Exhibit 7.1
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AGREEMENT AND PLAN OF MERGER,
AS AMENDED
by and among
DEVON ENERGY CORPORATION,
DEVON DELAWARE CORPORATION
and
PENNZENERGY COMPANY
Dated as of May 19, 1999
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TABLE OF CONTENTS
Page
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ARTICLE 1
THE MERGER
Section 1.1 The Merger.........................................................2
Section 1.2 The Closing........................................................2
Section 1.3 Effective Time.....................................................2
Section 1.4 Corporate Headquarters and Name....................................2
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation.......................................3
Section 2.2 Bylaws.............................................................3
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
Section 3.1 Directors and Officers of the Surviving Corporation................3
ARTICLE 4
CONVERSION OF DVN STOCK AND PZE STOCK
Section 4.1 Certain Definitions................................................3
Section 4.2 Conversion of DVN Stock and PZE Stock..............................4
Section 4.3 Exchange of Certificates Representing DVN Stock and PZE Stock......6
Section 4.4 Adjustment of Exchange Ratios......................................9
Section 4.5 Rule 16b-3 Approval................................................9
Section 4.6 Reservation of Right to Revise Transaction.........................9
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PZE
Section 5.1 Existence; Good Standing; Corporate Authority.....................10
Section 5.2 Authorization, Validity and Effect of Agreements..................10
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Section 5.3 Capitalization....................................................10
Section 5.4 Significant Subsidiaries..........................................11
Section 5.5 No Violation......................................................11
Section 5.6 No Conflict.......................................................12
Section 5.7 SEC Documents.....................................................13
Section 5.8 Litigation........................................................13
Section 5.9 Absence of Certain Changes........................................14
Section 5.10 Taxes.............................................................14
Section 5.11 Employee Benefit Plans............................................15
Section 5.12 Labor Matters.....................................................16
Section 5.13 Environmental Matters.............................................16
Section 5.14 Intellectual Property.............................................17
Section 5.15 Title to Properties...............................................17
Section 5.16 Insurance.........................................................18
Section 5.17 No Brokers........................................................18
Section 5.18 Opinion of Financial Advisor......................................18
Section 5.19 DVN Stock Ownership...............................................19
Section 5.20 Reorganization....................................................19
Section 5.21 Vote Required.....................................................19
Section 5.22 PZE Rights Agreement..............................................19
Section 5.23 Certain Approvals.................................................19
Section 5.24 Certain Contracts.................................................19
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DVN
AND NEWCO
Section 6.1 Existence; Good Standing; Corporate Authority.....................20
Section 6.2 Authorization, Validity and Effect of Agreements..................20
Section 6.3 Capitalization....................................................20
Section 6.4 Significant Subsidiaries..........................................21
Section 6.5 No Violation......................................................22
Section 6.6 No Conflict.......................................................22
Section 6.7 SEC Documents.....................................................23
Section 6.8 Litigation........................................................24
Section 6.9 Absence of Certain Changes........................................24
Section 6.10 Taxes.............................................................24
Section 6.11 Employee Benefit Plans............................................25
Section 6.12 Labor Matters.....................................................26
Section 6.13 Environmental Matters.............................................26
Section 6.14 Intellectual Property.............................................27
Section 6.15 Title to Properties...............................................28
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Section 6.16 Insurance.........................................................28
Section 6.17 No Brokers........................................................28
Section 6.18 Opinion of Financial Advisor......................................28
Section 6.19 PZE Stock Ownership...............................................29
Section 6.20 Reorganization....................................................29
Section 6.21 Vote Required.....................................................29
Section 6.22 DVN Rights Agreement..............................................29
Section 6.23 Certain Approvals.................................................29
Section 6.24 Certain Contracts.................................................29
ARTICLE 7
COVENANTS
Section 7.1 Conduct of Businesses.............................................30
Section 7.2 No Solicitation by PZE............................................33
Section 7.3 No Solicitation by DVN............................................34
Section 7.4 Meetings of Stockholders..........................................35
Section 7.5 Filings; Reasonable Best Efforts..................................35
Section 7.6 Inspection........................................................36
Section 7.7 Publicity.........................................................37
Section 7.8 Registration Statement............................................37
Section 7.9 Listing Application...............................................38
Section 7.10 Letters of Accountants............................................38
Section 7.11 Agreements of Rule 145 Affiliates.................................38
Section 7.12 Expenses..........................................................39
Section 7.13 Indemnification and Insurance.....................................39
Section 7.14 Certain Benefits..................................................40
Section 7.15 Reorganization....................................................40
Section 7.16 Rights Agreement..................................................41
Section 7.17 Transition Agreement Termination..................................41
ARTICLE 8
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger........42
Section 8.2 Conditions to Obligation of PZE to Effect the Merger..............42
Section 8.3 Conditions to Obligation of DVN and Newco to Effect the Merger....43
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ARTICLE 9
TERMINATION
Section 9.1 Termination by Mutual Consent.....................................44
Section 9.2 Termination by DVN or PZE.........................................44
Section 9.3 Termination by PZE................................................45
Section 9.4 Termination by DVN................................................45
Section 9.5 Effect of Termination.............................................46
Section 9.6 Extension; Waiver.................................................48
ARTICLE 10
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations, Warranties and Agreements.........48
Section 10.2 Notices...........................................................49
Section 10.3 Assignment; Binding Effect; Benefit...............................50
Section 10.4 Entire Agreement..................................................50
Section 10.5 Amendments........................................................50
Section 10.6 Governing Law.....................................................50
Section 10.7 Counterparts......................................................50
Section 10.8 Headings..........................................................51
Section 10.9 Interpretation....................................................51
Section 10.10 Waivers...........................................................51
Section 10.11 Incorporation of Exhibits.........................................51
Section 10.12 Severability......................................................51
Section 10.13 Enforcement of Agreement..........................................52
Section 10.14 Obligation of Newco...............................................52
Section 10.15 Subsidiaries......................................................52
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AGREEMENT AND PLAN OF MERGER
AS AMENDED
THIS AGREEMENT AND PLAN OF MERGER, AS AMENDED (this "Agreement"),
dated as of May 19, 1999, is among Devon Energy Corporation, an Oklahoma
corporation ("DVN"), Devon Delaware Corporation, a Delaware corporation and a
direct, wholly owned subsidiary of DVN ("Newco"), and PennzEnergy Company, a
Delaware corporation ("PZE").
RECITALS
WHEREAS, DVN and PZE have each determined to engage in a strategic
business combination with the other;
WHEREAS, in furtherance thereof, the parties hereto desire that each
of DVN and PZE merge with and into Newco (the "Merger"), pursuant to which each
share of PZE Common Stock and DVN Common Stock (each as defined in Section 4.1)
will be converted into Newco Common Stock (as defined in Section 4.1) and each
share of PZE Preferred Stock (as defined in Section 4.1) will be converted into
Newco Preferred Stock (as defined in Section 4.1);
WHEREAS, the respective Boards of Directors of each of DVN, Newco and
PZE have determined the Merger, in the manner contemplated herein, to be
desirable and in the best interests of their respective corporations and
stockholders and to be consistent with, and in furtherance of, their respective
business strategies and goals, 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");
WHEREAS, as an inducement to the willingness of PZE to enter into this
Agreement, DVN has granted PZE an option to purchase shares of DVN Common Stock
pursuant to a Stock Option Agreement (as defined in Section 4.1); and
WHEREAS, as an inducement to the willingness of DVN to enter into this
Agreement, PZE has granted DVN an option to purchase shares of PZE Common Stock
pursuant to a Stock Option Agreement (as defined in Section 4.1);
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, on the date of the Effective Time (as defined in Section 1.3),
each of DVN and PZE shall be merged in seriatim with and into Newco in
accordance with this Agreement, with DVN first merging with and into Newco
followed immediately on the same date by PZE merging with and into Newco, and
the separate corporate existence of DVN and PZE shall thereupon cease. Newco
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger shall have the effects specified
in the Delaware General Corporation Law ("DGCL") and the Oklahoma General
Corporation Act ("OGCA"). All references in this Agreement to the "Merger"
shall be deemed to include a reference to the two in seriatim mergers provided
for in this Section 1.1.
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 ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇, 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 8 shall be fulfilled or waived in accordance herewith or
(b) at such other time, date or place as DVN and PZE may agree. 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 8 shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated as provided in Article 9, on
the Closing Date:
(a) The charter of Newco shall be substantially as set forth in
Exhibit A with any changes therein approved by DVN and PZE; and
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(b) Certificates of merger, which shall reflect two in seriatim
mergers unless the second sentence Section 4.6 is applicable, (the "Certificates
of Merger") meeting the requirements of the applicable provisions of the DGCL
and the OGCA shall be properly executed and filed with the Secretaries of State
of the States of Delaware and Oklahoma (the "Secretaries of State").
The Merger shall include two in seriatim mergers and each merger shall
become effective at the time or times of filing of the Certificates of Merger
with the Secretaries of State in accordance with the DGCL and the OGCA with
respect to that merger, or at such later time that the parties hereto shall have
agreed upon and designated in such filings as the effective times of such
mergers (the effective time of the second in seriatim merger shall be the
"Effective Time").
Section 1.4 Corporate Headquarters and Name. After the Closing Date,
the corporate headquarters of the Surviving Corporation shall be located in
Oklahoma City, Oklahoma,
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and the corporate name of the Surviving Corporation, as reflected in its
charter, shall be "Devon Energy Corporation."
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The certificate of
incorporation of Newco 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 2.2 Bylaws. The bylaws of Newco in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation, until
duly amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
Section 3.1 Directors and Officers of the Surviving Corporation. At
the Effective Time:
(a) The principal officers of the Surviving Corporation shall be those
individuals set forth on Schedule 3.1; and
(b) Consistent with Newco's charter, the Board of Directors of the
Surviving Corporation shall consist of a number of persons equal to the
number of directors of DVN on the day preceding the Closing Date, who shall
be designated by DVN ("DVN Designees"), plus an equal number of persons
designated by PZE, one of whom shall have been mutually approved by the
Chairman of PZE and the President of DVN ("PZE Designees"). The DVN
Designees and PZE Designees shall have staggered terms consistent with the
provisions of Exhibit B hereto.
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ARTICLE 4
CONVERSION OF DVN STOCK AND PZE STOCK
Section 4.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
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(a) "DVN Common Stock" shall mean the common stock, par value $.10 per
share, of DVN.
(b) "DVN Exchange Ratio" shall equal 1.0.
(c) "Newco Common Stock" shall mean the common stock, par value $.01
per share, of Newco.
(d) "Newco Preferred Stock" shall mean the preferred stock, par value
$1.00 per share, of Newco.
(e) "PZE Common Stock" shall mean the common stock, par value
$0.83 1/3 per share, of PZE.
(f) "PZE Exchange Ratio" shall equal 0.4475.
(g) "PZE Preferred Stock" shall mean the preferred stock, par value
$1.00 per share, of PZE.
(h) "Stock Option Agreements" shall mean (i) the Stock Option
Agreement dated the date hereof between DVN and PZE pursuant to which DVN has
granted to PZE an option to purchase a certain number of shares of DVN Common
Stock and (ii) the Stock Option Agreement dated the date hereof between PZE and
DVN pursuant to which PZE has granted to DVN an option to purchase a certain
number of shares of PZE Common Stock.
Section 4.2 Conversion of DVN Stock and PZE Stock.
(a) (i) At the Effective Time, each share of PZE Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
PZE Common Stock (x) held in PZE's treasury or (y) owned by DVN, Newco or any
wholly owned Subsidiary (as defined in Section 10.15) of DVN or PZE) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the number of shares of Newco Common Stock equal to PZE
Exchange Ratio, subject to adjustment as provided in Section 4.4.
(ii) At the effective time of the merger of DVN into Newco, each
share of DVN Common Stock issued and outstanding immediately prior to the
effective time of the merger of DVN into Newco (other than shares of DVN Common
Stock (x) held in DVN's treasury or (y) owned by PZE, Newco or any wholly owned
Subsidiary of DVN or PZE) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the number of shares of
Newco Common Stock equal to the DVN Exchange Ratio, subject to adjustment as
provided in Section 4.4.
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(iii) At the Effective Time, each of the 1,500,000 shares of PZE
Preferred Stock designated as "6.49% Cumulative Preferred Stock, Series A"
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, be
converted into one share of Newco Preferred Stock designated as "6.49%
Cumulative Preferred Stock, Series A."
(b) As a result of the Merger and without any action on the part of
the holders thereof, (i) each share of DVN Common Stock and PZE Common Stock
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate (a "Certificate") representing any
shares of DVN Common Stock or PZE Common Stock shall thereafter cease to have
any rights with respect to such shares of DVN Common Stock or PZE Common Stock,
except that such Certificates shall thereafter evidence (x) the number of whole
shares of Newco Common Stock into which such shares are converted pursuant to
Section 4.2(a) and the right to receive any dividends or distributions with
respect thereto and (y), in the case of PZE Common Stock, the right to receive
cash for fractional shares of Newco Common Stock in accordance with Sections
4.3(b) and 4.3(e) upon the surrender of such Certificate, and (ii) the one share
of Special Voting Stock, par value $.10 per share ("DVN Special Voting Stock"),
of DVN shall be converted into one share of Special Voting Stock, par value $.10
per share, of Newco.
(c) Each share of Newco Common Stock issued and held in Newco's
treasury, and each share of Newco Common Stock owned by DVN or PZE or any other
wholly owned Subsidiary of DVN or PZE shall, at the Effective Time and by virtue
of the Merger, cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor, and no Newco Common Stock or other
consideration shall be delivered in exchange therefor.
(d) (i) At the Effective Time, all options (individually, a "PZE
Option" or a "DVN Option" and collectively, the "PZE Options" or the "DVN
Options") then outstanding under the stock option plans of DVN and PZE described
in the DVN Disclosure Letter (collectively, the "DVN Stock Option Plans") and
PZE Disclosure Letter (collectively, the "PZE Stock Option Plans"),
respectively, shall remain outstanding following the Effective Time and cease to
represent a right to acquire shares of DVN Common Stock and PZE Common Stock and
shall be converted automatically into options to purchase shares of Newco Common
Stock as provided in this Section 4.2(d). At the Effective Time, the DVN
Options and PZE Options shall, by virtue of the Merger and without any further
action on the part of DVN or PZE or the holder of any DVN Option or PZE Option,
be assumed by Newco in such manner that Newco (i) is a corporation "assuming a
stock option in a transaction to which section 424(a) applied" within the
meaning of section 424 of the Code or (ii) to the extent that section 424 of the
Code does not apply to any DVN Option or PZE Option, would be such a corporation
were section 424 of the Code applicable to such option. Each DVN Option and PZE
Option assumed by Newco shall be exercisable upon the same terms and conditions
as under the applicable DVN Stock Option Plan and PZE Stock Option Plan and the
applicable option agreement issued thereunder, except that (i) each DVN Option
and PZE Option shall be exercisable for that whole number of shares of Newco
Common Stock (rounded upward to the nearest whole share) into which the number
of shares of the DVN Common Stock or PZE
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Common Stock subject to such DVN Option or PZE Option immediately prior to the
Effective Time would be converted under Section 4.2(a), and (ii) the option
price per share of Newco Common Stock shall be an amount equal to the option
price per share of DVN Common Stock or PZE Common Stock subject to such DVN
Option or PZE Option, as the case may be, in effect immediately prior to the
Effective Time divided by the DVN Exchange Ratio for DVN Options and the PZE
Exchange Ratio for PZE Options, subject to adjustment as provided in Section 4.4
(the price per share, as so determined, being rounded upward to the nearest full
cent).
(ii) Newco shall take all corporate action necessary to reserve for
issuance a number of shares of Newco Common Stock equal to the number of shares
of Newco Common Stock issuable upon the exercise of the DVN Options and PZE
Options assumed by Newco pursuant to this Section 4.2(d). From and after the
date of this Agreement, except as provided in Section 7.1(f), no additional
options shall be granted by DVN or PZE or their Subsidiaries under the DVN Stock
Option Plans or PZE Stock Option Plans or otherwise. At the Effective Time or
as soon as practicable, but in no event more than three business days,
thereafter, Newco shall file with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-8 covering all shares of Newco Common
Stock to be issued upon exercise of DVN Options and PZE Options and shall cause
such registration statement to remain effective for as long as there are
outstanding any DVN Options or PZE Options.
(e) Newco shall take such action as may be necessary to provide for
(i) succession of Newco for DVN under the Support Agreement dated as of December
10, 1998 between DVN and Northstar Energy Company ("Northstar") and the Voting
and Exchange Trust Agreement dated as of December 10, 1998 between DVN and CIBC
Mellon Trust Company and (ii) the making of changes to, or in the rights of
holders of, exchangeable shares of Northstar economically equivalent to the
exchange of Newco Common Stock for DVN Common Stock in the Merger (it being
understood that such economic equivalence shall be based solely on the DVN
Exchange Ratio).
Section 4.3 Exchange of Certificates Representing DVN Stock and PZE
Stock.
