complete, stating that such Person has
reviewed the Loan Documents, containing all calculations required to be
made to show compliance or non-compliance with the provisions of
Section 7.7, and further stating that there is no condition or event at
the end of such Fiscal Year or at the time of such certificate which
constitutes a Default and specifying the nature and period of existence
of any such condition or event.
(b) As soon as available, and in any event within forty-five
(45) days after the end of each Fiscal Quarter, US Borrower's
Consolidated balance sheet and income statement as of the end of such
Fiscal Quarter and a Consolidated statement of cash flows for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter, all in reasonable detail and prepared in
accordance with US GAAP, subject to changes resulting
from normal year-end adjustments. In addition US Borrower will, together with each such set of financial statements, furnish a certificate in the form of Exhibit D signed by the President, Senior Vice President - Finance, Treasurer or Vice President - Accounting of US Borrower stating that such financial statements are accurate and complete (subject to normal year-end adjustments), stating that such Person has reviewed the Loan Documents, containing all calculations required to be made by US Borrower to show compliance or non-compliance with the provisions of Section 7.7 and further stating that there is no condition or event at the end of such Fiscal Quarter or at the time of such certificate which constitutes a Default and specifying the nature and period of existence of any such condition or event.
(c) Promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent by any Restricted Person to its stockholders and all registration statements, periodic reports and other statements and schedules filed by any Restricted Person with any securities exchange, the Securities and Exchange Commission or any similar Governmental Authority, including any information or estimates with respect to US Borrower's oil and gas business (including its exploration, development and production activities) which are required to be furnished in US Borrower's annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
Section 6.3. Other Information and Inspections. Each Restricted Person will furnish to each Lender any information which Administrative Agent may from time to time reasonably request concerning any covenant, provision or condition of the Loan Documents or any matter in connection with Restricted Person's businesses and operations. Each Restricted Person will permit representatives appointed by Administrative Agent (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect upon prior written notice during normal business hours any of such Restricted Person's property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit Administrative Agent or its representatives to investigate and verify the accuracy of the information furnished to Administrative Agent or any Lender in connection with the Loan Documents and to discuss all such matters with its officers, employees and representatives.
Section 6.4. Notice of Material Events and Change of Address. Each Borrower will promptly notify each Lender in writing, stating that such notice is being given pursuant to this Agreement, of:
(a) the occurrence of any event which would have a Material Adverse Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any Restricted Person having a principal balance of more than $150,000,000, or of any default by any Restricted Person under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound, if such default would have a Material Adverse Effect,
(d) the occurrence of any Termination Event which could reasonably be expected to cause (i) the total amount of withdrawal liability that would be incurred by all ERISA Affiliates upon their complete withdrawal from all Multiemployer Plans to exceed $250,000,000, or (ii) the aggregate Liabilities of the ERISA Affiliates to ERISA Plans to exceed $250,000,000,
(e) any claim of $250,000,000 or more, any notice of potential liability under any Environmental Laws which might exceed such amount, or any other material adverse claim asserted against any Restricted Person or with respect to any Restricted Person's properties, and
(f) the filing of any suit or proceeding against any Restricted Person in which an adverse decision would reasonably be expected to have a Material Adverse Effect.
Section 6.5. Maintenance of Properties. Each Restricted Person will maintain, preserve, protect, and keep all property used or useful in the conduct of its business in good condition, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be promptly and advantageously conducted at all times except to the extent failure to do so would not reasonably be expected to have a Material Adverse Effect.
Section 6.6. Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable Law, except where the failure so to qualify will not have a Material Adverse Effect.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted Person will (a) timely file all required tax returns; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property; and (c) maintain appropriate accruals and reserves for all of the foregoing in accordance with US GAAP. Each Restricted Person may, however, delay paying or discharging any of the foregoing so long as it is in good faith contesting the validity thereof by appropriate proceedings and has set aside on its books adequate reserves therefor.
Section 6.8. Insurance. Each Restricted Person will keep or cause to be kept insured in accordance with industry standards by financially sound and reputable insurers, its surface equipment and other property of a character usually insured by similar Persons engaged in the same or similar businesses.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other amounts it is required to pay under any Loan Document, Administrative Agent, may pay the same, and shall use its best efforts to give at least five (5) Business Days' notice to each Borrower prior to making any such payment; provided, however, that any failure by Administrative Agent to so notify each Borrower shall not limit or otherwise impair Administrative Agent's ability to make any such payment. Each Borrower shall immediately reimburse Administrative Agent for any such payments and each amount paid by Administrative
Agent shall constitute an Obligation owed hereunder which is due and payable on the date such amount is paid by Administrative Agent.
Section 6.10. Interest. The Applicable Borrower hereby promises to each Lender Party to pay interest at the Default Rate on all Obligations (including Obligations to pay fees or to reimburse or indemnify any Lender) which the Applicable Borrower has in this Agreement promised to pay to such Lender Party and which are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid.
Section 6.11. Compliance with Law. Each Restricted Person will conduct its business and affairs in compliance with all Laws applicable thereto except to the extent failure to do so would not reasonably be expected to have a Material Adverse Effect.
Section 6.12. Environmental Matters.
(a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Restricted Person, as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect, unless such failure to so comply or so obtain would not reasonably be expected to have a Material Adverse Effect.
(b) US Borrower will promptly furnish to Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by US Borrower or Canadian Borrower, or of which it has notice, pending or threatened against any Restricted Person, by any Governmental Authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with its ownership or use of its properties or the operation of its business which involve a potential liability or claim in excess of $250,000,000.
Section 6.13. Bank Accounts; Offset. Each Borrower hereby agrees that each Lender shall have the right to offset, which shall be in addition to all other interests, liens, and rights of any Lender at common Law, under the Loan Documents, or otherwise, (a) any and all moneys, securities or other property (and the proceeds therefrom) of such Borrower now or hereafter held or received by or in transit to such Lender for the account of such Borrower, (b) any and all deposits (general or special, time or demand, provisional or final) of such Borrower with such Lender, (c) any other credits and balances of such Borrower at any time existing against such Lender, including claims under certificates of deposit, and (d) any Indebtedness owed or payable by such Lender to such Borrower against Obligations due to it that have not been paid when due. At any time and from time to time after the occurrence of any Event of Default and during the continuance thereof, each Lender is hereby authorized to offset against the Obligations then due and payable to it (in either case without notice to either Borrower), any and all items hereinabove referred to. To the extent that either Borrower has accounts designated as royalty or joint interest owner accounts, the foregoing right of offset shall not extend to funds in such accounts which belong to, or otherwise arise from payments to such Borrower for the account of, third party royalty or joint interest owners.
ARTICLE VII
NEGATIVE COVENANTS OF BORROWERS
To conform with the terms and conditions under which each Lender is willing to have credit outstanding to US Borrower or Canadian Borrower, as the case may be, and to induce each Lender to enter into this Agreement and make the Loans, each Borrower warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Required Lenders have previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Subsidiary will in any manner owe or be liable for Indebtedness except:
(a) with respect to Canadian Borrower, (i) its Obligations hereunder and (ii) so long as the Devon Financing Guaranty is in effect, (A) the Indebtedness in respect of the Devon Financing Debentures and the Devon Financing Guaranty and (B) guaranties by the Canadian Borrower of Indebtedness of the US Borrower which is otherwise permitted to be incurred by the US Borrower in accordance with this Agreement.
(b) capital lease obligations (excluding oil, gas or mineral leases) entered into in the ordinary course of such Restricted Person's business in arm's length transactions at competitive market rates under competitive terms and conditions in all respects, provided that such capital lease obligations required to be paid in any Fiscal Year do not in the aggregate exceed $50,000,000 for all Restricted Subsidiaries.
(c) unsecured Liabilities owed among Restricted Persons; provided, that Liabilities owed by any Restricted Subsidiary to US Borrower may be secured by any and all assets of such Restricted Subsidiary.
(d) guaranties by one Restricted Person of Liabilities owed by another Restricted Person, if such Liabilities either (i) are not Indebtedness, or (ii) are allowed under subsection (a), (b) or (c) of this Section 7.1.
(e) Indebtedness of the Restricted Persons for plugging and abandonment bonds or for letters of credit issued by any Lender in place thereof which are required by regulatory authorities in the area of operations, and Indebtedness of the Restricted Persons for other bonds or letters of credit issued by any Lender which are required by such regulatory authorities with respect to other normal oil and gas operations.
(f) non-recourse Indebtedness as to which no Restricted Person
(i) provides any guaranty or credit support of any kind (including any
undertaking, guarantee, indemnity, agreement or instrument that would
constitute Indebtedness) or (ii) is directly or indirectly liable (as a
guarantor or otherwise); provided, that after giving effect to such
Indebtedness outstanding from time to time, US Borrower is not in
violation of Section 7.7.
(g) Indebtedness that is subordinated to the Obligations on terms acceptable to Required Lenders.
(h) Indebtedness in the approximate amount of C$3,459,000 owed to Indeck Gas Supply Corporation by Northstar Energy pursuant to a Gas Sales and Purchase Agreement dated as of March 9, 1989, as heretofore or hereafter amended from time to time.
(i) Acquired Debt.
(j) Indebtedness under Hedging Contracts.
(k) Indebtedness relating to the surety bonds and letter of credit obligations (including replacements thereof) listed on Schedule 2.
(l) Indebtedness relating to the undrawn amount of surety bonds and letters of credit (exclusive of the surety bonds and letters of credit obligations described in clause (k) above) incurred in the ordinary course of business not to exceed 2% of Consolidated Assets at any time.
(m) Indebtedness arising under the Devon Trust Securities.
(n) Indebtedness under the Existing Canadian Credit Facility as in effect on the date hereof or as the same may be amended, supplemented or modified from time to time or extended, renewed, restructured, refinanced or replaced so long as the aggregate principal amount outstanding at any time under this subsection (n) does not exceed $750.0 million.
(o) Indebtedness outstanding on the Closing Date or thereafter incurred pursuant to funding commitments in existence on the Closing Date and listed in Schedule 7.1 hereto, as the same may be amended, supplemented or modified from time to time or extended, renewed, restructured, refinanced or replaced, so long as the aggregate principal amount outstanding at any time under this subsection (o) does not exceed the sum of such Indebtedness and commitments on the Closing Date.
(p) miscellaneous items of Indebtedness of all Restricted Persons not otherwise permitted in subsections (a) through (o) which do not in the aggregate exceed $800,000,000 in principal amount at any one time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted Liens, no Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires. No Restricted Person will allow the filing or continued existence of any financing statement describing as collateral any assets or property of such Restricted Person, other than financing statements which describe only collateral subject to a Lien permitted under this Section 7.2 and which name as secured party or lessor only the holder of such Lien.
Section 7.3. Limitation on Mergers. No Restricted Person will merge with or into or consolidate with any other Person except that any Restricted Subsidiary of US Borrower may be merged into or consolidated with (a) another Subsidiary of US Borrower so long as the surviving
business entity of such merger or consolidation is a Restricted Subsidiary, or
(b) US Borrower, so long as US Borrower is the surviving business entity.
Section 7.4. Limitation on Issuance of Securities by Subsidiaries of US Borrower; Ownership of Certain Restricted Subsidiaries by US Borrower.
(a) No Restricted Subsidiary of US Borrower will issue any
additional shares of its capital stock, additional partnership interests or
other securities or any options, warrants or other rights to acquire such
additional shares, partnership interests or other securities except to another
Restricted Person which is a wholly-owned direct or indirect Subsidiary of US
Borrower unless (i) such securities are being issued to acquire a business,
directly or indirectly through the use of the proceeds of such issuance, and
(ii) such securities are convertible into the common or similar securities of US
Borrower and/or may be redeemed in cash at the option of the Restricted Person
that issued such securities. Notwithstanding the foregoing, this Section 7.4
shall not prohibit any transaction permitted pursuant to Section 7.4 of the
Existing US Credit Facility as in effect on the date hereof whether or not
terminated.
(b) US Borrower shall never own (directly or indirectly) less than one hundred percent (100%) of the outstanding capital stock of Canadian Borrower having ordinary voting power (disregarding changes in voting power based on the occurrence of contingencies) for the election of directors.
Section 7.5. Transactions with Affiliates. No Restricted Person will engage in any material transaction with any of its Affiliates on terms which are less favorable in any material respect to it than those which would have been obtainable at the time in arm's-length dealing with Persons other than such Affiliates, provided that such restriction shall not apply to transactions among Borrower and the other Restricted Persons that are wholly-owned, directly or indirectly, by US Borrower.
Section 7.6. Prohibited Contracts. Except as expressly provided for in the Loan Documents, the Support Agreement dated December 10, 1998 between US Borrower and Northstar Energy and in documents and instruments evidencing or governing Indebtedness (or commitments with respect thereto) in existence on the date hereof or Acquired Debt, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Restricted Person that is a Subsidiary of any Borrower: (a) to pay dividends or make other distributions to such Borrower, (b) to redeem equity interests held in it by such Borrower, (c) to repay loans and other indebtedness owing by it to such Borrower, or (d) to transfer any of its assets to such Borrower.
Section 7.7. Funded Debt to Total Capitalization. The ratio of US Borrower's Consolidated Total Funded Debt to US Borrower's Total Capitalization will not exceed (i) seventy percent (70%) at the end of any Fiscal Quarter ending on or before June 30, 2002,or (ii) sixty-five percent (65%) at the end of any Fiscal Quarter thereafter.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default. Each of the following events constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal component of any Obligation when due and payable or fails to pay any other Obligation within three (3) days after the date when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any Loan Document which defines either such term, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document;
(c) Any Restricted Person fails (other than as referred to in
subsection (a) or (b) above) to (i) duly comply with Section 1.4 or
Section 7.4(b) of this Agreement or (ii) duly observe, perform or
comply with any other covenant, agreement, condition or provision of
any Loan Document, and such failure remains unremedied for a period of
thirty (30) days after notice of such failure is given by
Administrative Agent to US Borrower;
(d) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made provided that if such falsity or lack of correctness is capable of being remedied or cured within a 30-day period, Borrowers shall (subject to the other provisions of this Section 8.1) have a period of 30 days after written notice thereof has been given to US Borrower by Administrative Agent within which to remedy or cure such lack of correctness, or this Agreement or any Note is asserted to be or at any time ceases to be valid, binding and enforceable in any material respect as warranted in Section 5.5 for any reason other than its release or subordination by Administrative Agent;
(e) Any Restricted Person (i) fails to duly pay any Indebtedness in excess of $150,000,000 constituting principal or interest owed by it with respect to borrowed money or money otherwise owed under any note, bond, or similar instrument or (ii) breaches or defaults in the performance of any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, other than a breach or default described in clause (i) above, and any such failure, breach or default results in the acceleration of such Indebtedness; provided, that notwithstanding any provision of this subsection (e) to the contrary, to the extent that the terms of any such agreement or instrument governing the sale, pledge or disposal of Margin Stock or utilization of the proceeds of such Indebtedness in connection therewith would result in such acceleration and in a Default or an Event of Default under this Agreement, and would cause this Agreement or any Loan to be subject to the margin requirements or any other restriction under Regulation U, then such acceleration shall not constitute a Default or an Event of Default under this subsection (e);
(f) Either of the following occurs: (i) a Termination Event occurs and the total amount of withdrawal liability that would be incurred by all ERISA Affiliates upon their complete withdrawal from all Multiemployer Plans would reasonably be expected to exceed $250,000,000 or (ii) a Termination Event occurs and the total present value of all unfunded benefit liabilities within the meaning of Title IV of ERISA of all ERISA Plans (based upon the actuarial assumptions used to fund each such Plan) would reasonably be expected to exceed $250,000,000;
(g) Any Change in Control occurs; or
(h) Either Borrower or any other Restricted Person having assets with a book value of at least $250,000,000:
(i) suffers the entry against it of a judgment, decree or order for relief by a Tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or fails generally to pay (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its property in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within thirty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the payment of money in an amount that exceeds (x) the valid and collectible insurance in respect thereof or (y) the amount of an indemnity with respect thereto reasonably acceptable to the Required Lenders by $250,000,000 or more, unless the same is discharged within thirty days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or similar process to be issued by any Tribunal against all or any part of its property having a book value of at least $250,000,000, and such writ or warrant of attachment or any similar process is not
stayed or released within thirty days after the entry or levy thereof or after any stay is vacated or set aside.
Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to either Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by each Borrower and each Restricted Person who at any
time ratifies or approves this Agreement. Upon any such acceleration, any
obligation of any Lender to make any further Loans shall be permanently
terminated. During the continuance of any other Event of Default, Administrative
Agent at any time and from time to time may (and upon written instructions from
Required Lenders, Administrative Agent shall), without notice to either Borrower
or any other Restricted Person, do either or both of the following: (1)
terminate any obligation of Lenders to make Loans hereunder, and (2) declare any
or all of the Obligations immediately due and payable, and all such Obligations
shall thereupon be immediately due and payable, without demand, presentment,
notice of demand or of dishonor and nonpayment, protest, notice of protest,
notice of intention to accelerate, declaration or notice of acceleration, or any
other notice or declaration of any kind, all of which are hereby expressly
waived by each Borrower and each Restricted Person who at any time ratifies or
approves this Agreement.
Section 8.2. Remedies. If any Event of Default shall occur and be continuing, each Lender Party may protect and enforce its rights under the Loan Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Loan Document, and each Lender Party may enforce the payment of any Obligations due it or enforce any other legal or equitable right which it may have. All rights, remedies and powers conferred upon Lender Parties under the Loan Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Loan Documents or at Law or in equity.
ARTICLE IX
AGENTS
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby irrevocably appoints and authorizes UBS to act as the Administrative Agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Each Agent-Related Person: (i) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (ii) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Restricted Person or any other Person to perform any of its obligations thereunder; (iii) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Restricted Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any Restricted Person or any of its Subsidiaries or Affiliates or for the failure of any Restricted Person or Lender Party to perform its obligations under any Loan Document; (iv) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (v) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the number of Lenders herein specified with respect to a particular action shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to an agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
Section 9.2. Reliance by Agent.
(a) The Administrative Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Restricted Person), independent accountants, and other experts selected by Administrative Agent. Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until Administrative Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 10.6 hereof. Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, Administrative Agent shall, and in all other instances, Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders.
(b) For purposes of determining compliance with the conditions specified in Section 4.1, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender; provided, however that the Administrative Agent shall not be required to take any action that exposes Administrative Agent to personal liability or that is contrary to any Loan Document or applicable Law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action.
Section 9.3. Defaults. Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Administrative Agent has
received written notice from a Lender or Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that Administrative Agent receives such a notice of the occurrence of a Default or Event of Default, Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 9.1 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders. Notwithstanding the foregoing, unless and until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of the Maximum Credit Amount and the Loans made by it, the Administrative Agent (and any successor) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Administrative Agent in its individual capacity. Administrative Agent (and any successor) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make Investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Restricted Person or any of its Subsidiaries or Affiliates as if it were not acting as Administrative Agent, and Administrative Agent (and any successor) and its Affiliates may accept fees and other consideration from any Restricted Person or any of its Subsidiaries or Affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders.
Section 9.5. Indemnification. The Lenders agree to indemnify each Agent-Related Person (to the extent not reimbursed under Section 10.4 hereof, but without limiting the obligations of Borrower under such section) ratably in accordance with their respective Percentage Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Administrative Agent (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by Administrative Agent under any Loan Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AN AGENT); provided, that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified; and provided, further, that no action taken in accordance with the directions of the number of Lenders herein specified with respect to a particular action shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender agrees to reimburse Administrative Agent promptly upon demand for its ratable share of any costs or expenses payable by Borrowers under Section 10.4, to the extent that Administrative Agent is not promptly reimbursed for such costs and expenses by Borrowers. The agreements contained in this section shall survive payment in full of the Loans and all other amounts payable under this Agreement.
Section 9.6. Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrowers and their respective Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by Administrative Agent hereunder, Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Restricted Person or any of its Subsidiaries or Affiliates that may come into the possession of Administrative Agent or any of its Affiliates.
Section 9.7. [Reserved]
Section 9.8. Sharing of Set-Offs and Other Payments. Each Lender Party agrees that if it shall, whether through the exercise of rights under Loan Documents or rights of banker's lien, set-off, or counterclaim against Borrowers or otherwise, obtain payment of a portion of the aggregate Obligations owed to it which, taking into account all distributions made by Administrative Agent under Section 3.1, causes such Lender Party to have received more than it would have received had such payment been received by Administrative Agent and distributed pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Obligations as necessary to cause all Lender Parties to share all payments as provided for in Section 3.1, and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that Administrative Agent and all Lender Parties share all payments of Obligations as provided in Section 3.1; provided, however, that nothing herein contained shall in any way affect the right of any Lender Party to obtain payment (whether by exercise of rights of banker's lien, set-off or counterclaim or otherwise) of indebtedness other than the Obligations. Each Borrower expressly consents to the foregoing arrangements and agrees that any holder of any such interest may to the fullest extent permitted by Law exercise any and all rights of banker's lien, set-off, or counterclaim as fully as if such holder were a holder of the Obligations in the amount of such interest. If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a Tribunal to be paid on account of the possession of such funds prior to such recovery.
Section 9.9. Investments. Whenever Administrative Agent in good faith determines that it is uncertain about how to distribute to Lender Parties any funds which it has received, or whenever Administrative Agent in good faith determines that there is any dispute among Lender Parties about how such funds should be distributed, Administrative Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If Administrative Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Administrative Agent is otherwise required to invest funds pending distribution to Lender Parties, Administrative Agent shall invest such funds pending distribution; all interest on any such Investment shall be distributed upon the distribution of such Investment and in the same proportion and to the same Persons as such Investment. All moneys received by Administrative Agent for distribution to Lender Parties (other than to the Person who is Administrative Agent in its separate capacity as a Lender Party) shall be held by Administrative Agent pending such distribution solely as Administrative Agent for such Lender Parties, and Administrative Agent shall have no equitable title to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of this Article (other than the following Section 9.11) are intended solely for the benefit of Lender Parties, and no Restricted Person shall be entitled to rely on any such provision or assert any such provision in a claim or defense against any Lender. Lender Parties may waive or amend such provisions as they desire without any notice to or consent of Borrowers or any other Restricted Person.
Section 9.11. Resignation. The Administrative Agent may resign at any time by giving written notice thereof to Lenders and Borrowers. Each such notice shall set forth the date of such resignation. Upon any such resignation of the Administrative Agent, Required Lenders shall have the right to appoint a successor Administrative Agent and if no Default or Event of Default has occurred and is continuing, Required Lenders shall obtain the consent of Borrowers. A successor must be appointed for any retiring Administrative Agent, and such Administrative Agent's resignation shall become effective when such successor accepts such appointment. If, within thirty days after the date of the retiring Administrative Agent's resignation, no successor Administrative Agent has been appointed and has accepted such appointment, then the retiring Administrative Agent may appoint a successor Administrative Agent, which in the case of the Administrative Agent, shall be a commercial bank organized or licensed to conduct a banking or trust business under the Laws of the United States of America or of any state thereof and if no Default or Event of Default has occurred and is continuing, retiring Administrative Agent shall obtain the consent of Borrowers. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Administrative Agent's resignation hereunder the provisions of this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Documents.
Section 9.12. [Reserved]
Section 9.13. Other Agents. None of the Lenders identified on the facing page or signature pages of this Agreement as "syndication agent" or "documentation agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of conduct or otherwise) by any Lender Party in exercising any right, power or remedy which such Lender Party may have under any of the Loan Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by any Lender Party of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is a Borrower, by such Borrower,
(ii) if such party is the Administrative Agent, by such party and (iii) if such
party is a Lender, by such Lender or by Administrative Agent on behalf of
Lenders with the written consent of Required Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in Section
10.10). Notwithstanding the foregoing or anything to the contrary herein, (i)
Administrative Agent shall not, without the prior consent of Required Lenders,
execute and deliver on behalf of such Lender any waiver or amendment which would
increase the Maximum Credit Amount hereunder, and (ii) Administrative Agent
shall not execute any waiver or amendment that would amend the definition of
"Required Lenders" without the consent of each Lender. Notwithstanding the
foregoing or anything to the contrary herein, Administrative Agent shall not,
without the prior consent of each individual Lender, execute and deliver on
behalf of such Lender any waiver or amendment which would: (1) increase the
maximum amount which such Lender is committed hereunder to lend, (2) reduce any
fees payable to such Lender hereunder, or the principal of, or interest on, such
Lender's Loan, (3) postpone any date fixed for any payment of any such fees or
interest or principal due on the Maturity Date, it being understood and agreed
that changes to the amortization schedules set forth in Section 1.6(b),
including changes which would postpone the date for payment of any principal of
any Loans, other than extending the Maturity Date, shall require the approval of
Lenders holding in the aggregate a Percentage Share equal to or in excess of 66
2/3%, (4) amend the definition herein of "Required Lenders" or otherwise change
the aggregate amount of Percentage Shares which is required for Administrative
Agent, Lenders or any of them to take any particular action under the Loan
Documents, (5) release any Borrower or a Guarantor (to the extent not otherwise
released pursuant to the terms of the Guaranty to which such Guarantor is a
party) from its obligation to pay such Lender's Loan (it being understood and
agreed that neither any assignment by the Canadian Borrower pursuant to Section
10.6(i) nor the termination of any Guaranty in accordance with the terms thereof
shall constitute a release of either Borrower or any Guarantor within the
meaning of this Section 10.1(a) or shall require the consent of any Lender
Party), or (6) amend this Section 10.1(a).
(b) Acknowledgments and Admissions. Each Borrower hereby represents, warrants, acknowledges and admits that (i) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents to which it is a party, (ii) it has made an independent decision to enter into this Agreement and the other Loan Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by Administrative Agent or Lender, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iii) there are no representations, warranties, covenants, undertakings or agreements by any Lender as to the Loan Documents except as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iv) no Lender has
any fiduciary obligation toward any Borrower with respect to any Loan Document or the transactions contemplated thereby, (v) the relationship pursuant to the Loan Documents between Borrowers and the other Restricted Persons, on one hand, and each Lender, on the other hand, is and shall be solely that of debtor and creditor, respectively, (vi) no partnership or joint venture exists with respect to the Loan Documents between any Restricted Person and any Lender, (vii) Administrative Agent is not Borrower's agent, but agent for Lenders, (viii) without limiting any of the foregoing, Borrower is not relying upon any representation or covenant by any Lender, or any representative thereof, and no such representation or covenant has been made, that any Lender will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Loan Documents with respect to any such Event of Default or Default or any other provision of the Loan Documents, and (ix) all Lender Parties have relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder.
(c) Joint Acknowledgment. This written Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties; provided, it is understood and agreed that the terms and provisions of the third and fourth paragraph of Section 1 of the Commitment Letter, the third paragraph of Section 4 of the Commitment Letter and the third and fifth paragraph of the Fee Letter shall survive the Closing Date. There are no oral agreements between the parties.
(d) Mitchell Restructuring Event. US Borrower may, in
connection with the Mitchell Acquisition, consummate one or more transactions
(collectively, the "Mitchell Restructuring Event") pursuant to which US Borrower
would (i) cause a new holding company ("Devon Holdco") to be formed under the
laws of the United States or any state thereof or the District of Columbia; and
(ii) pursuant to one or more mergers or other transactions, Devon HoldCo would
acquire, directly or indirectly, all of the issued and outstanding common stock
of each of the US Borrower and Mitchell. On or prior to the Mitchell
Restructuring Event:
(i) US Borrower shall notify the Administrative Agent that such Mitchell Restructuring Event will occur;
(ii) prior to or concurrently with the consummation of the Mitchell Restructuring Event, Devon HoldCo shall execute and deliver to the Administrative Agent, for the benefit of the Lenders, a full and unconditional guaranty of the Obligations of the Borrowers under this Agreement, such guaranty to be in form and substance substantially similar to Exhibit G-3 hereto;
(iii) concurrently with the consummation of the Mitchell Restructuring Event, the Amended and Restated Credit Agreement attached hereto as Exhibit H shall become effective, and this Agreement shall be deemed to be amended and restated to read in its entirety as set forth in Exhibit H hereto, in each case automatically and without any further action or consent by any Lender Party or any other Person; and
(iv) with the consent of the Administrative Agent but without the separate consent of any other Lender Party, US Borrower may amend, supplement or otherwise modify this
Agreement, Exhibit H hereto or any other Loan Document in connection with the Mitchell Restructuring Event and the related addition of Devon HoldCo as a Restricted Person in the Loan Documents (i) to cure any ambiguity or correct or supplement any provision contained in any Loan Document which may thereby become defective or inconsistent with any other provisions contained therein, so long as such amendment, supplement or other modification would not have an adverse effect on the interests of the Lender Parties under the Loan Documents or (ii) to add to the covenants and agreements of the Restricted Persons under the Loan Documents such further covenants, agreements, restrictions, conditions or provisions as the Administrative Agent shall consider to be for the protection of the Lender Parties.
Notwithstanding anything to the contrary, nothing in this Agreement or in any other Loan Document shall prohibit the Mitchell Restructuring Event or shall be deemed to give rise to a Change of Control, a Default or an Event of Default as a result of such Mitchell Restructuring Event. The rights and obligations of the parties to this Agreement with respect to periods following the time the Amended and Restated Credit Agreement attached hereto as Exhibit H becomes effective in accordance with this Section 10.1 (the "Amendment Effective Date") shall be governed exclusively by such Amended and Restated Credit Agreement. The rights and obligations of the parties to this Agreement with respect to the period prior to the Amendment Effective Date shall not be affected by such amendment and restatement. The parties hereto agree that on the Amendment Effective Date, the Borrowers and the Administrative Agent, acting on behalf of the Lenders (it being understood and agreed that each Lender hereby expressly consents to the Administrative Agent's so acting), shall execute and deliver counterparts to the Amended and Restated Credit Agreement attached thereto as Exhibit H, provided, however, that neither the failure of either Borrower or the Administrative Agent to execute and deliver such Amended and Restated Credit Agreement nor the fact that such Amended and Restated Credit Agreement shall not be executed and delivered by each Lender shall delay or otherwise affect the effectiveness of such Amended and Restated Credit Agreement or alter the rights or obligations of either Borrower, the Administrative Agent, either Arranger or any Lender thereunder.
