<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): DECEMBER 31, 1996
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OKLAHOMA 1-10067 73-1474008
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification
Number)
20 NORTH BROADWAY, SUITE 1500, OKLAHOMA CITY, OK 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Page 1 of 46 total pages
(Exhibit Index is found on page 20)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
TERMS OF THE ACQUISITION
On December 31, 1996, Devon Energy Corporation ("Devon") acquired all
of Kerr-McGee Corporation's ("Kerr-McGee") North American onshore oil and gas
exploration and production business and properties (the "KMG-NAOS Properties")
in exchange for 9,954,000 shares of Devon common stock. The acquisition of the
KMG-NAOS Properties had previously been approved by Devon's shareholders at a
special meeting held on December 6, 1996.
The transaction (the "Transaction") was made pursuant to an October
17, 1996, Agreement and Plan of Merger among Devon , Kerr-McGee and certain of
their subsidiaries (the "Merger Agreement"). According to the terms of the
Merger Agreement, the acquisition of the KMG-NAOS Properties was accomplished
at closing in two simultaneous transactions. First, Kerr-McGee North American
Onshore Corporation, a wholly-owned Oklahoma subsidiary of Kerr-McGee
("KMG-US"), was merged with and into Devon Energy Corporation (Nevada), a
wholly-owned Nevada subsidiary of Devon ("Devon Nevada"), in exchange for
7,554,880 shares of Devon's common stock. KMG-US owned all of Kerr-McGee's
U.S. onshore oil and gas exploration and production business and properties.
Second, Devon acquired all of the outstanding capital stock of Kerr-McGee
Canada Onshore Ltd., a wholly-owned subsidiary of Kerr-McGee organized under
the laws of Alberta, Canada ("KMG-CN"), in exchange for 2,399,120 shares of
Devon's common stock. KMG-CN owned all of Kerr-McGee's Canadian oil and gas
exploration and production business and properties. After Devon acquired the
capital stock of KMG-CN, Devon consolidated KMG-CN into Devon Energy Canada
Corporation ("Devon Canada"), a wholly-owned subsidiary of Devon. As a result of
the Transaction, the properties and assets of KMG-US became part of the
properties and assets of Devon Nevada and KMG-CN's properties and assets became
part of the properties and assets of Devon Canada.
Upon closing of the Transaction, Kerr-McGee owns 9,954,000 shares of
Devon's common stock, which represents 30.9695% (26.1938% on a fully-diluted
basis) of the Devon common stock outstanding as of December 31, 1996. The
number of shares involved in the Transaction was determined based on a number
of measures, including the contribution the KMG-NAOS Properties could make to
Devon's cash flow and earnings per share, reserves per share, net asset value
and liquidity. Because of this relatively large ownership position, Kerr-McGee
has negotiated arrangements by which Kerr-McGee can (a) exercise influence over
the management and policies of Devon through representation on Devon's board of
directors in proportion to its ownership of Devon's outstanding common stock and
(b) be assured of the cooperation of Devon management if Kerr-McGee wishes to
sell or transfer its shares of Devon's common stock. Because these arrangements
place Kerr-McGee in a position to cause or substantially influence a change in
control of Devon, or a liquidation or disposition of Devon's assets, Devon has
negotiated arrangements which limit Kerr-McGee's ability to (a) acquire
additional shares of Devon's common stock; (b) dispose of a large portion of its
Devon common stock to a third party; and (c) enter into transactions which would
result in a change in control of Devon. Finally, both Devon and Kerr-McGee have
negotiated arrangements so that Devon's existing anti-takeover defenses would
remain in force for both third parties and for certain further transactions with
Kerr-McGee.
Devon recorded a value of approximately $222 million for the KMG-NAOS
Properties as of the closing date. Such value was based on the value of the
shares of Devon common stock issued as determined pursuant to generally accepted
accounting principles. An additional $32 million was allocated to the KMG-NAOS
Properties for the deferred income tax liability created as a result of the
transaction. The amount recorded for the KMG-NAOS Properties (exclusive of the
deferred tax liability) includes approximately $193 million allocated to proved
oil and gas reserves and $29 million allocated to undeveloped leasehold
acquired. Although the $193 million initially recorded to proved properties is
expected to be revised when amounts are reallocated to other assets acquired and
liabilities assumed prior to Devon issuing its December 31, 1996, balance sheet,
the revised amount recorded to proved reserves is not expected to be materially
different from the $193 million.