(a) As of the Effective Time, Newco shall deposit, or shall cause to
be deposited, with Bankboston, N.A. or such other party reasonably satisfactory
to DVN and PZE (the "Exchange Agent"), for the benefit of the holders of shares
of DVN Common Stock and PZE Common Stock, for exchange in accordance with this
Article 4, certificates representing (i) the shares of Newco Common Stock (such
certificates for shares of Newco Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 4.2 in exchange for
outstanding shares of DVN Common Stock and PZE Common Stock and (ii) the shares
of Excess Stock (as defined in Section 4.3(e)) to be sold pursuant to Section
4.3(e) in lieu of issuing fractional shares of Newco Common Stock.
(b) Promptly after the Effective Time, Newco shall cause the Exchange
Agent to mail to each holder of record of one or more Certificates (other than
to holders of DVN Common Stock or PZE Common Stock that, pursuant to Section
4.2(c), are canceled without payment of any
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consideration therefor): (A) a letter of transmittal (the "Letter of
Transmittal") which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as DVN and PZE may reasonably specify and (B) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Newco Common Stock and cash in lieu of fractional shares.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such Letter of Transmittal, duly executed and completed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Newco Common Stock and (y) a check representing the amount of cash in
lieu of fractional shares, if any, and unpaid dividends and distributions, if
any, in respect of the Certificate surrendered pursuant to the provisions of
this Article 4, after giving effect to any required withholding tax, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of Certificates. In the event of a
transfer of ownership of DVN Common Stock or PZE Common Stock which is not
registered in the transfer records of DVN or PZE, a certificate representing the
proper number of shares of Newco Common Stock, together with a check for the
cash to be paid in lieu of fractional shares, shall be issued to such a
transferee if the Certificate representing such DVN Common Stock or PZE Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the Effective Time with
respect to Newco Common Stock with a record date after the Effective Time shall
be paid with respect to the shares represented by any Certificate until such
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of
Newco Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Newco Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Newco Common Stock, less
the amount of any withholding taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of DVN or PZE of the shares of DVN Common Stock or PZE
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to Newco, the presented
Certificates shall be canceled and exchanged for certificates for shares of
Newco Common Stock and cash in lieu of fractional shares, if any, deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Article 4.
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(e) No fraction of a share of Newco Common Stock will be issued, but
in lieu thereof each holder of PZE Common Stock otherwise entitled to receive a
fraction of a share of Newco Common Stock will be entitled to receive in
accordance with the provisions of this Section 4.3(e) from the Exchange Agent a
cash payment in lieu of such fraction of a share of Newco Common Stock
representing such holder's proportionate interest in the net proceeds from the
sale by the Exchange Agent on behalf of all such holders of the aggregate of the
fractions of shares of Newco Common Stock which would otherwise be issued (the
"Excess Stock"). The sale of the Excess Stock by the Exchange Agent shall be
executed on the principal national securities exchange on which Newco Common
Stock is trading immediately after the Effective Time (the "Principal Exchange")
through one or more member firms of the Principal Exchange and shall be executed
in round lots to the extent practicable. Until the net proceeds of such sale or
sales have been distributed to the holders of PZE Common Stock, the Exchange
Agent will hold such proceeds in trust for the holders of PZE Common Stock (the
"Common Stock Trust"). Newco shall pay all commissions, transfer taxes and
other out-of-pocket transactions costs, including the expenses and compensation,
of the Exchange Agent incurred in connection with such sale of the Excess Stock.
The Exchange Agent shall determine the portion of the Common Stock Trust to
which each holder of PZE Common Stock shall be entitled, if any, by multiplying
the amount of the aggregate net proceeds comprising the Common Stock Trust by a
fraction the numerator of which is the amount of the fractional Newco Common
Stock interest to which such holder of PZE Common Stock is entitled and the
denominator of which is the aggregate amount of fractional share interest to
which all holders of PZE Common Stock are entitled. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
PZE Common Stock in lieu of any fractional Newco Common Stock interests, the
Exchange Agent shall make available such amounts to such holders of PZE Common
Stock without interest.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Newco Common Stock) and the Common Stock
Trust that remains unclaimed by the former stockholders of the DVN or PZE one
year after the Effective Time shall be delivered to Newco. Any former
stockholders of DVN or PZE who have not theretofore complied with this Article 4
shall thereafter look only to Newco for payment of their shares of Newco Common
Stock, cash in lieu of fractional shares and unpaid dividends and distributions
on the Newco Common Stock deliverable in respect of each Certificate such former
stockholder holds as determined pursuant to this Agreement.
(g) None of Newco, the Exchange Agent or any other person shall be
liable to any former holder of shares of DVN Common Stock or PZE Common Stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) 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 required by Newco, the
posting by such person of a bond in such reasonable amount as Newco may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
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destroyed Certificate the shares of Newco Common Stock and cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Newco
Common Stock deliverable in respect thereof pursuant to this Agreement.
(i) Promptly after the Effective Time, Newco shall take all such steps
necessary to issue a new single global stock certificate registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"), representing
shares of Newco Preferred Stock into which shares of PZE Preferred Stock are
converted in the Merger, and to fully effect the conversion of PZE Preferred
Stock into Newco Preferred Stock in the DTC system for all purposes, including
with respect to payments of dividends and transfers of beneficial ownership.
Without limiting the foregoing, dividends declared or made after the Effective
Time with respect to PZE Preferred Stock or Newco Preferred Stock shall be paid
to Cede & Co., as nominee of DTC, for crediting to accounts of holders of Newco
Preferred Stock.
Section 4.4 Adjustment of Exchange Ratios. In the event that,
subsequent to the date of this Agreement but prior to the Effective Time, PZE
changes the number of shares of PZE Common Stock, or DVN changes the number of
shares of DVN Common Stock, issued and outstanding as a result of a stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, the DVN Exchange Ratio or the PZE Exchange Ratio, as the case may
be, and other items dependent thereon shall be appropriately adjusted.
Section 4.5 Rule 16b-3 Approval. Newco agrees that the Newco Board
of Directors or the Compensation Committee of the Newco Board of Directors shall
at or prior to the Effective Time adopt resolutions specifically approving, for
purposes of Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the receipt, pursuant to Section 4.2, of Newco
Common Stock and Newco stock options by officers and directors of the DVN and
PZE who will become officers or directors of the Newco subject to Section 16 of
the Exchange Act.
Section 4.6 Reservation of Right to Revise Transaction. The business
combination contemplated by this Agreement shall be effected by means of a
merger of DVN into a direct subsidiary of DVN incorporated in Delaware followed
immediately on the same date by a merger of PZE into the surviving corporation.
Notwithstanding the foregoing, if and to the extent that DVN and PZE determine
that it would be beneficial to the parties to effect the business combination by
means of (a) simultaneous merger or in seriatim mergers of DVN and PZE into a
direct subsidiary of DVN or PZE incorporated in Oklahoma or Delaware, or (b) a
share acquisition of DVN by a direct subsidiary of DVN or PZE incorporated in
Oklahoma or Delaware followed immediately on the same date by a merger of PZE
into the company that acquired DVN, then the Merger shall be effected in such
manner as so determined by DVN and PZE, provided, further, that no such change
shall (i) alter or change the amount or kind of consideration to holders of DVN
Common Stock or PZE Common Stock or DVN Options or PZE Options or PZE Preferred
Stock as provided in this Agreement, (ii) adversely affect the tax treatment to
holders of DVN Common Stock or PZE Common Stock as a result of such change,
(iii) reasonably be expected to materially impede or delay
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the consummation of the merger or (iv) constitute a waiver of any condition to
the merger provided in this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PZE
Except as set forth in the disclosure letter delivered to DVN
concurrently with the execution hereof (the "PZE Disclosure Letter") or as
disclosed with reasonable specificity in PZE Reports (as defined in
Section 5.7), PZE represents and warrants to DVN that:
Section 5.1 Existence; Good Standing; Corporate Authority. PZE is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. PZE 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,
individually or in the aggregate, a PZE Material Adverse Effect (as defined in
Section 10.9). PZE 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 PZE's certificate of incorporation and bylaws previously made
available to DVN are true and correct and contain all amendments as of the date
hereof.
Section 5.2 Authorization, Validity and Effect of Agreements. PZE
has the requisite corporate power and authority to execute and deliver this
Agreement, the Stock Option Agreements and all other agreements and documents
contemplated hereby. The consummation by PZE of the transactions contemplated
hereby and by the Stock Option Agreements has been duly authorized by all
requisite corporate action, other than, with respect to the Merger, the approval
and adoption of this Agreement by PZE's stockholders. This Agreement and the
Stock Option Agreements constitute the valid and legally binding obligations of
PZE, 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 PZE
consists of 100,000,000 shares of PZE Common Stock, 27,862,924 shares of
preference common stock, par value $0.83 1/3 per share, of PZE ("PZE Preference
Stock") and 9,747,720 shares of PZE Preferred Stock. As of May 18, 1999, there
were (a) 47,959,145 shares of PZE Common Stock issued and outstanding, (b)
4,796,374 shares of PZE Common Stock reserved for issuance under PZE Stock
Option Plans, (c) no shares of PZE Preference Stock issued and outstanding, (d)
1,500,000 shares of PZE Preferred Stock issued and outstanding and (e) 750,000
unissued shares of PZE Preferred Stock designated as Series A Junior
Participating Preferred Stock. All issued and outstanding shares of PZE Common
Stock and PZE Preferred Stock (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 PZE
and (iii) were issued in compliance with all
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applicable charter documents of PZE and all applicable federal and state
securities laws, rules and regulations. One right to purchase Series A Junior
Participating Preferred Stock of PZE (each, a "PZE Right") issued pursuant to a
Rights Agreement, dated as of October 28, 1994 (the "PZE Rights Agreement"), as
amended, between PZE and The Chase Manhattan Bank, is associated with and
attached to each outstanding share of PZE Common Stock. As of the date of this
Agreement, except as set forth in this Section 5.3 or in the Stock Option
Agreements and except for any shares of PZE Common Stock issued pursuant to
plans described in PZE 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
PZE or any of its Subsidiaries to issue, transfer or sell any shares of capital
stock or other voting securities of PZE or any of its Subsidiaries. PZE 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 PZE on any matter.
Section 5.4 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 Exchange Act. Each of PZE's Significant
Subsidiaries is a corporation 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, individually or in the aggregate, a
PZE Material Adverse Effect. All of the outstanding shares of capital stock of,
or other ownership interests in, each of PZE's Significant Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by PZE free and clear of all liens, pledges, security interests,
claims, preferential purchase rights or other rights, interests or encumbrances
("Liens"). Schedule 5.4 to PZE Disclosure Letter sets forth for each Significant
Subsidiary of PZE, its name and jurisdiction of incorporation or organization.
Section 5.5 No Violation. Neither PZE 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 PZE 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, individually or in the aggregate, a PZE Material Adverse Effect. PZE
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 "PZE Permits"), except where
the failure so to hold would not have, individually or in the aggregate, a PZE
Material
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Adverse Effect. PZE and its Subsidiaries are in compliance with the terms of PZE
Permits, except where the failure so to comply would not have, individually or
in the aggregate, a PZE Material Adverse Effect. No investigation by any
governmental authority with respect to PZE or any of its Subsidiaries is pending
or, to the knowledge of PZE, threatened, other than those the outcome of which
would not have, individually or in the aggregate, a PZE Material Adverse Effect.
Section 5.6 No Conflict.
(a) Neither the execution and delivery by PZE of this Agreement or the
Stock Option Agreements nor the consummation by PZE of the transactions
contemplated hereby or thereby in accordance with the terms hereof or thereof
will: (i) conflict with or result in a breach of any provisions of the articles
of incorporation or bylaws of PZE; (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 PZE or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to PZE 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
PZE or any of its Subsidiaries is a party, or by which PZE 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
PZE or any of its Subsidiaries, except, in the case of matters described in
clause (ii) or (iii), as would not have, individually or in the aggregate, a PZE
Material Adverse Effect.
(b) Neither the execution and delivery by PZE of this Agreement or the
Stock Option Agreements nor the consummation by PZE of the transactions
contemplated hereby or thereby 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 1 and (ii) filings required under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ 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"), and listing on the New York Stock
Exchange ("NYSE") of PZE Common Stock to be issued upon exercise of the option
granted to DVN pursuant to the applicable Stock Option Agreement, 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 or
materially delay the consummation of the Merger or otherwise prevent PZE from
performing its obligations under this Agreement and would not have, individually
or in the aggregate, a PZE 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
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contemplated hereby to provide for the continuation in full force and effect of
all of PZE's material contracts or leases or for PZE to consummate the
transactions contemplated hereby, except when the failure to receive such
consents or other certificates would not have, individually or in the aggregate,
a PZE Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (a) result in any
payment from PZE or its Subsidiaries (including severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee or independent contractor of PZE or any of its Subsidiaries
under any PZE Plan (as defined in Section 5.11) or otherwise; (b) materially
increase any benefits otherwise payable under any PZE Plan or otherwise; or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
Section 5.7 SEC Documents. PZE has made available to DVN each
registration statement, report, proxy statement or information statement (other
than preliminary materials) filed by PZE with the SEC since January 1, 1998,
each in the form (including exhibits and any amendments thereto) filed with the
SEC prior to the date hereof (collectively, the "PZE Reports"), and PZE 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, PZE Reports (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder and
complied in all material respects 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
PZE Reports (including the related notes and schedules) fairly presents in all
material respects the consolidated financial position of PZE and its
Subsidiaries as of its date and each of the consolidated statements of income,
comprehensive income, cash flows and stockholders' equity included in or
incorporated by reference into PZE Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations,
cash flows or changes in stockholders' equity, as the case may be, of PZE 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. Since December 31, 1998, neither PZE nor any of its Subsidiaries had
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), other than liabilities or obligations disclosed in PZE
Reports or which would not have, individually or in the aggregate, a PZE
Material Adverse Effect.
Section 5.8 Litigation. There are no actions, suits or proceedings
pending against PZE or any of its Subsidiaries or, to PZE's knowledge,
threatened against PZE or any of its Subsidiaries, at law or in equity, or
before or by any federal, state or foreign commission, board,
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bureau, agency or instrumentality, that are likely to have, individually or in
the aggregate, a PZE Material Adverse Effect. There are no outstanding
judgments, decrees, injunctions, awards or orders against PZE or any of its
Subsidiaries that are likely to have, individually or in the aggregate, a PZE
Material Adverse Effect.
Section 5.9 Absence of Certain Changes. Since December 31, 1998,
there has not been (i) an event that would have a PZE Material Adverse Effect;
(ii) any material change by PZE or any of its Subsidiaries, when taken as a
whole, in any of its accounting methods, principles or practices or any of its
tax methods, practices or elections; (iii) any material damage, destruction, or
loss to the business or properties of PZE and its Subsidiaries, taken as a
whole, not covered by insurance; (iv) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of PZE, or
any direct or indirect redemption, purchase or any other acquisition by PZE of
any such stock (except for, and provided that PZE may continue to pay, dividends
upon the shares of PZE Common Stock and PZE Preferred Stock at a rate not
greater than $0.0625 per share and $1.6225 per share, respectively, in any
quarter); (v) any change in the capital stock or in the number of shares or
classes of PZE's authorized or outstanding capital stock (other than as a result
of exercises of options to purchase PZE Common Stock 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 other event or condition known to
PZE particularly pertaining to and adversely affecting the operations, assets or
business of PZE or any of its Subsidiaries (other than events or conditions
which are of a general or industry-wide nature and of general public knowledge)
which would constitute, individually or in the aggregate, a PZE Material Adverse
Effect.
Section 5.10 Taxes.
(a) Each of PZE, its Subsidiaries and each affiliated, consolidated,
combined, unitary or similar group of which any such corporation is or 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, individually or in the aggregate, a PZE 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 PZE or a Subsidiary of PZE 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, individually or in the aggregate, a PZE Material Adverse Effect.
(b) (i) The federal income tax returns of PZE 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
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to the extent being contested in good faith, all material deficiencies asserted
as a result of such examinations and any other examinations of PZE and its
Subsidiaries by any taxing authority have been paid fully, settled or adequately
provided for in the financial statements contained in PZE Reports; (iii) as of
the date hereof, neither PZE 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 PZE or any of its Subsidiaries; (iv) neither PZE 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, individually or in the aggregate, a PZE Material
Adverse Effect; (v) there are no tax liens on any assets of PZE or its
Subsidiaries except for taxes not yet currently due and those which could not
reasonably be expected, individually or in the aggregate, to result in a PZE
Material Adverse Effect; and (vi) neither PZE 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 5.11 Employee Benefit Plans. For purposes of this Section
5.11, PZE Subsidiaries shall include any enterprise which, with PZE, 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 benefits plans, programs,
arrangements and agreements covering active, former or retired employees of PZE
and PZE Subsidiaries which provide material benefits to such employees are
listed in PZE Disclosure Letter (the "PZE Plans"). PZE has made available to
DVN true, complete and correct copies of each PZE Plan, any related trust
agreement, annuity or insurance contract or other funding vehicle, and: (a) each
PZE Plan has been maintained and administered in material 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 PZE 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, PZE Plans
comply, in all material 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 PZE Plan intended to be
qualified
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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 PZE Plan is covered by Title IV of ERISA or Section 412
of the Code; (f) there are no pending or anticipated material claims against or
otherwise involving any of PZE Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of PZE Plan
activities) has been brought against or with respect to any PZE Plan; (g) all
material contributions, reserves or premium payments, required to be made as of
the date hereof to PZE Plans have been made or provided for; (h) neither PZE nor
any PZE 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 PZE, any PZE Subsidiary or any entity which is considered one
employer with PZE under Section 4001 of ERISA; (i) neither PZE nor any PZE
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 PZE nor any
PZE Subsidiary has any material obligations for retiree health and life benefits
under any PZE Plan.