Section 10.2. Survival of Agreements; Cumulative Nature. All of Restricted Persons' various representations, warranties, covenants and agreements in the Loan Documents shall survive the execution and delivery of this Agreement and the other Loan Documents and the performance hereof and thereof, including the making or granting of the Loans and the delivery of the Notes and the other Loan Documents, and shall further survive until all of the Obligations are paid in full to each Lender Party and all of Lender Parties' obligations to Borrowers are terminated. All statements and agreements contained in any certificate or other instrument delivered by any Restricted Person to any Lender Party under any Loan Document shall be deemed representations and warranties by Borrowers or agreements and covenants of Borrowers under this Agreement. The representations, warranties, indemnities, and covenants made by Restricted Persons in the Loan Documents, and the rights, powers, and privileges granted to Lender Parties in the Loan Documents, are cumulative, and, except for expressly specified waivers and consents, no Loan Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to any Lender Party of any such representation, warranty, indemnity, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty, indemnity, or covenant herein contained shall apply to any similar representation, warranty, indemnity, or covenant contained in any other Loan Document, and each such similar representation, warranty, indemnity, or covenant shall be
subject only to those exceptions which are expressly made applicable to it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and other communications required or permitted under any Loan Document shall be in writing, unless otherwise specifically provided in such Loan Document (provided that Administrative Agent may give telephonic notices to the other Lender Parties), and shall be deemed sufficiently given or furnished if delivered by personal delivery, by facsimile, e-mail or other electronic transmission, by delivery service with proof of delivery, or by registered or certified United States or Canadian mail, postage prepaid, to US Borrower and Canadian Borrower at their respective addresses specified on the signature pages hereto and to each Lender Party at its address specified on Annex I hereto (unless changed by similar notice in writing given by the particular Person whose address is to be changed; provided, however, that notices given by e-mail transmission shall be followed by notice given by another permitted method described above and, unless sooner acknowledged by the intended recipient, shall be deemed to have been given only when such follow-up notice is deemed to have been given as provided below). Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or delivery service, as of the date of first attempted delivery during normal business hours at the address provided herein, (b) in the case of facsimile or other electronic transmission, upon receipt, or (c) in the case of registered or certified United States or Canadian mail, three days after deposit in the mail; provided, however, that no Borrowing Notice shall become effective until actually received by Administrative Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated by this Agreement are consummated, US Borrower will promptly (and in any event, within 30 days after any invoice or other statement or notice) pay or cause Canadian Borrower to promptly pay: (i) all reasonable out-of-pocket costs and expenses incurred by or on behalf of Administrative Agent (including without limitation, attorneys' fees) in connection with (1) the negotiation, preparation, execution and delivery of the Loan Documents, and any and all consents, waivers or other documents or instruments relating thereto (including but not limited to expenses incurred in connection with due diligence and travel, courier, reproduction, printing and delivery expenses) and (2) monitoring or confirming (or preparation or negotiation of any document related to) each Borrower's compliance with any covenants or conditions contained in this Agreement or in any Loan Document, and (ii) all reasonable costs and expenses incurred by or on behalf of any Lender Party (including without limitation, attorneys' fees, consultants' fees and accounting fees) in connection with the defense or enforcement of any of the Loan Documents (including this section) or the defense of any Lender Party's exercise of its rights thereunder.
(b) Indemnity. Each Borrower agrees to indemnify each Agent-Related Person and each Lender Party, upon demand, from and against any and all reasonable out-of-pocket liabilities, obligations, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called "liabilities and costs") which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Agent-Related Person or such Lender Party, as the case may be, growing out of, resulting from or in any
other way associated with the Loan Documents and the transactions and events (including the enforcement or defense thereof) at any time associated therewith, including but not limited to the Acquisitions, or contemplated therein (whether arising in contract or in tort or otherwise and including any violation or noncompliance with any Environmental Laws by any Agent-Related Person or Lender Party or any other Person or any liabilities or duties of any Agent-Related Person or Lender Party or any other Person with respect to Hazardous Materials found in or released into the environment); provided, no Borrower shall be required to pay the fees and disbursements of more than one separate counsel of any such indemnified Person in any jurisdiction in any single proceeding. The foregoing indemnification shall apply whether or not such liabilities and costs are in any way or to any extent owed, in whole or in part, under any claim or theory of strict liability or caused, in whole or in part by any negligent act or omission of any kind by any Agent-Related Person or Lender Party, provided only that no Agent-Related Person or Lender Party shall be entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. If any Person (including Borrowers or any of their Affiliates) ever alleges such gross negligence or willful misconduct by any Lender Party, the indemnification provided for in this section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. As used in this section the term "Lender Party" shall refer not only to each Person designated as such in Section 1.1 but also to each director, officer, agent, attorney, employee, representative, attorney-in-fact and Affiliate of such Person.
Section 10.5. Parties in Interest. All grants, covenants and agreements contained in the Loan Documents shall bind and inure to the benefit of the parties thereto and their respective successors and assigns; provided, however, that except as set forth in Section 10.6(i) no Restricted Person may assign or transfer any of its rights or delegate any of its duties or obligations under any Loan Document without the prior consent of all Lenders (and any attempted assignment or transfer by any Restricted Person without such consent shall be null and void). Neither Borrower and no Affiliate of a Borrower shall directly or indirectly purchase or otherwise retire any Obligations owed to any Lender nor will any Lender accept any offer to do so, unless each Lender shall have received substantially the same offer with respect to the same Percentage Share of the Obligations owed to it. If any Borrower or any Affiliate of a Borrower at any time purchases some but less than all of the Obligations owed to all Lender Parties, such purchaser shall not be entitled to any rights of any Lender under the Loan Documents unless and until Borrowers or their respective Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Transferees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Note, and its Percentage Share of the Maximum Credit Amount); provided, however, that
(i) each such assignment shall be to an Eligible Transferee;
(ii) except in the case of such an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Agreement (or, as otherwise consented to
by the Administrative Agent and the US Borrower), any partial assignment of such Lender's rights and obligations under this Agreement shall be in a collective amount at least equal to $10,000,000 or an integral multiple of $5,000,000 in excess thereof (so long as such Lender's remaining rights and obligations under this Agreement shall be at least equal to $10,000,000) and shall apply pro rata to such Lender's Loans and Commitments;
(iii) the parties to such assignment shall execute and deliver to Administrative Agent, for its acceptance an Assignment and Acceptance in the form of Exhibit F hereto, together with any Note subject to such assignment and a processing fee of $2,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance and registration of such assignment in the Register as provided in clause (c) below, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this section, the assignor, Administrative Agent and Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the Laws of the United States of America or a state thereof, it shall, as a condition to the effectiveness of such assignment, deliver to Borrowers and Administrative Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 3.9.
(b) Administrative Agent shall maintain at its address referred to in Section 10.3 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders, their respective Commitments and their Percentage Share of the Maximum Credit Amount of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrowers, Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit F hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. No assignment shall be effective unless such assignment shall have been recorded in the Register by Administrative Agent as provided in this clause (c). A Lender may assign all or a portion of its rights and obligations under this Agreement only by registration of such assignment in the Register.
(d) Each Lender may sell participations to one or more Persons
that are Eligible Transferees in all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Maximum Credit Amount
and its Loans); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participant shall be
entitled to the benefit of the yield protection provisions contained in Article
III (provided that a participant shall not be entitled to receive any greater
payment under Section 3.1 or 3.2 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such participant,
unless the sale of the participation to such participant is made with each
Borrower's prior written consent. A participant that would have been subject to
Section 3.9 if it were a Lender shall not be entitled to the benefit of Section
3.1 unless each Borrower has been notified of the participation sold to such
participant, and such participant agrees, for the benefit of each Borrower, to
comply with such Section as if it were a Lender, and (iv) each Borrower shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of each Borrower relating to
its Loans and its Note and to approve any amendments, modification, or waiver of
any provision of this Agreement (provided that such Lender may agree that it
will not approve amendments, modifications, or waivers decreasing the amount of
principal of or the rate at which interest is payable on such Loans or Note,
extending the Maturity Date or any date fixed for the payment of interest on
such Loans or Note, or extending the aggregate amount of its share of the
Maximum Credit Amount without the consent of the participant). Each Lender that
sells a participation shall, as agent of the Borrowers solely for the purpose of
this Section 10.6(d), record in book entries maintained by such Lender the name
and amount of the participating interest of each Participant entitled to receive
payments in respect of such participating interest.
(e) If the consent of Borrowers to an assignment to an Eligible Transferee is required hereunder, each Borrower shall be deemed to have given its consent ten (10) Business Days after the date notice thereof has been delivered by the assigning Lender (through Administrative Agent) unless such consent is expressly refused by Borrowers prior to such tenth Business Day.
(f) [Reserved]
(g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.
(h) Any Lender may furnish any information concerning Borrowers or any of their Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 10.7 hereof.
(i) The Canadian Borrower may assign, at any time and from time to time, all or any portion of its Obligations hereunder to the US Borrower without the consent of Administrative Agent or any Lender.
Section 10.7. Confidentiality. Administrative Agent and each Lender (each, a "Lending Party") agrees to keep confidential any information furnished or made available to it by Borrowers in connection with the Loan Documents that is marked confidential; provided that nothing herein shall prevent any Lending Party from disclosing such information (a) to any other Lending
Party or any Affiliate of any Lending Party, or any officer, director, employee, agent, or advisor of any Lending Party or Affiliate of any Lending Party, (b) to any other Person if reasonably incidental to the administration of the credit facility provided herein, (c) as required by any Law, rule, or regulation, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any regulatory agency or authority, (f) that is or becomes available to the public or that is or becomes available to any Lending Party other than as a result of a disclosure by any Lending Party prohibited by this Agreement, (g) in connection with any litigation to which such Lending Party or any of its Affiliates may be a party, (h) to the extent necessary in connection with the exercise of any remedy under this Agreement or any other Loan Document, and (i) subject to provisions substantially similar to those contained in this section, to any actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. Except to the extent that the law of another jurisdiction is expressly elected in a Loan Document, the Loan Documents shall be deemed contracts and instruments made under the laws of the State of New York and shall be construed and enforced in accordance with and governed by the laws of the State of New York and the laws of the United States of America. Each Borrower hereby irrevocably submits itself and each other Restricted Person and Administrative Agent hereby irrevocably submits itself and each Lender hereby irrevocably submits itself to the non-exclusive jurisdiction of the state and federal courts sitting in New York City and agrees and consents that service of process may be made upon it or any Restricted Person in any legal proceeding relating to the Loan Documents or the obligations by any means allowed under New York or federal law.
Section 10.9. Limitation on Interest. Lender Parties,
Restricted Persons and any other parties to the Loan Documents intend to
contract in strict compliance with applicable usury Law from time to time in
effect. In furtherance thereof such Persons stipulate and agree that none of the
terms and provisions contained in the Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged by
applicable Law from time to time in effect. Neither any Restricted Person nor
any present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith. Lender Parties expressly disavow any intention to charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is accelerated
for any reason, (b) any Obligation is prepaid and as a result any amounts held
to constitute interest are determined to be in excess of the legal maximum, or
(c) any Lender or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable Law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at such Lender's or holder's option, promptly
returned to Borrowers or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
As used in this section the term "applicable Law" means the Laws of the State of
New York or the Laws of the United States of America, whichever Laws allow the
greater interest, as such Laws now exist or may be changed or amended or come
into effect in the future.
Section 10.10. Termination; Limited Survival. In their sole and absolute discretion Borrowers may at any time that no Obligations are owing elect in a written notice delivered to Administrative Agent to terminate this Agreement. Upon receipt by Administrative Agent of such a notice, if no Obligations are then owing this Agreement and all other Loan Documents shall thereupon be terminated and the parties thereto released from all prospective Obligations thereunder. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by any Restricted Person in any Loan Document, any Obligations under Sections 3.2 through 3.6, and any obligations which any Person may have to indemnify or compensate any Lender Party shall survive any termination of this Agreement or any other Loan Document. At the request and expense of Borrowers, Administrative Agent shall prepare and execute all necessary instruments to reflect and effect such termination of the Loan Documents. Administrative Agent is hereby authorized to execute all such instruments on behalf of all Lenders, without the joinder of or further action by any Lender.
Section 10.11. Severability. If any term or provision of any Loan Document shall be determined to be illegal or unenforceable all other terms and provisions of the Loan Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable Law.
Section 10.12. Counterparts; Fax. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. This Agreement and the Loan Documents may be validly executed and delivered by facsimile or other electronic transmission.
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc. Each Borrower and each Lender Party hereby knowingly, voluntarily, intentionally, and irrevocably (a) waives, to the maximum extent not prohibited by Law, any right it may have to a trial by jury in respect of any litigation based hereon, or directly or indirectly at any time arising out of, under or in connection with the Loan Documents or any transaction contemplated thereby or associated therewith, before or after maturity, in each case whether now existing or hereafter arising, and whether founded in contract or tort or otherwise; and each such party hereby agrees and consents that any such claim, demand, action or cause of action shall be decided by court trial without a jury, and that any party to this Agreement may file an original counterpart or a copy of this section with any court as written evidence of the consent of the signatories hereto to the waiver of their right to trial by jury, (b) waives, to the maximum extent not prohibited by Law, any right it may have to claim or recover in any such litigation any "Special Damages", as defined below, (c) certifies that no party hereto nor any representative or agent or counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not,
in the event of litigation, seek to enforce the foregoing waivers, and (d) acknowledges that it has been induced to enter into this Agreement, the other Loan Documents and the transactions contemplated hereby and thereby, by, among other things, the mutual waivers and certifications contained in this section. As used in this section, "Special Damages" includes all special, consequential, exemplary, or punitive damages (regardless of how named), but does not include any payments or funds which any party hereto has expressly promised to pay or deliver to any other party hereto. If any Lender Party receives any payment or payments pursuant to any judgment or order in any currency other than US Dollars, and the amount of the US Dollars which the relevant Lender Party is able to purchase on the Business Day next following such receipt with the proceeds of such payment or payments in accordance with its normal procedures and after deducting any premiums and costs of exchange is less than the amount of the US Dollars due in respect of such Obligations immediately prior to such judgment or order, then the Applicable Borrower on demand shall, and Applicable Borrower hereby agrees to, indemnify and save such Lender Party harmless from and against any loss, cost or expense arising out of or in connection with such deficiency.
Section 10.14. Defined Terms. Capitalized terms and phrases used and not otherwise defined herein shall for all purposes of this Agreement have the meaning given to such terms and phrases in Article II herein.
Section 10.15. Annexes, Exhibits and Schedules. Annex I and all Exhibits and Schedules attached to this Agreement are a part hereof for all purposes.
Section 10.16. Amendment of Defined Instruments. Unless the context otherwise requires or unless otherwise provided herein the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments and restatements of such agreement, instrument or document, provided that nothing contained in this section shall be construed to authorize any such renewal, extension, modification, amendment or restatement. Unless the context otherwise requires or unless otherwise provided herein, the references in this Agreement to a particular statute, rule or regulation also refer to and include all amendments, supplements and other modifications to such statute, rule or regulation.
Section 10.17. References and Titles. All references in this Agreement to Exhibits, Schedules, articles, sections, subsections and other subdivisions refer to the Exhibits, Schedules, articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words "this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this section" and "this subsection" and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation". Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.
Section 10.18. Calculations and Determinations. All calculations under the Loan Documents of interest chargeable with respect to Eurodollar Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. All other calculations of interest made under the Loan Documents shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 365 or 366 days, as appropriate. Each determination by a Lender Party of amounts to be paid under Article III or any other matters which are to be determined hereunder by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate, Business Day, Interest Period, or Reserve Requirement) shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein, or unless Required Lenders otherwise consent, all financial statements and reports furnished to any Lender Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with US GAAP. For the purposes of the Interest Act (Canada), when ever interest payable pursuant to this Agreement is calculated on the basis of a period other than a calendar year, each rate of interest determined pursuant to such calculation expressed as an annual rate is equivalent to such rate as so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by the number of days in such interest period.
Section 10.19. Construction of Indemnities and Releases. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed as of the date first written above.
DEVON ENERGY CORPORATION, as
US Borrower
By: /s/ WILLIAM T. VAUGHN ----------------------------------------- Name: William T. Vaughn Title: Senior Vice President - Finance |
Address:
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attention: Senior Vice
President - Finance
Telephone: (405) 552-4700
Fax: (405) 228-7538
E-mail: BILL.VAUGHN@DVN.COM
DEVON FINANCING CORPORATION, U.L.C.,
as Canadian Borrower
By: /s/ JOHN RICHELS ----------------------------------------- Name: John Richels Title: Senior Vice President |
Address: 3000 400 3rd Avenue SW Calgary Alberta T2P 4H2
Telephone: (403) 213-8000
Fax: (403) 213-8100
E-mail: JOHNR@NORTHSNRG.COM
UBS WARBURG LLC, as
Joint Lead Arranger
By: /s/ DAVID A. JUGE ----------------------------------------- Name: David A. Juge Title: Managing Director By: /s/ DANIEL W. LADD III ----------------------------------------- Name: Daniel W. Ladd III Title: Executive Director |
Address:
Telephone:
Fax:
E-mail:
BANC OF AMERICA SECURITIES LLC,
as Joint Lead Arranger
By: /s/ STEPHANIE PENDLETON ----------------------------------------- Name: Stephanie Pendleton Title: Principal |
UBS AG, STAMFORD BRANCH,
as Administrative Agent and Lender
By: /s/ DAVID A. JUGE ---------------------------------------------- Name: David A. Juge Title: Managing Director By: /s/ DANIEL W. LADD III ---------------------------------------------- Name: Daniel W. Ladd III Title: Executive Director |
Address: 677 Washington Boulevard, 6th Floor Stamford, CT 06912 Telephone: (203) 719-4308 Fax: (203) 719-3888 |
E-mail:
BANK OF AMERICA, N.A.,
as Syndication Agent and Lender
By: /s/ JAMES R. ALLRED ---------------------------------------------- Name: James R. Allred Title: Managing Director |
Address: 901 Main Street, 14th Floor Dallas, TX 75202 Attention: Renita Cummings Telephone: (214) 209-1233 Fax: (214) 290-8371 E-mail: RENITA.CUMMINGS@BANKOFAMERICA.COM |
ABN AMRO BANK N.V., as Lender
By: /s/ FRANK R. RUSSO, JR. ---------------------------------------------- Name: Frank R. Russo, Jr. Title: Group Vice President By: /s/ JEFFERY WHITE ---------------------------------------------- Name: Jeffery White Title: Vice President |
Address: 3 Riverway, Suite 1700 Houston, Texas 77056 Telephone: (713) 964-3326 Fax: (713) 629-1115 |
E-mail: JEFF.G.WHITE@ABNAMRO.COM
BANK OF MONTREAL, as Lender
By: /s/ JAMES B. WHITMORE ----------------------------------------- Name: James B. Whitmore Title: Managing Director |
Address: 700 Louisiana, Suite 4400 Houston, TX 77002 Telephone: (713) 546-9734 Fax: (713) 223-4007 E-mail: JAMES.WHITMORE@BMO.COM |
THE CHASE MANHATTAN BANK, as Lender
By: /s/ RUSSELL A. JOHNSON ---------------------------------------- Name: Russell A. Johnson Title: Vice President |
Address: 600 Travis St., 20th Floor Houston, TX 77002-8086 Telephone: (713) 216-5617 Fax: (713) 216-8870 E-mail: RUSSELL.JOHNSON@JPMORGAN.COM |
CITIBANK, N.A., as Lender
By: /s/ TODD J. MOGIL ----------------------------------------- Name: Todd J. Mogil Title: Attorney-in-fact |
Address: 399 Park Avenue New York, NY 10022 Copy to: 1200 Smith Street, Suite 2000 Houston, TX 77002 Attention: Todd Mogil Telephone: (713) 654-3559 Fax: (713) 654-2849 E-mail: TODD.J.MOGIL@citi.COM |
CREDIT SUISSE FIRST BOSTON, TORONTO BRANCH
as Lender
By: /s/ BILL MCFARLAND ----------------------------------------- Name: Bill McFarland Title: Vice President By: /s/ PETER CHAUVIN ----------------------------------------- Name: Peter Chauvin Title: Vice President |
Address: 1 First Canadian Place P.O. Box 301 Toronto, Ontario, Canada M5X 1C9 Telephone: (416) 352-4528 Fax: (416) 352-4576 E-mail: BILL.MCFARLAND@CSFB.COM |
DEUTSCHE BANK AG, NEW YORK BRANCH, as Lender
By: /s/ JOEL MAKOWSKY ----------------------------------------- Name: Joel Makowsky Title: Vice President By: /s/ HANS C. NARBERHAUS ----------------------------------------- Name: Hans C. Narberhaus Title: Vice President |
Address: 31 West. 52nd Street New York, NY 10019 Attention: Noble Samuel Telephone: (732) 981 7440 Fax: (732) 981-7470 E-mail: NOBLE.SAMUEL@DB.COM |
CREDIT SUISSE FIRST BOSTON
as Lender
By: /s/ JAMES MORAN ----------------------------------------- Name: James Moran Title: Director By: /s/ DAVID KOCZAN ----------------------------------------- Name: David Koczan Title: Associate |
Address: 11 Madison Avenue New York, New York 10010 Telephone: (212) 325-9176 Fax: (212) 743-1878 E-mail: James.Moran@csfb.com |
FIRST UNION NATIONAL BANK, as Lender
By: /s/ DAVID E. HUMPHREYS ----------------------------------------- Name: David E. Humphreys Title: Vice President |
Address: 1001 Fannin Street, Suite 2255 Houston, TX 77002-6709 Telephone: (713) 346-2717 Fax: (713) 650-1071 E-mail: DAVID.HUMPHREYS@FUND.COM |
ROYAL BANK OF CANADA, as Lender
By: /s/ LORNE GARTNER ----------------------------------------- Name: Lorne Gartner Title: Vice President |
Address: 2800 Post Oak Blvd. 5700 Williams Tower Houston, TX 77056 Telephone: (713) 403-5662 Fax: (713) 403-5624 E-mail: LORNE.GARTNER@ROYALUSA.COM |
EXHIBIT 10.4
THIRD AMENDMENT TO US CREDIT AGREEMENT
THIS THIRD AMENDMENT TO US CREDIT AGREEMENT (herein called this "Amendment") made as of July 31, 2001 by and among Devon Energy Corporation, a Delaware corporation ("US Borrower"), Bank of America, N.A., individually and as administrative agent ("US Agent"), and the US Lenders party to the Original Agreement defined below ("US Lenders").
WITNESSETH:
WHEREAS, US Borrower, US Agent and US Lenders entered into that certain US Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby US Lenders became obligated to make loans to US Borrower as therein provided;
WHEREAS, US Borrower, US Agent and US Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by US Lenders to US Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this section.
"Amendment" means this Third Amendment to US Credit Agreement.
"US Agreement" means the Original Agreement as amended hereby.
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ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The definition of "ERISA Plan" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'ERISA Plan' means any employee pension benefit plan (other than a Multiemployer Plan) subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability."
(b) The definition of "Permitted Liens" in Annex I of the Original Agreement is hereby amended by deleting subsection (w) thereof and adding the following new subsections (w) and (x) in lieu thereof:
"(w) Liens on Margin Stock.
(x) in addition to Liens permitted by clauses (a) through (w) above, Liens on property or assets if the aggregate Indebtedness secured thereby does not exceed US $50,000,000."
(c) The definition of "Termination Event" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'Termination Event' means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA; or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) a complete or partial withdrawal by any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; or (d) the filing of a notice of intent to terminate any ERISA Plan or Multiemployer Plan or the treatment of any ERISA Plan amendment or Multiemployer Plan amendment as a termination under Section 4041 or 4041A of ERISA; or (e) the institution of proceedings to terminate any ERISA Plan or Multiemployer Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA; or (f) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan or Multiemployer Plan."
(d) The definition of "Total Capitalization" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
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"'Total Capitalization' means the sum (without duplication) of
(i) US Borrower's Consolidated Total Funded Debt plus (ii) US
Borrower's Consolidated shareholder's equity plus (iii) 60% of the
outstanding balance of the Devon Trust Securities. Total Capitalization
shall be calculated excluding non-cash write-downs and related charges
which are required under Rule 4-10 (Financial Accounting and Reporting
for Oil and Gas Producing Activities Pursuant to the Federal Securities
Laws and the Energy Policy and Conservation Act of 1975) of Regulation
S-X promulgated by Securities and Exchange Commission Regulation, or by
US GAAP."
(e) The first sentence of the definition of "Unrestricted Subsidiary" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows (it being understood that the last sentence thereof and the list of Unrestricted Subsidiaries set forth therein are not being modified by this Amendment):
"'Unrestricted Subsidiary' means any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization (i) which is listed below in this definition, or (ii) in which US Borrower did not own an interest (directly or indirectly) as of August 29, 2000, which thereafter became a Subsidiary of US Borrower and which, within 90 days after becoming a Subsidiary of US Borrower, is designated as an Unrestricted Subsidiary by US Borrower to US Agent; provided that in the event any such Subsidiary becomes a Material Subsidiary at any time, such Subsidiary shall cease to be an Unrestricted Subsidiary at such time and shall automatically become a Restricted Subsidiary."
(f) The following defined terms are hereby added to Annex I of the Original Agreement in alphabetical order:
"'Disclosure Report' means a written notice given by US Borrower to all Lender Parties or a certificate given by the Senior Vice President-Finance or the Treasurer of US Borrower under Sections 6.2(a) and (b)."
"'Multiemployer Plan' means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any ERISA Affiliate is making or is obligated to make contributions or, during the five preceding plan years, has made or has been obligated to make contributions."
"'Margin Stock' means 'margin stock' as defined in Reg U."
"'Material Subsidiary' means a Subsidiary of US Borrower which owns assets having a book value that exceeds ten percent (10%) of the book value of US Borrower's Consolidated assets."
"'Reg U' means Regulation U promulgated by the Board of Governors of the Federal Reserve System."
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Section 2.2. Use of Proceeds. Section 1.4 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 1.4. Use of Proceeds. US Borrower shall use all US Loans made under this Agreement to refinance existing indebtedness (including any commercial paper issued by or for the account of US Borrower), to finance capital expenditures, to refinance Matured US LC Obligations outstanding under this Agreement, and to provide working capital for its operations and for other general business purposes. US Borrower shall use all Letters of Credit for its general corporate purposes. If any US Loan is used for a purpose which is governed by Reg U, US Borrower shall comply with Reg U in all respects. US Borrower represents and warrants that US Borrower is not engaged principally, or as one of US Borrower's important activities, in the business of extending credit to others for the purpose of purchasing or carrying Margin Stock."
Section 2.3. Default Rate. Section 1.5(f) of the Original Agreement is hereby amended in its entirety to read as follows:
"(f) All US Loans. All past due principal of and past due interest on the US Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day, and such interest shall be due and payable daily as it accrues."
Section 2.4. Conditions Precedent. Section 4.3(c) of the Original Agreement is hereby deleted.
Section 2.5. Representations and Warranties; Litigation and ERISA Plans and Liabilities. Sections 5.2, 5.7 and 5.8 of the Original Agreement are hereby amended in their entirety to read as follows:
"Section 5.2 Organization and Good Standing. Each of US Borrower and the Material Subsidiaries is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each of US Borrower and the Material Subsidiaries is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where failure to so qualify would not have a Material Adverse Effect. Each of US Borrower and the Material Subsidiaries has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable except where failure to so qualify would not have a Material Adverse Effect.
Section 5.7. Litigation. Except as disclosed in the Initial Financial Statements, in the financial statements delivered to Agent and Lenders pursuant to Section 6.2, in the Disclosure Schedule or in a Disclosure Report, there are no actions, suits or legal,
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equitable, arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person before any Tribunal which would reasonably be expected to have a Material Adverse Effect, and there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any Restricted Person which would reasonably be expected to have a Material Adverse Effect.
Section 5.8. ERISA Plans and Liabilities. All currently
existing ERISA Plans and Multiemployer Plans are listed in the
Disclosure Schedule or in a Disclosure Report. Except as disclosed in
the Initial Financial Statements, in the Disclosure Schedule or in a
Disclosure Report, no Termination Event has occurred with respect to
any ERISA Plan or any Multiemployer Plan and all ERISA Affiliates are
in compliance with ERISA in all material respects. Except as set forth
in the Disclosure Statement or in a Disclosure Report, (i) no
"accumulated funding deficiency" (as defined in Section 412(a) of the
Internal Revenue Code) exists with respect to any ERISA Plan, whether
or not waived by the Secretary of the Treasury or his delegate, (ii)
the total amount of withdrawal liability that would be incurred by all
ERISA Affiliates upon their complete withdrawal from all Multiemployer
Plans would not reasonably be expected to exceed US $125,000,000, and
(iii) the total present value of all unfunded benefit liabilities
within the meaning of Title IV of ERISA of all ERISA Plans (based upon
the actuarial assumptions used to fund each such Plan) did not, as of
the respective annual valuation dates for the most recently ended plan
year of each such Plan, exceed US $125,000,000."
Section 2.6. Representations and Warranties; Names and Places of Business. Section 5.10 of the Original Agreement is hereby deleted in its entirety.
Section 2.7. Representations and Warranties; US Borrower's Subsidiaries; Title to Properties; Licenses. Sections 5.11 and 5.12 of the Original Agreement are hereby amended in their entirety to read as follows:
"Section 5.11. US Borrower's Subsidiaries. US Borrower does not presently have any Material Subsidiary except those listed in the Disclosure Schedule or in a Disclosure Report (it being understood that inclusion of a Subsidiary on the Disclosure Schedule does not mean that such Subsidiary is a Material Subsidiary). US Borrower owns, directly or indirectly, the equity interest in each of its Material Subsidiaries which is indicated in the Disclosure Schedule or in a Disclosure Report.
Section 5.12. Title to Properties; Licenses. Each Restricted Person has good and defensible title to all of its material properties and assets, free and clear of all Liens other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person's business except to the extent failure to have such title would not have a Material Adverse Effect. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property) which are necessary to carry out its business as presently conducted and as presently proposed to be
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conducted hereafter except to the extent failure to possess such licenses, permits, franchises, and intellectual property would not have a Material Adverse Effect, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property except to the extent any such violation would not have a Material Adverse Effect."
Section 2.8. Representations and Warranties; Insider. Section 5.14 of the Original Agreement is hereby deleted in its entirety.
Section 2.9. Notice of Material Events and Change of Address. Section 6.4 of the Original Agreement is hereby amended to replace all references therein to the amount of "$100,000,000" to "$125,000,000", to delete the last sentence of such section, and to amend clause (d) thereof in its entirety to read as follows:
"(d) the occurrence of any Termination Event which could reasonably be expected to cause (i) the total amount of withdrawal liability that would be incurred by all ERISA Affiliates upon their complete withdrawal from all Multiemployer Plans to exceed US $125,000,000, or (ii) the aggregate Liabilities of the ERISA Affiliates to ERISA Plans to exceed $125,000,000."
Section 2.10. Environmental Matters. Section 6.12(b) of the Original Agreement is hereby amended to replace the reference therein to the amount of "$100,000,000" to "$125,000,000."
Section 2.11. Indebtedness. Subsections (b) and (m) of Section 7.1 of the Original Agreement are hereby amended in their entirety to read as follows:
"(b) capital lease obligations (excluding oil, gas or mineral leases) entered into in the ordinary course of such Restricted Person's business in arm's length transactions at competitive market rates under competitive terms and conditions in all respects, provided that such capital lease obligations required to be paid in any Fiscal Year do not in the aggregate exceed US $50,000,000 for all Restricted Subsidiaries.
(m) miscellaneous items of Indebtedness of all Restricted Persons (other than US Borrower) not described in subsections (a) through (m) which do not in the aggregate exceed US $400,000,000 in principal amount at any one time outstanding."
Section 2.12. Limitation on Restricted Payments. Section 7.5 of the Original Agreement is hereby deleted.
Section 2.13. Prohibited Contracts. Section 7.7 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.7. Prohibited Contracts; ERISA. Except as expressly provided for in the US Loan Documents, the Support Agreement dated December 10, 1998 between the US Borrower and Northstar Energy, the Santa Fe Snyder Indentures, and documents and
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instruments evidencing or governing Acquired Debt, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Restricted Person that is a Subsidiary of US Borrower to pay dividends or make other distributions to US Borrower, to redeem equity interests held in it by US Borrower, to repay loans and other indebtedness owing by it to US Borrower, or to transfer any of its assets to US Borrower."