2
<PAGE> 3
PROPERTIES ACQUIRED
Devon's property base has been significantly expanded by the
Transaction. Estimated proved reserves associated with the KMG-NAOS Properties
as of December 31, 1995, were 43 million barrels of oil equivalent ("MMBoe") in
the United States and 18 MMBoe in Canada. These reserves are approximately 44%
oil and natural gas liquids and 56% natural gas. The United States assets
acquired are located predominantly in the Rocky Mountain, Permian Basin and
Mid-Continent areas of the country. All of these areas were already core areas
of Devon's operations. The $29 million allocated to undeveloped leasehold is
represented by an estimated 282,000 net undeveloped acres of leasehold and
mineral interests in the United States and 88,000 net undeveloped acres in
Canada.
FINANCIAL EFFECTS OF THE TRANSACTION
The Transaction is being accounted for under the purchase method of
accounting for business combinations. Pursuant to this method, Devon began
recording in its financial statements the revenues and expenses associated with
the KMG-NAOS Properties as of the closing date of December 31, 1996.
Accordingly, the KMG-NAOS Properties will have no effect on Devon's 1996
consolidated operations. The KMG-NAOS Properties are expected to materially
affect Devon's revenues, net earnings and operating cash flow for the year 1997.
However, the estimated impact of the KMG-NAOS Properties on 1997's results is
not known as of this date.
Item 7 of this report on Form 8-K includes certain historical financial
information regarding the KMG-NAOS Properties for the three-year period ended
December 31, 1995 and the first nine months of 1995 and 1996. Item 7 also
includes certain pro forma financial information for Devon for the year 1995 and
the first nine months of 1996. The future results of Devon and the KMG-NAOS
Properties may vary significantly from that presented in the pro forma and
historical financial information included in Item 7 due to normal oil and
natural gas production declines, changes in prices received for oil, gas and
natural gas liquids, Devon's future development of such properties, the
assumptions and estimates inherent in preparing the pro forma financial
information, and other factors. Therefore, the financial information presented
in Item 7 of this report is not necessarily indicative of the future operations
of Devon consolidated or the KMG-NAOS Properties.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of the KMG-NAOS Properties
Report of Independent Public Accountants
Statements of Revenues and Direct Operating Expenses
of Oil and Gas Properties Included in the
Agreement and Plan of Merger Among Devon
Energy Corporation, Devon Energy Corporation
(Nevada), Kerr-McGee Corporation, Kerr-McGee
North American Onshore Corporation, and
Kerr-McGee Canada Onshore Ltd.
Notes to Statements of Revenues and Direct Operating
Expenses
(b) Pro Forma Financial Information - Devon Energy Corporation
Unaudited Pro Forma Balance Sheet as of
September 30, 1996
Unaudited Pro Forma Statements of Operations for the
Year Ended December 31, 1995 and the Nine
Months Ended September 30, 1996
Notes to Unaudited Pro Forma Financial Statements
3
<PAGE> 4
(c) Exhibits
Exhibit
Number
-------
2 Agreement and Plan of Merger among Registrant, Devon
Energy Corporation (Nevada), Kerr-McGee Corporation,
Kerr-McGee North American Onshore Corporation and
Kerr-McGee Canada Onshore Ltd., dated October 17,
1996 (incorporated by reference to Addendum A to
Registrant's definitive proxy statement for a special
meeting of shareholders, filed on November 6, 1996).
3 Certificate of Amendment of Certificate of Incorporation
4.1 First Amendment to Rights Agreement between
Registrant and the First National Bank of Boston,
dated October 16, 1996 (incorporated by reference to
Exhibit H-1 to Addendum A to Registrant's definitive
proxy statement for a special meeting of
shareholders, filed on November 6, 1996).
4.2 Second Amendment to Rights Agreement between
Registrant and the First National Bank of Boston,
dated December 31, 1996.