Section 5.12 Labor Matters.
(a) Neither PZE 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 PZE 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 which would have,
individually or in the aggregate, a PZE Material Adverse Effect.
(c) To PZE'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 PZE or any of its Subsidiaries except for
those the formation of which would not have, individually or in the aggregate, a
PZE Material Adverse Effect.
Section 5.13 Environmental Matters. Except as would not have,
individually or in the aggregate, a PZE Material Adverse Effect:
(a) there are not any present or, to the knowledge of PZE, past
conditions or circumstances that interfere with the conduct of the business of
PZE 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) there are not any present or, to the knowledge of PZE, past
conditions or circumstances at, or arising out of, any current or, to the
knowledge of PZE, former businesses, assets or properties of PZE or any
Subsidiary of PZE, including but not limited to on-site or off-site
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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) neither PZE nor any of its Subsidiaries has (i) received any
written notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law, (ii) received any written 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) PZE 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) PZE 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 PZE's or its Subsidiaries' assets for their current purposes and
uses.
Section 5.14 Intellectual Property. PZE and its Subsidiaries own or
possess adequate 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 material Liens, except where the failure to own or
possess such licenses and other rights would not have, individually or in the
aggregate, a PZE Material Adverse Effect, and there are no assertions or claims
challenging the validity of any of the foregoing which are likely to have,
individually or in the aggregate, a PZE Material Adverse Effect. Except in the
ordinary course of business, neither PZE nor any of its Subsidiaries has granted
to any other person any license to use any of the foregoing. The conduct of
PZE'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 any way likely
to have, individually or in the aggregate, a PZE Material Adverse Effect. There
is no material infringement of any proprietary right owned by or licensed by or
to PZE or any of its Subsidiaries which is likely to have, individually or in
the aggregate, a PZE Material Adverse Effect. PZE has initiated a review of the
implications of the Year 2000 on its business and processes, including an
evaluation of key operating and information systems, field operations and third
parties and confirms the public disclosure provided by it in respect thereof.
Section 5.15 Title to Properties. Except for goods and other
property sold, used or otherwise disposed of since December 31, 1998 in the
ordinary course of business for fair value, PZE has defensible title for oil and
gas purposes to all its properties, interests in properties and
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assets, real and personal, reflected in its December 31, 1998 financial
statements, free and clear of any Lien, except: (a) Liens reflected in the
balance sheet of PZE as of December 31, 1998; (b) Liens for current taxes not
yet due and payable and (c) such imperfections of title, easements and Liens as
would not have, individually or in the aggregate, a PZE Material Adverse Effect.
All leases and other agreements pursuant to which PZE 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 PZE or any of its Subsidiaries which, individually or in the aggregate, would
have a PZE Material Adverse Effect and in respect to which PZE or any of its
Subsidiaries has not taken adequate steps to prevent a default from occurring.
All major items of operating equipment of PZE and its Subsidiaries are in good
operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted. Without limiting the generality of the
foregoing, PZE's interest in production of hydrocarbons from each well, unit or
property described in the report of ▇▇▇▇▇ ▇▇▇▇▇ PZE Petroleum Engineers dated
February 19, 1999 and delivered to DVN (after deducting all applicable
royalties, overriding royalties and other payments out of production) is not
materially less than the interest shown under the heading "Net Revenue Interest"
for such well, unit on property, and PZE's share of exploration, development and
operation costs for each such well, unit or property is not materially greater
than the percentage shown under the heading "Working Interest" for such well,
unit or property. PZE 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 has not taken or
received any hydrocarbons under any gas balancing or similar arrangements that
permit any person to receive any portion of PZE's interest in such hydrocarbons.
Section 5.16 Insurance. PZE and its Subsidiaries maintain insurance
coverage reasonably adequate for the operation of their respective businesses
(taking into account the cost and availability of such insurance).
Section 5.17 No Brokers. PZE has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Newco, PZE or DVN 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,
except that PZE has retained ▇. ▇. ▇▇▇▇▇▇ Securities Inc. as its financial
advisor, the arrangements with which have been disclosed in writing to DVN prior
to the date hereof.
Section 5.18 Opinion of Financial Advisor. The Board of Directors
of PZE has received the opinion of ▇. ▇. ▇▇▇▇▇▇ Securities Inc. to the effect
that, as of the date of this Agreement, the consideration to be received by PZE
stockholders in the Merger is fair, from a financial point of view, to such
stockholders; it being understood and acknowledged by DVN that such opinion has
been rendered for the benefit of the Board of Directors of PZE, and is not
intended to, and may not, be relied upon by DVN, its affiliates or their
respective Subsidiaries.
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Section 5.19 DVN Stock Ownership. Neither PZE nor any of its
Subsidiaries owns any shares of capital stock of DVN or any other securities
convertible into or otherwise exercisable to acquire capital stock of DVN.
Section 5.20 Reorganization. Neither PZE nor any of its Subsidiaries
has taken or failed to take any action, as a result of which the Merger would
not qualify as a reorganization within the meaning of Section 368(a) of the
Code.
Section 5.21 Vote Required. The affirmative vote of holders of a
majority of the outstanding shares of PZE Common Stock required by the DGCL is
the only vote necessary to approve this Agreement and the transactions
contemplated hereby.
Section 5.22 PZE Rights Agreement. PZE has taken all required action
under PZE Rights Agreement so that none of the execution and delivery of this
Agreement or the Stock Option Agreements, the conversion of shares of PZE Common
Stock into Newco Common Stock in accordance with Article 4 of this Agreement,
the issuance of shares of PZE Common Stock upon exercise of the option granted
to DVN pursuant to the applicable Stock Option Agreement, and the consummation
of the Merger or any other transaction contemplated hereby or by the Stock
Option Agreement, will cause (i) PZE Rights to become exercisable under PZE
Rights Agreement, (ii) Newco or DVN or any of their Subsidiaries to be deemed an
"Acquiring Person" (as defined in PZE Rights Agreement), (iii) any such event to
be an event described in Section 11(a)(ii) or 13 of PZE Rights Agreement or (iv)
the "Stock Acquisition Date" or the "Distribution Date" (each as defined in PZE
Rights Agreement) to occur upon any such event, and so that PZE Rights will
expire immediately prior to the Effective Time. PZE has delivered to DVN a true
and complete copy of PZE Rights Agreement, as amended to date.
Section 5.23 Certain Approvals. PZE's Board of Directors has taken
any and all necessary and appropriate action to render inapplicable to the
Merger and the transactions contemplated by this Agreement and the Stock Option
Agreements the provisions of Section 203 of the DGCL.
Section 5.24 Certain Contracts. Neither PZE 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 PZE and its Subsidiaries, taken
as a whole, or the DVN 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 each case for any such
agreements or obligations which would not have, individually or in the
aggregate, a PZE Material Adverse Effect.
-19-
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DVN
AND NEWCO
Except as set forth in the disclosure letter delivered to PZE
concurrently with the execution hereof (the "DVN Disclosure Letter") or as
disclosed with reasonable specificity in the DVN Reports (as defined in Section
6.7), DVN and Newco, jointly and severally, represent and warrant to PZE that:
Section 6.1 Existence; Good Standing; Corporate Authority. DVN and
Newco are corporations duly incorporated, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation. DVN 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, individually or in the aggregate, a DVN Material Adverse Effect (as
defined in Section 10.9). DVN 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 DVN's certificate of incorporation and bylaws
previously made available to PZE are true and correct and contain all amendments
as of the date hereof.
Section 6.2 Authorization, Validity and Effect of Agreements. Each
of DVN and Newco has the requisite corporate power and authority to execute and
deliver this Agreement, the Stock Option Agreements and all other agreements and
documents contemplated hereby to which it is a party. The consummation by each
of DVN and Newco of the transactions contemplated hereby including the issuance
and delivery by Newco of shares of Newco Common Stock pursuant to the Merger,
and the consummation by DVN of the transactions contemplated by the Stock Option
Agreements, has been duly authorized by all requisite corporate action, other
than, with respect to the Merger, approval and adoption of this Agreement by
DVN's stockholders. This Agreement and the Stock Option Agreements constitute
the valid and legally binding obligations of each of DVN and Newco 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 6.3 Capitalization. The authorized capital stock of DVN
consists of 400,000,000 shares of DVN Common Stock, one share of DVN Special
Voting Stock and 3,000,000 shares of preferred stock, par value $1.00 per share,
of DVN ("DVN Preferred Stock"). As of April 30, 1999, there were (a) 43,148,097
shares of DVN Common Stock issued and outstanding, (b) one share of DVN Special
Voting Stock issued and outstanding, (c) 4,949,708 shares of DVN Common Stock
reserved for issuance under DVN Stock Option Plans, (d) 5,495,401 shares
reserved for issuance upon exchange of outstanding exchangeable shares
("Northstar Exchangeable Shares") issued by Northstar, (e) 4,901,504 shares of
DVN Common Stock reserved for issuance upon conversion of outstanding trust
convertible preferred securities issued by DVN's wholly owned
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affiliate, Devon Financing Trust, (f) no shares of DVN Preferred Stock issued
and outstanding and (g) 300,000 unissued shares of DVN Preferred Stock
designated as Series A Junior Participating Preferred Stock. All issued and
outstanding shares of DVN Common Stock (i) are duly authorized, validly issued,
fully paid, nonassessable and, except as set forth in the DVN Disclosure Letter,
free of preemptive rights, (ii) were not issued in violation of the terms of any
agreement or other understanding binding upon DVN and (iii) were issued in
compliance with all applicable charter documents of DVN and all applicable
federal and state securities laws, rules and regulations. One right to purchase
Series A Junior Participating Preferred Stock of DVN (each, a "DVN Right")
issued pursuant to a Rights Agreement, dated as of April 17, 1995 (the "DVN
Rights Agreement"), as amended, between DVN and The First National Bank of
Boston, is associated with and attached to each outstanding share of DVN Common
Stock. The shares of Newco 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 6.3 or in the Stock Option Agreements and except for any
shares of DVN Common Stock issued pursuant to the plans described in the DVN
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 DVN or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock or other voting
securities of DVN or any of its Subsidiaries. DVN 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 DVN on any matter.
Section 6.4 Significant Subsidiaries.
(a) Each of DVN's Significant Subsidiaries is a corporation 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,
individually or in the aggregate, a DVN Material Adverse Effect. All of the
outstanding shares of capital stock of, or other ownership interests in, each of
the DVN's Significant Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by the DVN free
and clear of all Liens. Schedule 6.4 to the DVN Disclosure Letter sets forth
for each Significant Subsidiary of DVN its name and jurisdiction of
incorporation or organization.
(b) All of the outstanding shares of capital stock of Newco are owned
directly by DVN. Newco 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.
-21-
Section 6.5 No Violation. Neither DVN 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 DVN 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, individually or in the aggregate, a DVN Material Adverse Effect. DVN
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 "DVN Permits"), except where
the failure so to hold would not have, individually or in the aggregate, a DVN
Material Adverse Effect. DVN and its Subsidiaries are in compliance with the
terms of the DVN Permits, except where the failure so to comply would not have,
individually or in the aggregate, a DVN Material Adverse Effect. No
investigation by any governmental authority with respect to DVN or any of its
Subsidiaries is pending or, to the knowledge of DVN, threatened, other than
those the outcome of which would not have, individually or in the aggregate, a
DVN Material Adverse Effect.
Section 6.6 No Conflict.
(a) Neither the execution and delivery by DVN and Newco of this
Agreement, the execution and delivery by DVN of the Stock Option Agreements nor
the consummation by DVN and Newco of the transactions contemplated hereby or
thereby in accordance with the terms hereof or thereof will: (i) conflict with
or result in a breach of any provisions of the charter documents or bylaws of
DVN or Newco; (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 DVN and its Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, or otherwise result in a detriment to DVN 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 DVN or any
of its Subsidiaries is a party, or by which DVN 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 DVN or any of its
Subsidiaries, except, in the case of matters described in clause (ii) or (iii),
as would not have, individually or in the aggregate, a DVN Material Adverse
Effect.
(b) Neither the execution and delivery by DVN or Newco of this
Agreement, the execution and delivery by DVN of the Stock Option Agreements nor
the consummation by DVN or Newco of the transactions contemplated hereby or
thereby in accordance with the terms hereof or thereof will require any consent,
approval or authorization of, or filing or registration with, any
-22-
governmental or regulatory authority, other than Regulatory Filings, and listing
of the Newco Common Stock to be issued in the Merger on the Principal Exchange
and the listing on the DVN Common Stock upon exercise of the option granted to
PZE pursuant to the applicable Stock Option Agreement under the rules of the
American Stock Exchange ("AMEX"), 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 or materially delay the
consummation of the Merger or otherwise prevent DVN from performing its
obligations under this Agreement and would not have, individually or in the
aggregate, a DVN Material Adverse Effect.
(c) Other than as contemplated by Section 6.6(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 DVN's material contracts or
leases or for DVN to consummate the transactions contemplated hereby, except
when the failure to receive such consents or other certificates would not have,
individually or in the aggregate, a DVN Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (a) result in any
payment from DVN or its Subsidiaries (including severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee or independent contractor of DVN or any of its Subsidiaries
under any DVN Plan (as defined in Section 6.11) or otherwise; (b) materially
increase any benefits otherwise payable under any DVN Plan or otherwise; or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
Section 6.7 SEC Documents. DVN has made available to PZE each
registration statement, report, proxy statement or information statement (other
than preliminary materials) filed by DVN with the SEC since January 1, 1998,
each in the form (including exhibits and any amendments thereto) filed with the
SEC prior to the date hereof (collectively, the "DVN Reports"), and DVN 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 DVN Reports (i) were prepared in
all material respects in accordance with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder and
complied in all material respects 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 DVN Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of DVN and its
Subsidiaries as of its date and each of the consolidated statements of
operations, cash flows and shareholders' equity included in or incorporated by
reference into the DVN Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, cash flows
or changes in stockholders' equity, as the case may be, of DVN and its
Subsidiaries for the
-23-
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. Since December 31,
1998, neither DVN nor any of its Subsidiaries had any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise), other than
liabilities or obligations disclosed in the DVN Reports or which would not have,
individually or in the aggregate, a DVN Material Adverse Effect.
Section 6.8 Litigation. There are no actions, suits or proceedings
pending against DVN or any of its Subsidiaries or, to DVN's knowledge,
threatened against DVN 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, that are likely to have, individually or in the aggregate, a
DVN Material Adverse Effect. There are no outstanding judgments, decrees,
injunctions, awards or orders against DVN or any of its Subsidiaries that are
likely to have, individually or in the aggregate, a DVN Material Adverse Effect.
Section 6.9 Absence of Certain Changes. Since December 31, 1998,
there has not been (i) an event that would have a DVN Material Adverse Effect;
(ii) any material change by DVN or any of its Subsidiaries, when taken as a
whole, in any of its accounting methods, principles or practices or any of its
tax methods, practices or elections; (iii) any material damage, destruction, or
loss to the business or properties of DVN and its Subsidiaries, taken as a
whole, not covered by insurance; (iv) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of DVN, or
any direct or indirect redemption, purchase or any other acquisition by DVN of
any such stock (except for, and provided that DVN may continue to pay or cause
to be paid, dividends upon the shares of DVN Common Stock and the Northstar
Exchangeable Shares at a rate not greater than $.05 per share in any quarter);
(v) any change in the capital stock or in the number of shares or classes of
DVN's authorized or outstanding capital stock (other than as a result of
exercises of options to purchase DVN Common Stock 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 other event or condition known to
DVN particularly pertaining to and adversely affecting the operations, assets or
business of DVN or any of its Subsidiaries (other than events or conditions
which are of a general or industry-wide nature and of general public knowledge)
which would constitute, individually or in the aggregate, a DVN Material Adverse
Effect.
Section 6.10 Taxes.
(a) Each of DVN, its Subsidiaries and each affiliated, consolidated,
combined, unitary or similar group of which any such corporation is or 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 Returns required to be
filed by or with respect to it, except to the extent that any failure to file
would not have, individually or in
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the aggregate, a DVN 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 DVN or a
Subsidiary of DVN 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,
individually or in the aggregate, a DVN Material Adverse Effect.
(b) (i) The federal income tax returns of DVN and each of its
Subsidiaries have been examined by 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 DVN and its Subsidiaries by any taxing authority have
been paid fully, settled or adequately provided for in the financial statements
contained in the DVN Reports; (iii) as of the date hereof, neither DVN 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 DVN or any of its Subsidiaries; (iv)
neither DVN 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, individually or in the
aggregate, a DVN Material Adverse Effect; (v) there are no tax liens on any
assets of DVN or its Subsidiaries except for taxes not yet currently due and
those which could not reasonably be expected, individually or in the aggregate,
to result in a DVN Material Adverse Effect; and (vi) neither DVN 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.