Section 2.14. Events of Default. Subsection (c), (e) and (f) of Section 8.1 of the Original Agreement are hereby amended in their entirety to read as follows:
"(c) Any Restricted Person fails (other than as referred to in
subsections (a) or (b) above) to (i) duly comply with Section 1.4 or
Section 7.4(b) of the US Agreement or (ii) duly observe, perform or
comply with any other covenant, agreement, condition or provision of
any US Loan Document, and such failure remains unremedied for a period
of thirty (30) days after notice of such failure is given by US Agent
to US Borrower;
(e) Any Restricted Person fails to duly pay any Indebtedness in excess of US $125,000,000 constituting principal or interest owed by it with respect to borrowed money or money otherwise owed under any note, bond, or similar instrument, or (ii) breaches or defaults in the performance of any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, other than a breach or default described in clause (i) above, and any such failure, breach or default results in the acceleration of such Indebtedness; provided that notwithstanding any provision of this subsection (e) to the contrary, to the extent that the terms of any such agreement or instrument governing the sale, pledge or disposal of Margin Stock or utilization of the proceeds of such Indebtedness in connection therewith would result in such acceleration and in a Default or an Event of Default under this Agreement, and would cause this Agreement or any US Loan to be subject to the margin requirements or any other restriction under Reg U, then such acceleration shall not constitute a Default or Event of Default under this subsection (e);
(f) Either of the following occurs: (i) a Termination Event occurs and the total amount of withdrawal liability that would be incurred by all ERISA Affiliates upon their complete withdrawal from all Multiemployer Plans would reasonably be expected to exceed US $125,000,000, or (ii) a Termination Event occurs and the total present value of all unfunded benefit liabilities within the meaning of Title IV of ERISA of all ERISA Plans (based upon the actuarial assumptions used to fund each such Plan) would reasonably be expected to exceed US $125,000,000";
Section 2.15. Additional Events of Default. Section 8.1(h) is hereby amended by replacing all references therein to the amount of "$100,000,000" to "$125,000,000."
Section 2.16. Amendments to Statutes and Regulations. Section 10.16 of the Original Agreement is hereby amended by adding the following sentence at the end thereof:
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"Unless the context otherwise requires or unless otherwise provided herein, the references in this Agreement to a particular statute, rule or regulation also refer to and include all amendments, supplements and other modifications to such statute, rule or regulation."
Section 2.17. Disclosure Schedule. Paragraph 6 of the Disclosure Schedule to the Original Agreement is hereby amended by adding the name of the following Subsidiary thereto:
Canadian Mustang Energy Inc.
Section 2.18. Tranche A Notes. Each Tranche A Note (and the form of Tranche A Note attached as Exhibit A-1 to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day". Each Tranche A Note (and the form of Tranche A Note attached as Exhibit A-1 to the Original Agreement) are hereby further amended by deleting the proviso at the end of the third sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Loan shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
Section 2.19. Tranche B Notes. Each Tranche B Note (and the form of Tranche B Note attached as Exhibit A-2 to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day." Each Tranche B Note (and the form of Tranche B Note attached as Exhibit A-2 to the Original Agreement) are hereby further amended by deleting the proviso at the end of the third sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Loan shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
Section 2.20. US Swing Note. The US Swing Note (and the form of US Swing Note attached as Exhibit A-3 to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
Section 2.21. Competitive Bid Notes. Each Competitive Bid Note issued
under the US Agreement (and the form of Competitive Bid Note attached as Exhibit
L to the Original Agreement) are hereby amended by deleting the proviso at the
end of the first sentence of the fifth paragraph thereof which reads as follows:
"; provided that if an Event of Default has occurred and is continuing, such
Competitive Bid Loan shall bear interest on each day outstanding at the
applicable Default Rate in effect on such day."
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ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become effective as of the date first above written when and only when:
(a) US Agent shall have received all of the following, at US Agent's office, duly executed and delivered and in form and substance satisfactory to US Agent, all of the following:
(i) this Amendment executed by US Borrower, US Agent and US Required Lenders; provided that the amendment set forth in Section 2.3 hereof, insofar as it applies to the Tranche A Notes, and in Section 2.18 hereof shall become effective only when executed and delivered by all Tranche A Lenders, the amendment set forth in Section 2.3 hereof, insofar as it applies to the Tranche B Notes, and in Section 2.19 hereof shall become effective only when executed and delivered by all Tranche B Lenders, the amendment set forth in Section 2.3 hereof, insofar as it applies to the US Swing Note, and in Section 2.20 hereof shall become effective only when executed and delivered by the US Swing Lender, and the amendment set forth in Section 2.3 hereof, insofar as it applies to any Competitive Bid Note, and in Section 2.21 hereof shall become effective only when executed and delivered by the holder of such Competitive Bid Note; and provided further that the amendment set forth in Section 2.4 of this Amendment shall become effective only when executed and delivered by all US Lenders.
(ii) a certificate of the Senior Vice President - Finance or the Treasurer of US Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) US Borrower shall have paid, in connection with such US Loan Documents, all fees and reimbursements to be paid to US Agent pursuant to any US Loan Documents, or otherwise due US Agent and including fees and disbursements of US Agent's attorneys.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of US Borrower. In order to induce each US Lender to enter into this Amendment, US Borrower represents and warrants to each US Lender that:
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(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the US Agreement.
(b) US Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the US Agreement. US Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of US Borrower hereunder.
(c) The execution and delivery by US Borrower of this Amendment, the
performance by US Borrower of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not (i) conflict with any
provision of (A) any Law, (B) the organizational documents of US Borrower, or
(C) any agreement, judgment, license, order or permit applicable to or binding
upon US Borrower unless such conflict would not reasonably be expected to have a
Material Adverse Effect, or (ii) result in or require the creation of any Lien
upon any assets or properties of US Borrower which would reasonably be expected
to have a Material Adverse Effect, except as expressly contemplated or permitted
in the Loan Documents. Except as expressly contemplated in the Loan Documents no
consent, approval, authorization or order of, and no notice to or filing with,
any Tribunal or third party is required in connection with the execution,
delivery or performance by US Borrower of this Amendment or to consummate any
transactions contemplated by this Amendment, unless failure to obtain such
consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the US Agreement will be a legal and binding obligation of US Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
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(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of March 31, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each US Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement and the US Notes as hereby amended are hereby ratified and confirmed in all respects. The US Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the US Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of US Lenders under the US Agreement or any other US Loan Document nor constitute a waiver of any provision of the US Agreement or any other US Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of US Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by US Borrower or any Restricted Person hereunder or under the US Agreement to any US Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, US Borrower under this Amendment and under the US Agreement.
Section 5.3. US Loan Documents. This Amendment is a US Loan Document, and all provisions in the US Agreement pertaining to US Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
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THIS AMENDMENT AND THE OTHER US LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
DEVON ENERGY CORPORATION
US Borrower
By: /s/ William T. Vaughn ------------------------------- William T. Vaughn Senior Vice President - Finance |
BANK OF AMERICA, N.A.,
Administrative Agent, US LC Issuer
and Lender
By: /s/ James R. Allred ------------------------------- Name: James R. Allred Title: Managing Director |
BANK OF MONTREAL
Lender
By: /s/ J. B. Whitmore ------------------------------- Name: J. B. Whitmore Title: Managing Director |
BANK ONE, NA
Lender
By: /s/ Ronald L. Dierker ------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets |
THE CHASE MANHATTAN BANK
Lender
By: /s/ Russell A. Johnson ------------------------------- Name: Russell A. Johnson Title: Vice President |
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UMB BANK
Lender
By: /s/ Richard J. Lehrter ------------------------------- Name: Richard J. Lehrter Title: Community Bank President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ David Humphreys ------------------------------- Name: David Humphreys Title: Vice President |
TORONTO-DOMINION (TEXAS), INC.
Lender
By: /s/ Debbie A. Greene ------------------------------- Name: Debbie A. Greene Title: Vice President |
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Lender
By: /s/ Salvatore Battinelli ------------------------------- Name: Salvatore Battinelli Title: Managing Director, Credit Dept. By: /s/ Water T. Duffy III ------------------------------- Name: Walter T. Duffy III Title: Associate Director |
THE BANK OF NEW YORK
Lender
By: /s/ Raymond J. Palmer ------------------------------- Name: Raymond J. Palmer Title: Vice President |
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ROYAL BANK OF CANADA
Lender
By: /s/ Tom J. Oberaigner ------------------------------- Name: Tom J. Oberaigner Title: Senior Manager |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge ------------------------------- Name: David J. Edge Title: Director |
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK
Lender
By: /s/ Russell A. Johnson ------------------------------ Name: Russell A. Johnson Title: Vice President |
CITIBANK, N.A.
Lender
By: /s/ Lydia G. Junek ------------------------------- Name: Lydia G. Junek Title: Attorney-in-fact |
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
Lender
By: /s/ Michael E. Keating ------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky ------------------------------- Name: Joel Makowksy Title: Vice President |
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CIBC, INC.
Lender
By: /s/ Nora Q. Catiis ------------------------------- Name: Nora Q. Catiis Title: Authorized Signatory |
ABN AMRO BANK, N.V.
Lender
By: /s/ Frank R. Russo, Jr. ------------------------------- Name: Frank R. Russo, Jr. Title: Group Vice President By: /s/ Dana Montgomery ------------------------------- Name: Dana Montgomery Title: Vice President |
BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH
Lender
By: /s/ Hereward Drummond ------------------------------- Name: Hereward Drummond Title: Senior Vice President By: /s/ James H. Boyle ------------------------------- Name: James H. Boyle Title: Vice President |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury ------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
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CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Jacques Busquet ------------------------------- Name: Jacques Busquet Title: Executive Vice President |
BANK OF TOKYO - MITSUBISHI LTD.
HOUSTON AGENCY
Lender
By: /s/ K. Glasscock ------------------------------- Name: K. Glasscock Title: Vice President & Manager |
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COMPLIANCE CERTIFICATE
DEVON ENERGY CORPORATION
Reference is made to that certain Third Amendment to US Credit Agreement dated as of July 31, 2001 (the "Third Amendment"), among Devon Energy Corporation ("US Borrower") and Bank of America, N.A., individually and as administrative agent ("US Agent"), and certain financial institutions ("Lenders"). Terms which are defined in the Third Amendment and which are used but not defined herein shall have the meanings given them in the Third Amendment. The undersigned, William T. Vaughn and Dale Wilson, do hereby certify that they have made a thorough inquiry into all matters certified herein and, based upon such inquiry, experience, and the advice of counsel, do hereby further certify that:
1. They are the duly elected, qualified, and acting Senior Vice President-Finance and Treasurer, respectively, of US Borrower.
2. All representations and warranties made by any Restricted Person in any Loan Document delivered on or before the date hereof are true on and as of the date hereof (except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Third Amendment) as if such representations and warranties had been made as of the date hereof.
3. No Default exists on the date hereof.
4. Each Restricted Person has performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of July 31, 2001.
/s/ William T. Vaughn ------------------------------------------------ William T. Vaughn, Senior Vice President-Finance /s/ Dale Wilson ------------------------------------------------ Dale Wilson, Treasurer |
EXHIBIT 10.5
[US AGENT WILL ADVISE THE TRANCHE B LENDERS OF THE DATE ON WHICH US BORROWER EXECUTES AND DELIVERS THIS AMENDMENT TO US AGENT.]
FOURTH AMENDMENT TO US CREDIT AGREEMENT
The Offer for Extension set forth in this Fourth Amendment to US Credit Agreement (herein called this "Amendment") is made by Bank of America, N.A., individually and as administrative agent ("US Agent"), and the undersigned US Lenders and shall be open for acceptance by Devon Energy Corporation, a Delaware corporation ("US Borrower") until (and including) August 21, 2001.
WITNESSETH:
WHEREAS, US Borrower, US Agent and US Lenders have entered into that certain US Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby US Lenders became obligated to make loans to US Borrower as therein provided; and
WHEREAS, pursuant to Section 1.1(c) of the Original Agreement, US Borrower has delivered to US Agent a Request for Offer of Extension and a copy thereof has been provided to all Tranche B Lenders; and
WHEREAS, all of the Tranche B Lenders have agreed to accept such Request for Offer of Extension; and
WHEREAS, all of the Tranche B Lenders have agreed to extend the Tranche B Revolving Period until the Tranche B Conversion Date as described in Section 2.1 of this Amendment and US Agent hereby makes an Offer of Extension to US Borrower on such terms;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by US Lenders to US Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
Fourth Amendment to US Credit Agreement
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this section.
"Amendment" means this Fourth Amendment to US Credit Agreement.
"US Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms. The definition of "Tranche B Conversion Date" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'Tranche B Conversion Date' means the date which is 364 days after the date on which US Borrower executes and delivers to US Agent the Fourth Amendment to US Credit Agreement among US Borrower, US Agent and US Lenders, or such later day to which the Tranche B Conversion Date is extended pursuant to Section 1.1 of the US Agreement."
Section 2.2. Waiver of Notice. Each Tranche B Lender hereby waives the requirement under Section 1.1(c) of the Original Agreement that a Request for Offer of Extension be made by a specific date prior to the current Tranche B Conversion Date of August 28, 2001.
Section 2.3. Lenders Schedule. Annex II to this Amendment is hereby substituted for Annex II to the Original Agreement.
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become effective on the date on which US Borrower has executed and delivered this Amendment to US Agent (provided that US Borrower shall have executed this Amendment on or before August 21, 2001) and the following additional conditions are satisfied:
Fourth Amendment to US Credit Agreement
(a) US Agent shall have received all of the following, at US Agent's office, duly executed and delivered and in form and substance satisfactory to US Agent, all of the following:
(i) this Amendment executed by US Borrower, US Agent and all Tranche B Lenders;
(ii) a certificate of the Senior Vice President - Finance or the Treasurer of US Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) US Borrower shall have paid, in connection with such US Loan Documents, all fees and reimbursements to be paid to US Agent and US Lenders pursuant to any US Loan Documents, or otherwise due US Agent or US Lenders and including fees and disbursements of US Agent's attorneys.
Section 3.2. Offer to Extend. The Offer to Extend set forth herein shall be withdrawn and this Amendment shall be null and void if it is not executed and delivered by US Borrower on or before August 21, 2001.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of US Borrower. In order to induce each US Lender to enter into this Amendment, US Borrower represents and warrants to each US Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the US Agreement.
(b) US Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the US Agreement. US Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of US Borrower hereunder.
(c) The execution and delivery by US Borrower of this Amendment, the
performance by US Borrower of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not (i) conflict with any
provision of (A) any Law, (B) the organizational documents of US Borrower, or
(C) any agreement, judgment, license, order or permit applicable to or binding
upon US Borrower unless such conflict would not reasonably be
Fourth Amendment to US Credit Agreement
expected to have a Material Adverse Effect, or (ii) result in or require the creation of any Lien upon any assets or properties of US Borrower which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by US Borrower of this Amendment or to consummate any transactions contemplated by this Amendment, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the US Agreement will be a legal and binding obligation of US Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of March 31, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each US Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The US Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the US Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of US Lenders under the US Agreement or any other US Loan Document nor constitute a waiver of any provision of the US Agreement or any other US Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of US Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by US Borrower or any Restricted Person hereunder or under the US Agreement to any US Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, US Borrower under this Amendment and under the US Agreement.
Fourth Amendment to US Credit Agreement
Section 5.3. US Loan Documents. This Amendment is a US Loan Document, and all provisions in the US Agreement pertaining to US Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
THIS AMENDMENT AND THE OTHER US LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[The remainder of this page has been intentionally left blank.]
Fourth Amendment to US Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed by US Borrower as of August 13, 2001.
DEVON ENERGY CORPORATION
US Borrower
By: /s/ Dale T. Wilson ------------------------------------- Dale T. Wilson Treasurer |
Fourth Amendment to US Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed by US Agent and Tranche B Lenders.
BANK OF AMERICA, N.A.,
Administrative Agent, US LC Issuer
and Lender
By: /s/ Angela McCracken ------------------------------------- Name: Angela McCracken Title: Vice President |
ABN AMRO BANK, N.V.
Lender
Title: Group Vice President
By: /s/ Jeffrey G.White ------------------------------------- Name: Jeffrey G. White Title: Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs ------------------------------------- Name: Arthur B. Hobbs Title: Vice President |
BANK ONE, NA
Lender
By: /s/ Ronald L. Dierker ------------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets |
Fourth Amendment to US Credit Agreement
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH
Lender
By: /s/ Peter Obermann ------------------------------------- Name: Peter Obermann Title: Senior Vice President By: /s/ James H. Boyle ------------------------------------- Name: James H. Boyle Title: Vice President |
CIBC INC.
Lender
By: /s/ Nora Q. Catiis ------------------------------------- Name: Nora Q. Catiis Title: Authorized Signatory |
CITIBANK, N.A.
Lender
By: /s/ Lydia G.Junek ------------------------------------- Name: Lydia G. Junek Title: Attorney-in-fact |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Philippe Soustra ------------------------------------- Name: Philippe Soustra Title: Executive Vice President |
CREDIT SUISSE FIRST BOSTON
Lender
By: /s/ Paul L. Colon ------------------------------------- Name: Paul L. Colon Title: Vice President By: /s/ David M. Koczan ------------------------------------- Name: David M. Koczan Title: Assistant Vice President |
Fourth Amendment to US Credit Agreement
DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
Lender
By: /s/ Michael E. Keating ------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky ------------------------------------- Name: Joel Makowsky Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ David E. Humphreys ------------------------------------- Name: David E. Humphreys Title: Vice President |
ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner ------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge ------------------------------------- Name: David J. Edge Title: Director |
THE BANK OF NEW YORK
Lender
By: /s/ Raymond J. Palmer ------------------------------------- Name: Raymond J. Palmer Title: Vice President |
Fourth Amendment to US Credit Agreement
THE BANK OF TOKYO - MITSUBISHI
LTD. HOUSTON AGENCY
Lender
By: /s/ K. Glasscock -------------------------------------- Name: K. Glasscock Title: Vice President & Manager |
THE CHASE MANHATTAN BANK
Lender
By: /s/ Russell A. Johnson -------------------------------------- Name: Russell A. Johnson Title: Vice President |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury -------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
UBS AG, STAMFORD BRANCH
Lender
By: /s/ Susan Brunner -------------------------------------- Name: Susan Brunner Title: Associate Director Banking Products Services, US By: /s/ Patricia O'Kicki -------------------------------------- Name: Director Title: Director Banking Products Services |
UMB BANK
Lender
By: /s/ Derek K. Duncan -------------------------------------- Name: Derek K. Duncan Title: Vice President |
Fourth Amendment to US Credit Agreement
ANNEX II
LENDERS SCHEDULE
Fourth Amendment to US Credit Agreement
Annex II - Lender Schedule
BANK OF AMERICA
US AGREEMENT Name of Affiliate that is Lender under US Agreement Bank of America, N.A. Applicable Lending Office for US Loans: 901 Main Street, 64th Floor Dallas, Texas 75202 Address for Notices: Three Allen Center 333 Clay Street, Suite 4550 Houston, Texas 77022-4103 Attention: James R. Allred US TRANCHE A Tranche A Note Amount (5 year): US$ 19,333,333.34 Tranche A Percentage Share: 9.66666% US TRANCHE B Tranche B Note Amount (364 day): US$ 46,875,000.00 Tranche B Percentage Share: 7.500% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Bank of America Canada (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 200 Front Street West, Suite 2700 Toronto, Ontario M5V3L2 Address for Notices: 200 Front Street West, Suite 2700 Toronto, Ontario M5V3L2 Attention: Medina Sales de Andrade CANADIAN FACILITY Canadian Note Amount: US$ 28,125,000.00 Canadian Percentage Share: 7.500% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 60,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
ABN AMRO BANK, N.V.
US AGREEMENT Name of Affiliate that is Lender under US Agreement: ABN AMRO Bank, N.V. Applicable Lending Office for US Loans: 208 South LaSalle, Suite 1500 Chicago, Illinois 60604-1003 Attention: Loan Administration Address for Notices: 208 South LaSalle, Suite 1500 Chicago, Illinois 60604-1003 Attention: Loan Administration cc: Three Riverway Suite 1700 Houston, Texas 77056 Attention: Frank R. Russo, Jr. US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 39,062,500.00 Tranche B Percentage Share: 6.250% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: ABN AMRO Bank Canada (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: ABN AMRO Bank Canada 79 Wellington St. West, 15th Floor Toronto, Ontario M5K 1G8 Address for Notices: ABN AMRO Bank Canada 79 Wellington St. West, 15th Floor Toronto, Ontario M5K 1G8 Attention: Yasmin Mohideen cc: Three Riverway Suite 1700 Houston, Texas 77056 Attention: Frank R. Russo, Jr. CANADIAN FACILITY Canadian Note Amount: US$ 23,437,500.00 Canadian Percentage Share: 6.250% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 50,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
BANCFIRST
US AGREEMENT Name of Affiliate that is Lender under US Agreement: BancFirst Applicable Lending Office for US Loans: 101 N. Broadway Oklahoma City, Oklahoma 73102 Address for Notices: 101 N. Broadway Oklahoma City, Oklahoma 73102 Attention: Arthur B. Hobbs US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 7,812,500.00 Tranche B Percentage Share: 1.250% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: BancFirst (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 101 N. Broadway Oklahoma City, Oklahoma 73102 Address for Notices: 101 N. Broadway Oklahoma City, Oklahoma 73102 Attention: Arthur B. Hobbs CANADIAN FACILITY Canadian Note Amount: US$ 4,687,500.00 Canadian Percentage Share: 1.250% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 10,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
BANK OF MONTREAL
[TRANCHE A ONLY]
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Bank of Montreal Applicable Lending Office for US Loans: 115 South La Salle 11th Floor Chicago, Illinois 60603 Attention: Loan Administration Address for Notices: 700 Louisiana, Suite 4400 Houston, Texas 77002 Attention: James Whitmore US TRANCHE A Tranche A Note Amount (5 year): US$ 16,000,000.00 Tranche A Percentage Share: 8.0% US TRANCHE B Not a Tranche B Lender CANADIAN AGREEMENT Not a Canadian Lender |
Annex II - Lender Schedule
BANK ONE
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Bank One, NA Applicable Lending Office for US Loans: 1 Bank One Plaza Mail Code: IL1-0634 Chicago, Illinois 60670 Address for Notices: 1100 Louisiana, Suite 3200 Houston, Texas 77002 Attention: Ron Dierker US TRANCHE A Tranche A Note Amount (5 year): US$ 19,333,333.33 Tranche A Percentage Share: 9.66666% US TRANCHE B Tranche B Note Amount (364 day): US$ 46,875,000.00 Tranche B Percentage Share: 7.500% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Bank One, NA, Canada Branch (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 161 Bay Street, Suite 4240 Toronto, Ontario M5J 2S1 Address for Notices: 1100 Louisiana, Suite 3200 Houston, Texas 77002 Attention: Ron Dierker CANADIAN FACILITY Canadian Note Amount: US$ 28,125,000.00 Canadian Percentage Share: 7.500% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 60,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
BAYERISCHE LANDESBANK GIROZENTRALE
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Bayerische Landesbank Girozentrale, Cayman Islands Branch Applicable Lending Office for US Loans: 560 Lexington Avenue New York, New York 10022 Address for Notices: 560 Lexington Avenue New York, New York 10022 Attention: Stephen Christenson US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 31,250,000.00 Tranche B Percentage Share: 5.000% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Bayerische Landesbank Girozentrale, Toronto Branch (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: BCE Place - Suite 3210 181 Bay Street Toronto, Ontario M5J 2T3 Address for Notices: BCE Place - Suite 3210 181 Bay Street Toronto, Ontario M5J 2T3 Attention: Bernd Erpenbeck CANADIAN FACILITY Canadian Note Amount: US$ 18,750,000.00 Canadian Percentage Share: 5.000% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 40,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
CIBC INC.
US AGREEMENT Name of Affiliate that is Lender under US Agreement: CIBC Inc. Applicable Lending Office for US Loans: 2 Paces West 2727 Paces Ferry Road Suite 1200 Atlanta, Georgia 30339 Attention: Anita Rounds Address for Notices: 1600 Smith Street, Suite 3100 Houston, Texas 77002 Attention: Russell Otts US TRANCHE A Tranche A Note Amount (5 year): US$ 12,000,000.00 Tranche A Percentage Share: 6.0% US TRANCHE B Tranche B Note Amount (364 day): US$ 19,531,250.00 Tranche B Percentage Share: 3.125% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Canadian Imperial Bank of Commerce (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 40 Dundas Street West 5th Floor Toronto, Ontario M5G 2C2 Address for Notices: 855 Second Street, S.W. 10th Floor, Banker's Hall Calgary, Alberta T2P 4J7 Attention: Joelle Schellenberg CANADIAN FACILITY Canadian Note Amount: US$ 11,718,750.00 Canadian Percentage Share: 3.125% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 25,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
CITIBANK, N.A.
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Citibank, N.A. Applicable Lending Office for US Loans: 399 Park Avenue New York, New York 10043 Borrowing Notices: Two Penn's Way, 2nd Floor New Castle Delaware 19720 Attention: Sean L. Portrait Address for Notices: 1200 Smith Street, Suite 2000 Houston, Texas 77002 Attention: Todd J. Mogil US TRANCHE A Tranche A Note Amount (5 year): US$ 16,000,000.00 Tranche A Percentage Share: 8.0% US TRANCHE B Tranche B Note Amount (364 day): US$ 39,062,500.00 Tranche B Percentage Share: 6.250% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Citibank Canada (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 400 Third Avenue SW, Suite 4210 Calgary, Alberta T2P 4H2 Address for Notices: 400 Third Avenue SW, Suite 4210 Calgary, Alberta T2P 4H2 Attention: Diane Gould cc: 1200 Smith Street, Suite 2000 Houston, Texas 77002 Attention: Todd J. Mogil CANADIAN FACILITY Canadian Note Amount: US$ 23,437,500.00 Canadian Percentage Share: 6.250% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 50,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
CREDIT LYONNAIS
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Credit Lyonnais Applicable Lending Office for US Loans: 1000 Louisiana Street Suite 5360 Houston, Texas 77002 Address for Notices: 1000 Louisiana Street Suite 5360 Houston, Texas 77002 Attention: John Grandstaff US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 31,250,000.00 Tranche B Percentage Share: 5.000% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Credit Lyonnais (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 1000 Louisiana Street Suite 5360 Houston, Texas 77002 Address for Notices: 1000 Louisiana Street Suite 5360 Houston, Texas 77002 Attention: John Grandstaff CANADIAN FACILITY Canadian Note Amount: US$ 18,750,000.00 Canadian Percentage Share: 5.000% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 40,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
CREDIT SUISSE FIRST BOSTON
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Credit Suisse First Boston Applicable Lending Office for US Loans: Eleven Madison Avenue, 10th Floor New York, New York 10010-3629 Address for Notices: Eleven Madison Avenue, 10th Floor New York, New York 10010-3629 Attention: James Moran US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 39,062,500.00 Tranche B Percentage Share: 6.250% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Credit Suisse First Boston Canada (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 1 First Canadian Place, Suite 3000 P.O. Box 301 Toronto, Ontario M5X 1C9 Address for Notices: 1 First Canadian Place, Suite 3000 P.O. Box 301 Toronto, Ontario M5X 1C9 Attention: Bill McFarland CANADIAN FACILITY Canadian Note Amount: US$ 23,437,500.00 Canadian Percentage Share: 6.250% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 50,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
DEUTSCHE BANK AG
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Deutsche Bank AG New York Branch and/or Cayman Islands Branch Applicable Lending Office for US Loans: 31 West 52nd Street New York, New York 10019 Address for Notices: 31 West 52nd Street New York, New York 10019 Attention: Joel Makowsky US TRANCHE A Tranche A Note Amount (5 year): US$ 9,333,333.33 Tranche A Percentage Share: 4.66666% US TRANCHE B Tranche B Note Amount (364 day): US$ 39,062,500.00 Tranche B Percentage Share: 6.250% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Deutsche Bank AG New York Branch and/or Cayman Islands Branch (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 31 West 52nd Street New York, New York 10019 Address for Notices: 31 West 52nd Street New York, New York 10019 Attention: Joel Makowsky CANADIAN FACILITY Canadian Note Amount: US$ 23,437,500.00 Canadian Percentage Share: 6.250% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 50,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
FIRST UNION NATIONAL BANK
US AGREEMENT Name of Affiliate that is Lender under US Agreement: First Union National Bank Applicable Lending Office for US Loans: 1001 Fannin Street Suite 2255 Houston, Texas 77002 Address for Notices: 1001 Fannin Street Suite 2255 Houston, Texas 77002 Attention: David Humphreys US TRANCHE A Tranche A Note Amount (5 year): US$ 19,333,333.33 Tranche A Percentage Share: 9.66666% US TRANCHE B Tranche B Note Amount (364 day): US$ 46,875,000.00 Tranche B Percentage Share: 7.50% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: First Union National Bank (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 1001 Fannin Street Suite 2255 Houston, Texas 77002 Address for Notices: 1001 Fannin Street Suite 2255 Houston, Texas 77002 Attention: David Humphreys CANADIAN FACILITY Canadian Note Amount: US$ 28,125,000.00 Canadian Percentage Share: 7.50% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 60,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
ROYAL BANK OF CANADA
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Royal Bank of Canada Applicable Lending Office for US Loans: One Liberty Plaza, 3rd Floor New York, New York 10006-1404 Address for Notices: One Liberty Plaza, 3rd Floor New York, New York 10006 Attention: Manager, Loans Admin. cc: 2800 Post Oak Blvd., Suite 5700 Houston, Texas 77056 Attention: Lorne Gartner US TRANCHE A Tranche A Note Amount (5 year): US$ 16,000,000.00 Tranche A Percentage Share: 8.0% US TRANCHE B Tranche B Note Amount (364 day): US$ 46,875,000.00 Tranche B Percentage Share: 7.50% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Royal Bank of Canada (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: One Liberty Plaza, 3rd Floor New York, New York 10006-1404 Attention: Manager, Loans Admin. Address for Notices: One Liberty Plaza, 3rd Floor New York, New York 10006-1404 Attention: Manager, Loans Admin. cc: 2800 Post Oak Blvd., Suite 5700 Houston, Texas 77056 Attention: Lorne Gartner CANADIAN FACILITY Canadian Note Amount: US$ 28,125,000.00 Canadian Percentage Share: 7.50% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 60,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
SUNTRUST BANK, ATLANTA
US AGREEMENT Name of Affiliate that is Lender under US Agreement: SunTrust Bank, Atlanta Applicable Lending Office for US Loans: 303 Peachtree Street, N.E. Third Floor, M/C-1929 Atlanta, Georgia 30308 Address for Notices: 303 Peachtree Street, N.E. Third Floor, M/C-1929 Atlanta, Georgia 30308 Attention: David Edge US TRANCHE A Tranche A Note Amount (5 year): US$ 6,666,666.67 Tranche A Percentage Share: 3.33333% US TRANCHE B Tranche B Note Amount (364 day): US$ 11,718,750.00 Tranche B Percentage Share: 1.875% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: SunTrust Bank, Atlanta (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 303 Peachtree Street, N.E. Third Floor, M/C-1929 Atlanta, Georgia 30308 Address for Notices: 303 Peachtree Street, N.E. Third Floor, M/C-1929 Atlanta, Georgia 30308 Attention: David Edge CANADIAN FACILITY Canadian Note Amount: US$ 7,031,250.00 Canadian Percentage Share: 1.875% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 15,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
THE BANK OF NEW YORK
US AGREEMENT Name of Affiliate that is Lender under US Agreement: The Bank of New York Applicable Lending Office for US Loans: One Wall Street New York, New York 10286 Address for Notices: One Wall Street New York, New York 10286 Attention: Raymond Palmer US TRANCHE A Tranche A Note Amount (5 year): US$ 12,000,000.00 Tranche A Percentage Share: 6.0% US TRANCHE B Tranche B Note Amount (364 day): US$ 35,156,250.00 Tranche B Percentage Share: 5.625% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: The Bank of New York (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: One Wall Street New York, New York 10286 Address for Notices: One Wall Street New York, New York 10286 Attention: Raymond Palmer CANADIAN FACILITY Canadian Note Amount: US$ 21,093,750.00 Canadian Percentage Share: 5.625% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 45,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
THE BANK OF TOKYO - MITSUBISHI
US AGREEMENT Name of Affiliate that is Lender under US Agreement: The Bank of Tokyo - Mitsubishi Ltd. Houston Agency Applicable Lending Office for US Loans: 1100 Louisiana Street Suite 2800 Houston, Texas 77002-5216 Address for Notices: 1100 Louisiana Street, Suite 2800 Houston, Texas 77002-5216 Attention: John M. McIntyre US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 31,250,000.00 Tranche B Percentage Share: 5.000% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: Bank of Tokyo - Mitsubishi (Canada) (CANADIAN RESIDENT LENDER) Applicable Lending Office for Canadian Advances: Suite 950 Park Place 666 Burrard Street Vancouver, British Columbia V6C 3L1 Address for Notices: Suite 950 Park Place 666 Burrard Street Vancouver, British Columbia V6C 3L1 Attention: Davis Stewart CANADIAN FACILITY Canadian Note Amount: US$ 18,750,000.00 Canadian Percentage Share: 5.000% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 40,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
THE CHASE MANHATTAN BANK
US AGREEMENT Name of Affiliate that is Lender under US Agreement: The Chase Manhattan Bank Applicable Lending Office for US Loans: 600 Travis Street, 20th Floor Houston, Texas 77002-8086 Address for Notices: 600 Travis Street, 20th Floor Houston, Texas 77002-8086 Attention: Russell Johnson US TRANCHE A (The Chase Manhattan Bank) Tranche A Note Amount (5 year): US$ 19,333,333.33 Tranche A Percentage Share: 9.66666% US TRANCHE A (JP Morgan) Tranche A Note Amount (5 year): US$ 12,000,000.00 Tranche A Percentage Share: 6.0% US TRANCHE B (Combined Chase Manhattan Bank and JP Morgan) Tranche B Note Amount (364 day): US$ 46,875,000.00 Tranche B Percentage Share: 7.500% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: The Chase Manhattan Bank, Toronto Branch (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: Royal Bank Plaza, South Tower 200 Bay Street, Suite 1800 Toronto, Ontario M5J 2J2 Address for Notices: Royal Bank Plaza, South Tower 200 Bay Street, Suite 1800 Toronto, Ontario M5J 2J2 Attention: Drew McDonald CANADIAN FACILITY Canadian Note Amount: US$ 28,125,000.00 Canadian Percentage Share: 7.500% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 60,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
THE FUJI BANK, LIMITED (MIZUHO)
US AGREEMENT Name of Affiliate that is Lender under US Agreement: The Fuji Bank, Limited Applicable Lending Office for US Loans: Two World Trade Center 79th Floor New York, New York 10048 Address for Notices: 1221 McKinney Street Suite 4100 Houston, Texas 77010 Attention: Joseph Kankam US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 35,156,250.00 Tranche B Percentage Share: 5.625% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: The Fuji Bank, Limited (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: Two World Trade Center 79th Floor New York, New York 10048 Address for Notices: 1221 McKinney Street Suite 4100 Houston, Texas 77010 Attention: Joseph Kankam CANADIAN FACILITY Canadian Note Amount: US$ 21,093,750.00 Canadian Percentage Share: 5.625% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 45,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
TORONTO-DOMINION BANK
[TRANCHE A ONLY]
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Toronto-Dominion (Texas), Inc. Applicable Lending Office for US Loans: 909 Fannin Street Suite 1700 Houston, Texas 77010 Address for Notices: 909 Fannin Street Suite 1700 Houston, Texas 77010 Attention: Mark Green US TRANCHE A Tranche A Note Amount (5 year) US$ 6,666,666.67 Tranche A Percentage Share: 3.33333% US TRANCHE B Not a Tranche B Lender CANADIAN AGREEMENT Not a Canadian Lender |
Annex II - Lender Schedule
UBS AG
US AGREEMENT Name of Affiliate that is Lender under US Agreement: UBS AG, Stamford Branch Applicable Lending Office for US Loans: 677 Washington Boulevard Stamford, Connecticut 06901 Address for Notices: 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Denise Denicola US TRANCHE A Not a Tranche A Lender US TRANCHE B Tranche B Note Amount (364 day): US$ 19,531,250.00 Tranche B Percentage Share: 3.125% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: UBS AG, Stamford Branch (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 677 Washington Boulevard Stamford, Connecticut 06901 Address for Notices: 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Denise Denicola CANADIAN FACILITY Canadian Note Amount: US$ 11,718,750.00 Canadian Percentage Share: 3.125% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 25,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
UMB BANK
US AGREEMENT Name of Affiliate that is Lender under US Agreement: UMB Bank Applicable Lending Office for US Loans: 204 N. Robinson Oklahoma City, Oklahoma 73102 Address for Notices: 204 N. Robinson Oklahoma City, Oklahoma 73102 Attention: Richard Lehrter US TRANCHE A Tranche A Note Amount (5 year): US$ 4,000,000.00 Tranche A Percentage Share: 2.0% US TRANCHE B Tranche B Note Amount (364 day): US$ 11,718,750.00 Tranche B Percentage Share: 1.875% CANADIAN AGREEMENT Name of Affiliate that is Lender under Canadian Agreement: UMB Bank (NON-RESIDENT LENDER) Applicable Lending Office for Canadian Advances: 204 N. Robinson Oklahoma City, Oklahoma 73102 Address for Notices: 204 N. Robinson Oklahoma City, Oklahoma 73102 Attention: Richard Lehrter CANADIAN FACILITY Canadian Note Amount: US$ 7,031,250.00 Canadian Percentage Share: 1.875% AGGREGATE COMMITMENT UNDER US AGREEMENT US$ 15,000,000.00 AND CANADIAN AGREEMENT |
Annex II - Lender Schedule
WESTDEUTSCHE LANDESBANK GIROZENTRALE
[TRANCHE A ONLY]
US AGREEMENT Name of Affiliate that is Lender under US Agreement: Westdeutsche Landesbank Girozentrale Applicable Lending Office for US Loans: 1211 Avenue of the Americas New York, New York 10036 Address for Notices: 1211 Avenue of the Americas New York, New York 10036 Attention: Jeff Davidson US TRANCHE A Tranche A Note Amount (5 year): US$ 12,000,000.00 Tranche A Percentage Share: 6.0% US TRANCHE B Not a Tranche B Lender CANADIAN AGREEMENT Not a Canadian lender. |
COMPLIANCE CERTIFICATE
DEVON ENERGY CORPORATION
Reference is made to that certain Fourth Amendment to US Credit Agreement dated as of August 13, 2001 (the "Fourth Amendment"), among Devon Energy Corporation ("US Borrower") and Bank of America, N.A., individually and as administrative agent ("US Agent"), and certain financial institutions ("Lenders"). Terms which are defined in the Fourth Amendment and which are used but not defined herein shall have the meanings given them in the Fourth Amendment. The undersigned, Dale Wilson, does hereby certify that he has made a thorough inquiry into all matters certified herein and, based upon such inquiry, experience, and the advice of counsel, does hereby further certify that:
1. He is the duly elected, qualified, and acting Treasurer of US Borrower.
2. All representations and warranties made by any Restricted Person in any Loan Document delivered on or before the date hereof are true on and as of the date hereof (except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Fourth Amendment) as if such representations and warranties had been made as of the date hereof.
3. No Default exists on the date hereof.
4. Each Restricted Person has performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of August 13, 2001.
/s/ Dale T. Wilson ------------------------------ Dale Wilson, Treasurer |
ASSIGNMENT AND ACCEPTANCE
(US Credit Agreement)
Reference is made to the US Credit Agreement dated as of August 29, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") among Devon Energy Corporation, a Delaware corporation (the "US Borrower"), the US Lenders (as defined in the Credit Agreement) and Bank of America, N.A., individually and as administrative agent for the Lenders (the "US Agent"). Terms defined in the Credit Agreement are used herein with the same meaning.
Each of the "Assignors" and the "Assignees" referred to on Schedule 1 agree as follows:
1. Each Assignor hereby sells and assigns to the Assignees the portion of its Tranche B Maximum Credit Amount specified opposite its name on Schedule 1 hereto and the related Tranche B Rights and Obligations (as hereinafter defined), without recourse and without representation or warranty except as expressly set forth herein, and each Assignee hereby purchases and assumes from the Assignors the portion of the Tranche B Maximum Credit Amount specified opposite its name on Schedule 1 hereto and the related Tranche B Rights and Obligations. After giving effect to such sale and assignment, each Assignor's Tranche B Maximum Credit Amount and the amount of Tranche B Loans owing to each Assignor will be as set forth on Schedule 1 and each Assignee's Tranche B Maximum Credit Amount and the amount of Tranche B Loans owing to each Assignee will be as set forth on Schedule 1. As used herein, "Tranche B Rights and Obligations" means all outstanding rights and obligations under the Credit Agreement and the other US Loan Documents relating to the Tranche B Loans and the Tranche B Maximum Credit Amount. This Assignment and Acceptance is subject to Section 1.9 of the Credit Agreement. On the Effective Date under such Section 1.9, the amount allocated to the Tranche B Maximum Credit Amount is $525,000,000 and the amount allocated to the Canadian Maximum Credit Amount is $275,000,000.
2. Each Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the US Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the US Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Restricted Person or the performance or observance by any Restricted Person of any of its obligations under the US Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) is delivering to US Agent its Tranche B Note and requests that US Agent exchange such Tranche B Note for a new Tranche B Note payable to the order of such Assignor in an amount equal to the Tranche B Maximum Credit Amount retained by such Assignor as specified on Schedule 1 and a new Tranche B Note payable to the order of the relevant Assignee in an amount equal to the Tranche B Maximum Credit Amount of such Assignee specified in Schedule 1.
3. Each Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon US Agent, the Assignors or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Transferee; (iv) appoints and
authorizes US Agent to take such action as US Agent on its behalf and to
exercise such powers and discretion under the Credit Agreement as are delegated
to US Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 3.9.
4. Following the execution of this Assignment and Acceptance, it will be delivered to US Agent for acceptance and recording by US Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be August 9, 2001.
5. Upon such acceptance and recording by US Agent, as of the Effective Date, (i) the Assignees shall be parties to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of Tranche B Lenders thereunder and (ii) the Assignors shall, to the extent provided in this Assignment and Acceptance, relinquish their rights and be released from their obligations under the Credit Agreement.
6. Upon such acceptance and recording by US Agent, from and after the Effective Date, US Agent shall make all payments under the Credit Agreement and the Tranche B Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the appropriate Assignees. The Assignors and Assignees shall make all appropriate adjustments in payments under the Credit Agreement and the Tranche B Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the Laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
Assignment and Acceptance (US Credit Agreement)
IN WITNESS WHEREOF, the Assignors and the Assignees have caused this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of August 9, 2001.
ASSIGNORS: BANK OF AMERICA, N.A., as Assignor By: /s/ Angela McCracken ------------------------------------- Name: Angela McCracken Title: Vice President ABN AMRO BANK, N.V., as Assignor By: /s/ Frank R. Russo, Jr. ------------------------------------- Name: Frank R. Russo, Jr. Title: Group Vice President By: /s/ Jeffrey G. White ------------------------------------- Name: Jeffrey G. White Title: Vice President BANK ONE, NA, as Assignor By: /s/ Ronald L. Dierker ------------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets CITIBANK, N.A., as Assignor By: /s/ Todd J. Mogil ------------------------------------- Name: Todd J. Mogil Title: Attorney-in-fact FIRST UNION NATIONAL BANK, as Assignor By: /s/ David E. Humphreys ------------------------------------- Name: David E. Humphreys Title: Vice President Assignment and Acceptance (US Credit Agreement) |
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Assignor By: /s/ Russell A. Johnson ------------------------------------- Name: Russell A. Johnson Title: Vice President SUNTRUST BANK, ATLANTA, as Assignor By: /s/ David J. Edge ------------------------------------- Name: David J. Edge Title: Director THE CHASE MANHATTAN BANK, as Assignor By: /s/ Russell A. Johnson ------------------------------------- Name: Russell A. Johnson Title: Vice President UMB BANK, as Assignor By: /s/ Derek K. Duncan ------------------------------------- Name: Derek K. Duncan Title: Vice President Assignment and Acceptance (US Credit Agreement) |
WESTDEUTSCHE LANDESBANK GIROZENTRALE, as Assignor By: /s/ S. Battinelli ---------------------------------------- Name: S. Battinelli Title: Managing Director By: /s/ Walter T. Duffy III ---------------------------------------- Name: Walter T. Duffy III Title: Associate Director ASSIGNEES: BANCFIRST, as Assignee By: /s/ Arthur B. Hobbs ---------------------------------------- Name: Arthur B. Hobbs Title: Vice President BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as Assignee By: /s/ Peter Obermann ---------------------------------------- Name: Peter Obermann Title: Senior Vice President By: /s/ James H. Boyle ---------------------------------------- Name: James H. Boyle Title: Vice President CIBC INC., as Assignee By: /s/ Nora Q. Catiis ---------------------------------------- Name: Nora Q. Catiis Title: Authorized Signatory CREDIT LYONNAIS NEW YORK BRANCH, as Assignee By: /s/ Philippe Soustra ---------------------------------------- Name: Philippe Soustra Title: Executive Vice President Assignment and Acceptance (US Credit Agreement) |
CREDIT SUISSE FIRST BOSTON, as Assignee By: /s/ Paul L. Colon ------------------------------------- Name: Paul L. Colon Title: Vice President By: /s/ David M. Koczan ------------------------------------- Name: David M. Koczan Title: Assistant Vice President DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as Assignee By: /s/ Michael E. Keating ------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky ------------------------------------- Name: Joel Makowsky Title: Vice President ROYAL BANK OF CANADA, as Assignee By: /s/ Lorne Gartner ------------------------------------- Name: Lorne Gartner Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD, HOUSTON AGENCY, as Assignee By: /s/ K. Glasscock ------------------------------------- Name: K. Glasscock Title: Vice President & Manager THE BANK OF NEW YORK, as Assignee By: /s/ Raymond J. Palmer ------------------------------------- Name: Raymond J. Palmer Title: Vice President Assignment and Acceptance (US Credit Agreement) |
THE FUJI BANK, LIMITED, as Assignee By: /s/ Jacques Azagury -------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager UBS AG, STAMFORD BRANCH, as Assignee By: /s/ Wilfred V. Saint -------------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US By: /s/ Patricia O'Kicki -------------------------------------- Name: Patricia O'Kicki Title: Director Banking Products Services Assignment and Acceptance (US Credit Agreement) |
ACCEPTED AND APPROVED,
as of the 9th day of August, 2001
BANK OF AMERICA, N.A.
By: /s/ James R. Allred ------------------------------- Name: James R. Allred Title: Managing Director APPROVED as of the 9th day of August, 2001 |
DEVON ENERGY CORPORATION
By: /s/ Dale T. Wilson ------------------------------- Name: Dale T. Wilson Title: Treasurer |
Assignment and Acceptance (US Credit Agreement)
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
(US Credit Agreement)
Page 1 of Schedule 1 to
Assignment and Acceptance (US Credit Agreement)
MAXIMUM AMOUNT OF AGGREGATE TRANCHE B NEW TRANCHE B COMMITMENT UNDER MAXIMUM MAXIMUM AMOUNT OUTSTANDING U.S. CREDIT AMOUNT AFTER ASSIGNMENT TRANCHE B TRANCHE B AGREEMENT AND ASSIGNED AND TRANCHE B NOTE PERCENTAGE LOANS AFTER CANADIAN CREDIT (IN U.S. AMOUNT SHARE AFTER ASSIGNMENT AGREEMENT BANK NAME DOLLARS) (IN U.S. DOLLARS) ASSIGNMENT (IN U.S. DOLLARS) (IN U.S. DOLLARS) --------- --------- ------------------ ----------- ----------------- ----------------- ASSIGNORS: Bank of America, N.A. 8,593,750.03 46,875,000 7.500% 0 60,000,000.00 ABN AMRO Bank, N.V. 6,250,000.00 39,062,500 6.250% 0 50,000,000.00 Bank One, NA 8,593,750.03 46,875,000 7.500% 0 60,000,000.00 Citibank, N.A. 6,250,000.00 39,062,500 6.250% 0 50,000,000.00 First Union National Bank 8,593,750.03 46,875,000 7.500% 0 60,000,000.00 JP Morgan Chase 34,375,000.03 46,875,000 7.500% 0 60,000,000.00 SunTrust Bank 2,604,166.56 11,718,750 1.875% 0 15,000,000.00 UMB Bank 781,250.00 11,718,750 1.875% 0 15,000,000.00 Westdeutsche Landesbank 34,375,000.00 0 0 0 0 |
Page 2 of Schedule 1 to Assignment and Acceptance (US Credit Agreement)
MAXIMUM AMOUNT OF AGGREGATE TRANCHE B NEW TRANCHE B COMMITMENT UNDER MAXIMUM MAXIMUM AMOUNT OUTSTANDING U.S. CREDIT AMOUNT AFTER ASSIGNMENT TRANCHE B TRANCHE B AGREEMENT AND ASSIGNED AND TRANCHE B NOTE PERCENTAGE LOANS AFTER CANADIAN CREDIT (IN U.S. AMOUNT SHARE AFTER ASSIGNMENT AGREEMENT BANK NAME DOLLARS) (IN U.S. DOLLARS) ASSIGNMENT (IN U.S. DOLLARS) (IN U.S. DOLLARS) --------- --------- ------------------ ----------- ----------------- ----------------- ASSIGNEES: BancFirst 7,812,500.00 7,812,500 1.250% 0 10,000,000.00 Bayerische Landesbank 1,562,500.00 31,250,000 5.000% 0 40,000,000.00 CIBC, Inc. 1,562,500.00 19,531,250 3.125% 0 25,000,000.00 Credit Lyonnais 1,562,500.00 31,250,000 5.000% 0 40,000,000.00 Credit Suisse First Boston 39,062,500.00 39,062,500 6.250% 0 50,000,000.00 Deutsche Bank AG 7,291,666.66 39,062,500 6.250% 0 50,000,000.00 Royal Bank of Canada 12,500,000.00 46,875,000 7.500% 0 60,000,000.00 The Bank of New York 781,250.00 35,156,250 5.625% 0 45,000,000.00 The Bank of Tokyo - 13,281,250.00 31,250,000 5.000% 0 40,000,000.00 Mitsubishi The Fuji Bank, Limited 5,468,750.00 35,156,250 5.625% 0 45,000,000.00 (Mizuho) UBS AG 19,531,250.00 19,531,250 3.125% 0 25,000,000.00 |
Page 3 of Schedule 1 to Assignment and Acceptance (US Credit Agreement)
ASSIGNMENT AND ACCEPTANCE
Reference is made to the US Credit Agreement dated as of August 29, 2000 (the "Credit Agreement") among Devon Energy Corporation, a Delaware corporation (the "US Borrower"), the Lenders (as defined in the Credit Agreement) and Bank of America, N.A., individually and as administrative agent for the Lenders (the "US Agent"). Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement and the other US Loan Documents as of the date hereof equal to the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement and the other US Loan Documents relating to the Tranche B Loans and the Tranche B Maximum Credit Amount.
After giving effect to such sale and assignment, the Assignee's Tranche B Maximum Credit Amount and the amount of Tranche B Loans owing to Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the US Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the US Loan Documents or any other instrument or document furnished pursuant thereto and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Restricted Person or the performance or observance by any Restricted Person of any of its obligations under the US Loan Documents or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon US Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Transferee; (iv) appoints and
authorizes US Agent to take such action as US Agent on its behalf
and to exercise such powers and discretion under the Credit Agreement as are delegated to US Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms required under Section 3.9
4. Following the execution of this Assignment and Acceptance, it will be delivered to US Agent for acceptance and recording by US Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be August 8, 2001.
5. Upon such acceptance and recording by US Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by US Agent, from and after the Effective Date, US Agent shall make all payments under the Credit Agreement and the US Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the US Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the Laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon.
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Tranche B Percentage Share assigned: 100 % Assignee's Tranche B Maximum Credit Amount: US $ 25,781,250 Aggregate outstanding principal amount of Tranche B Loans assigned: US $ 0 MORGAN GUARANTY TRUST |
COMPANY OF NEW YORK, as Assignor
By: /s/ Russell A. Johnson ------------------------------------- Name: Russell A. Johnson Title: Vice President |
THE CHASE MANHATTAN BANK, as Assignee
By: /s/ Russell A. Johnson ------------------------------------- Name: Russell A. Johnson Title: Vice President |
Accepted
as of the 8th day of August, 2001
BANK OF AMERICA, N.A.
By: /s/ James R. Allred ------------------------------- Name: James R. Allred Title: Managing Director |
EXHIBIT 10.6
FIFTH AMENDMENT TO US CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO US CREDIT AGREEMENT (herein called this "Amendment") made as of September 21, 2001, by and among Devon Energy Corporation, a Delaware corporation ("US Borrower"), Bank of America, N.A., individually and as administrative agent ("US Agent"), and the US Lenders party to the Original Agreement defined below ("US Lenders").
WITNESSETH:
WHEREAS, US Borrower, US Agent and US Lenders entered into that certain US Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby US Lenders became obligated to make loans to US Borrower as therein provided;
WHEREAS, US Borrower, US Agent and US Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by US Lenders to US Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this section.
"Amendment" means this Fifth Amendment to US Credit Agreement.
Fifth Amendment to US Credit Agreement
"Amendment Fee" means a fee, payable to each US Lender which executes and delivers this Amendment before noon on September 21, 2001 (unless extended by US Borrower), in the amount of five basis points (0.05%) of such US Lender's Percentage Share of the Tranche A Maximum Credit Amount and the Tranche B Maximum Credit Amount.
Fifth Amendment to US Credit Agreement
"Long Term Financing" means a senior unsecured bank facility in an amount not to exceed US $6,000,000,000 arranged by UBS Warburg LLC and Banc of America Securities LLC to finance the acquisition by US Borrower of Anderson Exploration Ltd. and/or Mitchell Energy & Development Corp. through wholly-owned Subsidiaries of US Borrower.
"US Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The definitions of "Canadian Agent", "Canadian LC Issuer", Canadian Lenders", Canadian Prime Rate", "Canadian Resident Lender", "Canadian Swing Lender", "Canadian Swing Rate" and "Canadian US Dollar Base Rate" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
"Canadian Agent" means Bank of America Canada and its successors and assigns, as administrative agent under the Canadian Agreement.
"Canadian LC Issuer" means Bank of America Canada and its successors and assigns in its capacity as the issuer of Letters of Credit under the Canadian Agreement. Canadian Agent may, with the consent of Canadian Borrower and the Lender in question, appoint any Canadian Resident Lender hereunder as a Canadian LC Issuer in place of or in addition to Canadian Agent.
"Canadian Lenders" means each signatory to the Canadian Agreement (other than any Borrower), including Bank of America Canada and, upon the requirements of Section 2.5 of the Fifth Amendment to Canadian Credit Agreement, dated as of September 21, 2001, among Canadian Borrower, Canadian Agent and Canadian Lenders, being completed, Bank of America, N.A., acting through a Canadian branch in the capacity of a Canadian Lender and the Canadian Swing Lender hereunder, rather than as Canadian Agent and Canadian LC Issuer, and the successors of each such party as holder of a Canadian Note.
"Canadian Prime Rate" means on any day a fluctuating rate of
interest per annum equal to the higher of (i) the rate of interest per
annum most recently announced by Canadian Agent as its reference rate
for Canadian Dollar commercial loans made to a Person in Canada; and
(ii) Canadian Agent's Discount Rate for Bankers' Acceptances
Fifth Amendment to US Credit Agreement
having a maturity of thirty days plus the Applicable Margin. No Canadian Prime Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Canadian Resident Lender" means each Lender identified as such on Annex II to the Canadian Agreement or any Assignment and Acceptance executed by a new Lender, each being a Person that is (i) not a non-resident of Canada for the purposes of the Income Tax Act (Canada) or (ii) a Person that is an "authorized foreign bank" as defined in section 2 of the Bank Act (Canada) and in subsection 248(1) of the Income Tax Act (Canada) which will receive all amounts paid or credited to it under the Canadian Obligations in respect of its "Canadian banking business" the purposes of paragraph 212(13.3)(a)of the Income Tax Act (Canada).
"Canadian Swing Lender" means Bank of America Canada and its successors and assigns, in their individual capacities, as Canadian Swing Lender.
"Canadian Swing Rate" means on any day a fluctuating rate of interest per annum established from time to time by Canadian Swing Lender as its money market rate, which rate may not be the lowest rate of interest charged by Canadian Swing Lender to its customers, plus the Applicable Margin. The Canadian Swing Rate shall never exceed the Highest Lawful Rate.
"Canadian US Dollar Base Rate" means on any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the rate of interest per annum most recently established by Canadian Agent as its reference rate for US Dollar commercial loans made to a Person in Canada. Any change in the Canadian US Dollar Base Rate due to a change in Canadian Agent's reference rate shall be effective on the effective date of such change. No Canadian US Dollar Base Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Schedule II BA Reference Banks" means the Lenders listed in Schedule II to the Bank Act (Canada) and the Lenders listed in Schedule III to the Bank Act (Canada) that are not subject to the restrictions and requirements referred to in subsection 524(2) of the Bank Act (Canada) as are, at such time, designated by Canadian Agent, with the prior consent of the Canadian Borrower (acting reasonably), as the Schedule II BA Reference Banks.
(b) Clauses (o) and (x) of the definition of "Permitted Liens" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
"(o) Liens in respect of Indebtedness permitted by Sections 7.1(b), 7.1(f) and 7.1(j), and Liens in respect of Indebtedness permitted by Section 7.1(c), but only to the extent that such Liens encumber the assets expressly permitted to secure such Indebtedness by the terms of Section 7.1(c);"
Fifth Amendment to US Credit Agreement
"(x) in addition to Liens permitted by clauses (a) through
(w) above, Liens on property or assets if the
aggregate Indebtedness secured thereby does not
exceed two percent (2%) of Consolidated Assets."
Section 2.2. Indebtedness. Section 7.1 of the Original Agreement is hereby amended as follows:
(i) Subsection (c) is hereby amended in its entirety to read as follows:
"(c) unsecured Liabilities owed among the Restricted Persons; provided that Liabilities owed by any Restricted Subsidiary (other than Canadian Borrower) to US Borrower may be secured by any and all assets of such Restricted Subsidiary."
(ii) A new subsection (m) is hereby substituted for the existing subsection (m) to read as follows:
"(m) Indebtedness in an aggregate principal amount not to exceed $4,300,000,000 owed by a Nova Scotia unlimited liability company and wholly-owned Subsidiary of US Borrower formed for the purpose of obtaining financing for the acquisition by US Borrower, directly or indirectly through its Subsidiaries, of Anderson Exploration Ltd. and/or Mitchell Energy & Development Corp. and/or for other general corporate purposes; provided that prior to the incurrence of such Indebtedness such Subsidiary shall have delivered (i) to US Agent a guaranty of all of the US Obligations and an opinion of counsel to such Subsidiary with respect to the enforceability thereof, in each case in form and substance reasonably acceptable to US Agent, and (ii) to Canadian Agent a guaranty of all of the Canadian Obligations and an opinion of counsel to such Subsidiary with respect to the enforceability thereof, in each case in form and substance reasonably acceptable to Canadian Agent."
(iii) The existing subsection (m) is renumbered as subsection
(n) and reads as follows:
"(n) miscellaneous items of Indebtedness of all Restricted Persons (other than US Borrower) not otherwise permitted in subsections (a) through (m) which do not in the aggregate exceed US $400,000,000 in principal amount at any one time outstanding."
Section 2.3. Limitation on Liens. Section 7.2 of the Original Agreement is hereby amended by inserting the following sentence immediately after the second sentence thereof:
US Lenders acknowledge that all or any portion of the proceeds of the Indebtedness referred to in Section 7.1(m) may be held in escrow pending the completion of the acquisition of Anderson Exploration Ltd.
and/or Mitchell Energy & Development Corp.,
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that all or any portion of such proceeds may be released from escrow and used to effect either or both of such acquisitions or, in the event either or both of such acquisitions fails to close, to redeem or prepay Indebtedness referred to in Section 7.1(m), together with interest and premiums thereon and fees and expenses in connection therewith, and that no such escrow arrangement constitutes or shall be deemed to constitute a Lien for purposes of this Agreement.
Section 2.4. Funded Debt to Total Capitalization. Section 7.7 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.7. Funded Debt to Total Capitalization. The ratio of US Borrower's Consolidated Total Funded Debt to US Borrower's Total Capitalization will not exceed (i) seventy percent (70%) at the end of any Fiscal Quarter ending on or before June 30, 2002, or (ii) sixty-five percent (65%) at the end of any Fiscal Quarter thereafter."
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. Except for the amendment in Section 2.4 hereof, this Amendment shall become effective as of the date first above written when and only when:
(a) US Agent shall have received all of the following, at US Agent's office, duly executed and delivered and in form and substance satisfactory to US Agent, all of the following:
(i) this Amendment executed by US Borrower, US Agent and US Required Lenders;
(ii) a certificate of the Senior Vice President - Finance or the Treasurer of US Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) US Borrower shall have paid on or before such effective date to each US Lender which executed and delivered this Amendment before noon on September 21, 2001 (unless extended by US Borrower), such US Lenders Amendment Fee and all other fees and reimbursements to be paid to US Agent and US Lenders pursuant to any US Loan Documents, or otherwise due US Agent or US Lenders and including fees and disbursements of US Agent's attorneys.
Section 3.2. Effective Date of Section 2.4. The amendment in Section 2.4 of this Amendment shall become effective as of the date when and only as of the date when:
(a) The conditions set forth in Section 3.1 (a) and (b) above have been satisfied; and
Fifth Amendment to US Credit Agreement
(b) The documentation governing the Long Term Financing shall have been executed and delivered, the initial funding shall have been advanced thereunder, and shares of Anderson Exploration Ltd. shall have been acquired by US Borrower or a Restricted Subsidiary pursuant to US Borrower's offer to purchase the shares of Anderson Exploration Ltd.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of US Borrower. In order to induce each US Lender to enter into this Amendment, US Borrower represents and warrants to each US Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the US Agreement.
(b) US Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the US Agreement. US Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of US Borrower hereunder.
(c) The execution and delivery by US Borrower of this Amendment, the
performance by US Borrower of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not (i) conflict with any
provision of (A) any Law, (B) the organizational documents of US Borrower, or
(C) any agreement, judgment, license, order or permit applicable to or binding
upon US Borrower unless such conflict would not reasonably be expected to have a
Material Adverse Effect, or (ii) result in or require the creation of any Lien
upon any assets or properties of US Borrower which would reasonably be expected
to have a Material Adverse Effect, except as expressly contemplated or permitted
in the Loan Documents. Except as expressly contemplated in the Loan Documents no
consent, approval, authorization or order of, and no notice to or filing with,
any Tribunal or third party is required in connection with the execution,
delivery or performance by US Borrower of this Amendment or to consummate any
transactions contemplated by this Amendment, unless failure to obtain such
consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the US Agreement will be a legal and binding obligation of US Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
Fifth Amendment to US Credit Agreement
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of June 30, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each US Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Long Term Financing. Pursuant to Section 9.7 of the US Agreement, US Lenders agreed that Bank of America and its Affiliates may engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Restricted Persons and their respective Affiliates as though Bank of America were not the US Agent or the US LC Issuer hereunder and without notice to or consent of Lenders. US Lenders acknowledged that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Restricted Person or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Restricted Person or such Affiliate) and that the US Agent shall be under no obligation to provide such information to them. Although not required by the terms of the Original Agreement, Bank of America hereby notifies US Lenders that USB AG, Stamford Branch, UBS Warburg LLC, Bank of America and Banc of America Securities LLC have agreed to provide the Long Term Financing and may provide additional services to the Restricted Persons in connection with the acquisitions financed thereby.