4.3 Stock Rights and Restrictions Agreement, dated as of
December 31, 1996, between Registrant and Kerr-McGee
Corporation
4.4 Registration Rights Agreement, dated December 31, 1996,
by and between Registrant and Kerr-McGee Corporation
23 Consent of Arthur Andersen LLP
__________________________
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DEVON ENERGY CORPORATION
Date: January 14, 1997 /s/DANNY J. HEATLY
------------------
Danny J. Heatly
Controller
4
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kerr-McGee Corporation:
We have audited the accompanying statements of revenues and direct
operating expenses of oil and gas properties included in the Agreement and Plan
of Merger among Devon Energy Corporation, Devon Energy Corporation (Nevada),
Kerr-McGee Corporation, Kerr-McGee North American Onshore Corporation, and
Kerr-McGee Canada Onshore Ltd. (the "Properties") for the three years in the
period ended December 31, 1995. These statements are the responsibility of
Kerr-McGee Corporation's management. Our responsibility is to express an opinion
on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and direct operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and, as described in Note 1, exclude general
and administrative expenses, depreciation, depletion and amortization, interest,
income tax expenses, and other items as these expenses would not be comparable
to those resulting from the proposed future operations of the Properties.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of the Properties for the three years in the period
ended December 31, 1995.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
October 18, 1996
5
<PAGE> 6
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTIES INCLUDED IN THE AGREEMENT
AND PLAN OF MERGER AMONG DEVON ENERGY
CORPORATION, DEVON ENERGY CORPORATION (NEVADA),
KERR-MCGEE CORPORATION, KERR-MCGEE NORTH AMERICAN
ONSHORE CORPORATION, AND KERR-MCGEE CANADA ONSHORE LTD.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil sales................... $ 67,852,490 $ 46,365,811 $ 56,651,121 $41,771,127 $50,318,946
Gas sales................... 65,721,983 65,544,740 44,221,516 32,799,703 42,664,082
Natural gas liquids sales... 4,265,824 3,493,232 3,659,412 2,855,023 3,166,382
Gas Processing and other.... 4,275,871 3,805,029 3,746,813 3,452,659 2,225,401
------------ ------------ ------------ ----------- -----------
Total revenues...... 142,116,168 119,208,812 108,278,862 80,878,512 98,374,811
------------ ------------ ------------ ----------- -----------
DIRECT OPERATING EXPENSES:
Production and operating
expenses................. 37,893,561 31,733,902 32,922,740 24,554,260 25,581,750
------------ ------------ ------------ ----------- -----------
REVENUES IN EXCESS OF DIRECT
OPERATING EXPENSES.......... $104,222,607 $ 87,474,910 $ 75,356,122 $56,324,252 $72,793,061
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTIES INCLUDED IN THE AGREEMENT
AND PLAN OF MERGER AMONG DEVON ENERGY
CORPORATION, DEVON ENERGY CORPORATION (NEVADA),
KERR-MCGEE CORPORATION, KERR-MCGEE NORTH AMERICAN
ONSHORE CORPORATION, AND KERR-MCGEE CANADA ONSHORE LTD.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying statements present revenues and direct operating expenses
of working and royalty interests in oil, gas and natural gas liquids properties
located in the United States and Canada and three gas processing plants included
in the Agreement and Plan of Merger among Devon Energy Corporation ("Devon"),
Devon Energy Corporation (Nevada), Kerr-McGee Corporation, Kerr-McGee North
American Onshore Corporation, and Kerr-McGee Canada Onshore Ltd. (the
"Properties").
The accompanying statements of revenues and direct operating expenses were
prepared on the accrual basis of accounting and relate only to the Properties
described above. These historical results may not be indicative of future
operations. The statements do not include general and administrative expenses,
interest, depreciation, depletion and amortization, Federal and state income
taxes and other items because such amounts would not be indicative of those
expenses which will be incurred by Devon.
The unaudited statements of revenues and direct operating expenses for the
nine month periods ended September 30, 1995 and 1996, in the opinion of
management, were prepared on a basis consistent with the audited statements of
revenues and direct operating expenses of the Properties for the three years in
the period ended December 31, 1995, and include all adjustments, consisting only
of normal recurring accruals, necessary to present fairly the revenues and
direct operating expenses for the indicated periods.
Gas Balancing Arrangements
Gas balancing arrangements with partners in gas wells are accounted for by
the entitlements method.