Section 6.11 Employee Benefit Plans. For purposes of this Section
6.11, DVN Subsidiaries shall include any enterprise which, with DVN, 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 benefits plans, programs,
arrangements and agreements covering active, former or retired employees of DVN
and DVN Subsidiaries which provide material benefits to such employees are
listed in the DVN Disclosure Letter (the "DVN Plans"). DVN has made available to
PZE true, complete and correct copies of each DVN Plan, any related trust
agreement, annuity or insurance contract or other funding vehicle, and: (a) each
DVN Plan has been maintained and administered in material 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 DVN 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,
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registration or approval; (d) to the extent applicable, the DVN Plans comply, in
all material respects, with the requirements of ERISA, the Code and any other
applicable tax act and other laws, and any DVN 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 DVN Plan is covered by Title IV of ERISA or Section 412
of the Code; (f) there are no pending or anticipated material claims against or
otherwise involving any of the DVN Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of DVN Plan
activities) has been brought against or with respect to any DVN Plan; (g) all
material contributions, reserves or premium payments, required to be made as of
the date hereof to the DVN Plans have been made or provided for; (h) neither DVN
nor any DVN 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 DVN, any DVN Subsidiary or any entity which is considered one
employer with DVN under Section 4001 of ERISA; (i) neither DVN nor any DVN
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 DVN nor any
DVN Subsidiary has any material obligations for retiree health and life benefits
under any DVN Plan.
Section 6.12 Labor Matters.
(a) Neither DVN 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 DVN 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 which would have,
individually or in the aggregate, a DVN Material Adverse Effect.
(c) To DVN'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 DVN or any of its Subsidiaries, except for
those the formation of which would not have, individually or in the aggregate, a
DVN Material Adverse Effect.
Section 6.13 Environmental Matters. Except as would not have,
individually or in the aggregate, a DVN Material Adverse Effect:
(a) there are not any present or, to the knowledge of DVN, past
conditions or circumstances that interfere with the conduct of the business of
DVN 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 Environmental Law;
-26-
(b) there are not any present or, to the knowledge of DVN, past
conditions or circumstances at, or arising out of, any current or, to the
knowledge of DVN, former businesses, assets or properties of DVN or any
Subsidiary of DVN, 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) neither DVN nor any of its Subsidiaries has (i) received any
written notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law, (ii) received any written 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) DVN 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) DVN 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 DVN's or its Subsidiaries' assets for their current purposes and
uses.
Section 6.14 Intellectual Property. DVN and its Subsidiaries own
or possess adequate 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 material Liens, except where the failure to own or
possess such licenses and other rights would not have, individually or in the
aggregate, a DVN Material Adverse Effect, and there are no assertions or claims
challenging the validity of any of the foregoing which are likely to have,
individually or in the aggregate, a DVN Material Adverse Effect. Except in the
ordinary course of business, neither DVN nor any of its Subsidiaries has granted
to any other person any license to use any of the foregoing. The conduct of
DVN'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 any way likely
to have, individually or in the aggregate, a DVN Material Adverse Effect. There
is no material infringement of any proprietary right owned by or licensed by or
to DVN or any of its Subsidiaries which is likely to have, individually or in
the aggregate, a DVN Material Adverse Effect. DVN has initiated a review of the
implications of the Year 2000 on its business and processes, including an
evaluation of key operating and information systems, field operations and third
parties and confirms the public disclosure provided by it in respect thereof.
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Section 6.15 Title to Properties. Except for goods and other
property sold, used or otherwise disposed of since December 31, 1998 in the
ordinary course of business for fair value, DVN 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, 1998 financial statements, free and
clear of any Lien, except: (a) Liens reflected in the balance sheet of DVN as of
December 31, 1998; (b) Liens for current taxes not yet due and payable and (c)
such imperfections of title, easements and Liens as would not have, individually
or in the aggregate, a DVN Material Adverse Effect. All leases and other
agreements pursuant to which DVN 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 DVN or any of
its Subsidiaries which, individually or in the aggregate, would have a DVN
Material Adverse Effect and in respect to which DVN or any of its Subsidiaries
has not taken adequate steps to prevent a default from occurring. All major
items of operating equipment of DVN and its Subsidiaries are in good operating
condition and in a state of reasonable maintenance and repair, ordinary wear and
tear excepted. Without limiting the generality of the foregoing, DVN's interest
in production of hydrocarbons from each well, unit or property described in the
reports of (i) ▇▇▇▇▇▇▇ Petroleum Consultants, Ltd. dated January 25, 1999, (ii)
Paddock ▇▇▇▇▇▇▇▇▇ & Associates, Ltd. dated January 13, 1999, (iii) AMH Group
Ltd. dated January 18, 1999 and (iv) DVN dated February 8, 1999 and delivered to
PZE (after deducting all applicable royalties, overriding royalties and other
payments out of production) is not materially less than the interest shown under
the heading "Net Revenue Interest" for such well, unit on property, and DVN's
share of exploration, development and operation costs for each such well, unit
or property is not materially greater than the percentage shown under the
heading "Working Interest" for such well, unit or property. DVN 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 has not taken or received any hydrocarbons under any gas balancing
or similar arrangements that permit any person to receive any portion of DVN's
interest in such hydrocarbons.
Section 6.16 Insurance. DVN and its Subsidiaries maintain insurance
coverage reasonably adequate for the operation of their respective businesses
(taking into account the cost and availability of such insurance).
Section 6.17 No Brokers. DVN has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Newco, PZE or DVN 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,
except that DVN has retained PaineWebber Incorporated as its financial advisor,
the arrangements with which have been disclosed in writing to PZE prior to the
date hereof.
Section 6.18 Opinion of Financial Advisor. The Board of Directors of
DVN has received the opinion of PaineWebber Incorporated to the effect that, as
of the date of this Agreement, the DVN Exchange Ratio is fair, from a financial
point of view, to the holders of DVN Common
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Stock; it being understood and acknowledged by PZE that such opinion has been
rendered for the benefit of the Board of Directors of DVN, and is not intended
to, and may not, be relied upon by PZE, its affiliates or their respective
Subsidiaries.
Section 6.19 PZE Stock Ownership. Neither DVN nor any of its
Subsidiaries owns any shares of capital stock of PZE or any other securities
convertible into or otherwise exercisable to acquire capital stock of PZE.
Section 6.20 Reorganization. Neither DVN nor any of its Subsidiaries
has taken or failed to take any action, as a result of which the Merger would
not qualify as a reorganization within the meaning of Section 368(a) of the
Code.
Section 6.21 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of DVN Common Stock and the outstanding
Northstar Exchangeable Shares, voting as a single class with the DVN Special
Voting Share voting for the Northstar Exchangeable Shares as provided in DVN's
charter, is the only vote of the holders of any class or series of DVN capital
stock necessary to approve this Agreement and the transactions contemplated
hereby.
Section 6.22 DVN Rights Agreement. DVN has taken all required action
under the DVN Rights Agreement so that none of the execution and delivery of
this Agreement or the Stock Option Agreements, the conversion of shares of DVN
Common Stock into Newco Common Stock in accordance with Article 4 of this
Agreement, the issuance of shares of DVN Common Stock upon exercise of the
option granted to PZE pursuant to the applicable Stock Option Agreement, and the
consummation of the Merger or any other transaction contemplated hereby or by
the Stock Option Agreement, will cause (i) the DVN Rights to become exercisable
under the DVN Rights Agreement, (ii) Newco or PZE or any of their Subsidiaries
to be deemed an "Acquiring Person" (as defined in the DVN Rights Agreement),
(iii) any such event to be an event described in Section 11(a)(ii) or 13 of the
DVN Rights Agreement or (iv) the "Stock Acquisition Date" or the "Distribution
Date" (each as defined in the DVN Rights Agreement) to occur upon any such
event, and so that the DVN Rights will expire immediately prior to the Effective
Time. DVN has delivered to PZE a true and complete copy of the DVN Rights
Agreement, as amended to date.
Section 6.23 Certain Approvals. Section 1090.3 of the OGCA is
inapplicable to the Merger and the transactions contemplated by this Agreement
and the Stock Option Agreements.
Section 6.24 Certain Contracts. Neither DVN 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 DVN and its Subsidiaries, taken
as a whole, or PZE 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 each case for any such
agreements or obligations which would not have, individually or in the
aggregate, a DVN Material Adverse Effect.
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ARTICLE 7
COVENANTS
Section 7.1 Conduct of Businesses. Prior to the Effective Time,
except as set forth in the DVN Disclosure Letter or PZE Disclosure Letter or as
expressly contemplated by any other provision of this Agreement or the Stock
Option Agreements, unless DVN or PZE, respectively, has consented in writing
thereto, each of PZE and DVN:
(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 commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially 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 certificate of incorporation or bylaws;
(d) shall promptly notify the other of any material change in its
condition (financial or otherwise) 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 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, or referred to in clause (ii) below and disclosed pursuant to this
Agreement or in connection with transactions permitted by Section 7.1(i), 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 (x) the grant of options to
new employees consistent with past practice in an amount not to exceed 100,000
shares of PZE Common Stock, in the case of PZE, and 100,000 shares of DVN Common
Stock, in the case of DVN or pursuant to contractual commitments existing on the
date of this Agreement; (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
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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 (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock or
(ii) redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of any of its Subsidiaries, or make any commitment for any such
action, except for, and provided that PZE may continue to pay, dividends upon
the shares of PZE Common Stock and PZE Preferred Stock at a rate not greater
than $0.0625 per share and $1.6225 per share, respectively, in any quarter, and
that DVN may continue to pay or cause to be paid, dividends upon the shares of
DVN Common Stock and the Northstar Exchangeable Shares at a rate not greater
than $.05 per share in any quarter;
(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 PZE or DVN, as the case may be, 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 DVN Disclosure Letter or PZE Disclosure Letter, as the case may be,
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 or otherwise acquire or agree to
acquire any assets or securities in each case (i) for an aggregate consideration
for all such acquisitions in excess of $3 million (excluding acquisitions
approved in writing by DVN and PZE) and (ii) where a filing under the HSR Act is
required, except where DVN and PZE have agreed in writing that such action is
not likely to (x) have a material adverse effect on the ability of the parties
to consummate the transactions contemplated by this Agreement or (y) delay
materially the Effective Time;
(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
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, (i)
make or rescind any material express or deemed election relating to taxes unless
it is reasonably expected that such action will not, individually or in the
aggregate, materially and adversely affect DVN or PZE, 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 material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, except where such settlement or compromise will not,
individually
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or in the aggregate, materially and adversely affect DVN or PZE or (iii) change
in any material 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 or except for such changes that are
reasonably expected not to, individually or in the aggregate, materially and
adversely affect DVN or PZE;
(m) shall not, nor shall it permit any of its Subsidiaries to, (i)
incur any indebtedness for borrowed money (except (x) under existing credit
lines, (y) refinancings of existing debt and (z) other immaterial borrowings
that, in the case of (x), (y) or (z), permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) 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 DVN or PZE or any of their Subsidiaries in connection with
any indebtedness thereof, or (iii) make or commit to make aggregate capital
expenditures in excess of $3 million over the fiscal 1999 capital expenditures
budget disclosed in reasonable detail on the DVN Disclosure Letter or PZE
Disclosure Letter, as the case may be;
(n) shall not purchase any shares of DVN Common Stock or PZE Common
Stock;
(o) shall not, nor shall it permit any of its Subsidiaries to, agree
in writing or otherwise to take any of the foregoing actions;
(p) subject to Section 7.5, 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;
(q) 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;
(r) shall not enter into or amend any agreement with any holder of
shares of DVN Common Stock or PZE Common Stock with respect to holding, voting
or disposing of shares; and
(s) shall not by resolution of its Board of Directors cause the
acceleration of rights, benefits or payments under any PZE Plans or DVN Plans.
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Section 7.2 No Solicitation by PZE.
(a) PZE agrees that (i) neither it nor any of its Subsidiaries shall,
and shall not knowingly permit any of its officers, directors, employees, agents
or representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to, solicit,
initiate or knowingly encourage (including by way of furnishing material non-
public information) any inquiry, proposal or offer (including, without
limitation, 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 PZE (any such
proposal, offer or transaction being hereinafter referred to as a "PZE
Acquisition Proposal") or participate or engage in any discussions or
negotiations concerning a PZE Acquisition Proposal; and (ii) it 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 7.4(b), nothing contained in this Agreement shall
prevent PZE or its Board of Directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a PZE Acquisition Proposal or
(B) prior to the Cutoff Date, providing information (pursuant to a
confidentiality agreement in reasonably customary form) to or engaging in any
negotiations or discussions with any person or entity who has made an
unsolicited bona fide PZE Acquisition Proposal with respect to all the
outstanding PZE Common Stock or all or substantially all the assets of PZE that,
in the good faith judgment of PZE's Board of Directors, taking into account the
likelihood of consummation, after consultation with its financial advisors, is
superior to the Merger (a "PZE Superior Proposal"), if the Board of Directors of
PZE, after consultation with its outside legal counsel, determines that the
failure to do so would be inconsistent with its fiduciary obligations.
(b) PZE will immediately notify DVN of any such requests for such
information or the receipt of any PZE Acquisition Proposal, including the
identity of the person or group engaging in such discussions or negotiations,
requesting such information or making such PZE Acquisition Proposal, and the
material terms and conditions of any PZE Acquisition Proposal, and shall keep
the DVN informed on a timely basis of any material changes with respect thereto.
Prior to taking any action referred to in Section 7.2(a), if PZE intends to
participate in any such discussions or negotiations or provide any such
information to any such third party, PZE shall give prompt prior notice to DVN
of each such action.
(c) Nothing in this Section 7.2 shall permit PZE to enter into any
agreement with respect to a PZE Acquisition Proposal during the term of this
Agreement, it being agreed that during the term of this Agreement, PZE shall not
enter into any agreement with any person that provides for, or in any way
facilitates, a PZE Acquisition Proposal, other than a confidentiality agreement
in reasonably customary form.
(d) For purposes hereof, the "Cutoff Date" means the date the
conditions set forth in Section 8.1(a) are satisfied.
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Section 7.3 No Solicitation by DVN.
(a) DVN agrees that (i) neither it nor any of its Subsidiaries shall,
and shall not knowingly permit any of its officers, directors, employees, agents
or representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to, solicit,
initiate or knowingly encourage (including by way of furnishing material non-
public information) any inquiry, proposal or offer (including, without
limitation, 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 DVN (any such
proposal, offer or transaction being hereinafter referred to as a "DVN
Acquisition Proposal") or participate or engage in any discussions or
negotiations concerning a DVN Acquisition Proposal; and (ii) it 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 7.4(b), nothing contained in this Agreement shall
prevent DVN or its Board of Directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a DVN Acquisition Proposal or
(B) prior to the Cutoff Date, providing information (pursuant to a
confidentiality agreement in reasonably customary form) to or engaging in any
negotiations or discussions with any person or entity who has made an
unsolicited bona fide DVN Acquisition Proposal with respect to all the
outstanding DVN Common Stock or all or substantially all the assets of DVN that,
in the good faith judgment of DVN's Board of Directors, taking into account the
likelihood of consummation, after consultation with its financial advisors, is
superior to the Merger (a "DVN Superior Proposal"), if the Board of Directors of
DVN, after consultation with its outside legal counsel, determines that the
failure to do so would be inconsistent with its fiduciary obligations.
(b) DVN will immediately notify PZE of any such requests for such
information or the receipt of any DVN Acquisition Proposal, including the
identity of the person or group engaging in such discussions or negotiations,
requesting such information or making such DVN Acquisition Proposal, and the
material terms and conditions of any DVN Acquisition Proposal, and shall keep
PZE informed on a timely basis of any material changes with respect thereto.
Prior to taking any action referred to in Section 7.3(a), if DVN intends to
participate in any such discussions or negotiations or provide any such
information to any such third party, DVN shall give prompt prior notice to PZE
of each such action.
(c) Nothing in this Section 7.3 shall permit DVN to enter into any
agreement with respect to a DVN Acquisition Proposal during the term of this
Agreement, it being agreed that during the term of this Agreement, DVN shall not
enter into any agreement with any person that provides for, or in any way
facilitates, a DVN Acquisition Proposal, other than a confidentiality agreement
in reasonably customary form.
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Section 7.4 Meetings of Stockholders.
(a) Each of DVN and PZE will take all action necessary in accordance
with applicable law and its certificate of incorporation and bylaws to convene a
meeting of its stockholders as promptly as practicable to consider and vote upon
the approval of this Agreement and the Merger. PZE and DVN shall coordinate and
cooperate with respect to the timing of such meetings and shall use their
reasonable best efforts to hold such meetings on the same day.