Section 5.2. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The US Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the US Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of US Lenders under the US Agreement or any other US Loan Document nor constitute a waiver of any provision of the US Agreement or any other US Loan Document.
Section 5.3. Survival of Agreements. All representations, warranties, covenants and agreements of US Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by US Borrower or any Restricted Person hereunder or under the US Agreement to any US Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, US Borrower under this Amendment and under the US Agreement.
Fifth Amendment to US Credit Agreement
Section 5.4. US Loan Documents. This Amendment is a US Loan Document, and all provisions in the US Agreement pertaining to US Loan Documents apply hereto.
Section 5.5. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance.
Section 5.6. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
THIS AMENDMENT AND THE OTHER US LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
Fifth Amendment to US Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
DEVON ENERGY CORPORATION
US Borrower
By: /s/ Dale T. Wilson ------------------------------------------ Dale T. Wilson Treasurer |
BANK OF AMERICA, N.A.,
Administrative Agent, US LC Issuer
and Lender
By: /s/ James R. Allred ------------------------------------------ Name: James R. Allred Title: Managing Director |
ABN AMRO BANK, N.V.
Lender
By: /s/ Jeffery White ------------------------------------------ Name: Jeffery White Title: Vice President By: /s/ John Reed ------------------------------------------ Name: John Reed Title: Assistant Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs ------------------------------------------ Name: Arthur B. Hobbs Title: Vice President |
BANK OF MONTREAL
Lender
By: /s/ James V. Ducote ------------------------------------------ Name: James V. Ducote Title: Director |
Fifth Amendment to US Credit Agreement
BANK ONE, NA (Main Office - Chicago) Lender
By: /s/ Jeanie C. Harman ------------------------------------------ Name: Jeanie C. Harman Title: First Vice President |
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH
Lender
By: /s/ Hereward Drummond ------------------------------------------ Name: Hereward Drummond Title: Senior Vice President By: /s/ James H. Boyle ------------------------------------------ Name: James H. Boyle Title: Vice President |
CIBC, INC.
Lender
By: /s/ Nora Q. Catiis ------------------------------------------ Name: Nora Q. Catiis Title: Authorized Signatory |
CITIBANK, N.A.
Lender
By: /s/ Todd J. Mogil ------------------------------------------ Name: Todd J. Mogil Title: Attorney-in-fact |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Bernard Weymuller ------------------------------------------ Name: Bernard Weymuller Title: Senior Vice President |
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CREDIT SUISSE FIRST BOSTON
Lender
By: /s/ James P.Moran ----------------------------------------- Name: James P. Moran Title: Director By: /s/ David M. Koczan ----------------------------------------- Name: David M. Koczan Title: Assistant Vice President |
DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
Lender
By: /s/ Joel Makowsky ----------------------------------------- Name: Joel Makowsky Title: Vice President By: /s/ Hans C. Narberhaus ----------------------------------------- Name: Hans C. Narberhaus Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ James M. Kopp ----------------------------------------- Name: James M. Kopp Title: Managing Director |
ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner ----------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge ----------------------------------------- Name: David J. Edge Title: Director |
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THE BANK OF NEW YORK
Lender
By: /s/ Raymond J. Palmer ----------------------------------------- Name: Raymond J. Palmer Title: Vice President |
THE BANK OF TOKYO - MITSUBISHI LTD.
HOUSTON AGENCY
Lender
Title:
THE CHASE MANHATTAN BANK
Lender
By: /s/ Russell A. Johnson ----------------------------------------- Name: Russell A. Johnson Title: Vice President |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury ----------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
TORONTO-DOMINION (TEXAS), INC.
Lender
By: /s/ Mark A. Baird ----------------------------------------- Name: Mark A. Baird Title: Vice President |
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UBS AG, STAMFORD BRANCH
Lender
By: /s/ Patricia O'Kicki ----------------------------------------- Name: Patricia O'Kicki Title: Director - Banking Products Services By: /s/ Wilfred V. Saint ----------------------------------------- Name: Wilfred V. Saint Title: Associate Director - Banking Products Services, US |
UMB BANK
Lender
By: /s/ Richard J. Lehrter ----------------------------------------- Name: Richard J. Lehrter Title: Community Bank President |
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
Title:
Title:
Fifth Amendment to US Credit Agreement
EXHIBIT 10.7
SIXTH AMENDMENT TO US CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO US CREDIT AGREEMENT (herein called this "Amendment") made as of October 5, 2001, by and among Devon Energy Corporation, a Delaware corporation ("US Borrower"), Bank of America, N.A., individually and as administrative agent ("US Agent"), and the US Lenders party to the Original Agreement defined below ("US Lenders").
WITNESSETH:
WHEREAS, US Borrower, US Agent and US Lenders entered into that certain US Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby US Lenders became obligated to make loans to US Borrower as therein provided;
WHEREAS, US Borrower, US Agent and US Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by US Lenders to US Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this section.
"Amendment" means this Sixth Amendment to US Credit Agreement.
"Mitchell" means Mitchell Energy & Development Corp., a Texas corporation, and its successors and assigns.
"Mitchell Restructuring Event" means one or a series of transactions pursuant to which US Borrower may form or cause to be formed a new holding company under the law of any state of the United States of America, which pursuant to one or more mergers or other transactions would acquire all of the outstanding common stock of each of US Borrower and Mitchell.
"US Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The following definitions of "Anderson Financing", "Devon HoldCo", "Mitchell" and "Mitchell Restructuring Event" are hereby added to Annex I to the Original Agreement in alphabetical order:
"Anderson Financing" means (i) the closing of and funding of the initial loans under a senior unsecured bank facility in an amount not to exceed US $3,032,000,000 arranged by UBS Warburg LLC and Banc of America Securities LLC to finance the acquisition by US Borrower of Anderson Exploration Ltd. and/or Mitchell through wholly-owned Subsidiaries of US Borrower or, in the case of Mitchell, through a Mitchell Restructuring Event, and (ii) the acquisition of shares of Anderson Exploration Ltd. by US Borrower or a Restricted Subsidiary pursuant to US Borrower's offer to purchase the shares of Anderson Exploration Ltd.
"Devon HoldCo" means a new holding company formed under the law of any state of the United States of America to effect a Mitchell Restructuring Event, together with its successors and assigns.
"Mitchell" means Mitchell Energy & Development Corp., a Texas corporation, and its successors and assigns.
"Mitchell Restructuring Event" means one or a series of transactions pursuant to which US Borrower may form or cause to be formed a new holding company under the law of any state of the United States of America, which pursuant to one or more mergers or other transactions would acquire all of the outstanding common stock of each of US Borrower and Mitchell.
(b) The definitions of "Change of Control", "Consolidated Assets", "ERISA Affiliate", "Material Adverse Effect", "Material Subsidiary", "Restricted Person", "Restricted Subsidiary", "Total Capitalization" and "US GAAP" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
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"Change of Control" means the occurrence of either of the following events: (i) any Person (or syndicate or group of Persons which is deemed a "person" for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires more than fifty percent (50%) of the outstanding stock of Devon HoldCo having ordinary voting power (disregarding changes in voting power based on the occurrence of contingencies) for the election of directors, or (ii) during any period of twelve successive months a majority of the Persons who were directors of Devon HoldCo at the beginning of such period cease to be directors of Devon HoldCo, unless such cessation relates to a voluntary reduction by Devon HoldCo of the number of directors that comprise the board of directors of Devon HoldCo. For the avoidance of doubt, the Mitchell Restructuring Event shall not constitute or be deemed to constitute a "Change of Control" for purposes of the US Agreement, the Canadian Agreement or any other Loan Document.
"Consolidated Assets" means the total assets of Devon HoldCo and its Restricted Subsidiaries which would be shown as assets on a Consolidated balance sheet of Devon HoldCo and its Restricted Subsidiaries prepared in accordance with US GAAP, after eliminating all amounts properly attributable to minority interest, if any, in the stock and surplus of the Restricted Subsidiaries.
"ERISA Affiliate" means Devon HoldCo and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with Devon HoldCo, are treated as a single employer under Section 414 of the Internal Revenue Code.
"Material Adverse Effect" means any event which would reasonably be expected to have a material and adverse effect upon (a) Devon HoldCo's Consolidated financial condition, (b) Devon HoldCo's Consolidated operations, properties or prospects, considered as a whole, (c) US Borrower's ability to timely pay the Obligations, or (d) the enforceability of the material terms of any Loan Documents.
"Material Subsidiary" means a Subsidiary of Devon HoldCo other than US Borrower which owns assets having a book value that exceeds ten percent (10%) of the book value of Devon HoldCo's Consolidated assets.
"Restricted Person" means any of Devon HoldCo, US Borrower and each Restricted Subsidiary.
"Restricted Subsidiary" means Canadian Borrower, Devon Oklahoma, Devon SFS, Mitchell and any other Subsidiary of Devon HoldCo (other than US Borrower) that is not an Unrestricted Subsidiary.
"Total Capitalization" means the sum (without duplication) of
(i) Devon HoldCo's Consolidated Total Funded Debt plus (ii) Devon
HoldCo's Consolidated shareholder's equity plus (iii) 60% of the
outstanding balance of the Devon Trust Securities. Total Capitalization
shall be calculated excluding non-cash write-downs and related charges
Sixth Amendment to US Credit Agreement
which are required under Rule 4-10 (Financial Accounting and Reporting for Oil and Gas Producing Activities Pursuant to the Federal Securities Laws and the Energy Policy and Conservation Act of 1975) of Regulation S-X promulgated by Securities and Exchange Commission Regulation, or by US GAAP.
"US GAAP" means those generally accepted accounting principles and practices which are recognized as such from time to time by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Devon HoldCo and its Consolidated Subsidiaries, are applied in a manner consistent with the manner in which such principles and practices were applied in the Initial Financial Statements.
(c) The first sentence of the definition of "Unrestricted Subsidiary" in Annex I to the Original Agreement is hereby amended in its entirety to read as follows:
"Unrestricted Subsidiary" means any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization (i) which is listed below in this definition, or (ii) in which US Borrower did not own an interest (directly or indirectly) as of August 29, 2001, which thereafter became a Subsidiary of US Borrower or Devon HoldCo and which, within 90 days after becoming a Subsidiary of US Borrower or Devon HoldCo, was designated as an Unrestricted Subsidiary by US Borrower to US Agent; provided that in the event any such Subsidiary becomes a Material Subsidiary at any time, such Subsidiary shall cease to be an Unrestricted Subsidiary at such time and shall automatically become a Restricted Subsidiary.
(d) The definition of "Permitted Liens" is hereby amended by substituting the words "US Borrower, Devon HoldCo" for the words "US Borrower".
(e) The definition of "Subordinated US Borrower Debentures" is hereby amended by substituting the words "Devon HoldCo or US Borrower" for the words "US Borrower".
Section 2.2. Representations and Warranties.
(a) Section 5.2 and the first sentence of Section 5.3 of the Original Agreement are hereby amended by substituting the words "Devon HoldCo, US Borrower" for the words "US Borrower" each place where such words appear therein.
(b) Section 5.10 of the Original Agreement is hereby amended by substituting the word "Devon HoldCo" for the words "US Borrower" each place where such words appear therein and by deleting the period at the end of the first sentence thereof and adding the words "and US Borrower and Mitchell and its Subsidiaries." in place thereof.
Sixth Amendment to US Credit Agreement
Section 2.3. Affirmative Covenants.
(a) The first sentence of Section 6.2(a), the first sentence of Section 6.2(b), and Section 6.2(c) of the Original Agreement are hereby amended by substituting the words "Devon HoldCo" for the words "US Borrower".
(b) Section 6.13 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 6.13 Bank Accounts; Offset. US Borrower hereby agrees that each US Lender shall have the right to offset (which shall be in addition to all other interests, liens, and rights of any Lender at common Law, under the Loan Documents, or otherwise) (a) any and all moneys, securities or other property (and the proceeds therefrom) of US Borrower now or hereafter held or received by or in transit to any US Lender for the account of US Borrower, (b) any and all deposits (general or special, time or demand, provisional or final) of US Borrower with any US Lender, (c) any other credits and balances of US Borrower at any time existing against any US Lender, including claims under certificates of deposit, and (d) any indebtedness owed or payable by any Lender to US Borrower at any time against US Obligations due to it that have not been paid when due. At any time and from time to time after the occurrence of any Event of Default and during the continuance thereof, each Lender is hereby authorized to offset against the US Obligations then due and payable to it (in either case without notice to US Borrower), any and all items hereinabove referred to. To the extent that US Borrower has accounts designated as royalty or joint interest owner accounts, the foregoing right of offset shall not extend to funds in such accounts which belong to, or otherwise arise from payments to US Borrower for the account of, third party royalty or joint interest owners."
Section 2.4. Negative Covenants.
(a) Section 7.1(m) of the Original Agreement is hereby amended in its entirety to read as follows:
"(m) (1) Indebtedness in an aggregate principal amount not to exceed US $4,300,000,000 owed by Devon Financing Corporation, U.L.C., a Nova Scotia unlimited liability company and wholly-owned Subsidiary of US Borrower, and (2) other Indebtedness of such Nova Scotia unlimited liability company with respect to guaranties of Indebtedness of US Borrower or the holding company referred to in the definition of Mitchell Restructuring Event, to the extent US Borrower is in compliance with the terms of Section 7.8 at the time such guaranties are executed and delivered."
(b) Section 7.3 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.3 Limitation on Mergers. No Restricted Person will merge with or into or consolidate with any other Person except that:
Sixth Amendment to US Credit Agreement
(a) any Restricted Subsidiary may be merged with or into or consolidated with (i) Devon HoldCo, so long as Devon HoldCo is the surviving business entity of such merger or consolidation, (ii) US Borrower, so long as US Borrower is the surviving business entity of such merger or consolidation, or (iii) any other Subsidiary of Devon HoldCo, so long as the surviving business entity of such merger or consolidation is a Restricted Subsidiary;
(b) US Borrower may be merged with or into or consolidated with Devon HoldCo, or Devon HoldCo may be merged with or into or consolidated with US Borrower, so long as (i) US Borrower is the surviving business entity of such merger or consolidation or (ii) Devon HoldCo, as the surviving business entity of such merger or consolidation, expressly assumes, by execution of a supplement to this Agreement in form and substance reasonably satisfactory to US Agent, the due and punctual payment of all US Obligations and the performance of the obligations of US Borrower contained herein and in the other Loan Documents;
(c) US Borrower may merge with or into or be consolidated with a Subsidiary of Devon HoldCo to effect the Mitchell Restructuring Event so long as US Borrower is the surviving business entity of such merger or consolidation; and
(d) Any Person which is not a Restricted Person may be merged with or into or consolidated with a Restricted Person, so long as such Restricted Person is the surviving business entity of such merger or consolidation."
(c) Section 7.4 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.4 Limitation on Issuance of Securities by US Borrower and Restricted Subsidiaries; Ownership of certain Restricted Subsidiaries by US Borrower.
(a) No Restricted Subsidiary will issue any additional shares of its capital stock, additional partnership interests or other securities or any options, warrants or other rights to acquire such additional shares, partnership interests or other securities except to another Restricted Person which is a wholly-owned direct or indirect Subsidiary of Devon HoldCo unless (i) such securities are being issued to acquire a business, directly or indirectly through the use of the proceeds of such issuance, and (ii) such securities are convertible into the common or similar securities of Devon HoldCo and/or may be redeemed in cash at the option of the Restricted Person that issued such securities. In addition, (A) Canadian Borrower may issue "Exchangeable Shares" (as defined in the Articles of Amalgamation of Canadian Borrower and in this section called "Exchangeable Shares") upon the terms specified in the Articles of Amalgamation of Canadian Borrower as in effect on January 1, 2001, which terms are substantially the same as those set forth in the Restated Articles of Incorporation of Northstar Energy Corporation immediately prior to the amalgamation of Canadian Borrower, (B) Canadian Borrower may issue stock options to its employees from time to time to acquire such Exchangeable Shares, provided
Sixth Amendment to US Credit Agreement
that such options are granted under a stock option plan of Canadian Borrower and/or Devon HoldCo, and (C) Devon Trust may issue common securities to US Borrower or Devon HoldCo and the Devon Trust Securities.
(b) US Borrower will at all times own, directly or indirectly, 100% of the partnership interests in Devon Energy Production Company, L.P., 100% of the outstanding shares of common stock of Devon SFS and Northstar Energy, and 100% of the outstanding common securities of Devon Trust. Devon HoldCo will at all times own directly 100% of the outstanding capital stock of US Borrower having ordinary voting power (disregarding changes in voting power based on the occurrence of contingencies) for the election of directors."
(d) Section 7.6 of the Original Agreement is hereby amended by substituting the words "Devon HoldCo" for the words "US Borrower".
(e) Section 7.7 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.7 Prohibited Contracts. Except as expressly provided for in the US Loan Documents, the Support Agreement dated December 10, 1998 between the US Borrower and Northstar Energy, the Santa Fe Snyder Indentures, and documents and instruments evidencing or governing Acquired Debt, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of (i) any Restricted Person that is a Subsidiary of US Borrower to pay dividends or make other distributions to US Borrower, to redeem equity interests held in it by US Borrower, to repay loans and other indebtedness owing by it to US Borrower, or to transfer any of its assets to US Borrower or (ii) any Restricted Person that is a Subsidiary of Devon HoldCo (other than US Borrower and its Subsidiaries) to pay dividends or make other distributions to Devon HoldCo, to redeem equity interests held in it by Devon HoldCo, to repay loans and other indebtedness owing by it to Devon HoldCo or US Borrower, or to transfer any of its assets to Devon HoldCo."
(f) Section 7.8 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.8 Funded Debt to Total Capitalization. The ratio of
Devon HoldCo's Consolidated Total Funded Debt to Total Capitalization
will not exceed (i) at the end of each Fiscal Quarter prior to the
consummation of the Anderson Financing, sixty-five percent (65%) and
(ii) at the end of each Fiscal Quarter thereafter until and including
June 30, 2002, seventy percent (70%) and (iii) at the end of each
Fiscal Quarter ending after June 30, 2002 sixty-five percent (65%)."
(g) Section 7.9 of the Original Agreement is hereby amended by substituting the words "US Borrower or Devon HoldCo" for the words "US Borrower" except where "US Borrower" is part of another defined term.
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Section 2.5. Miscellaneous. Section 10.1(a) of the Original Agreement is hereby amended by inserting the following at the end of the fourth sentence thereof:
"; provided, however, that with the consent of the US Agent but without the separate consent of any other Lender Party, US Borrower may amend, supplement or otherwise modify this Agreement or any other US Loan Document in connection with the Mitchell Restructuring Event and the related addition of the holding company referred to in the definition of Mitchell Restructuring Event as a Restricted Person herein and in the other US Loan Documents (i) to cure any ambiguity or correct or supplement any provision contained herein or in any other US Loan Document which may thereby become defective or inconsistent with any other provisions contained herein or therein, so long as such amendment, supplement or other modification would not have an adverse effect on the interests of the Lender Parties hereunder and under the other US Loan Documents or (ii) to add to the covenants and agreements of the Restricted Persons hereunder and thereunder such further covenants, agreements, restrictions, conditions or provisions as the US Agent shall consider to be for the protection of the Lender Parties."
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date of Amendments in Section 2.3(b), Section 2.4(a), Section 2.5, and "Mitchell Restructuring Event". The amendments set forth in Section 2.3(b), Section 2.4(a), Section 2.5, and the definition of "Mitchell Restructuring Event" in Section 2.1(a) of this Amendment shall become effective as of the date first written above when and only when:
(a) US Agent shall have received at US Agent's office (i) this Amendment executed by US Borrower, US Agent and US Required Lenders and (ii) a certificate of the Senior Vice President - Finance or the Treasurer of US Borrower dated the date of this Amendment certifying: (A) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (B) that no Default exists at and as of such date; and
(b) US Borrower shall have paid on or before such effective date all fees and reimbursements to be paid to US Agent and US Lenders pursuant to any US Loan Documents, or otherwise due US Agent or US Lenders and including fees and disbursements of US Agent's attorneys.
Section 3.2. Effective Date of Entire Amendment. This Amendment (other than the sections described in Section 3.1) shall become effective contemporaneously with the occurrence of the Mitchell Restructuring Event on the date the Mitchell Restructuring Event occurs; provided that the following conditions have been satisfied:
(a) US Agent shall have received all of the following, at US Agent's office, duly executed and delivered and in form and substance satisfactory to US Agent, all of the following:
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(i) a guaranty of the US Obligations from Devon HoldCo in form and substance reasonably acceptable to US Agent;
(ii) an opinion of counsel to US Borrower with respect to this Amendment in form and substance reasonably acceptable to US Agent;
(iii) a certificate of the Senior Vice President - Finance or the Treasurer of US Borrower dated the date of the Mitchell Restructuring Event certifying: (A) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (B) that no Default exists at and as of such date;
(iv) an opinion of counsel to Devon HoldCo with respect to the guaranty of Devon HoldCo referred to in clause (i) above in form and substance reasonable acceptable to US Agent; and
(v) a certificate of the Senior Vice President - Finance or the Treasurer of Devon HoldCo dated the date of the Mitchell Restructuring Event with respect to its articles of incorporation, bylaws, incumbency, authorizing resolutions, and similar corporate matters.
(b) US Borrower shall have paid on or before such effective date all fees and reimbursements to be paid to US Agent and US Lenders pursuant to any US Loan Documents, or otherwise due US Agent or US Lenders and including fees and disbursements of US Agent's attorneys.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of US Borrower. In order to induce each US Lender to enter into this Amendment, US Borrower represents and warrants to each US Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the US Agreement.
(b) US Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the US Agreement. US Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of US Borrower hereunder.
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(c) The execution and delivery by US Borrower of this Amendment, the
performance by US Borrower of its obligations hereunder and the consummation of
the transactions contemplated hereby do not and will not (i) conflict with any
provision of (A) any Law, (B) the organizational documents of US Borrower, or
(C) any agreement, judgment, license, order or permit applicable to or binding
upon US Borrower unless such conflict would not reasonably be expected to have a
Material Adverse Effect, or (ii) result in or require the creation of any Lien
upon any assets or properties of US Borrower which would reasonably be expected
to have a Material Adverse Effect, except as expressly contemplated or permitted
in the Loan Documents. Except as expressly contemplated in the Loan Documents no
consent, approval, authorization or order of, and no notice to or filing with,
any Tribunal or third party is required in connection with the execution,
delivery or performance by US Borrower of this Amendment or to consummate any
transactions contemplated by this Amendment, unless failure to obtain such
consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the US Agreement will be a legal and binding obligation of US Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of June 30, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each US Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The US Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the US Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of US Lenders under the US Agreement or any other US Loan Document nor constitute a waiver of any provision of the US Agreement or any other US Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of US Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and
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shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by US Borrower or any Restricted Person hereunder or under the US Agreement to any US Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, US Borrower under this Amendment and under the US Agreement.
Section 5.3. US Loan Documents. This Amendment is a US Loan Document, and all provisions in the US Agreement pertaining to US Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
Section 5.6 Renumbering of Funded Debt to Total Capitalization Covenant. The reference to Section 7.7 of the Original Agreement contained in the Fifth Amendment to US Credit Agreement was intended to refer to Section 7.8 of the Original Agreement and is hereby renumbered as Section 7.8 of the Original Agreement.
THIS AMENDMENT AND THE OTHER US LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
DEVON ENERGY CORPORATION
US Borrower
By: /s/ Dale T. Wilson -------------------------------- Dale T. Wilson Treasurer |
BANK OF AMERICA, N.A.,
Administrative Agent, US LC Issuer
and Lender
By: /s/ James R. Allred -------------------------------- Name: James R. Allred Title: Managing Director |
ABN AMRO BANK, N.V.
Lender
By: /s/ James Conn -------------------------------- Name: Jamie Conn Title: Group Vice President By: /s/ Frank R. Russo, Jr. -------------------------------- Name: Frank R. Russo, Jr. Title: Group Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs -------------------------------- Name: Arthur B. Hobbs Title: Vice President |
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BANK OF MONTREAL
Lender
By: /s/ James B. Whitmore ------------------------------------ Name: James B. Whitmore Title: Managing Director |
BANK ONE, NA (MAIN OFFICE - CHICAGO)
Lender
By: /s/ Jeanie Harman ------------------------------------ Name: Jeanie Harman Title: First Vice President |
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH Lender
By: /s/ Peter Obermann ------------------------------------ Name: Peter Obermann Title: Senior Vice President By: /s/ James H. Boyle ------------------------------------ Name: James H. Boyle Title: Vice President |
CIBC INC.
Lender
By: /s/ Nora Q. Catiis ------------------------------------ Name: Nora Q. Catiis Title: Authorized Signatory |
CITIBANK, N.A.
Lender
By: /s/ Todd J. Mogil ------------------------------------ Name: Todd J.Mogil Title: Attorney-in-fact |
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CREDIT LYONNAIS NEW YORK
BRANCH
Lender
Title:
CREDIT SUISSE FIRST BOSTON
Lender
By: /s/ James P. Moran ------------------------------- Name: James P. Moran Title: Director By: /s/ Paul L. Colon ------------------------------- Name: Paul L.Colon Title: Vice President |
DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
Lender
By: /s/ Michael E. Keating ------------------------------- Name: Michael A. Keating Title: Managing Director By: /s/ Joel Makowsky ------------------------------- Name: Joel Makowsky Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ Robert R. Wetteroff ------------------------------- Name: Robert R. Wetteroff Title: Senior Vice President |
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ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner --------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
Title:
THE BANK OF NEW YORK
Lender
By: /s/ John V. Yancey --------------------------------------- Name: John V. Yancey Title: Senior Vice President |
THE BANK OF TOKYO - MITSUBISHI
LTD. HOUSTON AGENCY
Lender
Title:
THE CHASE MANHATTAN BANK
Lender
By: /s/ Russell A. Johnson --------------------------------------- Name: Russell A. Johnson Title: Vice President |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury --------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
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TORONTO-DOMINION (TEXAS), INC.
Lender
Title:
UBS AG, STAMFORD BRANCH
Lender
By: /s/ Patricia O'Kicki ----------------------------------------- Name: Patricia O'Kicki Title: Director Banking Products Services By: /s/ Wilfred V. Saint ----------------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US |
UMB BANK
Lender
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
Title:
Title:
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CONSENT AND AGREEMENT
Devon Financing Corporation, U.L.C., a Nova Scotia unlimited liability company, hereby (i) consents to the provisions of this Amendment and the transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated as of October 3, 2001 (the "DFC Guaranty") made by it for the benefit of US Agent and Lenders executed pursuant to the US Agreement and the other US Loan Documents, (iii) agrees that all of its respective obligations and covenants thereunder shall remain unimpaired by the execution and delivery of this Amendment and the other documents and instruments executed in connection herewith, and (iv) agrees that the DFC Guaranty and such other US Loan Documents shall remain in full force and effect.
DEVON FINANCING CORPORATION,
U.L.C.
By: /s/ Dale T. Wilson ------------------------------- Name: Dale T. Wilson Title: Treasurer |
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EXHIBIT 10.8
THIRD AMENDMENT TO CANADIAN CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CANADIAN CREDIT AGREEMENT (herein called this "Amendment") made as of July 31, 2001 by and among Northstar Energy Corporation, an Alberta corporation ("Canadian Borrower"), Bank of America Canada, individually and as administrative agent ("Canadian Agent"), and the Canadian Lenders party to the Original Agreement defined below ("Canadian Lenders").
WITNESSETH:
WHEREAS, Canadian Borrowers, Canadian Agent and Canadian Lenders entered into that certain Canadian Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby Canadian Lenders became obligated to make loans to Canadian Borrowers as therein provided;
WHEREAS, on January 1, 2001 Northstar Energy, Devon Energy Canada Holding Corporation (the successor by amalgamation to Devon Energy Canada) and certain other Alberta corporations, all of which were Subsidiaries of US Borrower, amalgamated under the name Northstar Energy Corporation (defined above as the "Canadian Borrower") which is now the sole Canadian Borrower;
WHEREAS, Canadian Borrower, Canadian Agent and Canadian Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by Canadian Lenders to Canadian Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2.
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"Amendment" means this Third Amendment to Canadian Credit Agreement.
"Canadian Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The definition of "ERISA Plan" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'ERISA Plan' means any employee pension benefit plan (other than a Multiemployer Plan) subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability."
(b) The definition of "Permitted Liens" in Annex I of the Original Agreement is hereby amended by deleting subsection (w) thereof and adding the following new subsections (w) and (x) in lieu thereof:
"(w) Liens on Margin Stock.
(x) in addition to Liens permitted by clauses (a) through (w) above, Liens on property or assets if the aggregate Indebtedness secured thereby does not exceed US $50,000,000."
(c) The definition of "Stamping Fee Rate" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"`Stamping Fee Rate' means with respect to any Bankers' Acceptance accepted by any Canadian Resident Lender at any time, the Applicable Margin then in effect.
(d) The definition of "Termination Event" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'Termination Event' means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA; or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was
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a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or
(c) a complete or partial withdrawal by any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; or (d) the filing of a notice of intent to terminate
any ERISA Plan or Multiemployer Plan or the treatment of any ERISA Plan
amendment or Multiemployer Plan amendment as a termination under
Section 4041 or 4041A of ERISA; or (e) the institution of proceedings
to terminate any ERISA Plan or Multiemployer Plan by the Pension
Benefit Guaranty Corporation under Section 4042 of ERISA; or (f) any
other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any ERISA Plan or Multiemployer Plan."
(e) The definition of "Total Capitalization" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'Total Capitalization' means the sum (without duplication) of
(i) US Borrower's Consolidated Total Funded Debt plus (ii) US
Borrower's Consolidated shareholder's equity plus (iii) 60% of the
outstanding balance of the Devon Trust Securities. Total Capitalization
shall be calculated excluding non-cash write-downs and related charges
which are required under Rule 4-10 (Financial Accounting and Reporting
for Oil and Gas Producing Activities Pursuant to the Federal Securities
Laws and the Energy Policy and Conservation Act of 1975) of Regulation
S-X promulgated by Securities and Exchange Commission Regulation, or by
US GAAP."
(f) The first sentence of the definition of "Unrestricted Subsidiary" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows (it being understood that the last sentence thereof and the list of Unrestricted Subsidiaries set forth therein are not being modified by this Amendment):
"'Unrestricted Subsidiary' means any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization (i) which is listed below in this definition, or (ii) in which US Borrower did not own an interest (directly or indirectly) as of August 29, 2000, which thereafter became a Subsidiary of US Borrower and which, within 90 days after becoming a Subsidiary of US Borrower, is designated as an Unrestricted Subsidiary by US Borrower to US Agent; provided that in the event any such Subsidiary becomes a Material Subsidiary at any time, such Subsidiary shall cease to be an Unrestricted Subsidiary at such time and shall automatically become a Restricted Subsidiary."
(g) The following defined terms are hereby added to Annex I of the Original Agreement in alphabetical order:
"'Disclosure Report' means a written notice given by US Borrower to all Lender Parties or a certificate given by the Senior Vice President-Finance or the Treasurer of US Borrower under Sections 6.2(a) and (b)."
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"'Multiemployer Plan' means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any ERISA Affiliate is making or is obligated to make contributions or, during the five preceding plan years, has made or has been obligated to make contributions."
"'Margin Stock' means 'margin stock' as defined in Reg U."
"'Material Subsidiary' means a Subsidiary of US Borrower which owns assets having a book value that exceeds ten percent (10%) of the book value of US Borrower's Consolidated assets."
"'Reg U' means Regulation U promulgated by the Board of Governors of the Federal Reserve System."
Section 2.2. Default Rate. Section 1.5(a)(vi) of the Original Agreement is hereby amended in its entirety to read as follows:
"(vi) All past due principal of and past due interest on the Canadian Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day, and such interest shall be due and payable daily as it accrues."
Section 2.3. Use of Proceeds. Section 1.10 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 1.10. Use of Proceeds. Canadian Borrower shall use all Canadian Advances and Canadian Swing Loans made under this Agreement to refinance existing indebtedness (including any commercial paper issued by or for the account of Canadian Borrower), to finance capital expenditures, to refinance Matured Canadian LC Obligations outstanding under this Agreement, and to provide working capital for its operations and for other general business purposes. Canadian Borrower shall use all Letters of Credit for its general corporate purposes. If any Canadian Advance or Canadian Swing Loan is used for a purpose which is governed by Reg U, Canadian Borrower shall comply with Reg U in all respects. Canadian Borrower represents and warrants that Canadian Borrower is not engaged principally, or as one of Canadian Borrower's important activities, in the business of extending credit to others for the purpose of purchasing or carrying Margin Stock."
Section 2.4. Conditions Precedent. Section 4.3(c) of the Original Agreement is hereby deleted.
Section 2.5. Representations and Warranties; Litigation. Sections 5.2 and 5.7 of the Original Agreement are hereby amended in their entirety to read as follows:
"Section 5.2 Organization and Good Standing. Each of Canadian Borrower and the
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Material Subsidiaries of Canadian Borrower is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each of Canadian Borrower and the Material Subsidiaries of Canadian Borrower is duly qualified, in good standing, and authorized to do business in all other jurisdictions within Canada wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where failure to so qualify would not have a Material Adverse Effect. Each of Canadian Borrower and the Material Subsidiaries of Canadian Borrower has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside Canada wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable except where failure to so qualify would not have a Material Adverse Effect.
Section 5.7. Litigation. Except as disclosed in the Initial Financial Statements, in the financial statements delivered to each Lender Party pursuant to Section 6.2, in the Disclosure Schedule or in a Disclosure Report, there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of Canadian Borrower threatened, against Canadian Borrower or any Subsidiary of Canadian Borrower that is a Restricted Person before any Tribunal which would reasonably be expected to have a Material Adverse Effect, and there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any such Person which would reasonably be expected to have a Material Adverse Effect."
Section 2.6. Representations and Warranties; Names and Places of Business. Section 5.9 of the Original Agreement is hereby deleted in its entirety.
Section 2.7. Representations and Warranties; Canadian Borrower's Subsidiaries; Title to Properties; Licenses. Sections 5.10 and 5.11 of the Original Agreement are hereby amended in their entirety to read as follows:
"Section 5.10. Canadian Borrower's Subsidiaries. Canadian Borrower does not presently have any Material Subsidiary except those listed in the Disclosure Schedule or in a Disclosure Report (it being understood that inclusion of a Subsidiary on the Disclosure Schedule does not mean that such Subsidiary is a Material Subsidiary). Canadian Borrower owns, directly or indirectly, the equity interest in each of its Material Subsidiaries which is indicated in the Disclosure Schedule or in a Disclosure Report.
Section 5.11. Title to Properties; Licenses. Canadian Borrower and each Subsidiary of Canadian Borrower that is a Restricted Person has good and defensible title to all of its material properties and assets, free and clear of all Liens other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person's business except to the extent failure to have such title would not have a Material Adverse Effect. Canadian Borrower and each Subsidiary of Canadian Borrower that is a
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Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property
(or otherwise possesses the right to use such intellectual property)
which are necessary to carry out its business as presently conducted
and as presently proposed to be conducted hereafter except to the
extent failure to possess such licenses, permits, franchises, and
intellectual property would not have a Material Adverse Effect, and no
such Restricted Person is in violation in any material respect of the
terms under which it possesses such intellectual property or the right
to use such intellectual property except to the extent any such
violation would not have a Material Adverse Effect."
Section 2.8. Notice of Material Events and Change of Address. Section 6.4 of the Original Agreement is hereby amended to replace all references therein to the amount of "$100,000,000" to "$125,000,000", to delete the last sentence of such section, and to amend clause (d) thereof in its entirety to read as follows:
"(d) the occurrence of any Termination Event which could reasonably be expected to cause (i) the total amount of withdrawal liability that would be incurred by all ERISA Affiliates upon their complete withdrawal from all Multiemployer Plans to exceed US $125,000,000, or (ii) the aggregate Liabilities of the ERISA Affiliates to ERISA Plans to exceed $125,000,000."
Section 2.9. Environmental Matters. Section 6.12(b) of the Original Agreement is hereby amended to replace the reference therein to the amount of "$100,000,000" to "$125,000,000."
Section 2.10. Indebtedness. Subsections (b) and (l) of Section 7.1 of the Original Agreement are hereby amended in their entirety to read as follows:
"(b) capital lease obligations (excluding oil, gas or mineral leases) entered into in the ordinary course of such Restricted Person's business in arm's length transactions at competitive market rates under competitive terms and conditions in all respects, provided that such capital lease obligations required to be paid in any Fiscal Year do not in the aggregate exceed US $50,000,000 for all Restricted Subsidiaries, whether or not Subsidiaries of Canadian Borrower.
(l) miscellaneous items of Indebtedness of all Restricted Persons (other than US Borrower) not described in subsections (a) through (k) which do not in the aggregate exceed US $400,000,000 in principal amount at any one time outstanding."
Section 2.11. Limitation on Restricted Payments. Section 7.5 of the Original Agreement is hereby deleted.
Section 2.12. Events of Default. Subsection (c) and (e) of Section 8.1 of the Original Agreement are hereby amended in their entirety to read as follows:
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"(c) Any Restricted Person fails (other than as referred to in
subsections (a) or (b) above) to (i) duly comply with Section 1.10 or
Section 7.4(b) of the Canadian Agreement or (ii) duly observe, perform
or comply with any other covenant, agreement, condition or provision of
any Canadian Loan Document, and such failure remains unremedied for a
period of thirty (30) days after notice of such failure is given by
Canadian Agent to Canadian Borrower;
(e) Any Restricted Person fails to duly pay any Indebtedness in excess of US $125,000,000 constituting principal or interest owed by it with respect to borrowed money or money otherwise owed under any note, bond, or similar instrument, or (ii) breaches or defaults in the performance of any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, other than a breach or default described in clause (i) above, and any such failure, breach or default results in the acceleration of such Indebtedness; provided that notwithstanding any provision of this subsection (e) to the contrary, to the extent that the terms of any such agreement or instrument governing the sale, pledge or disposal of Margin Stock or utilization of the proceeds of such Indebtedness in connection therewith would result in such acceleration and in a Default or an Event of Default under this Agreement, and would cause this Agreement or any Canadian Loan to be subject to the margin requirements or any other restriction under Reg U, then such acceleration shall not constitute a Default or Event of Default under this subsection (e);"
Section 2.13. Additional Events of Default. Section 8.1(h) is hereby amended by replacing all references therein to the amount of "$100,000,000" to "$125,000,000."
Section 2.14. Amendments to Statutes and Regulations. Section 10.18 of the Original Agreement is hereby amended by adding the following sentence at the end thereof:
"Unless the context otherwise requires or unless otherwise provided herein, the references in this Agreement to a particular statute, rule or regulation also refer to and include all amendments, supplements and other modifications to such statute, rule or regulation."
Section 2.15. Disclosure Schedule. Paragraph 6 of the Disclosure Schedule to the Original Agreement is hereby amended by adding the name of the following Subsidiary thereto:
Canadian Mustang Energy Inc.
Section 2.16. Canadian Notes. Each Canadian Note (and the form of Canadian Note attached as Exhibit A-1 to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, Canadian Base Rate Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day". Each Canadian Note (and the form of Canadian Note attached as Exhibit A-1 to the Original Agreement) are hereby further amended by deleting the proviso at the end of the third sentence of the fourth paragraph
Third Amendment to Canadian Credit Agreement
thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, Canadian Prime Rate Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day." Each Canadian Note (and the form of Canadian Note attached as Exhibit A-1 to the Original Agreement) are hereby further amended by deleting the proviso at the end of the fifth sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such US Dollar Eurodollar Loan shall bear interest on each day outstanding at the applicable Default Rate in effect on such day." Each Canadian Note (and the form of Canadian Note attached as Exhibit A-1 to the Original Agreement) are hereby further amended by deleting the proviso at the end of the seventh sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Canadian Dollar Eurodollar Loan shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
Section 2.17. Canadian Swing Note. The Canadian Swing Note (and the form of Canadian Swing Note attached as Exhibit A-2 to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fourth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, Canadian Swing Loans shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
Section 2.18. Competitive Bid Notes. Each Competitive Bid Note issued under the Canadian Agreement (and the form of Competitive Bid Note attached as Exhibit M to the Original Agreement) are hereby amended by deleting the proviso at the end of the first sentence of the fifth paragraph thereof which reads as follows: "; provided that if an Event of Default has occurred and is continuing, such Competitive Bid Loan shall bear interest on each day outstanding at the applicable Default Rate in effect on such day."
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become effective as of the date first above written when and only when:
(a) Canadian Agent shall have received all of the following, at Canadian Agent's office, duly executed and delivered and in form and substance satisfactory to Canadian Agent, all of the following:
(i) this Amendment executed by Canadian Borrower, Canadian Agent and Canadian Required Lenders; provided that the amendment set forth in Section 2.2 hereof, insofar as it applies to the Canadian Notes, and in Section 2.16 hereof shall become effective only when executed and delivered by all Canadian Lenders, the amendment set forth in Section 2.3 hereof, insofar as it applies to the Canadian Swing Note, and in Section 2.17 hereof shall become effective only when executed and delivered by the Canadian Swing Lender, and the amendment set forth in Section 2.3 hereof, insofar as it
Third Amendment to Canadian Credit Agreement
applies to any Competitive Bid Note, and in Section 2.18 hereof shall become effective only when executed and delivered by the holder of such Competitive Bid Note; and provided further that the amendment set forth in Section 2.4 of this Amendment shall become effective only when executed and delivered by all Canadian Lenders.
(ii) a certificate of the Chairman of the Board, President, or Vice President - Finance of Canadian Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) Canadian Borrower shall have paid, in connection with such Canadian Loan Documents, all fees and reimbursements to be paid to Canadian Agent pursuant to any Canadian Loan Documents, or otherwise due Canadian Agent and including fees and disbursements of Canadian Agent's attorneys.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of Canadian Borrower. In order to induce each Canadian Lender to enter into this Amendment, Canadian Borrower represents and warrants to each Canadian Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the Canadian Agreement.
(b) Canadian Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the Canadian Agreement. Canadian Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of Canadian Borrower hereunder.
(c) The execution and delivery by Canadian Borrower of this Amendment, the performance by Canadian Borrower of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not (i) conflict with any provision of (A) any Law, (B) the organizational documents of Canadian Borrower, or (C) any agreement, judgment, license, order or permit applicable to or binding upon Canadian Borrower unless such conflict would not reasonably be expected to have a Material Adverse Effect, or (ii) result in or require the creation of any Lien upon any assets or properties of Canadian Borrower which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by Canadian Borrower
of this Amendment or to consummate any transactions contemplated by this Amendment, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the Canadian Agreement will be a legal and binding obligation of Canadian Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of March 31, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each Canadian Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement and the Canadian Notes as hereby amended are hereby ratified and confirmed in all respects. The Canadian Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the Canadian Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Canadian Lenders under the Canadian Agreement or any other Canadian Loan Document nor constitute a waiver of any provision of the Canadian Agreement or any other Canadian Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Canadian Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Canadian Borrower or any Restricted Person hereunder or under the Canadian Agreement to any Canadian Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Canadian Borrower under this Amendment and under the Canadian Agreement.
Third Amendment to Canadian Credit Agreement
Section 5.3. Canadian Loan Documents. This Amendment is a Canadian Loan Document, and all provisions in the Canadian Agreement pertaining to Canadian Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the Province of Alberta and any applicable laws of Canada in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
THIS AMENDMENT AND THE OTHER CANADIAN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By: /s/ John Richels -------------------------------------------- Name: John Richels Title: President & Chief Executive Officer |
Third Amendment to Canadian Credit Agreement
BANK OF AMERICA CANADA
Administrative Agent, Canadian LC Issuer and
Lender
By: /s/ Donald R. Chung --------------------------------------- Name: Donald R. Chung Title: Vice President Corporate Investment Banking |
BANK ONE, NA CANADA BRANCH
Lender
By: /s/ Ronald L. Dierker --------------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets |
THE CHASE MANHATTAN BANK, TORONTO BRANCH
Lender
By: /s/ Drew McDonald --------------------------------------- Name: Drew McDonald Title: Authorized Representative By: /s/ Ralph Kern --------------------------------------- Name: Ralph Kern Title: Authorized Representative |
UMB BANK
Lender
By: /s/ Richard J. Lehrter --------------------------------------- Name: Richard J. Lehrter Title: Community Bank President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ David Humphreys --------------------------------------- Name: David Humphreys Title: Vice President |
Third Amendment to Canadian Credit Agreement
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Lender
By: /s/ Salvatore Battinelli --------------------------------------- Name: Salvatore Battinelli Title: Managing Director, Credit Dept. By: /s/ Water T. Duffy III --------------------------------------- Name: Walter T. Duffy III Title: Associate Director |
THE BANK OF NEW YORK
Lender
By: /s/ Raymond J. Palmer --------------------------------------- Name: Raymond J. Palmer Title: Vice President |
ROYAL BANK OF CANADA
Lender
By: /s/ Tom J. Oberaigner --------------------------------------- Name: Tom J. Oberaigner Title: Senior Manager |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge --------------------------------------- Name: David J. Edge Title: Director |
THE CHASE MANHATTAN BANK, TORONTO BRANCH
Lender
Title:
Third Amendment to Canadian Credit Agreement
CITIBANK CANADA
Lender
By: /s/ James K. G. Campbell --------------------------------------- Name: James K. G. Campbell Title: Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH
Lender
By: /s/ Michael E. Keating --------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky --------------------------------------- Name: Joel Makowsky Title: Vice President |
CANADIAN IMPERIAL BANK OF COMMERCE
Lender
By: /s/ Joelle Schellenberg --------------------------------------- Name: Joelle Schellenberg Title: Director By: /s/ David W. Richardson --------------------------------------- Name: David W. Richardson Title: Vice President |
ABN AMRO BANK CANADA
Lender
By: /s/ Mark Bohn --------------------------------------- Name: Mark Bohn Title: Group Vice President By: /s/ Teresa Wu --------------------------------------- Name: Teresa Wu Title: Vice President |
Third Amendment to Canadian Credit Agreement
BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH
Lender
By: /s/ Hereward Drummond --------------------------------------- Name: Hereward Drummond Title: Senior Vice President By: /s/ James H. Boyle --------------------------------------- Name: James H. Boyle Title: Vice President |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury --------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Jacues Busquet --------------------------------------- Name: Jacques Busquet Title: Executive Vice President |
BANK OF TOKYO - MITSUBISHI (CANADA)
Lender
By: /s/ Davis J. Stewart --------------------------------------- Name: Davis J. Stewart Title: Vice President |
Third Amendment to Canadian Credit Agreement
Third Amendment
CONSENT AND AGREEMENT
Devon Energy Corporation, a Delaware corporation ("Canadian
Guarantor"), hereby (i) consents to the provisions of this Amendment and the
transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated
as of August 29, 2000 made by it for the benefit of Canadian Agent and Lenders
executed pursuant to the Credit Agreement and the other Canadian Loan Documents,
(iii) agrees that all of its respective obligations and covenants thereunder
shall remain unimpaired by the execution and delivery of this Amendment and the
other documents and instruments executed in connection herewith, and (iv) agrees
that the Canadian Guaranty and such other Canadian Loan Documents shall remain
in full force and effect.
DEVON ENERGY CORPORATION
By: /s/ William T. Vaughn ----------------------------------- Name: William T. Vaughn Title: Senior Vice President - Finance |
Third Amendment to Canadian Credit Agreement
COMPLIANCE CERTIFICATE
NORTHSTAR ENERGY CORPORATION
Reference is made to that certain Third Amendment to Canadian Credit Agreement dated as of July 31, 2001 (the "Third Amendment") among Northstar Energy Corporation, ("Northstar"), Bank of America Canada, individually and as administrative agent ("Canadian Agent"), and certain financial institutions ("Lenders"). Terms which are defined in the Third Amendment and which are used but not defined herein shall have the meanings given them in the Third Amendment. The undersigned, Paul F. Brereton, does hereby certify that he has made a thorough inquiry into all matters certified herein and, based upon such inquiry, experience, and the advice of counsel, does hereby further certify that:
1. He is the duly elected, qualified, and acting Vice President-Finance of Northstar.
2. All representations and warranties made by any Restricted Person in any Canadian Loan Document delivered on or before the date hereof are true on and as of the date hereof (except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Third Amendment) as if such representations and warranties had been made as of the date hereof.
3. No Default exists on the date hereof.
4. Each Restricted Person has performed and complied with all agreements and conditions required in the Canadian Loan Documents to be performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of July 31, 2001.
NORTHSTAR ENERGY CORPORATION
By: /s/ Paul Brereton ------------------------------------ Paul F. Brereton Vice President-Finance |
EXHIBIT 10.9
[CANADIAN AGENT WILL ADVISE THE CANADIAN LENDERS OF THE DATE ON WHICH CANADIAN BORROWER EXECUTES AND DELIVERS THIS AMENDMENT TO CANADIAN AGENT.]
FOURTH AMENDMENT TO CANADIAN CREDIT AGREEMENT
The Offer for Extension set forth in this Fourth Amendment to Canadian Credit Agreement (herein called this "Amendment") is made by Bank of America Canada, individually and as administrative agent ("Canadian Agent"), and the undersigned Canadian Lenders party to the Original Agreement defined below ("Canadian Lenders") and shall be open for acceptance by Northstar Energy Corporation, an Alberta corporation ("Canadian Borrower") until (and including) August 21, 2001.
WITNESSETH:
WHEREAS, Canadian Borrowers, Canadian Agent and Canadian Lenders have entered into that certain Canadian Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby Canadian Lenders became obligated to make loans to Canadian Borrowers as therein provided; and
WHEREAS, on January 1, 2001 Northstar Energy, Devon Energy Canada Holding Corporation (the successor by amalgamation to Devon Energy Canada) and certain other Alberta corporations, all of which were Subsidiaries of US Borrower, amalgamated under the name Northstar Energy Corporation (defined above as the "Canadian Borrower") which is now the sole Canadian Borrower; and
WHEREAS, pursuant to Section 1.6 of the Original Agreement, Canadian Borrower has delivered to Canadian Agent a Request for Offer of Extension and a copy thereof has been provided to all Canadian Lenders; and
WHEREAS, all of the Canadian Lenders have agreed to accept such Request for Offer of Extension; and
WHEREAS, all of the Canadian Lenders have agreed to extend the Canadian Revolving Period until the Conversion Date as described in Section 2.1 of this Amendment and Canadian Agent hereby makes an Offer of Extension to Canadian Borrower on such terms;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which
Fourth Amendment to Canadian Credit Agreement
may hereafter be made by Canadian Lenders to Canadian Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2.
"Amendment" means this Fourth Amendment to Canadian Credit Agreement.
"Canadian Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The definition of "Conversion Date" in Annex I of the Original Agreement is hereby amended in its entirety to read as follows:
"'Conversion Date' means the date which is 364 days after the date on which Canadian Borrower executes and delivers to Canadian Agent the Fourth Amendment to Canadian Credit Agreement among Canadian Borrower, Canadian Agent and Canadian Lenders, or such later day to which the Conversion Date is extended pursuant to Section 1.6 of the Canadian Agreement."
Section 2.2. Waiver of Notice. Each Canadian Lender hereby waives the requirement under Section 1.6 of the Original Agreement that a Request for Offer of Extension be made by a specific date prior to the current Conversion Date of August 28, 2001.
Section 2.3. Lenders Schedule. Annex II to this Amendment is hereby substituted for Annex II to the Original Agreement.
Fourth Amendment to Canadian Credit Agreement
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become effective on the date on which Canadian Borrower has executed and delivered this Amendment to Canadian Agent (provided that Canadian Borrower shall have executed this Amendment on or before August 21, 2001) and the following additional conditions are satisfied:
(a) Canadian Agent shall have received all of the following, at Canadian Agent's office, duly executed and delivered and in form and substance satisfactory to Canadian Agent, all of the following:
(i) this Amendment executed by Canadian Borrower, Canadian Agent and all Canadian Lenders.
(ii) a certificate of the Chairman of the Board, President, or Vice President - Finance of Canadian Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) Canadian Borrower shall have paid, in connection with such Canadian Loan Documents, all fees and reimbursements to be paid to Canadian Agent and Canadian Lenders pursuant to any Canadian Loan Documents, or otherwise due Canadian Agent or Canadian Lenders and including fees and disbursements of Canadian Agent's attorneys.
Section 3.2. Offer to Extend. The Offer to Extend set forth herein shall be withdrawn and this Amendment shall be null and void if it is not executed and delivered by Canadian Borrower on or before August 21, 2001.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of Canadian Borrower. In order to induce each Canadian Lender to enter into this Amendment, Canadian Borrower represents and warrants to each Canadian Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the Canadian Agreement.
Fourth Amendment to Canadian Credit Agreement
(b) Canadian Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the Canadian Agreement. Canadian Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of Canadian Borrower hereunder.
(c) The execution and delivery by Canadian Borrower of this Amendment, the performance by Canadian Borrower of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not (i) conflict with any provision of (A) any Law, (B) the organizational documents of Canadian Borrower, or (C) any agreement, judgment, license, order or permit applicable to or binding upon Canadian Borrower unless such conflict would not reasonably be expected to have a Material Adverse Effect, or (ii) result in or require the creation of any Lien upon any assets or properties of Canadian Borrower which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by Canadian Borrower of this Amendment or to consummate any transactions contemplated by this Amendment, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the Canadian Agreement will be a legal and binding obligation of Canadian Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of March 31, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each Canadian Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended are hereby ratified and confirmed in all respects. The Canadian Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the Canadian Agreement in any Loan Document shall be deemed to be a reference to
Fourth Amendment to Canadian Credit Agreement
the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Canadian Lenders under the Canadian Agreement or any other Canadian Loan Document nor constitute a waiver of any provision of the Canadian Agreement or any other Canadian Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Canadian Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Canadian Borrower or any Restricted Person hereunder or under the Canadian Agreement to any Canadian Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Canadian Borrower under this Amendment and under the Canadian Agreement.
Section 5.3. Canadian Loan Documents. This Amendment is a Canadian Loan Document, and all provisions in the Canadian Agreement pertaining to Canadian Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the Province of Alberta and any applicable laws of Canada in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
THIS AMENDMENT AND THE OTHER CANADIAN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[The remainder of this page has been intentionally left blank.]
Fourth Amendment to Canadian Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed by Canadian Borrower as of August 13, 2001.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By: /s/ Paul Brereton ---------------------------- Paul Brereton Vice President - Finance |
Fourth Amendment to Canadian Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed by Canadian Agent and Canadian Lenders.
BANK OF AMERICA CANADA
Administrative Agent, Canadian LC Issuer and
Lender
By: /s/ Nelson Liam -------------------------------------- Name: Nelson Liam Title: Vice President |
ABN AMRO BANK CANADA
Lender
By: /s/ Teresa Wu -------------------------------------- Name: Teresa Wu Title: Vice President By: /s/ Mark Bohn -------------------------------------- Name: Mark Bohn Title: Group Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs -------------------------------------- Name: Arthur B. Hobbs Title: Vice President |
BANK OF TOKYO - MITSUBISHI (CANADA)
Lender
By: /s/ Davis J. Stewart -------------------------------------- Name: Davis J. Stewart Title: Vice President |
BANK ONE, NA CANADA BRANCH
Lender
By: /s/ Ronald L. Dierker -------------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets |
Fourth Amendment to Canadian Credit Agreement
BAYERISCHE LANDESBANK
GIROZENTRALE, TORONTO BRANCH
Lender
By: /s/ Eckhart Mehler ------------------------------------------- Name: Eckhart Mehler Title: Senior Vice President & Principal Officer By: /s/ Bernd Erpenbeck ------------------------------------------- Name: Bernd Erpenbeck Title: Second Vice President |
CANADIAN IMPERIAL BANK OF COMMERCE
Lender
By: /s/ Joelle Schellenberg ------------------------------------------- Name: Joelle Schellenberg Title: Director By: /s/ Chris A. Perks ------------------------------------------- Name: Chris A. Perks Title: Executive Director |
CITIBANK CANADA
Lender
By: /s/ James K. G. Campbell ------------------------------------------- Name: James K. G. Campbell Title: Vice President |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Philippe Soustra ------------------------------------------- Name: Philippe Soustra Title: Executive Vice President |
Fourth Amendment to Canadian Credit Agreement
CREDIT SUISSE FIRST BOSTON CANADA
Lender
By: /s/ Peter Chauvin -------------------------------------- Name: Peter Chauvin Title: Vice President By: /s/ Bill McFarland -------------------------------------- Name: Bill McFarland Title: Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
Lender
By: /s/ Michael E. Keating -------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky -------------------------------------- Name: Joel Makowsky Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ David E. Humphreys -------------------------------------- Name: David E. Humphreys Title: Vice President |
ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner -------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge -------------------------------------- Name: David J.Edge Title: Director |
Fourth Amendment to Canadian Credit Agreement
THE BANK OF NEW YORK
Lender
By: /s/ Raymond J. Palmer ------------------------------------------- Name: Raymond J. Palmer Title: Vice President |
THE CHASE MANHATTAN BANK, TORONTO BRANCH
Lender
By: /s/ Drew McDonald ------------------------------------------- Name: Drew McDonald Title: Authorized Representative By: /s/ Christine Chan ------------------------------------------- Name: Christine Chan Title: Authorized Representative |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury ------------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
UBS AG, STAMFORD BRANCH
Lender
By: /s/ Susan Brunner ------------------------------------------- Name: Susan Brunner Title: Associate Director By: /s/ Patricia O'Kicki ------------------------------------------- Name: Patricia O'Kicki Title: Director |
UMB BANK
Lender
By: /s/ Derek K. Duncan ------------------------------------------- Name: Derek K. Duncan Title: Vice President |
Fourth Amendment to Canadian Credit Agreement
ANNEX II
LENDERS SCHEDULE
Fourth Amendment to Canadian Credit Agreement
Fourth Amendment
CONSENT AND AGREEMENT
Devon Energy Corporation, a Delaware corporation ("Canadian
Guarantor"), hereby (i) consents to the provisions of this Amendment and the
transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated
as of August 29, 2000 made by it for the benefit of Canadian Agent and Lenders
executed pursuant to the Credit Agreement and the other Canadian Loan Documents,
(iii) agrees that all of its respective obligations and covenants thereunder
shall remain unimpaired by the execution and delivery of this Amendment and the
other documents and instruments executed in connection herewith, and (iv) agrees
that the Canadian Guaranty and such other Canadian Loan Documents shall remain
in full force and effect.
DEVON ENERGY CORPORATION
By: /s/ Dale T. Wilson ------------------------------ Dale T. Wilson Treasurer |
COMPLIANCE CERTIFICATE
NORTHSTAR ENERGY CORPORATION
Reference is made to that certain Fourth Amendment to Canadian Credit Agreement dated as of August 13, 2001 (the "Fourth Amendment") among Northstar Energy Corporation, ("Northstar"), Bank of America Canada, individually and as administrative agent ("Canadian Agent"), and certain financial institutions ("Lenders"). Terms which are defined in the Fourth Amendment and which are used but not defined herein shall have the meanings given them in the Fourth Amendment. The undersigned, Paul F. Brereton, does hereby certify that he has made a thorough inquiry into all matters certified herein and, based upon such inquiry, experience, and the advice of counsel, does hereby further certify that:
1. He is the duly elected, qualified, and acting Vice President-Finance of Northstar.
2. All representations and warranties made by any Restricted Person in any Canadian Loan Document delivered on or before the date hereof are true on and as of the date hereof (except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Fourth Amendment) as if such representations and warranties had been made as of the date hereof.
3. No Default exists on the date hereof.
4. Each Restricted Person has performed and complied with all agreements and conditions required in the Canadian Loan Documents to be performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of August 13, 2001.
NORTHSTAR ENERGY CORPORATION
By: /s/ Paul F. Brereton -------------------------------- Paul F. Brereton Vice President-Finance |
ASSIGNMENT AND ACCEPTANCE
(Canadian Credit Agreement)
Reference is made to the Canadian Credit Agreement dated as of August 29, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") among Northstar Energy Corporation, an Alberta corporation (the "Canadian Borrower"), the Canadian Lenders (as defined in the Credit Agreement) and Bank of America Canada, individually and as administrative agent for the Lenders (the "Canadian Agent"). Terms defined in the Credit Agreement are used herein with the same meaning.
Each of the "Assignors" and the "Assignees" referred to on Schedule 1 agree as follows:
1. Each Assignor hereby sells and assigns to the Assignees the portion
of its Canadian Maximum Credit Amount specified opposite its name on Schedule 1
hereto and the related Canadian Rights and Obligations (as hereinafter defined),
without recourse and without representation or warranty except as expressly set
forth herein, and each Assignee hereby purchases and assumes from the Assignors
the portion of the Canadian Maximum Credit Amount specified opposite its name on
Schedule 1 hereto and the related Canadian Rights and Obligations. After giving
effect to such sale and assignment, each Assignor's Canadian Maximum Credit
Amount and the amount of Canadian Loans owing to each Assignor will be as set
forth on Schedule 1 and each Assignee's Canadian Maximum Credit Amount and the
amount of Canadian Loans owing to each Assignee will be as set forth on Schedule
1. As used herein, "Canadian Rights and Obligations" means all outstanding
rights and obligations under the Credit Agreement and the other Canadian Loan
Documents relating to the Canadian Loans and the Canadian Maximum Credit Amount.
This Assignment and Acceptance is subject to Section 1.12 of the Credit
Agreement. On the Effective Date under such Section 1.12, the amount allocated
to the Canadian Maximum Credit Amount is $275,000,000 and the amount allocated
to the Tranche B Maximum Credit Amount is $525,000,000.
2. Each Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Canadian Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Canadian Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Restricted Person or the performance or observance by any Restricted Person of any of its obligations under the Canadian Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) is delivering to Canadian Agent its Canadian Note and requests that Canadian Agent exchange such Canadian Note for a new Canadian Note payable to the order of such Assignor in an amount equal to the Canadian Maximum Credit Amount retained by such Assignor as specified on Schedule 1 and a new Canadian Note payable to the order of the relevant Assignee in an amount equal to the Canadian Maximum Credit Amount of such Assignee specified in Schedule 1.
3. Each Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon Canadian Agent, the Assignors or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Transferee; (iv)
appoints and authorizes Canadian Agent to take such action as Canadian Agent on
its behalf and to exercise such powers and discretion under the Credit Agreement
as are delegated to Canadian Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; (v) agrees that it
will perform in accordance with their terms all of the obligations that by the
terms of the Credit Agreement are required to be performed by it as a Lender.
4. Following the execution of this Assignment and Acceptance, it will be delivered to Canadian Agent for acceptance and recording by Canadian Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be August 9, 2001.
5. Upon such acceptance and recording by Canadian Agent, as of the Effective Date, (i) the Assignees shall be parties to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of Canadian Lenders thereunder and (ii) the Assignors shall, to the extent provided in this Assignment and Acceptance, relinquish their rights and be released from their obligations under the Credit Agreement.
6. Upon such acceptance and recording by Canadian Agent, from and after the Effective Date, Canadian Agent shall make all payments under the Credit Agreement and the Canadian Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the appropriate Assignees, except that BAs outstanding on the Effective Date shall settle on the expiration date thereof in accordance with the interests therein held by Assignors on the Effective Date. The Assignors and Assignees shall make all appropriate adjustments in payments under the Credit Agreement and the Canadian Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the Laws of the Province of Alberta, Canada.