(b) PZE and DVN, through their respective Boards of Directors, shall
recommend approval of such matters; provided that the Board of Directors of PZE
or the Board of Directors of DVN may at any time prior to the Effective Time
withdraw, modify, or change any recommendation and declaration regarding this
Agreement or the Merger, or recommend and declare advisable any other offer or
proposal, if and only if, after receipt of a PZE Superior Proposal or a DVN
Superior Proposal, as the case may be, in the opinion of such Board of Directors
after consultation with its counsel the failure to so withdraw, modify, or
change its recommendation and declaration would be inconsistent with its
fiduciary obligations.
Section 7.5 Filings; Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided, PZE and DVN
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 and thereafter shall promptly make any other required submissions
under the HSR Act;
(ii) use their reasonable best efforts 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 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 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 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 unless it consults with the
other party in advance and, to the extent permitted
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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; 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 7.5(a), DVN and PZE 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
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).
Section 7.6 Inspection. From the date hereof to the Effective Time,
each of PZE and DVN shall allow all designated officers, attorneys, accountants
and other representatives of DVN or PZE, as the case may be, 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 DVN and PZE and their respective Subsidiaries,
including inspection of such properties; provided that no investigation pursuant
to this Section 7.6 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, no 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 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
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disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Each of DVN and PZE agrees that it will not, and will
cause its respective representatives not to, use any information obtained
pursuant to this Section 7.6 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement.
Section 7.7 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 7.8 Registration Statement.
(a) Each of DVN and PZE shall cooperate and promptly prepare and Newco
shall file with the SEC as soon as practicable a Registration Statement on Form
S-4 (the "Form S-4") under the Securities Act and a registration statement on
Form 10 under the Exchange Act (or such other appropriate form) (the Form S-4
and such appropriate form under the Exchange Act are collectively referred to as
the "Registration Statements"), with respect to the Newco Common Stock issuable
in the Merger. A portion of the Form S-4 shall also serve as the joint proxy
statement with respect to the meetings of the stockholders of DVN and of PZE in
connection with the Merger (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Registration
Statements 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. Each of DVN and Newco shall use its reasonable best efforts, and
PZE will cooperate with DVN and Newco, to have the Registration Statements
declared effective by the SEC as promptly as practicable. Each of DVN and Newco
shall use its reasonable best efforts to obtain, prior to the effective date of
the Form S-4, 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. DVN will advise PZE, promptly after
it receives notice thereof, of the time when either or both of the Registration
Statements have become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of the Newco
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Registration Statements or comments thereon and
responses thereto or requests by the SEC for additional information.
(b) Each of DVN and PZE 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.
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(c) Each of DVN and PZE 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 DVN and of PZE, or, in the case of information
provided by it for inclusion in the Registration Statements or any amendment or
supplement thereto, at the time it is filed or becomes effective, (i) 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, and (ii)
will comply as to form in all material respects with the provisions of the
Exchange Act.
Section 7.9 Listing Application. PZE and DVN shall each use their
reasonable best efforts to cause the Newco Common Stock to be issued in the
Merger to be approved for listing on the NYSE prior to the Effective Time,
subject to official notice of issuance. DVN shall promptly prepare and submit
to the NYSE a listing application covering the shares of Newco Common Stock
issuable in the Merger. If, for any reason, Newco Common Stock is not approved
for listing on the NYSE, PZE and DVN shall each use their reasonable best
efforts to cause Newco Common Stock to be issued in the Merger to be approved
for listing on AMEX prior to the Effective Time, subject to official notice of
issuance.
Section 7.10 Letters of Accountants.
(a) If requested to do so by DVN, PZE shall use its reasonable best
efforts to cause to be delivered to DVN "comfort" letters of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, PZE's independent public accountants, dated the effective date of the Form
S-4 and the Closing Date, respectively, and addressed to DVN with regard to
certain financial information regarding PZE included in the Form S-4, in form
reasonably satisfactory to DVN and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) If requested to do so by PZE, DVN shall use its reasonable best
efforts to cause to be delivered to PZE "comfort" letters of KPMG LLP, DVN's
independent public accountants, dated the effective date of the Form S-4 and the
Closing Date, respectively, and addressed to PZE, with regard to certain
financial information regarding DVN included in the Form S-4, in form reasonably
satisfactory to PZE and customary in scope and substance for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
Section 7.11 Agreements of Rule 145 Affiliates. Prior to the
Effective Time, DVN and PZE shall cause to be prepared and delivered to Newco a
list identifying all persons who, at the time of the meeting or the meeting of
DVN's and PZE's stockholders pursuant to Section 7.4, DVN or PZE believes may be
deemed to be "affiliates" of DVN or PZE, as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates"). Newco
shall be entitled to place restrictive legends on any shares of Newco Common
Stock received by such Rule 145
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Affiliates. DVN and PZE shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
Newco, at or prior to the Effective Time, a written agreement, in the form to be
approved by the parties hereto, that such Rule 145 Affiliate will not sell,
pledge, transfer or otherwise dispose of any shares of Newco Common Stock issued
to such Rule 145 Affiliate pursuant to the Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 or an exemption
from the registration requirements of the Securities Act.
Section 7.12 Expenses. Whether or not the Merger is 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 9.5.
Section 7.13 Indemnification and Insurance.
(a) From and after the Effective Time, Newco shall 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 PZE or DVN (or any Subsidiary or division thereof) and each
person who served at the request of PZE or DVN 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) Newco shall pay, as incurred, the fees and expenses of counsel
selected by the Indemnified Party, which counsel shall be reasonably acceptable
to Newco, 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) Newco will cooperate in the
defense of any such matter; provided, however, Newco shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld or delayed), and provided further, that Newco shall not be
obligated pursuant to this Section 7.13 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 certificate of incorporation, bylaws and any indemnification
agreement of DVN and PZE and their 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 seven years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
Action pending or asserted or claim
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made within such period shall continue until the disposition of such Action or
resolution of such claim.
(c) For a period of seven years after the Effective Time, Newco shall
cause to be maintained officers' and directors' liability insurance covering the
Indemnified Parties who are or at any time prior to the Effective Time were
covered by DVN's and PZE's existing officers' and directors' liability 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, Newco shall not be
required to pay annual premiums in excess of 250% of the last annual premium
paid by DVN or in excess of 250% of the last annual premium paid by PZE, as the
case may be, prior to the date hereof (the amount of which premiums are set
forth in the DVN Disclosure Letter and PZE Disclosure Letter), but in such case
shall purchase as much coverage as reasonably practicable for such amount.
(d) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have under the
certificate of incorporation or bylaws of DVN and PZE or any of their
Subsidiaries, under the DGCL, OGCA or otherwise. The provisions of this Section
7.13 shall survive the consummation of the Merger and expressly are intended to
benefit each of the Indemnified Parties.
(e) In the event Newco 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 Newco, as the case may be, shall assume the
obligations set forth in this Section 7.13.
Section 7.14 Certain Benefits. Schedule 7.14 sets forth certain
agreements of Newco, DVN and PZE with respect to employee benefit matters.
Section 7.15 Reorganization. From and after the date hereof and
until the Effective Time, none of DVN, PZE 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. Each of the parties shall use its reasonable best efforts to
obtain the opinions of counsel referred to in Sections 8.2(b) and 8.3(b).
Following the Effective Time, Newco 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).
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Section 7.16 Rights Agreement. (a) Prior to the Effective Time,
the Board of Directors of PZE shall take any action (including, if necessary,
amending or terminating (but with respect to termination, only as of immediately
prior to the Effective Time) PZE Rights Agreement) necessary so that none of the
execution and delivery of this Agreement, the Stock Option Agreements, the
conversion of shares of PZE Common Stock into Newco Common Stock in accordance
with Article 4 of this Agreement, the issuance of PZE Common Stock upon exercise
of the option granted to DVN pursuant to the applicable Stock Option Agreement,
the consummation of the Merger, or any other transaction contemplated hereby or
by the Stock Option Agreements will cause (i) PZE Rights to become exercisable
under PZE Rights Agreement, (ii) Newco or DVN or any of their Subsidiaries to be
deemed an "Acquiring Person" (as defined in PZE Rights Agreement), (iii) any
such event to be an event described in Section 11(a)(ii) or 13 of PZE Rights
Agreement or (iv) the "Stock Acquisition Date" or the "Distribution Date" (each
as defined in PZE Rights Agreement) to occur upon any such event, and so that
PZE Rights will expire immediately prior to the Effective Time. Neither the
Board of Directors of PZE nor PZE shall take any other action to terminate PZE
Rights Agreement, redeem PZE Rights, cause any person not to be or become an
"Acquiring Person" or otherwise amend PZE Rights Agreement in a manner adverse
to DVN, unless otherwise ordered by a court of competent jurisdiction.
(b) Prior to the Effective Time, the Board of Directors of DVN shall
take any action (including, if necessary, amending or terminating (but with
respect to termination, only as of immediately prior to the Effective Time) the
DVN Rights Agreement) necessary so that none of the execution and delivery of
this Agreement, the Stock Option Agreements, the conversion of shares of DVN
Common Stock into Newco Common Stock in accordance with Article 4 of this
Agreement, the issuance of DVN Common Stock upon exercise of the option granted
to PZE pursuant to the applicable Stock Option Agreement, the consummation of
the Merger, or any other transaction contemplated hereby or by the Stock Option
Agreements will cause (i) the DVN Rights to become exercisable under the DVN
Rights Agreement, (ii) Newco or PZE or any of their Subsidiaries to be deemed an
"Acquiring Person" (as defined in the DVN Rights Agreement), (iii) any such
event to be an event described in Section 11(a)(ii) or 13 of the DVN Rights
Agreement or (iv) the "Stock Acquisition Date" or the "Distribution Date" (each
as defined in the DVN Rights Agreement) to occur upon any such event, and so
that the DVN Rights will expire immediately prior to the Effective Time.
Neither the Board of Directors of DVN nor DVN shall take any other action to
terminate the DVN Rights Agreement, redeem the DVN Rights, cause any person not
to be or become an "Acquiring Person" or otherwise amend the DVN Rights
Agreement in a manner adverse to PZE, unless otherwise ordered by a court of
competent jurisdiction.
(c) Any Rights Agreement approved or adopted by the Board of
Directors of Newco prior to or as of the Effective Time shall be subject to the
approval of DVN and PZE.
Section 7.17 Transition Agreement Termination. PZE will use its
reasonable best efforts to obtain the termination as of the Effective Time of
(i) the Transition Services Agreement dated as of December 2, 1998 between PZE
and Pennzoil-Quaker State Company and (ii) any similar
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agreements or arrangements involving sharing of costs under which PZE receives
and/or pays for any services, facilities or property from or to any affiliated
or formerly affiliated entity.
ARTICLE 8
CONDITIONS
Section 8.1 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) This Agreement and the Merger shall have been adopted and approved
by the affirmative vote of holders of (i) a majority of the outstanding
shares of PZE Common Stock; and (ii) a majority of the outstanding shares
of DVN Common Stock and the Northstar Exchangeable Shares voting as a
single class with the DVN Special Voting Stock voting for the Northstar
Exchangeable Shares as provided in DVN's charter.
(b) The waiting period applicable to the consummation of the Merger
shall have expired or been terminated under (i) the HSR Act and (ii) any
mandatory waiting period under any applicable foreign competition or antitrust
law or regulation where the failure to observe such waiting period referred to
in this clause (ii) would have, individually or in the aggregate, a DVN Material
Adverse Effect or a PZE Material Adverse Effect.
(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; provided, however, that prior to
invoking this condition each party agrees to comply with Section 7.5, and with
respect to other matters not covered by Section 7.5, to use its commercially
reasonable best efforts to have any such decree, order or injunction lifted or
vacated; 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 Form S-4 shall have become effective and no stop order with
respect thereto shall be in effect.
(e) The shares of Newco Common Stock to be issued pursuant to the
Merger shall have been authorized for listing on the NYSE or the AMEX, subject
to official notice of issuance.
Section 8.2 Conditions to Obligation of PZE to Effect the Merger.
The obligation of PZE to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) DVN 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
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and the representations and warranties of DVN and Newco contained in this
Agreement and in any document delivered in connection herewith (i) to the extent
qualified by DVN Material Adverse Effect or any other materiality qualification
shall be true and correct and (ii) to the extent not qualified by DVN Material
Adverse Effect or any other materiality qualification shall be true and correct
so long as any failures of such representations and warranties to be true and
correct, individually or in the aggregate, do not have a DVN Material Adverse
Effect, 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 PZE shall have received a
certificate of the DVN, executed on its behalf by its President or a Vice
President of DVN, dated the Closing Date, certifying to such effect.
(b) PZE shall have received the opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.,
counsel to PZE, in form and substance reasonably satisfactory to PZE, dated the
Closing Date, a copy of which shall be furnished to DVN, 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 PZE or the stockholders of PZE who exchange all of their PZE
Common Stock solely for Newco Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in Newco Common
Stock). In rendering such opinion, such counsel shall be entitled to receive
and rely upon representations of officers of PZE and DVN as to such matters as
such counsel may reasonably request.
(c) At any time after the date of this Agreement, there shall not have
been any event or occurrence, individually or in the aggregate with all such
events or occurrences, that have had or is likely to have a DVN Material Adverse
Effect.
Section 8.3 Conditions to Obligation of DVN and Newco to Effect the
Merger. The obligations of DVN and Newco to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) PZE 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 PZE contained in
this Agreement and in any document delivered in connection herewith (i) to the
extent qualified by PZE Material Adverse Effect or any other materiality
qualification shall be true and correct and (ii) to the extent not qualified by
PZE Material Adverse Effect or any other materiality qualification shall be true
and correct so long as any failures of such representations and warranties to be
true and correct, individually or in the aggregate, do not have a PZE Material
Adverse Effect, 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 DVN shall have
received a certificate of PZE, executed on its behalf by its President or a Vice
President of PZE, dated the Closing Date, certifying to such effect.
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(b) DVN shall have received the opinion of McAfee & ▇▇▇▇ A
Professional Corporation, counsel to DVN, in form and substance reasonably
satisfactory to DVN, dated the Closing Date, a copy of which will be furnished
to PZE, to the effect that the (i) 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 DVN or the stockholders of DVN
who exchange all of their DVN Common Stock solely for Newco Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Newco Common Stock). In rendering such opinion,
such counsel shall be entitled to receive and rely upon representations of
officers of PZE and DVN as to such matters as such counsel may reasonably
request.
(c) At any time after the date of this Agreement, there shall not have
been any event or occurrence, individually or the in aggregate, with all such
events or occurrences that have had or is likely to have a PZE Material Adverse
Effect.
ARTICLE 9
TERMINATION
Section 9.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time by the mutual written consent
of PZE and DVN.
Section 9.2 Termination by DVN or PZE. This Agreement may be
terminated by action of the Board of Directors of DVN or of PZE if:
(a) the Merger shall not have been consummated by December 31, 1999;
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;
(b) a meeting (including adjournments and postponements) of PZE's
stockholders for the purpose of obtaining the approval required by Section
8.1(a)(i) shall have been held and such stockholder approval shall not have been
obtained; or
(c) a meeting (including adjournments and postponements) of the DVN's
stockholders for the purpose of obtaining the approval required by Section
8.1(a)(ii) shall have been held and such stockholder approval 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
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this clause (d) shall have complied with Section 7.5 and with respect to other
matters not covered by Section 7.5 shall have used its commercially reasonable
best efforts to remove such injunction, order or decree.
Section 9.3 Termination by PZE. This Agreement may be terminated
prior to the Effective Time, by action of the Board of Directors of PZE after
consultation with its legal advisors, if
(a) the Board of Directors of PZE determines that proceeding with the
Merger would be inconsistent with its fiduciary obligations by reason of a PZE
Superior Proposal and elects to terminate this Agreement effective prior to the
Cutoff Date; provided that PZE may not effect such termination pursuant to this
Section 9.3(a) unless and until (i) DVN receives at least one week's prior
written notice from PZE of its intention to effect such termination pursuant to
this Section 9.3(a); (ii) during such week, PZE shall, and shall cause its
respective financial and legal advisors to, consider any adjustment in the terms
and conditions of this Agreement that DVN may propose; and provided, further,
that any termination of this Agreement pursuant to this Section 9.3(a) shall not
be effective until PZE has made the $22,000,000 payment required by Section
9.5(a)(i); or
(b) (i) there has been a breach by DVN or Newco of any representation,
warranty, covenant or agreement set forth in this Agreement or if any
representation or warranty of DVN or Newco shall have become untrue, in either
case such that the conditions set forth in Section 8.2(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 DVN by PZE; provided, however,
that the right to terminate this Agreement pursuant to Section 9.3(b) shall not
be available to PZE if it, at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in this Agreement such
that the condition set forth in Section 8.3(a) shall not be satisfied; or
(c) the Board of Directors of DVN shall have withdrawn or materially
modified, in a manner adverse to PZE, its approval or recommendation of the
Merger or recommended a DVN Acquisition Proposal, or resolved to do so.