8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignors and the Assignees have caused this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of August 9, 2001.
ASSIGNORS: BANK OF AMERICA CANADA, as Assignor
By: /s/ Nelson Lam ---------------------------------------- Name: Nelson Lam Title: Vice President |
ABN AMRO BANK CANADA, as Assignor
By: /s/ Mark Bohn ---------------------------------------- Name: Mark Bohn Title: Group Vice President By: /s/ Teresa Wu ---------------------------------------- Name: Teresa Wu Title: Vice President |
BANK ONE, NA, CANADA BRANCH,
as Assignor
By: /s/ Ronald L. Dierker ---------------------------------------- Name: Ronald L. Dierker Title: Director, Capital Markets |
CITIBANK CANADA, as Assignor
By: /s/ James K. G. Campbell ---------------------------------------- Name: James K. G. Campbell Title: Vice President |
Assignment and Acceptance (Canadian Credit Agreement)
FIRST UNION NATIONAL BANK,
as Assignor
By: /s/ David E. Humphreys ---------------------------------------- Name: David E. Humphreys Title: Vice President |
SUNTRUST BANK, ATLANTA,
as Assignor
By: /s/ David J. Edge ---------------------------------------- Name: David J. Edge Title: Director |
THE CHASE MANHATTAN BANK,
TORONTO BRANCH, as Assignor
By: /s/ Drew McDonald ---------------------------------------- Name: Drew McDonald Title: Authorized Representative By: /s/ Christine Chan ---------------------------------------- Name: Christine Chan Title: Authorized Representative |
UMB BANK, as Assignor
By: /s/ Derek K. Duncan ---------------------------------------- Name: Derek K. Duncan Title: Vice President |
Assignment and Acceptance (Canadian Credit Agreement)
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, as Assignor
By: /s/ Salvatore Battinelli ---------------------------------------- Name: Salvatore Battinelli Title: Managing Director By: /s/ Walter T. Duffy III ---------------------------------------- Name: Walter T. Duffy III Title: Associate Director |
ASSIGNEES: BANCFIRST, as Assignee
By: /s/ Arthur B. Hobbs ---------------------------------------- Name: Arthur B. Hobbs Title: Vice President |
BANK OF TOKYO - MITSUBISHI
(CANADA), as Assignee
By: /s/ Davis J. Stewart ---------------------------------------- Name: Davis J. Stewart Title: Vice President |
Assignment and Acceptance (Canadian Credit Agreement)
BAYERISCHE LANDESBANK
GIROZENTRALE, TORONTO BRANCH,
as Assignee
By: /s/ Eckhart Mehler --------------------------------------- Name: Eckhart Mehler Title: Senior Vice President & Principal Officer By: /s/ Bernd Erpenbeck --------------------------------------- Name: Bernd Erpenbeck Title: Second Vice President |
CANADIAN IMPERIAL BANK OF
COMMERCE, as Assignee
By: /s/ Joelle Schellenberg --------------------------------------- Name: Joelle Schellenberg Title: Director |
CREDIT LYONNAIS NEW YORK
BRANCH, as Assignee
By: /s/ Philippe Soustra --------------------------------------- Name: Philippe Soustra Title: Executive Vice President |
CREDIT SUISSE FIRST BOSTON,
as Assignee
By: /s/ Peter Chauvin --------------------------------------- Name: Peter Chauvin Title: Vice President By: /s/ Bill McFarland --------------------------------------- Name: Bill McFarland Title: Vice President |
Assignment and Acceptance (Canadian Credit Agreement)
DEUTSCHE BANK AG NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH, as Assignee
By: /s/ Michael E. Keating --------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky --------------------------------------- Name: Joel Makowsky Title: Vice President |
ROYAL BANK OF CANADA, as Assignee
By: /s/ Lorne Gartner --------------------------------------- Name: Lorne Gartner Title: Vice President |
THE BANK OF NEW YORK, as Assignee
By: /s/ Raymond J. Palmer --------------------------------------- Name: Raymond J. Palmer Title: Vice President |
THE FUJI BANK, LIMITED, as Assignee
By: /s/ Jacques Azagury --------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
Assignment and Acceptance (Canadian Credit Agreement)
UBS AG, STAMFORD BRANCH,
as Assignee
By: /s/ Wilfred V. Saint --------------------------------------- Name: Wilfred S. Saint Title: Associate Director Banking Products Services US By: /s/ Patricia O'Kicki --------------------------------------- Name: Patricia O'Kicki Title: Director Banking Products Services |
ACCEPTED AND APPROVED,
as of the 9th day of August, 2001:
BANK OF AMERICA, CANADA
By: /s/ Nelson Lam --------------------------------------- Name: Nelson Lam Title: Vice President |
APPROVED as of the 9th day of August, 2001:
NORTHSTAR ENERGY CORPORATION
By: /s/ John Richels --------------------------------------- Name: John Richels Title: Chief Executive Officer |
Assignment and Acceptance (Canadian Credit Agreement)
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
(CANADIAN CREDIT AGREEMENT)
Page 1 of Schedule 1 to
Assignment and Acceptance (Canadian Credit Agreement)
MAXIMUM AGGREGATE NEW CANADIAN CREDIT OUTSTANDING COMMITMENT UNDER U.S. AMOUNT OF CANADIAN MAXIMUM AMOUNT PERCENTAGE SHARE CANADIAN CREDIT AGREEMENT AND MAXIMUM CREDIT AFTER ASSIGNMENT AND UNDER THE CANADIAN LOANS AFTER CANADIAN CREDIT AMOUNT ASSIGNED CANADIAN NOTE AMOUNT CREDIT AGREEMENT ASSIGNMENT AGREEMENT BANK NAME (IN US DOLLARS) (IN U.S. DOLLARS) AFTER ASSIGNMENT (IN US DOLLARS) (IN U.S. DOLLARS) --------- ------------------ -------------------- ------------------ --------------- --------------------- ASSIGNORS: Bank of America Canada 5,156,250 28,125,000 7.500% 5,897,853.46 60,000,000.00 ABN AMRO Bank Canada 3,750,000 23,437,500 6.250% 4,914,877.89 50,000,000.00 Bank One, NA, Canada Branch 5,156,250 28,125,000 7.500% 5,897,853.46 60,000,000.00 Citibank Canada 3,750,000 23,437,500 6.250% 4,914,877.89 50,000,000.00 First Union National Bank 5,156,250 28,125,000 7.500% 5,897,853.46 60,000,000.00 SunTrust Bank 1,562,500 7,031,250 1.875% 1,474,463.37 15,000,000.00 The Chase Manhattan Bank, 20,625,000 28,125,000 7.500% 5,897,853.46 60,000,000.00 Toronto Branch UMB Bank 468,750 7,031,250 1.875% 1,474,463.37 15,000,000.00 Westdeutsche Landesbank 20,625,000 0 0 0 0 |
Page 2 of Schedule 1 to Assignment and Acceptance (Canadian Credit Agreement)
MAXIMUM AGGREGATE NEW CANADIAN CREDIT OUTSTANDING COMMITMENT UNDER U.S. AMOUNT OF CANADIAN MAXIMUM AMOUNT PERCENTAGE SHARE CANADIAN CREDIT AGREEMENT AND MAXIMUM CREDIT AFTER ASSIGNMENT AND UNDER THE CANADIAN LOANS AFTER CANADIAN CREDIT AMOUNT ASSIGNED CANADIAN NOTE AMOUNT CREDIT AGREEMENT ASSIGNMENT AGREEMENT BANK NAME (IN US DOLLARS) (IN U.S. DOLLARS) AFTER ASSIGNMENT (IN US DOLLARS) (IN U.S. DOLLARS) --------- ------------------ -------------------- ------------------ --------------- --------------------- ASSIGNEES: BancFirst 4,687,500 4,687,500 1.250% 982,463.37 10,000,000.00 Bank of Tokyo - Mitsubishi 7,968,750 18,750,000 5.000% 3,931,902.31 40,000,000.00 Canada Bayerische 937,500 18,750,000 5.000% 3,931,902.31 40,000,000.00 Landesbank Girozentrale, Toronto Branch Canadian Imperial Bank of 937,500 11,718,750 3.125% 2,457,438.94 25,000,000.00 Commerce Credit Lyonnais 937,500 18,750,000 5.000% 3,931,902.31 40,000,000.00 Credit Suisse First Boston 23,437,500 23,437,500 6.250% 4,914,877.89 50,000,000.00 Deutsche Bank AG 4,375,000 23,437,500 6.250% 4,914,877.89 50,000,000.00 Royal Bank of Canada 7,500,000 28,125,000 7.500% 5,897,853.46 60,000,000.00 The Bank of New York 468,750 21,093,750 5.625% 4,423,390.10 45,000,000.00 The Fuji Bank, Limited 3,281,250 21,093,750 5.625% 4,423,390.10 45,000,000.00 (Mizuho) UBS AG 11,718,750 11,718,750 3.125% 2,457,438.94 25,000,000.00 |
Page 3 of Schedule 1 to Assignment and Acceptance (Canadian Credit Agreement)
EXHIBIT 10.10
FIFTH AMENDMENT TO CANADIAN CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CANADIAN CREDIT AGREEMENT (herein called this
"Amendment") made as of September 21, 2001 by and among Northstar Energy
Corporation, an Alberta corporation ("Canadian Borrower"), Bank of America
Canada, individually and as administrative agent ("Canadian Agent"), and the
Canadian Lenders party to the Original Agreement defined below ("Canadian
Lenders").
WITNESSETH:
WHEREAS, Canadian Borrower, Canadian Agent and Canadian Lenders entered into that certain Canadian Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby Canadian Lenders became obligated to make loans to Canadian Borrowers as therein provided;
WHEREAS, upon becoming an "authorized foreign bank", it is intended that Bank of America, N.A. acting through a Canadian branch will replace Bank of America Canada as Canadian Agent, Canadian LC Issuer, Canadian Swing Lender and as a Canadian Lender;
WHEREAS, Canadian Borrower, Canadian Agent and Canadian Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by Canadian Lenders to Canadian Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2.
"Amendment" means this Fifth Amendment to Canadian Credit Agreement.
"Amendment Fee" means a fee, payable to each Canadian Lender which executes and delivers this Amendment before noon on September 21, 2001 (unless extended by Canadian Borrower), in the amount of five basis points (0.05%) of such Canadian Lender's Percentage Share of the Canadian Maximum Credit Amount.
"Long Term Financing" means a senior unsecured bank facility in an amount not to exceed US $6,000,000,000 arranged by UBS Warburg LLC and Banc of America Securities LLC to finance the acquisition by US Borrower of Anderson Exploration Ltd. and/or Mitchell Energy & Development Corp. through wholly-owned Subsidiaries of US Borrower.
"Canadian Agreement" means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The definitions of "Canadian Agent", "Canadian LC Issuer", "Canadian Lenders", "Canadian Prime Rate", "Canadian Resident Lender", "Canadian Swing Lender", "Canadian Swing Rate" and "Canadian US Dollar Base Rate" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
"Canadian Agent" means Bank of America Canada and its successors and assigns as administrative agent under the Canadian Agreement.
"Canadian LC Issuer" means Bank of America Canada and its successors and assigns in its capacity as the issuer of Letters of Credit under the Canadian Agreement. Canadian Agent may, with the consent of Canadian Borrower and the Lender in question, appoint any Canadian Resident Lender hereunder as a Canadian LC Issuer in place of or in addition to Canadian Agent.
"Canadian Lenders" means each signatory to the Canadian Agreement (other than any Borrower), including Bank of America Canada and, upon the requirements of Section 2.5 of the Fifth Amendment to Canadian Credit Agreement, dated as of September 21, 2001, among Canadian Borrower, Canadian Agent and Canadian Lenders, being completed, Bank of America, N.A. acting through a Canadian branch in the capacity of a Canadian Lender and the Canadian Swing Lender hereunder, rather than as Canadian Agent and Canadian LC Issuer, and the successors of each such party as holder of a Canadian Note.
"Canadian Prime Rate" means on any day a fluctuating rate of interest per annum equal to the higher of (i) the rate of interest per annum most recently announced by
Fifth Amendment to Canadian Credit Agreement
Canadian Agent as its reference rate for Canadian Dollar commercial loans made to a Person in Canada; and (ii) Canadian Agent's Discount Rate for Bankers' Acceptances having a maturity of thirty days plus the Applicable Margin. No Canadian Prime Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Canadian Resident Lender" means each Lender identified as such on Annex II to the Canadian Agreement or any Assignment and Acceptance executed by a new Lender, each being a Person that is (i) not a non-resident of Canada for the purposes of the Income Tax Act (Canada) or (ii) a Person that is an "authorized foreign bank" as defined in section 2 of the Bank Act (Canada) and in subsection 248(1) of the Income Tax Act (Canada) which will receive all amounts paid or credited to it under the Canadian Obligations in respect of its "Canadian banking business" for the purposes of paragraph 212(13.3)(a) of the Income Tax Act (Canada).
"Canadian Swing Lender" means Bank of America Canada and its successors and assigns, in their individual capacities, as Canadian Swing Lender.
"Canadian Swing Rate" means on any day a fluctuating rate of interest per annum established from time to time by Canadian Swing Lender as its money market rate, which rate may not be the lowest rate of interest charged by Canadian Swing Lender to its customers, plus the Applicable Margin. The Canadian Swing Rate shall never exceed the Highest Lawful Rate.
"Canadian US Dollar Base Rate" means on any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the rate of interest per annum most recently established by Canadian Agent as its reference rate for US Dollar commercial loans made to a Person in Canada. Any change in the Canadian US Dollar Base Rate due to a change in Canadian Agent's reference rate shall be effective on the effective date of such change. No Canadian US Dollar Base Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Schedule II BA Reference Banks" means the Lenders listed in Schedule II to the Bank Act (Canada) and the Lenders listed in Schedule III to the Bank Act (Canada) that are not subject to the restrictions and requirements referred to in subsection 524(2) of the Bank Act (Canada) as are, at such time, designated by Canadian Agent, with the prior consent of the Canadian Borrower (acting reasonably), as the Schedule II BA Reference Banks.
(b) Clauses (o) and (x) of the definition of "Permitted Liens" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
"(o) Liens in respect of Indebtedness permitted by Sections 7.1(b), 7.1(f) and 7.1(j), and Liens in respect of Indebtedness permitted by Section 7.1(c), but only to the extent that such Liens encumber the assets expressly permitted to secure such Indebtedness by the terms of Section 7.1(c);"
Fifth Amendment to Canadian Credit Agreement
"(x) in addition to Liens permitted by clauses (a) through
(w) above, Liens on property or assets if the
aggregate Indebtedness secured thereby does not
exceed two percent (2%) of Consolidated Assets."
Section 2.2. Indebtedne Section Subsection (c) of Section 7.1 of the Original Agreement is hereby amended in its entirety to read as follows:
"(c) unsecured Liabilities owed among the Restricted Persons; provided that Liabilities owed by any Restricted Subsidiary (other than Canadian Borrower) to US Borrower may be secured by any and all assets of such Restricted Subsidiary."
Section 2.3. Funded Debt to Total Capitalization. Section 7.6 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.6. Funded Debt to Total Capitalization. The ratio of US Borrower's Consolidated Total Funded Debt to US Borrower's Total Capitalization will not exceed (i) seventy percent (70%) at the end of any Fiscal Quarter ending on or before June 30, 2002, or (ii) sixty-five percent (65%) at the end of any Fiscal Quarter thereafter."
Section 2.4. Assignments. Section 10.6(a)(ii) of the Original Agreement is hereby amended in its entirety to read as follows:
"(ii) together with each such assignment of its rights and obligations under this Agreement, such Lender shall assign the same Percentage Share of its rights and obligations with respect to the Tranche B Loans under the US Agreement to the same Eligible Transferee or an Affiliate of such Eligible Transferee, unless such assignment is being made to an Eligible Transferee which is an Affiliate of the assignor;"
Section 2.5. Concerning Bank of America. Canadian Agent, Canadian
Borrower and Canadian Lenders hereby agree that Bank of America, N.A. acting
through a Canadian branch shall automatically become Canadian Agent, Canadian LC
Issuer, Canadian Swing Lender and a Canadian Lender under the Canadian Agreement
and that all references to Bank of America Canada in the Loan Documents shall be
deemed to refer to Bank of America, N.A. acting through a Canadian branch upon
(i) Bank of America, N.A. acting through a Canadian branch becoming an
"authorized foreign bank" under the Bank Act (Canada), and (ii) Bank of America,
N.A. acting through a Canadian branch providing to Canadian Borrower all of the
following:
(a) evidence that Bank of America, N.A. acting through a Canadian branch has become an "authorized foreign bank" under the Bank Act (Canada); and
(b) an assignment by Bank of America Canada to Bank of America, N.A. acting through a Canadian branch of all its rights and obligations under the Canadian Agreement (including, without limitation, all of its Canadian Loans, Canadian Note and its Percentage Share of the Canadian LC Obligations and the Canadian Maximum Credit Amount) complying with the requirements of Section 10.6 of the Canadian Agreement, as amended hereby except for the provisions of the last sentence of Section 10.6(a) which shall not be applicable.
Fifth Amendment to Canadian Credit Agreement
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. Except for the amendment in Section2.3 hereof, this Amendment shall become effective as of the date first above written when and only when:
(a) Canadian Agent shall have received all of the following, at Canadian Agent's office, duly executed and delivered and in form and substance satisfactory to Canadian Agent, all of the following:
(i) this Amendment executed by Canadian Borrower, Canadian Agent and Canadian Required Lenders.
(ii) a certificate of the Chairman of the Board, President, or Vice President - Finance of Canadian Borrower dated the date of this Amendment certifying: (i) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (ii) that no Default exists at and as of such date.
(b) Canadian Borrower shall have paid, to each Canadian Lender which executed and delivered this Amendment before noon on September 21, 2001 (unless extended by Canadian Borrower), such Canadian Lender's Amendment Fee and all other fees and reimbursements to be paid to Canadian Agent and Canadian Lenders pursuant to any Canadian Loan Documents, or otherwise due Canadian Agent or Canadian Lenders and including fees and disbursements of Canadian Agent's attorneys.
Section 3.2. Effective Date of Section 2.3. The amendment in Section 2.3 of this Amendment shall become effective as of the date when and only as of the date when:
(a) The conditions set forth in Section 3.1 (a) and (b) above have been satisfied; and
(b) The documentation governing the Long Term Financing shall have been executed and delivered, the initial funding shall have been advanced thereunder, and shares of Anderson Exploration Ltd. shall have been acquired by US Borrower or a Restricted Subsidiary pursuant to US Borrower's offer to purchase the shares of Anderson Exploration Ltd.
Fifth Amendment to Canadian Credit Agreement
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of Canadian Borrower. In order to induce each Canadian Lender to enter into this Amendment, Canadian Borrower represents and warrants to each Canadian Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the Canadian Agreement.
(b) Canadian Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the Canadian Agreement. Canadian Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of Canadian Borrower hereunder.
(c) The execution and delivery by Canadian Borrower of this Amendment, the performance by Canadian Borrower of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not (i) conflict with any provision of (A) any Law, (B) the organizational documents of Canadian Borrower, or (C) any agreement, judgment, license, order or permit applicable to or binding upon Canadian Borrower unless such conflict would not reasonably be expected to have a Material Adverse Effect, or (ii) result in or require the creation of any Lien upon any assets or properties of Canadian Borrower which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by Canadian Borrower of this Amendment or to consummate any transactions contemplated by this Amendment, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the Canadian Agreement will be a legal and binding obligation of Canadian Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of June 30, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial
Fifth Amendment to Canadian Credit Agreement
statements have heretofore been delivered to each Canadian Lender. Since such dates no material adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Long Term Financing. Pursuant to Section 9.7 of the Canadian Agreement, Canadian Lenders agreed that Bank of America Canada and its Affiliates may engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Restricted Persons and their respective Affiliates as though Bank of America Canada were not the Canadian Agent or the Canadian LC Issuer hereunder and without notice to or consent of Lenders. Canadian Lenders acknowledged that, pursuant to such activities, Bank of America Canada or its Affiliates may receive information regarding any Restricted Person or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Restricted Person or such Affiliate) and that the Canadian Agent shall be under no obligation to provide such information to them. Although not required by the terms of the Original Agreement, Bank of America Canada hereby notifies Canadian Lenders that USB AG, Stamford Branch, UBS Warburg LLC, Bank of America and Banc of America Securities LLC have agreed to provide the Long Term Financing and may provide additional services to the Restricted Persons in connection with the acquisitions financed thereby.
Section 5.2. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The Canadian Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the Canadian Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Canadian Lenders under the Canadian Agreement or any other Canadian Loan Document nor constitute a waiver of any provision of the Canadian Agreement or any other Canadian Loan Document.
Section 5.3. Survival of Agreements. All representations, warranties, covenants and agreements of Canadian Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Canadian Borrower or any Restricted Person hereunder or under the Canadian Agreement to any Canadian Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Canadian Borrower under this Amendment and under the Canadian Agreement.
Section 5.4. Canadian Loan Documents. This Amendment is a Canadian Loan Document, and all provisions in the Canadian Agreement pertaining to Canadian Loan Documents apply hereto.
Fifth Amendment to Canadian Credit Agreement
Section 5.5. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the Province of Alberta and any applicable laws of Canada in all respects, including construction, validity and performance.
Section 5.6. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
THIS AMENDMENT AND THE OTHER CANADIAN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
Fifth Amendment to Canadian Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By: /s/ Paul Brereton ---------------------------------------------- Name: Paul Brereton Title: Vice President - Finance |
BANK OF AMERICA CANADA
Administrative Agent, Canadian LC Issuer and
Lender
By: /s/ Nelson Lam ---------------------------------------------- Name: Nelson Lam Title: Vice President |
ABN AMRO BANK CANADA
Lender
By: /s/ Mark Bohn ---------------------------------------------- Name: Mark Bohn Title: Group Vice President By: /s/ Teresa Wu ---------------------------------------------- Name: Teresa Wu Title: Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs ---------------------------------------------- Name: Arthur B. Hobbs Title: Vice President |
BANK OF TOKYO - MITSUBISHI (CANADA)
Lender
Title:
Fifth Amendment to Canadian Credit Agreement
BANK ONE, NA, CANADA BRANCH
Lender
By: /s/ Jeanie C. Harman ---------------------------------------------- Name: Jeanie C. Harman Title: First Vice President |
BAYERISCHE LANDESBANK
GIROZENTRALE, TORONTO BRANCH
Lender
By: /s/ Thomas Miller ---------------------------------------------- Name: Thomas Miller Title: Vice President By: /s/ Bernd Erpenbeck ---------------------------------------------- Name: Bernd Erpenbeck Title: Second Vice President |
CANADIAN IMPERIAL BANK OF COMMERCE
Lender
By: /s/ Joelle Schellenberg ---------------------------------------------- Name: Joelle Schellenerg Title: Director By: /s/ Chris A.Perks ---------------------------------------------- Name: Chris A. Perks Title: Executive Director |
CITIBANK CANADA
Lender
By: /s/ James K. G. Campbell ---------------------------------------------- Name: James K. G. Campbell Title: Vice President |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
By: /s/ Bernard Weymuller ---------------------------------------------- Name: Bernard Weymuller Title: Senior Vice President |
Fifth Amendment to Canadian Credit Agreement
CREDIT SUISSE FIRST BOSTON CANADA
Lender
By: /s/ W. M. McFarland ---------------------------------------------- Name: W. M. McFarland Title: Vice President By: /s/ Peter Chauvin ---------------------------------------------- Name: Peter Chauvin Title: Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
Lender
By: /s/ Joel Makowsky ---------------------------------------------- Name: Joel Makowsky Title: Vice President By: /s/ Hans C. Narberhaus ---------------------------------------------- Name: Hans C. Narberhaus Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ James M. Kipp ---------------------------------------------- Name: James M. Kipp Title: Managing Director |
ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner ---------------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge ---------------------------------------------- Name: David J.Edge Title: Director |
Fifth Amendment to Canadian Credit Agreement
THE BANK OF NEW YORK
Lender
By: /s/ Raymond J.Palmer ---------------------------------------------- Name: Raymond J. Palmer Title: Vice President |
THE CHASE MANHATTAN BANK, TORONTO
BRANCH
Lender
By: /s/ Drew McDonald ---------------------------------------------- Name: Drew McDonald Title: Authorized Representative By: /s/ Christine Chan ---------------------------------------------- Name: Christine Chan Title: Authorized Representative |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury ---------------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
UBS AG, STAMFORD BRANCH
Lender
By: /s/ Patricia O'Kicki ---------------------------------------------- Name: Patricia O'Kicki Title: Director Banking Products Services By: /s/ Wilfred V. Saint ---------------------------------------------- Name: Wilfred V. Saint Title: Associate Director Banking Products Services, US |
UMB BANK
Lender
By: /s/ Richard J. Lehrter ---------------------------------------------- Name: Richard J. Lehrter Title: Community Bank President |
Fifth Amendment to Canadian Credit Agreement
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
Title:
Title:
Fifth Amendment to Canadian Credit Agreement
Fifth Amendment
CONSENT AND AGREEMENT
Devon Energy Corporation, a Delaware corporation ("Canadian
Guarantor"), hereby (i) consents to the provisions of this Amendment and the
transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated
as of August 29, 2000 made by it for the benefit of Canadian Agent and Lenders
executed pursuant to the Credit Agreement and the other Canadian Loan Documents,
(iii) agrees that all of its respective obligations and covenants thereunder
shall remain unimpaired by the execution and delivery of this Amendment and the
other documents and instruments executed in connection herewith, and (iv) agrees
that the Canadian Guaranty and such other Canadian Loan Documents shall remain
in full force and effect.
DEVON ENERGY CORPORATION
By: /s/ Dale T. Wilson ----------------------------------- Name: Dale T. Wilson Title: Treasurer |
Fifth Amendment to Canadian Credit Agreement
EXHIBIT 10.11
SIXTH AMENDMENT TO CANADIAN CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CANADIAN CREDIT AGREEMENT (herein called this
"Amendment") made as of October 5, 2001 by and among Northstar Energy
Corporation, an Alberta corporation ("Canadian Borrower"), Bank of America
Canada, individually and as administrative agent ("Canadian Agent"), and the
Canadian Lenders party to the Original Agreement defined below ("Canadian
Lenders").
WITNESSETH:
WHEREAS, Canadian Borrower, Canadian Agent and Canadian Lenders entered into that certain Canadian Credit Agreement dated as of August 29, 2000 (as amended, supplemented, or restated to the date hereof, the "Original Agreement"), for the purpose and consideration therein expressed, whereby Canadian Lenders became obligated to make loans to Canadian Borrowers as therein provided;
WHEREAS, Canadian Borrower, Canadian Agent and Canadian Lenders desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by Canadian Lenders to Canadian Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2.
"Amendment" means this Sixth Amendment to Canadian Credit Agreement.
"Canadian Agreement" means the Original Agreement as amended hereby.
"Mitchell" means Mitchell Energy & Development Corp., a Texas corporation, and its successors and assigns.
"Mitchell Restructuring Event" means one or a series of transactions pursuant to which US Borrower may form or cause to be formed a new holding company under the law of any state of the United States of America, which pursuant to one or more mergers or other transactions would acquire all of the outstanding common stock of each of US Borrower and Mitchell.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Defined Terms.
(a) The following definitions of "Anderson Financing", "Devon HoldCo", "Mitchell" and "Mitchell Restructuring Event" are hereby added to Annex I to the Original Agreement in alphabetical order:
"Anderson Financing" means (i) the closing of and funding of the initial loans under a senior unsecured bank facility in an amount not to exceed US $3,032,000,000 arranged by UBS Warburg LLC and Banc of America Securities LLC to finance the acquisition by US Borrower of Anderson Exploration Ltd. and/or Mitchell through wholly-owned Subsidiaries of US Borrower or, in the case of Mitchell, through a Mitchell Restructuring Event, and (ii) the acquisition shares of Anderson Exploration Ltd. by US Borrower or a Restricted Subsidiary pursuant to US Borrower's offer to purchase the shares of Anderson Exploration Ltd.
"Devon HoldCo" means a new holding company formed under the law of any state of the United States of America to effect a Mitchell Restructuring Event, together with its successors and assigns.
"Mitchell" means Mitchell Energy & Development Corp., a Texas corporation, and its successors and assigns.
"Mitchell Restructuring Event" means one or a series of transactions pursuant to which US Borrower may form or cause to be formed a new holding company under the law of any state of the United States of America, which pursuant to one or more mergers or other transactions would acquire all of the outstanding common stock of each of US Borrower and Mitchell.
(b) The definitions of "Change of Control", "Consolidated Assets", "ERISA Affiliate", "Material Adverse Effect", "Material Subsidiary", "Restricted Person", "Restricted Subsidiary",
Sixth Amendment to Canadian Credit Agreement
"Total Capitalization" and "US GAAP" in Annex I to the Original Agreement are hereby amended in their entirety to read as follows:
"Change of Control" means the occurrence of either of the following events: (i) any Person (or syndicate or group of Persons which is deemed a "person" for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires more than fifty percent (50%) of the outstanding stock of Devon HoldCo having ordinary voting power (disregarding changes in voting power based on the occurrence of contingencies) for the election of directors, or (ii) during any period of twelve successive months a majority of the Persons who were directors of Devon HoldCo at the beginning of such period cease to be directors of Devon HoldCo, unless such cessation relates to a voluntary reduction by Devon HoldCo of the number of directors that comprise the board of directors of Devon HoldCo. For the avoidance of doubt, the Mitchell Restructuring Event shall not constitute or be deemed to constitute a "Change of Control" for purposes of the US Agreement, the Canadian Agreement or any other Loan Document.
"Consolidated Assets" means the total assets of Devon HoldCo and its Restricted Subsidiaries which would be shown as assets on a Consolidated balance sheet of Devon HoldCo and its Restricted Subsidiaries prepared in accordance with US GAAP, after eliminating all amounts properly attributable to minority interest, if any, in the stock and surplus of the Restricted Subsidiaries.
"ERISA Affiliate" means Devon HoldCo and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with Devon HoldCo, are treated as a single employer under Section 414 of the Internal Revenue Code.
"Material Adverse Effect" means any event which would reasonably be expected to have a material and adverse effect upon (a) Devon HoldCo's Consolidated financial condition, (b) Devon HoldCo's Consolidated operations, properties or prospects, considered as a whole, (c) US Borrower's ability to timely pay the Obligations, or (d) the enforceability of the material terms of any Loan Documents.
"Material Subsidiary" means a Subsidiary of Devon HoldCo other than US Borrower which owns assets having a book value that exceeds ten percent (10%) of the book value of Devon HoldCo's Consolidated assets.
"Restricted Person" means any of Devon HoldCo, US Borrower and each Restricted Subsidiary.
"Restricted Subsidiary" means Canadian Borrower, Devon Oklahoma, Devon SFS, Mitchell and any other Subsidiary of Devon HoldCo (other than US Borrower) that is not an Unrestricted Subsidiary.
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"Total Capitalization" means the sum (without duplication) of
(i) Devon HoldCo's Consolidated Total Funded Debt plus (ii) Devon
HoldCo's Consolidated shareholder's equity plus (iii) 60% of the
outstanding balance of the Devon Trust Securities. Total Capitalization
shall be calculated excluding non-cash write-downs and related charges
which are required under Rule 4-10 (Financial Accounting and Reporting
for Oil and Gas Producing Activities Pursuant to the Federal Securities
Laws and the Energy Policy and Conservation Act of 1975) of Regulation
S-X promulgated by Securities and Exchange Commission Regulation, or by
US GAAP.