Section 9.4 Termination by DVN. This Agreement may be terminated
at any time prior to the Effective Time, by action of the Board of Directors of
DVN after consultation with its legal advisors, if:
(a) the Board of Directors of DVN determines that proceeding with the
Merger would be inconsistent with its fiduciary obligations by reason of a DVN
Superior Proposal and elects to terminate this Agreement effective prior to the
Cutoff Date; provided that DVN may not effect such termination pursuant to this
Section 9.4(a) unless and until (i) PZE receives at least one week's prior
written notice from DVN of its intention to effect such termination pursuant to
this Section 9.4(a); (ii) during such week, DVN shall, and shall cause its
respective financial and legal advisors to, consider any adjustment in the terms
and conditions of this Agreement that PZE may propose;
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and provided, further, that any termination of this Agreement pursuant to this
Section 9.4(a) shall not be effective until DVN has made the $22,000,000 payment
required by Section 9.5(b)(i); or
(b) (i) there has been a breach by PZE of any representation,
warranty covenant or agreement set forth in this Agreement or if any
representation or warranty of PZE shall have become untrue, in either case such
that the conditions set forth in Section 8.3(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 DVN to PZE; provided, however, that
the right to terminate this Agreement pursuant to Section 9.4(b) shall not be
available to DVN 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 8.2(a) shall not be satisfied; or
(c) the Board of Directors of PZE shall have withdrawn or
materially modified, in a manner adverse to DVN, its approval or recommendation
of the Merger or recommended a PZE Acquisition Proposal, or resolved to do so.
Section 9.5 Effect of Termination.
(a) If this Agreement is terminated
(i) by PZE pursuant to Section 9.3(a); or
(ii) after the public announcement of a PZE Acquisition Proposal, by
PZE or DVN pursuant to Section 9.2(b); or
(iii) after the public announcement or receipt by PZE's Board of
Directors of a PZE Acquisition Proposal, by DVN pursuant to Section 9.4(c);
then PZE shall pay DVN the PZE Termination Amount (subject to reduction pursuant
to Section 6 of the applicable Stock Option Agreement) at the time of such
termination in cash by wire transfer to an account designated by DVN. The term
"PZE Termination Amount" shall mean, in the case of termination pursuant to
clause (i) or clause (iii) of the preceding sentence, $22,000,000 or, in the
case of termination pursuant to clause (ii) of the preceding sentence, "PZE
Termination Amount" shall mean $10,000,000 plus, if (x) PZE executes and
delivers an agreement with respect to any PZE Acquisition or (y) a PZE
Acquisition is consummated, in any such case, within 12 months from the date of
termination pursuant to clause (ii), an additional $12,000,000 (which additional
amount shall be paid promptly by wire transfer to an account designated by DVN).
In the event that the board of directors of PZE recommends the acceptance by the
stockholders of PZE of a third-party tender or exchange offer for PZE Common
Stock, such recommendation shall be treated for purposes of this paragraph as
though an agreement with respect to a PZE Acquisition had been executed and
delivered. For purposes hereof, "PZE Acquisition" means (i) a consolidation,
exchange of shares or merger of PZE with any person, other than DVN or one of
its Subsidiaries, and, in the case of a merger, in which PZE shall not be the
continuing or surviving corporation, (ii) a merger of PZE with
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a person, other than DVN or one of its Subsidiaries, in which PZE shall be the
continuing or surviving corporation but the then outstanding shares of PZE
Common Stock shall be changed into or exchanged for stock or other securities of
PZE or any other person or cash or any other property or the shares of PZE
Common Stock outstanding immediately before such merger shall after such merger
represent less than 50% of the voting stock of PZE outstanding immediately after
the merger, (iii) the acquisition of beneficial ownership of 50% or more of the
voting stock of PZE by any person (as such term is used under Section 13(d) of
the Exchange Act), or (iv) a sale, lease or other transfer of 50% or more of the
assets of PZE to any person, other than DVN or one of its Subsidiaries. PZE
acknowledges that the agreements contained in this Section 9.5(a) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, DVN would not enter into this Agreement; accordingly,
if PZE fails promptly to pay any amount due pursuant to this Section 9.5(a),
and, in order to obtain such payment, DVN commences a suit which results in a
judgment against PZE for the payment set forth in this Section 9.5(a), PZE shall
pay to DVN its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on PZE Termination Amount from each date for
payment until the date of such payment at the prime rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made plus 2 percent.
(b) If this Agreement is terminated
(i) by DVN pursuant to Section 9.4(a); or
(ii) after the public announcement of a DVN Acquisition Proposal, by
PZE or DVN pursuant to Section 9.2(c); or
(iii) after the public announcement or receipt by DVN's Board of
Directors of a DVN Acquisition Proposal, by PZE pursuant to Section 9.3(c);
then DVN shall pay PZE the DVN Termination Amount (subject to reduction pursuant
to Section 6 of the applicable Stock Option Agreement) at the time of such
termination in cash by wire transfer to an account designated by PZE. The term
"DVN Termination Amount" shall mean, in the case of termination pursuant to
clause (i) or clause (iii) of the preceding sentence, $22,000,000 or, in the
case of termination pursuant to clause (ii) of the preceding sentence, "DVN
Termination Amount" shall mean $10,000,000 plus, if (x) DVN executes and
delivers an agreement with respect to any DVN Acquisition or (y) a DVN
Acquisition is consummated, in any such case, within 12 months from the date of
termination pursuant to clause (ii), an additional $12,000,000 (which additional
amount shall be paid promptly by wire transfer to an account designated by PZE).
In the event that the board of directors of DVN recommends the acceptance by the
stockholders of DVN of a third-party tender or exchange offer for the DVN Common
Stock, such recommendation shall be treated for purposes of this paragraph as
though an agreement with respect to a DVN Acquisition had been executed and
delivered. For purposes hereof, "DVN Acquisition" means (i) a consolidation,
exchange of shares or merger of DVN with any person, other than PZE or one of
its Subsidiaries, and, in the case of a merger, in which DVN shall not be the
continuing or surviving corporation, (ii)
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a merger of DVN with a person, other than PZE or one of its Subsidiaries, in
which DVN shall be the continuing or surviving corporation but the then
outstanding shares of DVN Common Stock shall be changed into or exchanged for
stock or other securities of DVN or any other person or cash or any other
property or the shares of DVN Common Stock outstanding immediately before such
merger shall after such merger represent less than 50% of the voting stock of
DVN outstanding immediately after the merger, (iii) the acquisition of
beneficial ownership of 50% or more of the voting stock of DVN by any person (as
such term is used under Section 13(d) of the Exchange Act), or (iv) a sale,
lease or other transfer of 50% or more of the assets of DVN to any person, other
than PZE or one of its Subsidiaries. DVN acknowledges that the agreements
contained in this Section 9.5(a) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, PZE would
not enter into this Agreement; accordingly, if DVN fails promptly to pay any
amount due pursuant to this Section 9.5(a), and, in order to obtain such
payment, PZE commences a suit which results in a judgment against DVN for the
payment set forth in this Section 9.5(a), DVN shall pay to PZE its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the DVN Termination Amount from each date for payment until the date
of such payment at the prime rate of The Chase Manhattan Bank in effect on the
date such payment was required to be made plus 2 percent.
(c) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 9, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.5 and Section 7.12 and except for the provisions of Sections 10.3, 10.4, 10.6,
10.8, 10.9, 10.12, 10.13 and 10.14, provided that nothing herein shall relieve
any party from any liability for any willful and material 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 willful and material breach, at law or in equity, shall be preserved.
Section 9.6 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 10
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall not survive the
Merger; provided, however, that the agreements
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contained in Article 3, Article 4 and in Sections 7.11, 7.12, 7.13, 7.14, 7.15
and this Article 10 and the agreements delivered pursuant to this Agreement
shall survive the Merger.
Section 10.2 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 DVN or Newco:
Devon Energy Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
McAfee & ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) if to PZE:
PennzEnergy Company
Pennzoil Place
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr.
-49-
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 10.3 Assignment; Binding Effect; Benefit. 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.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Article 4 and Section 7.13, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
Section 10.4 Entire Agreement. This Agreement, the exhibits to this
Agreement, PZE Disclosure Letter, the DVN 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 10.5 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 PZE or DVN, 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 10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its rules of conflict of laws. Each of PZE and DVN hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware 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 Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
Section 10.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may
-50-
consist of a number of copies hereof each signed by less than all, but together
signed by all of the parties hereto.
Section 10.8 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 10.9 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 phrase "to the knowledge of" and similar phrases relating to
knowledge of PZE or DVN, as the case may be, shall mean the actual knowledge of
its executive officers.
(c) "Material Adverse Effect" with respect to PZE or DVN shall mean a
material adverse effect or change on (a) the business or financial condition of
a party and its Subsidiaries on a consolidated basis, except for such changes or
effects in general economic, capital market, regulatory or political conditions
or changes that affect generally the oil and gas industry or (b) the ability of
the party to consummate the transactions contemplated by this Agreement or
fulfill the conditions to closing. "PZE Material Adverse Effect" and "DVN
Material Adverse Effect" mean a Material Adverse Effect with respect to PZE and
DVN, respectively.
Section 10.10 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 10.11 Incorporation of Exhibits. PZE Disclosure Letter,
the DVN 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 10.12 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 broadly as is enforceable.
-51-
Section 10.13 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 Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 10.14 Obligation of Newco. Whenever this Agreement requires
Newco (or its successors) to take any action prior to Effective Time, such
requirement shall be deemed to include an undertaking on the part of DVN to
cause Newco to take such action and a guarantee of the performance thereof.
Section 10.15 Subsidiaries. As used in this Agreement, the word
"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.
[SIGNATURE PAGE TO FOLLOW]
-52-
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
DEVON ENERGY CORPORATION
By:
----------------------------
Name:
Title:
DEVON DELAWARE CORPORATION
By:
----------------------------
Name:
Title:
PENNZENERGY COMPANY
By:
----------------------------
Name:
Title:
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
-53-
Exhibit A
-54-
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
DEVON ENERGY CORPORATION
(Originally incorporated under the name
"Devon Delaware Corporation" on __________ ___, 199__)
ARTICLE I
Name
The name of this corporation (the "Corporation") is Devon Energy
Corporation.
ARTICLE II
Registered Office
The address of the registered office of the Corporation in the State
of Delaware is at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, in the City of Wilmington, County of New
Castle, and the name of its registered agent at that address is The Corporation
Trust Company.
ARTICLE III
Business
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
ARTICLE IV
Authorized Capital Stock
A. The Corporation shall be authorized to issue a total of
404,500,001 shares of capital stock divided into classes as follows:
(1) 400,000,000 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) one share of Special Voting Stock, par value $.10 per share.
B. Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of Directors
of the Corporation (the "Board"), each of said series to be distinctly
designated. The voting powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations or
restrictions thereof, if any, of each such series may differ from those of any
and all other series of Preferred Stock at any time outstanding, and the Board
is hereby expressly granted authority to fix or alter, by resolution or
resolutions, the designation, number, voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, of each such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, such series, which number (except
where otherwise provided by the Board in the resolution establishing such
series) may be increased or decreased (but not below the number of shares
of such series then outstanding) from time to time by action of the Board;
(2) The rights in respect of dividends, if any, of such series of
Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or any
other series of the same or other class or classes of capital stock of the
Corporation, and whether or in what circumstances such dividends shall be
cumulative;
(3) The right, if any, of the holders of such series of Preferred
Stock to convert the same into, or exchange the same for, shares of any
other class or classes or of any other series of the same or any other
class or classes of capital stock or other securities of the Corporation or
any other person, and the terms and conditions of such conversion or
exchange;
(4) Whether or not shares of such series of Preferred Stock shall be
subject to redemption, and, if so, the terms and conditions of such
redemption (including whether such redemption shall be optional or
mandatory), including the date or dates or event or events upon or after
which they shall be redeemable, and the amount and type of consideration
payable upon redemption, which may vary under different conditions and at
different redemption dates;
(5) The rights, if any, of the holders of such series of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation or in the event of any merger or
consolidation of or sale of assets by the Corporation;
(6) The terms of any sinking fund or redemption or purchase account,
if any, to be provided for shares of such series of the Preferred Stock;
2
(7) The voting powers, if any, of the holders of any series of
Preferred Stock generally or with respect to any particular matter, which
may be less than, equal to or greater than one vote per share, and which
may, without limiting the generality of the foregoing, include the right,
voting as a series by itself or together with the holders of any other
series of Preferred Stock or all series of Preferred Stock as a class, to
elect one or more directors of the Corporation generally or under such
specific circumstances and on such conditions, as shall be provided in the
resolution or resolutions of the Board adopted pursuant hereto, including,
without limitation, in the event there shall have been a default in the
payment of dividends on or redemption of any one or more series of
Preferred Stock; and
(8) Any other powers, preferences and relative, participating,
optional or other rights, and qualifications, limitations or restrictions
of shares of such series of Preferred Stock.
C. (1) After the provisions with respect to preferential dividends
on any series of Preferred Stock (fixed in accordance with the provisions
of Paragraph B of this Article IV), if any, shall have been satisfied and
after the Corporation shall have complied with all the requirements, if
any, with respect to redemption of, or the setting aside of sums as sinking
funds or redemption or purchase accounts with respect to, any series of
Preferred Stock (fixed in accordance with the provisions of Paragraph B of
this Article IV), and subject further to any other conditions that may be
fixed in accordance with the provisions of Paragraph B of this Article IV,
then and not otherwise the holders of Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the Board.
(2) In the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, after distribution in full of
the preferential amounts, if any (fixed in accordance with the provisions
of Paragraph B of this Article IV), to be distributed to the holders of
Preferred Stock by reason thereof, the holders of Common Stock shall,
subject to the additional rights, if any (fixed in accordance with the
provisions of Paragraph B of this Article IV), of the holders of any
outstanding shares of Preferred Stock, be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of whatever
kind available for distribution to stockholders ratably in proportion to
the number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law, and subject to the
provisions of such resolution or resolutions as may be adopted by the Board
pursuant to Paragraph B of this Article IV granting the holders of one or
more series of Preferred Stock exclusive voting powers with respect to any
matter, each holder of Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by the stockholders.
(4) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
combined voting power of the then-outstanding shares of Voting Stock,
voting together as a single class.
3
1,500,000 shares of Preferred Stock are designated 6.49% Cumulative
Preferred Stock, Series A, and have the voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof set forth in Exhibit A.
D. Each outstanding share of Special Voting Stock shall be entitled,
on all matters presented to the stockholders of the Corporation, to that number
of votes equal to the number of "Exchangeable Shares" (as such term is defined
in the Amended and Restated Combination Agreement dated as of June 29, 1998 by
and between Devon Energy Corporation, an Oklahoma corporation, and Northstar
Energy Corporation, as amended and restated from time to time (the "Combination
Agreement")) outstanding from time to time not owned by the Corporation or any
of its wholly owned subsidiaries. No dividend or distribution of assets shall
be paid to the holders of Special Voting Stock. The Special Voting Stock is not
convertible into any other class or series of the capital stock of the
Corporation or into cash, property or other rights, and may not be redeemed. Any
shares of Special Voting Stock purchased or otherwise acquired by the
Corporation shall be deemed retired and shall be canceled and may not thereafter
be reissued or otherwise disposed of by the Corporation. At such time as the
Special Voting Stock has no votes attached to it because there are no
"Exchangeable Shares" (as that term is defined in the Combination Agreement)
outstanding, the Special Voting Stock shall be canceled. In respect of all
matters concerning the voting of shares, the Common Stock and the Special Voting
Stock shall vote as a single class and such voting rights shall be identical in
all respects.
E. No stockholder of the Corporation shall by reason of his holding
shares of any class or series of stock of the Corporation have any preemptive or
preferential right to purchase, acquire, subscribe for or otherwise receive any
additional, unissued or treasury shares (whether now or hereafter acquired) of
any class or series of stock of the Corporation now or hereafter to be
authorized, or any notes, debentures, bonds or other securities convertible into
or carrying any right, option or warrant to purchase, acquire, subscribe for or
otherwise receive shares of any class or series of stock of the Corporation now
or hereafter to be authorized, whether or not the issuance of any such shares,
or such notes, debentures, bonds or other securities, would adversely affect the
dividends or voting or other rights of such stockholder, and the Board may issue
or authorize the issuance of shares of any class or series of stock of the
Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying rights, options or warrants to purchase, acquire, subscribe for
or otherwise receive shares of any class or series of stock of the Corporation,
without offering any such shares of any such class, either in whole or in part,
to the existing stockholders of any class.
F. Cumulative voting of shares of any class or series of capital
stock of the Corporation having voting rights is not permitted.
4
ARTICLE V
Election of Directors
A. The business and affairs of the Corporation shall be conducted
and managed by, or under the direction of, the Board. The number of directors
which shall constitute the entire Board shall not be less than three nor more
than twenty, and, except as provided in Paragraph D of this Article V, shall be
determined by resolution adopted by a majority of the entire Board. No
reduction in number shall have the effect of removing any director prior to the
expiration of his or her term.
B. The Board, other than those directors elected by the holders of
any series of Preferred Stock as provided for or fixed pursuant to the
provisions of Article IV, shall be divided into three classes, Class I, Class II
and Class III, and the Board shall designate the directors who shall first serve
in Class I, Class II and Class III. Such classes shall be as nearly equal in
number as possible. Each director shall serve for a term ending on the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that the directors first designated to Class I shall serve
for a term expiring at the annual meeting next following the date of their
designation as Class I Directors, the directors first designated to Class II
shall serve for a term expiring at the second annual meeting next following the
date of their designation as Class II Directors, and the directors first
designated to Class III shall serve for a term expiring at the third annual
meeting next following the date of their designation as Class III Directors. At
each annual election of directors, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors of the Corporation
they succeed, unless, by reason of any intervening changes in the authorized
number of directors, the Board of Directors shall designate one or more
directorships whose term then expires as directorships of another class in order
more nearly to achieve equality of number of directors among the classes. In
the event of any change in the authorized number of Directors of the
Corporation, each Director of the Corporation then continuing to serve as such
shall nevertheless continue as a Director of the class of which he is a member
until the expiration of his current term, or his prior death, resignation or
removal.
C. Except as otherwise provided for or fixed pursuant to the
provisions of Article IV relating to the rights of the holders of any series of
Preferred Stock to elect additional directors, except as provided in Paragraph D
of this Article V, and subject to the provisions hereof, newly created
directorships resulting from any increase in the authorized number of directors,
and any vacancies on the Board resulting from death, resignation,
disqualification, removal, or other cause, may be filled only by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board. Any director elected in accordance with the
preceding sentence or Paragraph D of this Article V shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or in which the vacancy occurred, and until such
director's successor shall have been duly elected and qualified, subject to his
earlier death, disqualification, resignation or removal. Except as otherwise
provided pursuant to Article IV of this Certificate of Incorporation relating to
additional directors elected by the holders of one or more
5
series of Preferred Stock, no decrease in the number of directors constituting
the Board shall shorten the term of any incumbent director.
D. Until the annual meeting of shareholders in the year 2000 and as
long thereafter as any ▇▇▇▇-▇▇▇▇▇ Designee (hereafter defined) serves as a
director of the Corporation, any vacancy caused by the death, resignation,
removal or any other reason of a Continuing Director (hereinafter defined)
shall be filled by the remaining Continuing Directors and nominations for
election of directors to succeed Continuing Directors upon the expiration of the
term of office of Continuing Directors shall be made by the Continuing
Directors; and any vacancy caused by the death, resignation, removal or any
other reason of a director other than a Continuing Director ("New Director")
shall be filled by the remaining New Directors and nominations for election as
directors to succeed New Directors upon the expiration of the term of office of
New Directors shall be made by the New Directors; provided, however, at least
one New Director shall be a person who shall have been mutually approved by the
Chairman and the President of the Corporation. Following such time as there
shall no longer be any ▇▇▇▇-▇▇▇▇▇ Designees serving as directors of the
Corporation, effective as of the next annual meeting of shareholders, vacancies
shall be filled and nominations for directors shall be made by a majority of the
whole board. "▇▇▇▇-▇▇▇▇▇ Designee" shall have the meaning set forth in the
Stock Rights and Restriction Agreement, dated as of December 31, 1996, between
the Devon Energy Corporation, an Oklahoma corporation, and ▇▇▇▇-▇▇▇▇▇
Corporation. "Continuing Director" shall mean a director who was a director of
Devon Energy Corporation, an Oklahoma corporation, immediately prior to the
Closing under the Agreement and Plan of Merger by and among the Corporation,
Devon Energy Corporation and PennzEnergy Company dated as of May 19, 1999, or
who subsequently became a director as a result of the filling of a vacancy by
the Continuing Directors as aforesaid or as a result of his election as a
director having been nominated by the Continuing Directors as aforesaid.
E. During any period when the holders of any series of Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to the provisions of Article IV, then upon commencement and for the
duration of the period during which such right continues (i) the then otherwise
total authorized number of directors of the Corporation shall automatically be
increased by such specified number of directors, and the holders of such
Preferred Stock shall be entitled to elect the additional directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional director
shall serve until such director's successor shall have been duly elected and
qualified, or until such director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to his earlier
death, disqualification, resignation or removal. Except as otherwise provided
by the Board in the resolution or resolutions establishing such series, whenever
the holders of any series of Preferred Stock having such right to elect
additional directors are divested of such right pursuant to the provisions of
such stock, the terms of office of all such additional directors elected by the
holders of such stock, or elected to fill any vacancies resulting from the
death, resignation, disqualification or removal of such additional directors,
shall forthwith terminate and the total and authorized number of directors of
the Corporation shall be reduced accordingly.
6
ARTICLE VI
Meetings of Stockholders
A. Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the By-laws of the Corporation may provide.
Except as otherwise provided for or fixed pursuant to the provisions of Article
IV relating to the rights of the holders of any series of Preferred Stock,
special meetings of stockholders of the Corporation may be called only (i)
pursuant to a resolution adopted by a majority of the then-authorized number of
directors of the Corporation and (ii) if permitted by the By-laws of the
Corporation, by the Chairman of the Board or the President of the Corporation as
and in the manner provided in the By-laws of the Corporation. Special meetings
of stockholders may not be called by any other person or persons or in any other
manner. The ability of the stockholders of the Corporation to call a special
meeting of stockholders is hereby specifically denied. Elections of directors
need not be by written ballot unless the By-laws of the Corporation shall so
provide.
B. In addition to the powers conferred on the Board by this
Certificate of Incorporation and by the General Corporation Law, and without
limiting the generality thereof, the Board is specifically authorized from time
to time, by resolution of the Board without additional authorization by the
stockholders of the Corporation, to adopt, amend or repeal the By-laws of the
Corporation, in such form and with such terms as the Board may determine,
including, without limiting the generality of the foregoing, By-laws relating to
(i) regulation of the procedure for submission by stockholders of nominations of
persons to be elected to the Board, (ii) regulation of the attendance at annual
or special meetings of the stockholders of persons other than holders of record
or their proxies, and (iii) regulation of the business that may properly be
brought by a stockholder of the Corporation before an annual or special meeting
of stockholders of the Corporation.
ARTICLE VII
Stockholder Consent
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation, and the ability of the stockholders of the
Corporation to consent in writing to the taking of any action is hereby
specifically denied.
ARTICLE VIII
Limitation of Liability
A director of this Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law as the same
7
exists or may hereafter be amended. Any repeal or modification of the foregoing
paragraph shall not adversely affect any right or protection of a director of
the Corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
ARTICLE IX
Executive Committee
The Board, pursuant to the By-laws of the Corporation or by resolution
passed by a majority of the then-authorized number of directors, may designate
any of their number to constitute an Executive Committee, which Executive
Committee, to the fullest extent permitted by law and provided for in said
resolution or in the By-laws of the Corporation, shall have and may exercise all
of the powers of the Board in the management of the business and affairs of the
Corporation, and shall have power to authorize the seal of the Corporation to be
affixed to all papers that may require it.
ARTICLE X
Indemnification
A. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that 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 or other enterprise against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, 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
interest of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that 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
interest of the Corporation and with respect to any criminal action or
proceeding had reasonable cause to believe that his conduct was unlawful.
B. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that 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 attorney's 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 interest of the
8
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine, upon application, that despite
the adjudication of liability, but in the view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
C. 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 upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized herein.
D. The Corporation may purchase (upon resolution duly adopted by the
board of directors) 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 any 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.
E. To the extent that a 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 herein 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.
F. Every such person shall be entitled, without demand by him upon
the Corporation or any action by the Corporation, to enforce his right to such
indemnity in an action at law against the Corporation. The right of
indemnification and advancement of expenses hereinabove provided shall not be
deemed exclusive of any rights to which any such person may now or hereafter be
otherwise entitled and specifically, without limiting the generality of the
foregoing, shall not be deemed exclusive of any rights pursuant to statute or
otherwise, of any such person in any such action, suit or proceeding to have
assessed or allowed in his favor against the Corporation or otherwise, his costs
and expenses incurred therein or in connection therewith or any part thereof.
ARTICLE XI
Amendment Of Corporate Documents
A. Certificate of Incorporation
In addition to any affirmative vote required by applicable law and in
addition to any vote of the holders of any series of Preferred Stock provided
for or fixed pursuant to the provisions of Article IV, any alteration,
amendment, repeal or rescission (a "Change") of any provision of this
9
Certificate of Incorporation must be approved by at least a majority of the
then-authorized number of directors and by the affirmative vote of the holders
of at least a majority of the combined voting power of the then-outstanding
shares of Voting Stock, voting together as a single class; provided, however,
that if any such Change relates to Article V, VI, VII, VIII, X or XII hereof or
to this Article XI, such Change must also be approved by the affirmative vote of
the holders of at least 66 % of the combined voting power of the then-
outstanding shares of Voting Stock, voting together as a single class. Subject
to the provisions hereof, the Corporation reserves the right at any time, and
from time to time, to amend, alter, repeal or rescind any provision contained in
this Certificate of Incorporation in the manner now or hereafter prescribed by
law, and other provisions authorized by the laws of the State of Delaware at the
time in force may be added or inserted, in the manner now or hereafter
prescribed by law; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other persons whomsoever by
and pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this article.
B. By-Laws
In addition to any affirmative vote required by law, any Change of the
By-laws of the Corporation may be adopted either (i) by the Board by the
affirmative vote of at least a majority of the then-authorized number of
directors or (ii) by the stockholders by the affirmative vote of the holders of
at least 66 % of the combined voting power of the then-outstanding shares of
Voting Stock, voting together as a single class.
ARTICLE XII
Definitions
For the purposes of this Certificate of Incorporation:
A. A "person" shall mean any individual, firm, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity.
B. "Voting Stock" means all outstanding shares of capital stock of
the Corporation that pursuant to or in accordance with this Certificate of
Incorporation are entitled to vote generally in the election of directors of the
Corporation, and each reference herein, where appropriate, to a percentage or
portion of shares of Voting Stock shall refer to such percentage or portion of
the voting power of such shares entitled to vote.
10
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and does further amend the provisions of the Certificate
of Incorporation of the Corporation, and which has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law, has been executed by an authorized officer of the Corporation
on this _____ day of _______________, 1999.
DEVON ENERGY CORPORATION
By:
-----------------------------
11
Exhibit A
CERTIFICATE OF DESIGNATIONS
of the
6.49% CUMULATIVE PREFERRED STOCK, SERIES A
of
DEVON ENERGY CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
DEVON ENERGY CORPORATION, a Delaware corporation (the "Corporation"),
HEREBY CERTIFIES that resolutions were duly adopted by the Board of Directors of
the Corporation in accordance with Section 151(g) of the General Corporation Law
of the State of Delaware pursuant to the authority conferred upon the Board of
Directors of the Corporation by the provisions of the Restated Certificate of
Incorporation of the Corporation as follows:
RESOLVED, that a series of the Corporation's Preferred Stock, par
value $1.00 per share ("Preferred Stock"), designated as 6.49% Cumulative
Preferred Stock, Series A be and hereby is created and that the designation and
number of shares thereof and the powers, preferences and rights thereof are as
follows:
6.49% Cumulative Preferred Stock, Series A
1. Designation and Amount; No Fractional Shares. There shall be a
series of Preferred Stock designated as "6.49% Cumulative Preferred Stock,
Series A" (the "Series A Preferred Stock") and the authorized number of shares
constituting such series shall be 1,500,000. The Series A Preferred Stock is
issuable in whole shares only.
2. Dividends. Holders of shares of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors or a
duly authorized committee thereof out of funds of the Corporation legally
available for payment of dividends, cumulative cash dividends at the rate of
6.49% per annum per share on the initial liquidation preference of $100.00 per
share (equivalent to $6.49 per annum per share of Series A Preferred Stock).
Dividends on the Series A Preferred Stock shall be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year, commencing
[September 30, 1999] (each a "Dividend Payment Date"). If any date on which
dividends would otherwise be payable is a Saturday, Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close, then the dividends otherwise payable on such date
shall instead be payable on the next succeeding business day. Dividends on
shares of the Series A Preferred Stock shall be fully cumulative and shall
accumulate (whether or not earned or declared and whether or not the
Corporation has funds legally available for the payment of dividends), on a
daily basis, without interest, from the previous Dividend Payment Date, except
that the first dividend shall accrue, without interest, from the date of initial
issuance of the Series A Preferred Stock. Accumulated and unpaid dividends shall
not bear interest. Dividends shall be payable, in arrears, to holders of record
as they appear in the records of the Corporation at the close of business on the
applicable record date, which shall be the 15th day of the calendar month in
which the applicable Dividend Payment Date falls or such other date designated
by the Board of Directors of the Corporation for the payment of dividends that
is not more than 30 nor less than 10 days prior to such Dividend Payment Date.
Any dividend payable on the Series A Preferred Stock for any dividend period
that is shorter or longer than a full quarterly period shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
If, prior to 18 months after the date of the original issuance of the
Series A Preferred Stock, one or more amendments to the Internal Revenue Code of
1986, as amended (the "Code"), are enacted that change the percentage of the
dividends received deduction (currently 70%) as specified in section 243(a)(1)
of the Code or any successor provision (the "Dividends Received Percentage"),
the amount of each dividend payable (if declared) per share of Series A
Preferred Stock for dividend payments made on or after the effective date of
such change in the Code will be adjusted by multiplying the amount of the
dividend payable described above (before adjustment) by the factor determined by
the following formula (the "DRD Formula"), and rounding the result to the
nearest cent (with one-half cent rounded up):
1- .35(1-.70)
-------------
1- .35(1-DRP)
For the purposes of the DRD Formula, "DRP" means the Dividends Received
Percentage (expressed as a decimal) applicable to the dividend in question;
provided, however, that if the Dividends Received Percentage applicable to the
dividend in question shall be less than 50%, then the DRP shall equal .50. No
amendment to the Code, other than a change in the percentage of the dividends
received deduction set forth in section 243(a)(1) of the Code or any successor
provision thereto, will give rise to such an adjustment. Notwithstanding the
foregoing provisions, if, with respect to any such amendment, the Corporation
receives either an unqualified opinion of nationally recognized independent tax
counsel selected by the Corporation or a private letter ruling or similar form
of authorization from the Internal Revenue Service ("IRS") to the effect that
such amendment does not apply to a dividend payable on the Series A Preferred
Stock, then such amendment will not result in the adjustment provided for
pursuant to the DRD Formula with respect to such dividend (including, if
applicable, any adjustment that would otherwise result in the payment of Post-
Declaration Date Dividends or Additional Dividends as defined below). Any such
opinion shall be based upon the legislation amending or establishing the
Dividends Received Percentage or upon a published pronouncement of the IRS
addressing such legislation. Unless the context otherwise requires, references
to dividends in this Certificate of Designations will mean dividends as adjusted
by the DRD Formula. The Corporation's calculation of the dividends payable, as
so adjusted and as certified accurate as to calculation and reasonable as to
method by the independent certified public
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accountants then regularly engaged by the Corporation, shall be final and not
subject to review absent manifest error.
Notwithstanding anything contained in the preceding paragraph, if any
such amendment to the Code which reduces the Dividends Received Percentage is
enacted after the dividend payable on a Dividend Payment Date has been declared
but before such Dividend Payment Date, the amount of the dividend payable on
such Dividend Payment Date will not be increased; instead, an additional
dividend (a "Post-Declaration Date Dividend") equal to the excess, if any, of
(x) the product of the dividend paid by the Corporation on such Dividend Payment
Date and the factor determined in accordance with the DRD Formula (with the DRP
used in the DRD Formula equal to the greater of the Dividend Received Percentage
applicable to the dividend in question and .50) over (y) the dividend paid by
the Corporation on such Dividend Payment Date, will accrue and will be payable
(if declared) on the next succeeding Dividend Payment Date to holders of Series
A Preferred Stock on the record date applicable to the next succeeding Dividend
Payment Date or, if the Series A Preferred Stock is called for redemption prior
to such record date, to holders of Series A Preferred Stock on the applicable
redemption date, as the case may be, in addition to any other amounts payable on
such date.
If any such amendment to the Code is enacted that reduces the
Dividends Received Percentage and the reduction in the Dividends Received
Percentage retroactively applies to a Dividend Payment Date as to which the
Corporation previously paid dividends on the Series A Preferred Stock (each, an
"Affected Dividend Payment Date"), additional dividends (the "Additional
Dividends") will accrue and will be payable (if declared) on the next succeeding
Dividend Payment Date (or, if such amendment is enacted after the dividend
payable on such Dividend Payment Date has been declared, on the second
succeeding Dividend Payment Date following the date of enactment) to holders of
record on the record date applicable to such succeeding Dividend Payment Date
or, if the Series A Preferred Stock is called for redemption prior to such
record date, to holders of Series A Preferred Stock on the applicable redemption
date, as the case may be, in an amount equal to the sum, for all Affected
Dividend Payment Dates, of the excess of (x) the product of the dividend paid by
the Corporation on such Affected Dividend Payment Date and the factor determined
in accordance with the DRD Formula (with the DRP used in the DRD Formula equal
to the greater of the Dividends Received Percentage and .50 applied to such
Affected Dividend Payment Date) over (y) the dividend paid by the Corporation on
such Affected Dividend Payment Date. The Corporation will only make one payment
of Additional Dividends for any such amendment.