"US GAAP" means those generally accepted accounting principles and practices which are recognized as such from time to time by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Devon HoldCo and its Consolidated Subsidiaries, are applied in a manner consistent with the manner in which such principles and practices were applied in the Initial Financial Statements.
(c) The first sentence of the definition of "Unrestricted Subsidiary" in Annex I to the Original Agreement is hereby amended in its entirety to read as follows:
"Unrestricted Subsidiary" means any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization (i) which is listed below in this definition, or (ii) in which US Borrower did not own an interest (directly or indirectly) as of August 29, 2001, which thereafter became a Subsidiary of US Borrower or Devon HoldCo and which, within 90 days after becoming a Subsidiary of US Borrower or Devon HoldCo, was designated as an Unrestricted Subsidiary by US Borrower to US Agent; provided that in the event any such Subsidiary becomes a Material Subsidiary at any time, such Subsidiary shall cease to be an Unrestricted Subsidiary at such time and shall automatically become a Restricted Subsidiary.
(d) The definition of "Permitted Liens" is hereby amended by substituting the words "US Borrower, Devon HoldCo" for the words "US Borrower".
(e) The definition of "Subordinated US Borrower Debentures" is hereby amended by substituting the words "Devon HoldCo or US Borrower" for the words "US Borrower".
Section 2.2. Affirmative Covenants.
(a) The first sentence of Section 6.2(a), the first sentence of Section 6.2(b), and Section 6.2(c) of the Original Agreement are hereby amended by substituting the words "Devon HoldCo" for the words "US Borrower".
(b) Section 6.13 of the Original Agreement is hereby amended in its entirety to read as follows:
Sixth Amendment to Canadian Credit Agreement
"Section 6.13 Bank Accounts; Offset.Canadian Borrower hereby
agrees that each Canadian Lender shall have the right to offset (which
shall be in addition to all other interests, liens, and rights of any
Lender at common Law, under the Loan Documents, or otherwise) (a) any
and all moneys, securities or other property (and the proceeds
therefrom) of Canadian Borrower now or hereafter held or received by or
in transit to any Canadian Lender for the account of Canadian Borrower,
(b) any and all deposits (general or special, time or demand,
provisional or final) of Canadian Borrower with any Canadian Lender,
(c) any other credits and balances of Canadian Borrower at any time
existing against any Canadian Lender, including claims under
certificates of deposit, and (d) any indebtedness owed or payable by
any Lender to Canadian Borrower at any time against Canadian
Obligations due to it that have not been paid when due. At any time and
from time to time after the occurrence of any Event of Default and
during the continuance thereof, each Lender is hereby authorized to
offset against the Canadian Obligations then due and payable to it (in
either case without notice to Canadian Borrower), any and all items
hereinabove referred to. To the extent that Canadian Borrower has
accounts designated as royalty or joint interest owner accounts, the
foregoing right of offset shall not extend to funds in such accounts
which belong to, or otherwise arise from payments to Canadian Borrower
for the account of, third party royalty or joint interest owners."
Section 2.3. Negative Covenants.
(a) Section 7.3 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.3 Limitation on Mergers. No Restricted Person will merge with or into or consolidate with any other Person except that:
(a) any Restricted Subsidiary may be merged with or into or consolidated with (i) Devon HoldCo, so long as Devon HoldCo is the surviving business entity of such merger or consolidation, (ii) US Borrower, so long as US Borrower is the surviving business entity of such merger or consolidation, or (iii) any other Subsidiary of Devon HoldCo, so long as the surviving business entity of such merger or consolidation is a Restricted Subsidiary;
(b) US Borrower may be merged with or into or consolidated with Devon HoldCo, or Devon HoldCo may be merged with or into or consolidated with US Borrower, so long as (i) US Borrower is the surviving business entity of such merger or consolidation or (ii) Devon HoldCo, as the surviving business entity of such merger or consolidation, expressly assumes, by execution of a supplement to this Agreement in form and substance reasonably satisfactory to US Agent, the due and punctual payment of all US Obligations and the performance of the obligations of US Borrower contained herein and in the other Loan Documents;
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(c) US Borrower may merge with or into or be consolidated with a Subsidiary of Devon HoldCo to effect the Mitchell Restructuring Event so long as US Borrower is the surviving business entity of such merger or consolidation; and
(d) Any Person which is not a Restricted Person may be merged with or into or consolidated with a Restricted Person, so long as such Restricted Person is the surviving business entity of such merger or consolidation."
(c) Section 7.4(a) of the Original Agreement is hereby amended in its entirety to read as follows:
"(a) Neither Canadian Borrower nor any Subsidiary of Canadian Borrower that is a Restricted Person will issue any additional shares of its capital stock, additional partnership interests or other securities or any options, warrants or other rights to acquire such additional shares, partnership interests or other securities except to another Restricted Person which is a wholly-owned direct or indirect Subsidiary of Devon HoldCo unless (i) such securities are being issued to acquire a business, directly or indirectly through the use of the proceeds of such issuance, and (ii) such securities are convertible into the common shares or similar securities of Devon HoldCo and/or can be redeemed in cash at the option of the Restricted Person that issued such securities. In addition, (A) Canadian Borrower may issue "Exchangeable Shares" (as defined in the Articles of Amalgamation of Canadian Borrower and in this section called "Exchangeable Shares") upon the terms specified in the Articles of Amalgamation of Canadian Borrower as in effect on January 1, 2001, which terms are substantially the same as those set forth in the Restated Articles of Incorporation of Northstar Energy Corporation immediately prior to the amalgamation of Canadian Borrower, and (B) Canadian Borrower may issue stock options to its employees from time to time to acquire such Exchangeable Shares, provided that such options are granted under a stock option plan of Canadian Borrower and/or Devon HoldCo."
(d) Section 7.6 of the Original Agreement is hereby amended by substituting the words "Devon HoldCo" for the words "US Borrower".
(e) Section 7.7 of the Original Agreement is hereby amended in its entirety to read as follows:
"Section 7.7 Funded Debt to Total Capitalization. The ratio of
Devon HoldCo's Consolidated Total Funded Debt to Total Capitalization
will not exceed (i) at the end of each Fiscal Quarter prior to the
consummation of the Anderson Financing, sixty-five percent (65%) and
(ii) at the end of each Fiscal Quarter thereafter until and including
June 30, 2002, seventy percent (70%) and (iii) at the end of each
Fiscal Quarter ending after June 30, 2002 sixty-five percent (65%).
Sixth Amendment to Canadian Credit Agreement
Section 2.4. Miscellaneous. Section 10.1(a) of the Original Agreement is hereby amended by inserting the following at the end of the fourth sentence thereof:
"; provided, however, that with the consent of the Canadian
Agent but without the separate consent of any other Lender Party,
Canadian Borrower may amend, supplement or otherwise modify this
Agreement or any other Canadian Loan Document in connection with the
Mitchell Restructuring Event and the related addition of the holding
company referred to in the definition of Mitchell Restructuring Event
as a Restricted Person herein and in the other Canadian Loan Documents
(i) to cure any ambiguity or correct or supplement any provision
contained herein or in any other Canadian Loan Document which may
thereby become defective or inconsistent with any other provisions
contained herein or therein, so long as such amendment, supplement or
other modification would not have an adverse effect on the interests of
the Lender Parties hereunder and under the other Canadian Loan
Documents or (ii) to add to the covenants and agreements of the
Restricted Persons hereunder and thereunder such further covenants,
agreements, restrictions, conditions or provisions as the Canadian
Agent shall consider to be for the protection of the Lender Parties."
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date of Amendments in Section 2.2(b), Section
2.4, and "Mitchell Restructuring Event". The amendments set forth in Section
2.2(b), Section 2.4, and the definition of "Mitchell Restructuring Event" in
Section 2.1(a) of this Amendment shall become effective as of the date first
written above when and only when:
(a) Canadian Agent shall have received at Canadian Agent's office (i) this Amendment executed by Canadian Borrower, Canadian Agent and Canadian Required Lenders and (ii) a certificate of the Chairman of the Board, President, or Vice President - Finance of Canadian Borrower dated the date of this Amendment certifying: (A) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (B) that no Default exists at and as of such date; and
(b) Canadian Borrower shall have paid on or before such effective date all fees and reimbursements to be paid to Canadian Agent and Canadian Lenders pursuant to any Canadian
Loan Documents, or otherwise due Canadian Agent or Canadian Lenders and including fees and disbursements of Canadian Agent's attorneys.
Section 3.2. Effective Date of Entire Amendment. This Amendment (other than the sections described in Section 3.1) shall become effective contemporaneously with the occurrence of the Mitchell Restructuring Event on the date the Mitchell Restructuring Event occurs; provided that the following conditions have been satisfied:
(a) Canadian Agent shall have received all of the following, at Canadian Agent's office, duly executed and delivered and in form and substance satisfactory to Canadian Agent, all of the following:
(i) a guaranty of the Canadian Obligations from Devon HoldCo in form and substance reasonably acceptable to Canadian Agent;
(ii) an opinion of counsel to Canadian Borrower with respect to this Amendment in form and substance reasonably acceptable to Canadian Agent;
(iii) a certificate of the Chairman of the Board, President, or Vice President - Finance of Canadian Borrower dated the date of the Mitchell Restructuring Event certifying: (A) that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of such date, and (B) that no Default exists at and as of such date;
(iv) an opinion of counsel to Devon HoldCo with respect to the guaranty of Devon HoldCo referred to in clause (i) above in form and substance reasonably acceptable to Canadian Agent; and
(v) a certificate of the Senior Vice President - Finance or the Treasurer of Devon HoldCo dated the date of the Mitchell Restructuring Event with respect to its articles of incorporation, bylaws, incumbency, authorizing resolutions, and similar corporate matters.
(b) Canadian Borrower shall have paid on or before such effective date all fees and reimbursements to be paid to Canadian Agent and Canadian Lenders pursuant to any Canadian Loan Documents, or otherwise due Canadian Agent or Canadian Lenders and including fees and disbursements of Canadian Agent's attorneys.
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ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of Canadian Borrower. In order to induce each Canadian Lender to enter into this Amendment, Canadian Borrower represents and warrants to each Canadian Lender that:
(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof, except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the Canadian Agreement.
(b) Canadian Borrower is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the Canadian Agreement. Canadian Borrower has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of Canadian Borrower hereunder.
(c) The execution and delivery by Canadian Borrower of this Amendment, the performance by Canadian Borrower of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not (i) conflict with any provision of (A) any Law, (B) the organizational documents of Canadian Borrower, or (C) any agreement, judgment, license, order or permit applicable to or binding upon Canadian Borrower unless such conflict would not reasonably be expected to have a Material Adverse Effect, or (ii) result in or require the creation of any Lien upon any assets or properties of Canadian Borrower which would reasonably be expected to have a Material Adverse Effect, except as expressly contemplated or permitted in the Loan Documents. Except as expressly contemplated in the Loan Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by Canadian Borrower of this Amendment or to consummate any transactions contemplated by this Amendment, unless failure to obtain such consent would not reasonably be expected to have a Material Adverse Effect.
(d) When duly executed and delivered, each of this Amendment and the Canadian Agreement will be a legal and binding obligation of Canadian Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of US Borrower dated as of December 31, 2000 and the unaudited quarterly Consolidated financial statements of US Borrower dated as of June 30, 2001 fairly present the Consolidated financial position at such dates and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such dates for US Borrower. Copies of such financial statements have heretofore been delivered to each Canadian Lender. Since such dates no material
Sixth Amendment to Canadian Credit Agreement
adverse change has occurred in the Consolidated financial condition or businesses of US Borrower.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. The Canadian Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects. Any reference to the Canadian Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Canadian Lenders under the Canadian Agreement or any other Canadian Loan Document nor constitute a waiver of any provision of the Canadian Agreement or any other Canadian Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Canadian Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Canadian Borrower or any Restricted Person hereunder or under the Canadian Agreement to any Canadian Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Canadian Borrower under this Amendment and under the Canadian Agreement.
Section 5.3. Canadian Loan Documents. This Amendment is a Canadian Loan Document, and all provisions in the Canadian Agreement pertaining to Canadian Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the Province of Alberta and any applicable laws of Canada in all respects, including construction, validity and performance.
Section 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be validly executed by facsimile or other electronic transmission.
Sixth Amendment to Canadian Credit Agreement
THIS AMENDMENT AND THE OTHER CANADIAN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
Sixth Amendment to Canadian Credit Agreement
IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By: /s/ Paul Brereton -------------------------------------- Name: Paul Brereton Title: Vice President - Finance |
BANK OF AMERICA CANADA
Administrative Agent, Canadian LC Issuer
and Lender
By: /s/ Nelson Lam -------------------------------------- Name: Nelson Lam Title: Vice President |
ABN AMRO BANK CANADA
Lender
By: /s/ Mark Bohn -------------------------------------- Name: Mark Bohn Title: Group Vice President By: /s/ Teresa Wu -------------------------------------- Name: Teresa Wu Title: Vice President |
BANCFIRST
Lender
By: /s/ Arthur B. Hobbs -------------------------------------- Name: Arthur B. Hobbs Title: Vice President |
BANK OF TOKYO - MITSUBISHI (CANADA)
Lender
Title:
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BANK ONE, NA, CANADA BRANCH
Lender
By: /s/ Jeanie Harman -------------------------------------- Name: Jeanie Harman Title: First Vice President |
BAYERISCHE LANDESBANK GIROZENTRALE,
TORONTO BRANCH
Lender
By: /s/ Thomas Miller -------------------------------------- Name: Thomas Miller Title: Vice President By: /s/ Bernd Erpenbeck -------------------------------------- Name: Bernd Erpenbeck Title: Second Vice President |
CANADIAN IMPERIAL BANK OF COMMERCE
Lender
By: /s/ Joelle Schellenberg -------------------------------------- Name: Joelle Schellenberg Title: Director By: /s/ Chris A. Perks -------------------------------------- Name: Chris A. Perks Title: Executive Director |
CITIBANK CANADA
Lender
By: /s/ James K. G. Campbell -------------------------------------- Name: James K. G. Campbell Title: Vice President |
CREDIT LYONNAIS NEW YORK BRANCH
Lender
Title:
Sixth Amendment to Canadian Credit Agreement
CREDIT SUISSE FIRST BOSTON CANADA
Lender
By: /s/ W. M. McFarland -------------------------------------- Name: W. M. McFarland Title: Vice President By: /s/ Peter Chauvin -------------------------------------- Name: Peter Chauvin Title: Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
Lender
By: /s/ Michael E. Keating -------------------------------------- Name: Michael E. Keating Title: Managing Director By: /s/ Joel Makowsky -------------------------------------- Name: Joel Makowsky Title: Vice President |
FIRST UNION NATIONAL BANK
Lender
By: /s/ Robert R. Wetteroff -------------------------------------- Name: Robert R. Wetteroff Title: Senior Vice President |
ROYAL BANK OF CANADA
Lender
By: /s/ Lorne Gartner -------------------------------------- Name: Lorne Gartner Title: Vice President |
SUNTRUST BANK, ATLANTA
Lender
By: /s/ David J. Edge -------------------------------------- Name: David J. Edge Title: Director |
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THE BANK OF NEW YORK
Lender
By: /s/ John V. Yancey -------------------------------------- Name: John V. Yancey Title: Senior Vice President |
THE CHASE MANHATTAN BANK, TORONTO BRANCH
Lender
By: /s/ Drew McDonald -------------------------------------- Name: Drew McDonald Title: Authorized Representative By: /s/ Sara Collins -------------------------------------- Name: Sara Collins Title: Authorized Representative |
THE FUJI BANK, LIMITED
Lender
By: /s/ Jacques Azagury -------------------------------------- Name: Jacques Azagury Title: Senior Vice President & Manager |
UBS AG, STAMFORD BRANCH
Lender
By: /s/ Patricia O'Kicki -------------------------------------- Name: Patricia O'Kicki Title: Director - Banking Products Services By: /s/ Wilfred V. Saint -------------------------------------- Name: Wilfred V. Saint Title: Associate Director - Banking Products Services, US |
Sixth Amendment to Canadian Credit Agreement
UMB BANK
Lender
Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Lender
Title:
Title:
Sixth Amendment to Canadian Credit Agreement
Sixth Amendment
CONSENT AND AGREEMENT
Devon Energy Corporation, a Delaware corporation ("Canadian Guarantor"), hereby (i) consents to the provisions of this Amendment and the transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated as of August 29, 2000 (the "Parent Guaranty") made by it for the benefit of Canadian Agent and Lenders executed pursuant to the Canadian Agreement and the other Canadian Loan Documents, (iii) agrees that all of its respective obligations and covenants thereunder shall remain unimpaired by the execution and delivery of this Amendment and the other documents and instruments executed in connection herewith, and (iv) agrees that the Parent Guaranty and such other Canadian Loan Documents shall remain in full force and effect.
DEVON ENERGY CORPORATION
By: /s/ Dale T. Wilson -------------------------------------- Name: Dale T. Wilson Title: Treasurer |
Devon Financing Corporation, U.L.C., a Nova Scotia unlimited liability company, hereby (i) consents to the provisions of this Amendment and the transactions contemplated herein, (ii) ratifies and confirms the Guaranty dated as of October 3, 2001 (the "DFC Guaranty") made by it for the benefit of Canadian Agent and Lenders executed pursuant to the Canadian Agreement and the other Canadian Loan Documents, (iii) agrees that all of its respective obligations and covenants thereunder shall remain unimpaired by the execution and delivery of this Amendment and the other documents and instruments executed in connection herewith, and (iv) agrees that the DFC Guaranty and such other Canadian Loan Documents shall remain in full force and effect.
DEVON FINANCING CORPORATION, U.L.C.
By: /s/ Dale T. Wilson -------------------------------------- Name: Dale T. Wilson Title: Treasurer |
Sixth Amendment to Canadian Credit Agreement
EXHIBIT 21.1
DEVON ENERGY CORPORATION
Significant Subsidiaries
1. Devon Energy Corporation (Oklahoma), an Oklahoma corporation;
2. Devon Energy Production Company, L.P., an Oklahoma limited partnership;
3. Devon SFS Operating, Inc., a Delaware corporation;
4. Northstar Energy Corporation, an Alberta corporation;
5. Devon NewCo Corporation, a Delaware corporation;
6. Devon Canada Corporation, an Alberta corporation;
7. Devon Canada, a general partnership registered in Alberta; and
8. Devon AXL, a general partnership registered in Alberta.
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) incorporated by reference in this Registration Statement.
/s/ Arthur Andersen LLP Houston, Texas October 25, 2001 |
EXHIBIT 23.4
CONSENT OF DELOITTE & TOUCHE LLP
We consent to incorporation by reference in this Amendment No. 2 to the Registration Statement on Form S-4 of Devon Energy Corporation of our report dated January 20, 1999 to the shareholders of Northstar Energy Corporation, relating to the consolidated balance sheet of Northstar Energy Corporation and subsidiaries as at December 31, 1998 and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the year then ended, which report appears in the December 31, 2000 annual report on Form 10-K of Devon Energy Corporation.
We also consent to the reference to our firm under the heading "Experts" in the joint proxy statement/prospectus of Devon Energy Corporation and Mitchell Energy & Development Corp.
/s/ DELOITTE & TOUCHE LLP ---------------------------------- Deloitte & Touche LLP Chartered Accountants Calgary, Alberta, Canada October 26, 2001 |
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Devon Holdco Corporation:
We consent to the use of our report dated October 24, 2001, included herein, relating to the consolidated balance sheet of Devon Holdco Corporation as of October 18, 2001, and to the reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG LLP Oklahoma City, Oklahoma October 26, 2001 |
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration Statement on Amendment No. 2 to Form S-4 of Devon Energy Corporation of our report dated January 28, 2000, except for Note 2 and the second paragraph of our report which are as of October 30, 2000, relating to the consolidated financial statements of Santa Fe Snyder Corporation, which appears in Devon Energy Corporation's Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP Houston, Texas October 26, 2001 |
EXHIBIT 23.7
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Devon Energy Corporation
We consent to the use of our report dated November 15, 2000 (except for note 13 which is as of April 24, 2001 and note 14 which is as of October 17, 2001) included herein relating to the consolidated balance sheets of Anderson Exploration Ltd. as of September 30, 2000 and 1999 and the related consolidated statements of earnings, retained earnings and cash flows for each of the years in the three-year period ended September 30, 2000 and to the reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG LLP Chartered Accountants Calgary Canada October 29, 2001 |
EXHIBIT 23.8
Consent of AMH Group, Ltd.
We consent to the reference to our appraisal report for Devon Energy Corporation, as of the years ended December 31, 1998, 1999 and 2000, incorporated herein by reference.
AMH GROUP, LTD.
/s/ Allan K. Ashton ----------------------------- Allan K. Ashton, P. Geol. President October 26, 2001 |
EXHIBIT 23.9
CONSENT OF LAROCHE PETROLEUM CONSULTANTS, LTD.
We consent to the reference to our appraisal report for Devon Energy Corporation as of the years ended December 31, 2000, 1999, and 1998, incorporated herein by reference.
LAROCHE PETROLEUM CONSULTANTS, LTD.
By: /s/ William Kazmann ---------------------------------------- William Kazmann Partner October 26, 2001 |
EXHIBIT 23.10
CONSENT OF PADDOCK LINDSTROM & ASSOCIATES LTD.
We consent to the reference to our appraisal report for Devon Energy Corporation as of December 31, 1999 and 2000, and to our appraisal report for Northstar Energy Corporation as of the year ended December 31, 1998, incorporation by reference.
PADDOCK LINDSTROM & ASSOCIATES LTD.
/s/ D. L. Paddock -------------------------------------- D.L. Paddock, P. Eng. Vice-President October 26, 2001 |
EXHIBIT 23.11
CONSENT OF RYDER SCOTT COMPANY, L.P.
We consent to the reference to our oil and gas reserve reports for Devon Energy Corporation and Santa Fe Snyder Corporation as of December 31, 2000 and 1999, and to our oil and gas reserve reports for PennzEnergy Company and Santa Fe Energy Resources, Inc. as of the year ended December 31, 1998, incorporated herein by reference.
/s/ Ryder Scott Company, L.P. RYDER SCOTT COMPANY, L.P. Houston, Texas October 26, 2001 |
EXHIBIT 23.12
LETTER OF CONSENT
We consent to the reference to our firm name in this Amendment No. 2 to the Registration Statement on Form S-4 and the reference to our firm name and our reports providing estimates of a portion of the natural gas, natural gas liquids and conventional oil reserves of Anderson Exploration Ltd. as of March 31, 2000 and September 30, 2000 in this Registration Statement of Devon Energy Corporation.
Yours very truly,
GILBERT LAUSTSEN JUNG
ASSOCIATES LTD.
/s/ Dana B. Laustsen Dana B. Laustsen, P. Eng. Executive Vice President Calgary, Alberta October 26, 2001 |
EXHIBIT 23.13
PERSONAL AND CONFIDENTIAL
October 26, 2001
Board of Directors
Mitchell Energy & Development Corp.
2001 Timberloch Place
The Woodlands, Texas 77380
Re: Amendment No. 2 to Registration Statement on Form S-4 of Devon Energy Corporation (File No. 333-68694)
Gentlemen:
Reference is made to our opinion letter dated August 13, 2001 with respect to the fairness from a financial point of view to the holders of the outstanding shares of Class A Common Stock, par value $0.10 per share (the "Shares"), of Mitchell Energy & Development Corp., a Texas corporation (the "Company"), of the Merger Consideration (as defined therein) to be received for the Shares pursuant to the Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, a Delaware corporation ("Parent"), Devon NewCo Corporation, a wholly owned subsidiary of Parent, and the Company.
The foregoing opinion letter was provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the transaction contemplated therein and is not to be used, circulated, quoted or otherwise referred to for any other purpose, nor is it to be filed with, included in or referred to in whole or in part in any registration statement, proxy statement or any other document, except in accordance with our prior written consent. We understand that the Company has determined to include our opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm under the captions "SUMMARY--Opinions of Financial Advisors" and "THE MERGER--Opinions of Financial Advisors--Opinion of Goldman, Sachs & Co. -- Financial Advisor to Mitchell" in, and to the inclusion of the foregoing opinion in Annex D to, the Joint Proxy Statement/Prospectus included in the above-mentioned Registration Statement. Notwithstanding the foregoing, it is understood that our consent is being delivered solely in connection with the filing of the above-mentioned
Mitchell Energy & Development Corp.
October 26, 2001
version of the Registration Statement and that our opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose, nor is it to be filed with, included in or referred to in whole or in part in any registration statement (including any subsequent amendments to the above-mentioned Registration Statement), proxy statement or any other document, except in accordance with our prior written consent. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO. ------------------------ (Goldman, Sachs & Co.) |
EXHIBIT 23.14
CONSENT OF J.P. MORGAN SECURITIES INC.
The Board of Directors
Mitchell Energy & Development Corp.
2001 Timberloch Place
The Woodlands, Texas 77387-4000
We hereby consent to the use of the opinion letter of J.P. Morgan Securities Inc. dated September 7, 2001 to the Board of Directors of Mitchell Energy & Development Corp. (the "Company") included as Annex E to the joint proxy statement/prospectus which forms a part of Amendment No. 2 to the Registration Statement on Form S-4 of Devon Energy Corporation and Form S-4 of Devon Holdco Corporation relating to the proposed merger involving the Company and Devon Energy Corporation, and to the references to such opinion in such joint proxy statement/prospectus under the caption "Opinion of J.P. Morgan Securities Inc.--Financial Advisor to Mitchell." In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we hereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ WYATT CROWELL -------------------------------------- Name: Wyatt Crowell Title: Vice President October 30, 2001 |
EXHIBIT 23.15
CONSENT OF UBS WARBURG LLC
We hereby consent to the use of our opinion letter dated August 13, 2001 to
the Board of Directors of Devon Energy Corporation ("Devon") included as Annex F
to the Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 dated October 29, 2001 relating to the proposed merger of
Devon and Mitchell Energy & Development Corp. and references to such opinion in
such Joint Proxy Statement/Prospectus. In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "Experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
UBS WARBURG LLC
By: /s/ JAMES BRENNAN --------------------- James Brennan Managing Director New York, New York October 29, 2001 |
EXHIBIT 99.1
PROXY
DEVON ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Devon Energy Corporation, a Delaware corporation, hereby nominates and appoints J. Larry Nichols and Marian J. Moon, or either one of them, with full power of substitution, as true and lawful agents and proxies to represent the undersigned and to vote all shares of stock of Devon Energy Corporation owned by the undersigned in all matters coming before the Special Meeting of Stockholders (or any adjournment thereof) of Devon Energy Corporation to be held at the Renaissance Oklahoma City Hotel, Ten North Broadway, Oklahoma City, Oklahoma, on , 2001, at a.m., local time. The Board of Directors recommends a vote "FOR" the matter set forth on the reverse side.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE SIDE |
DETACH HERE
VOTE BY TELEPHONE
It's fast, convenient, and immediate!
Call the Toll-Free number located at the top of your voting form.
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER LOCATED AT THE TOP OF YOUR VOTING FORM.
3. ENTER YOUR 12-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
VOTE BY INTERNET
It's fast, convenient, and your vote is immediately confirmed and posted.
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. GO TO THE WEB SITE
HTTP://WWW.PROXYVOTE.COM
3. ENTER YOUR 12-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
YOUR VOTE IS IMPORTANT!
Go to HTTP://WWW.PROXYVOTE.COM anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER SPECIFIED BELOW BY THE STOCKHOLDER. TO THE EXTENT CONTRARY SPECIFICATIONS ARE NOT GIVEN, THIS PROXY WILL BE VOTED "FOR" THE MATTER LISTED BELOW.
1. Approval and adoption of the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. and the transactions that it contemplates, including the possible issuance of up to 31,762,199 shares of Devon common stock in the merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Other matters: In their discretion, to vote with respect to any other matters that may come before the meeting or any adjournment thereof, including matters incident to its conduct such as adjournment, including for the purpose of soliciting additional proxies.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your
name appears at left,
indicating your official
position or representative
capacity, if applicable. If
shares are held jointly, each
owner should sign.
EXHIBIT 99.2
VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DEVON ENERGY CORPORATION
The undersigned holder of Exchangeable Shares of Northstar Energy Corporation hereby directs CIBC Mellon Trust Company (the "Trustee") to cast a number of votes equal to the number of Exchangeable Shares owned by the undersigned in accordance with the instructions indicated on the reverse side hereof at the Special Meeting of Stockholders (or any adjournment thereof) of Devon Energy Corporation to be held at the Renaissance Oklahoma City Hotel, Ten North Broadway, Oklahoma City, Oklahoma, on , 2001, at a.m., local time. The Board of Directors recommends a vote "FOR"the matter set forth on the reverse side.
PLEASE SIGN ON THE REVERSE SIDE OF THIS CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
WHEN PROPERLY EXECUTED, THE TRUSTEE WILL CAST A NUMBER OF VOTES AT THE MEETING EQUAL TO THE NUMBER OF EXCHANGEABLE SHARES OF RECORD OWNED BY THE UNDERSIGNED IN THE MANNER SPECIFIED ON THE REVERSE SIDE HEREOF.
IF NO INSTRUCTIONS ARE GIVEN, NO VOTES WILL BE CAST ON BEHALF OF THE UNDERSIGNED.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE SIDE |
DETACH HERE
1. Approval and adoption of the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp. and the transactions that it contemplates, including the issuance of up to 31,762,199
shares of Devon common stock in the merger. [ ] FOR [ ] AGAINST [ ] ABSTAIN MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ] |
Please sign exactly as your name appears at left, indicating your official position or representative capacity, if applicable. If shares are held jointly, each owner should sign.
EXHIBIT 99.3
CLASS A COMMON STOCK
PROXY
MITCHELL ENERGY & DEVELOPMENT CORP.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD , 2001
The undersigned hereby appoints Bernard F. Clark and Thomas P. Battle, or either of them, as Proxies, with full power of substitution, and hereby authorizes and directs them, or either of them, to represent the undersigned at the Special Meeting of Stockholders of Mitchell Energy & Development Corp. to be held on , 2001, or any adjournment thereof, and to vote as follows the number of shares which the undersigned would be entitled to vote if personally present.
This Proxy will be voted in accordance with your instructions or, if no instructions are indicated, will be voted for approval of the Amended and Restated Agreement and Plan of Merger, dated as of August 13, 2001, by and among Devon Energy Corporation, Devon NewCo Corporation, Devon Holdco Corporation, Devon Merger Corporation, Mitchell Merger Corporation and Mitchell Energy & Development Corp., and in accordance with the discretion of the person voting it with respect to any other business properly before the meeting, such as adjournment, including for the purpose of soliciting additional proxies. In the merger, each Mitchell stockholder, other than those exercising dissenters rights, will receive $31.00 in cash and 0.585 of a share of common stock of Devon or Devon Holdco for each share of Mitchell common stock that the stockholder owns.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
O FOLD AND DETACH HERE O
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. Approval of the Amended and Restated Agreement and Plan of Merger referred to on the reverse.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote on such other business as may properly come before the meeting.
I PLAN TO ATTEND THE MEETING. [ ]
Dated: ---------------------------- ---------------------------------- Signature ---------------------------------- Signature NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. |
O FOLD AND DETACH HERE O
EXHIBIT 99.4
CONSENT OF J. TODD MITCHELL TO BE NAMED AS A DIRECTOR
The undersigned hereby consents to be named as a director of Devon Energy Corporation and of Devon Holdco Corporation in the Registration Statements on Form S-4 filed by Devon Energy Corporation (Registration No. 333-68694) and to be filed by Devon Holdco Corporation with the Securities and Exchange Commission.
Dated: October 26, 2001 /s/ J. TODD MITCHELL ----------------------------------- Name: J. Todd Mitchell |