Notwithstanding the foregoing, no adjustment in the dividends payable
by the Corporation shall be made, and no Post-Declaration Date Dividends or
Additional Dividends shall be payable by the Corporation, in respect of the
enactment of any amendment to the Code 18 months or more after the date of
original issuance of the Series A Preferred Stock.
In the event that the amount of dividends payable per share of the
Series A Preferred Stock is adjusted pursuant to the DRD Formula and/or Post-
Declaration Date Dividends or Additional Dividends are to be paid, the
Corporation shall give notice of each such adjustment and,
A-3
if applicable, any Post-Declaration Date Dividends and Additional Dividends to
the holders of Series A Preferred Stock.
No dividends may be declared or paid or set apart for payment on any
stock of the Company ranking on a parity with the Series A Preferred Stock with
respect to the payment of dividends unless there shall also be or have been
declared and paid or set apart for payment on the Series A Preferred Stock
dividends for all dividend payment periods of the Series A Preferred Stock
ending on or before the dividend payment date of such parity stock, ratably in
proportion to the respective amounts of dividends (x) accumulated and unpaid or
payable on such parity stock, on the one hand, and (y) accumulated and unpaid
through the dividend payment period or periods of the Series A Preferred Stock
next preceding such dividend payment date, on the other hand.
Except as set forth in the preceding paragraph, unless full cumulative
dividends on the Series A Preferred Stock have been paid through the most
recently completed quarterly dividend period for the Series A Preferred Stock,
no dividends (other than in Common Stock of the Corporation) may be paid or
declared and set apart for payment or other distribution made upon the Common
Stock or on any other stock of the Corporation ranking junior to or on a parity
with the Series A Preferred Stock as to dividends, nor may any Common Stock or
any other stock of the Corporation ranking junior to or on a parity with the
Series A Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock; provided, however,
that any moneys theretofore deposited in any sinking fund with respect to any
such stock in compliance with the provisions of such sinking fund may thereafter
be applied to the purchase or redemption of such stock in accordance with the
terms of such sinking fund, regardless of whether at the time of such
application full cumulative dividends upon shares of the Series A Preferred
Stock outstanding to the most recent Dividend Payment Date shall have been paid
or declared and set apart for payment) by the Corporation; provided that any
such junior or parity stock or Common Stock may be converted into or exchanged
for stock of the Corporation ranking junior to the Series A Preferred Stock as
to dividends.
3. Liquidation Preference. The shares of Series A Preferred Stock
shall rank, as to rights to distributions on liquidation, dissolution or winding
up of the Corporation, prior to the shares of Common Stock and any other stock
of the Corporation ranking junior to the Series A Preferred Stock as to rights
upon liquidation, dissolution or winding up of the Corporation, so that in the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the Series A Preferred Stock shall be
entitled to receive out of the assets of the Corporation legally available for
distribution to its stockholders, an amount equal to $100 per share, plus an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid on the shares of Series A Preferred Stock to the date of
payment (including any Post-Declaration Date Dividends and Additional
Dividends), before any distribution of assets is made to holders of shares of
Common Stock or any other class or series of stock of the Corporation that ranks
junior to the Series A Preferred Stock as to rights to distributions
A-4
upon liquidation, dissolution or winding up. The holders of the Series A
Preferred Stock shall not be entitled to receive the preferential amounts as
aforesaid until the liquidation preference of any other stock of the Corporation
ranking senior to the Series A Preferred Stock as to rights to distributions
upon liquidation, dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full. After payment of the
full amount of the preferential amounts as aforesaid, the holders of shares of
Series A Preferred Stock will not be entitled to any further participation in
any distribution of assets by the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of Series A
Preferred Stock and any stock ranking on a parity with the Series A Preferred
Stock as to rights to distributions on liquidation, dissolution or winding up of
the Corporation shall be insufficient to pay in full the preferential amounts to
which such stock would be entitled, then such assets, or the proceeds thereof,
shall be distributable among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts payable
thereon were paid in full. For the purposes hereof, neither a consolidation or
merger of the Corporation with or into any other corporation, nor a merger of
any one or more other corporations with or into the Corporation, nor a sale,
lease, exchange or transfer of all or substantially all of the Corporation's
assets shall be considered a liquidation, dissolution or winding up of the
Corporation.
4. Conversion. The Series A Preferred Stock is not convertible
into, or exchangeable for, other securities or property.
5. Voting Rights. The Series A Preferred Stock, except as provided
herein or as otherwise from time to time required by law, shall have no voting
rights. Whenever, at any time or times, the equivalent of six quarterly
dividends, whether or not consecutive, on the outstanding shares of Series A
Preferred Stock or on any stock ranking on a parity with the Series A Preferred
Stock with respect to the payments of dividends shall be in arrears, the number
of directors of the Corporation shall be increased by two (without duplication
of any increase made pursuant to the terms of any other series of Preferred
Stock) and the holders of the Series A Preferred Stock shall have the right,
with holders of shares of any one or more other series of Preferred Stock
outstanding at the time upon which like voting rights have been conferred and
are exercisable ("Voting Parity Stock"), voting together as a class, to vote for
the election of two directors (hereinafter the "Preferred Directors" and each a
"Preferred Director") to fill such newly created directorships at a special
meeting called at the request of holders of Series A Preferred Stock and/or
Voting Parity Stock entitled to cast not less than 25% of the votes entitled to
be cast by all such Series A Preferred Stock and Voting Parity Stock outstanding
(provided that no such special meeting shall be called during the period within
60 days immediately prior to the date fixed for the next annual meeting of
stockholders) or at the Corporation's next annual meeting of stockholders, and
at each subsequent annual meeting of stockholders until such right shall
terminate as hereinafter provided. Such voting right shall continue until all
dividends accumulated on such shares of Preferred Stock on which voting rights
have been conferred, including the Series A Preferred Stock, for the past
dividend periods and the then current dividend period shall have been fully paid
or declared and a sum sufficient for the payment thereof set aside for payment,
whereupon such right shall terminate, subject to revesting in the event of each
and every subsequent default of the character above mentioned. Upon any
termination of the right of the holders of shares of Series A Preferred Stock
and Voting Parity Stock as a class to vote for directors as provided above, the
term of office of all Preferred Directors then in office shall terminate
immediately and the authorized number of directors shall be reduced by the
number of Preferred Directors elected pursuant hereto. Any vacancy created
A-5
by the removal of any Preferred Director may be filled only by the affirmative
vote of the holders of shares of Series A Preferred Stock voting separately as a
class (together with the holders of shares of Voting Parity Stock). If the
office of any Preferred Director becomes vacant for any reason other than
removal from office, the remaining Preferred Director may choose a successor who
shall hold office for the unexpired term in respect of which such vacancy
occurred. At elections for such directors, each holder of shares of Series A
Preferred Stock shall be entitled to one vote for each share held (the holders
of shares of any other class or series of Voting Parity Stock being entitled to
such number of votes, if any, for each share of such stock held as may be
granted to them).
So long as any shares of any Series A Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote of the
holders of at least 66-2/3% of the shares of such Series A Preferred Stock:
(i) authorize, create or issue any capital stock of the
Corporation ranking, as to dividends or upon liquidation, dissolution or
winding up, prior to such Series A Preferred Stock, or reclassify any
authorized capital stock of the Corporation into any such shares of such
capital stock or issue any obligation or security convertible into or
evidencing the right to purchase any such shares of capital stock, or
(ii) amend, alter or repeal the certificate of designations for
such Series A Preferred Stock, or the Restated Certificate of Incorporation
of the Corporation, whether by merger, consolidation or otherwise, so as to
adversely affect the powers, preferences or special rights of such Series A
Preferred Stock (provided that no such adverse effect shall be deemed to
result if the Series A Preferred Stock is converted or exchanged in a
merger or consolidation into preferred stock of the corporation surviving
such merger or consolidation or of the corporation issuing any securities
into which Common Stock is converted or exchanged in such transaction if
the powers, preferences and rights of such preferred stock are not
different in an adverse respect from those of the Series A Preferred
Stock).
Any increase in the amount of authorized Common Stock, Preference Common Stock
or Preferred Stock, or any increase or decrease in the number of shares of any
series of Preference Common Stock or Preferred Stock or the authorization,
creation and issuance of other classes or series of Common Stock or other stock,
in each case ranking on a parity with or junior to the shares of Series A
Preferred Stock with respect to the payment of dividends and distributions upon
liquidation, dissolution or winding up, shall not be deemed to adversely affect
such powers, preferences or special rights.
The foregoing voting provisions shall not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required or upon
which the holders of Series A Preferred Stock shall be entitled to vote shall be
effected, all outstanding shares of Series A Preferred Stock shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
6. Redemption. The shares of Series A Preferred Stock shall not be
redeemable prior to June 2, 2008. On and after such date, the Corporation, at
its option, may redeem shares of
A-6
the Series A Preferred Stock, as a whole or in part, at any time or from time to
time, at a redemption price equal to $100 per share, plus, in each case, an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid (including any Post-Declaration Date Dividends and
Additional Dividends) to the date fixed for redemption, without interest.
If full cumulative dividends on the Series A Preferred Stock have not
been paid or set apart for payment with respect of all prior dividend periods,
the Series A Preferred Stock may not be redeemed in part and the Corporation may
not purchase or acquire any shares of the Series A Preferred Stock otherwise
than pursuant to a purchase or exchange offer made on the same terms to all
holders of the Series A Preferred Stock. If fewer than all the outstanding
shares of Series A Preferred Stock are to be redeemed, the number of shares to
be redeemed shall be determined by the Board of Directors and the shares to be
redeemed shall be selected by lot or pro rata or by any other means determined
by the Board of Directors in its sole discretion to be equitable.
In the event the Corporation shall redeem shares of Series A Preferred
Stock, written notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock books of the Corporation and
notice shall also be given by publication during the aforesaid period prior to
the redemption date in a newspaper of general circulation in the Borough of
Manhattan, the City of New York; provided, however, that no failure to give such
notice nor any defect therein shall affect the validity of the proceedings for
the redemption of any shares of Series A Preferred Stock to be redeemed except
as to the holder to whom the Corporation has failed to mail said notice or
except as to the holder whose notice was defective. Each such notice shall
state: (a) the redemption date; (b) the number of shares of Series A Preferred
Stock to be redeemed and, if less than all the shares held by such holder are to
be redeemed from such holder, the number of shares to be redeemed from such
holder; (c) the redemption price and any accumulated and unpaid dividends to the
redemption date; (d) the place or places where certificates for such shares are
to be surrendered for payment of the redemption price; and (e) that dividends on
the shares to be redeemed will cease to accrue on such redemption date (unless
the Corporation shall default in providing funds for the payment of the
redemption price of the shares called for redemption at the time and place
specified in such notice).
If a notice of redemption has been given pursuant to this Paragraph 6
and if, on or before the date fixed for redemption, the funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the pro rata benefit of the holders of the shares
of Series A Preferred Stock so called for redemption, then, notwithstanding that
any certificates for such shares have not been surrendered for cancellation, on
the redemption date dividends shall cease to accrue on the shares to be
redeemed, and at the close of business on the redemption date the holders of
such shares shall cease to be stockholders with respect to such shares and shall
have no interest in or claims against the Corporation by virtue thereof and
shall have no voting or other rights with respect to such shares, except the
right to receive the moneys payable upon surrender (and endorsement, if required
by the Corporation) of their certificates, and the shares evidenced thereby
shall no longer be outstanding. The Corporation's obligation to provide funds
for the payment of the redemption price (and any accumulated and unpaid
dividends to the redemption date) of the shares called for redemption shall be
deemed fulfilled if, on or before a redemption date,
A-7
the Corporation shall deposit, with a bank or trust company, or an affiliate of
a bank or trust company, having an office or agency in New York City and having
a capital and surplus of at least $50,000,000, such funds sufficient to pay the
redemption price (and any accumulated and unpaid dividends to the redemption
date) of the shares called for redemption, in trust for the account of the
holders of the shares to be redeemed (and so as to be and continue to be
available therefor), with irrevocable instructions and authority to such bank or
trust company that such funds be delivered upon redemption of the shares of
Series A Preferred Stock so called for redemption.
Subject to applicable escheat laws, any moneys so set aside by the
Corporation and unclaimed at the end of two years from the redemption date shall
revert to the general funds of the Corporation, after which reversion the
holders of such shares so called for redemption shall look only to the general
funds of the Corporation for the payment of the amounts payable upon such
redemption. Any interest accrued on funds so deposited shall be paid to the
Corporation from time to time.
Shares of Series A Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the State of Delaware)
have the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of the preferred stock.
7. Amendment of Resolution. The Board reserves the right from time
to time to increase or decrease the number of shares that constitute the Series
A Preferred Stock (but not below the number of shares thereof then outstanding)
and in other respects to amend this Certificate of Designations within the
limitations provided by law, this resolution and the Restated Certificate of
Incorporation.
8. Rank. Any stock of any class or classes or series of the
Corporation shall be deemed to rank:
(a) prior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if the
holders of stock of such class or classes or series shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of the Series A Preferred Stock;
(b) on a parity with shares of the Series A Preferred Stock, either
as to dividends or upon liquidation, dissolution or winding up, or both, whether
or not the dividend rates, dividend payment dates, or redemption or liquidation
prices per share thereof are different from those of the Series A Preferred
Stock, if the holders of stock of such class or classes or series shall be
entitled by the terms thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation prices, without
preference or priority of one over the other as between the holders of such
stock and the holders of shares of Series A Preferred Stock; and
A-8
(c) junior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if such class
or classes or series shall be Common Stock or if the holders of the Series A
Preferred Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of stock of such class or classes or
series.
The Series A Preferred Stock shall rank, as to dividends and upon
liquidation, dissolution or winding up, senior to the Corporation's Series A
Junior Participating Preferred Stock.
A-9
Exhibit B
Director Designees
------------------
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20 18 16 14
Name of Director Directors Directors I Directors Directors Remarks
---------------- --------- --------- ----------- --------- ----------------------------------------
-------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ To resign and become Chairman Emeritus
honorary, non-voting director
-------------------------------------------------------------------------------------------------------------------------
DVN Designees*
-------------
1. J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ May-00 May-00 May-00 May-00 President and Chief Executive Officer
2. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ May-00 May-00 May-01 May-01
3. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ May-00 ▇▇▇▇ ▇▇▇▇▇ Representative
4. ▇▇▇▇ ▇. ▇▇▇▇ May-00 May-00 May-00 May-00
5. ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ May-01 May-01 ▇▇▇▇ ▇▇▇▇▇ Representative
6. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ May-01 May-01 May-01 ▇▇▇▇ ▇▇▇▇▇ Representative
7. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ May-01 May-01 May-01 May-01
8. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ May-02 May-02 May-02 May-02
9. ▇.▇. ▇▇▇▇▇▇▇, ▇▇. May-02 May-02 May-02 May-02
10. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ May-02 May-02 May-02 May-02
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PZE Designees**
-------------
1. New director May-00
2. New director May-00 May-00
3. New director May-00 May-00 May-00
4. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ May-00 May-00 May-00 May-00
5. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ May-01 May-01 May-01 May-00
6. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ May-01 May-01 May-01 May-01
7. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ May-01 May-01 May-01 May-01
8. ▇▇▇▇▇ ▇. ▇▇▇▇ May-02 May-02 May-02 May-02 Chairman of the Board
9. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. May-02 May-02 May-02 May-02
10. New director May-02 May-02 May-02 May-02 Mutually approved by Chairman and
President
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--------------------
* Vacancies to be filled by remaining DVN Designees so long as ▇▇▇▇ ▇▇▇▇▇
representatives are members of the Board.
** Vacancies to be filled by remaining PZE Designees so long as ▇▇▇▇ ▇▇▇▇▇
representatives are members of the Board
-55-
Schedule 3.1
------------
Principal Officers of Newco
---------------------------
Chairman - ▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer - J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
The remaining officers will be designated by DVN.
Schedule 7.14
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Employee Benefit Matters
------------------------
1. With respect to an award consisting of a conditional or restricted share
unit award of PZE Common Stock outstanding as of the Effective Time, such
award shall be converted as of the Effective Time into the same conditional
or restricted share unit awards of Newco Common Stock with the number of
shares of Newco Common Stock covered by such award being equal to the
number of shares of PZE Common Stock covered by the award prior to the
Effective Time multiplied by the PZE Exchange Ratio. All vesting
conditions and time periods shall remain the same and apply to the
converted awards of Newco Common Stock.
2. Subsequent to the Effective Time, ▇▇▇▇▇ ▇. ▇▇▇▇ will receive an annual
salary from Newco of $200,000 payable monthly, plus normal business
expenses, and Newco will make available to ▇▇. ▇▇▇▇ office space in Newco's
corporate headquarters with access to secretarial and administrative
services. ▇▇. ▇▇▇▇ will be issued either (i) 15,000 shares of Newco Common
Stock immediately after the Effective Time or (ii) 33,520 shares of PZE
Common Stock immediately prior the Effective Time. These shares will be
restricted, with restrictions ending for 1/3 of the shares on each of the
first, second and third anniversaries of the Effective Time. Restrictions
end on all shares in the event of death, disability or removal of ▇▇. ▇▇▇▇
as Chairman of the Board of Newco.