Cost of Injected Gas
The cost of injected gas is deferred until sold at completion of miscible
gas flood projects.
Foreign Currency
The U.S. dollar is the functional currency for the Properties located in
Canada. Revenues and direct operating expenses incurred in Canadian dollars have
been remeasured to U.S. dollars using monthly average exchange rates. Foreign
currency transaction gains and losses have not been included in the accompanying
statements because such amounts would not be indicative of those expenses which
will be incurred by Devon.
Use of Estimates
The preparation of the statements of revenues and direct operating expenses
in conformity with generally accepted accounting principles requires Kerr-McGee
Corporation to make estimates and assumptions that affect the reported amounts
of revenues and direct operating expenses during the reporting periods. Actual
results could differ from those estimates as additional information becomes
available.
2. RELATED PARTY TRANSACTIONS:
Gas Sales
Beginning in March 1994, Kerr-McGee Corporation sold a portion of its share
of gas produced from the domestic Properties to a gas marketing affiliate. The
terms agreed to by these two related entities provided for a price which was
equal to that published in an independent index of monthly prices for gas
7
<PAGE> 8
produced in specific regions. These gas sales represented 18% and 32% of total
gas revenues for the years ended December 31, 1994 and 1995, respectively.
Kerr-McGee Corporation believes these sales were made at prices which
approximate the prices which would have been paid by an unrelated party.
Oil Sales
Kerr-McGee Corporation sold a portion of its share of oil produced from the
domestic Properties to a crude oil refining affiliate until August 1995. These
oil sales represented 51%, 43% and 27% of total oil revenues for the years ended
December 31, 1993, 1994 and 1995, respectively. Kerr-McGee Corporation believes
these sales were made at prices which approximate the prices which would have
been paid by an unrelated party.
Overhead Charges
Charges from an affiliate for monthly overhead allowed under joint
operating agreements for operated properties totaling $3,053,444, $3,086,334 and
$3,450,114 for the years ended December 31, 1993, 1994 and 1995, respectively,
are included in the accompanying statements as direct operating expenses.
3. RESULTS OF OPERATIONS FROM CRUDE OIL AND NATURAL GAS ACTIVITIES:
The results of operations from crude oil and natural gas activities of the
Properties for the three years ended December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
REVENUES
-------------------------------------- REVENUES IN
SALES TO SALES TO DIRECT EXCESS OF DIRECT
UNAFFILIATED AFFILIATED OPERATING OPERATING
ENTITIES ENTITIES TOTAL EXPENSES EXPENSES
------------ ---------- -------- --------- ----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1993 --
Domestic............................ $ 62,976 $ 34,581 $ 97,557 $28,724 $ 68,833
Canada.............................. 40,283 -- 40,283 8,154 32,129
-------- --------- -------- ------- --------
Total crude oil and natural gas
activities..................... 103,259 34,581 137,840 36,878 100,962
Other(1)............................ 4,276 -- 4,276 1,015 3,261
-------- --------- -------- ------- --------
Total....................... $107,535 $ 34,581 $142,116 $37,893 $104,223
======== ========= ======== ======= ========
1994 --
Domestic............................ $ 41,069 $ 32,144 $ 73,213 $24,280 $ 48,933
Canada.............................. 42,191 -- 42,191 6,093 36,098
-------- --------- -------- ------- --------
Total crude oil and natural gas
activities..................... 83,260 32,144 115,404 30,373 85,031
Other(1)............................ 3,805 -- 3,805 1,361 2,444
-------- --------- -------- ------- --------
Total....................... $ 87,065 $ 32,144 $119,209 $31,734 $ 87,475
======== ========= ======== ======= ========
1995 --
Domestic............................ $ 40,282 $ 29,420 $ 69,702 $24,543 $ 45,159
Canada.............................. 34,830 -- 34,830 7,208 27,622
-------- --------- -------- ------- --------
Total crude oil and natural gas
activities..................... 75,112 29,420 104,532 31,751 72,781
Other(1)............................ 3,747 -- 3,747 1,172 2,575
-------- --------- -------- ------- --------
Total....................... $ 78,859 $ 29,420 $108,279 $32,923 $ 75,356
======== ========= ======== ======= ========
</TABLE>
- ---------------
(1) Includes gas processing plant revenues, Canadian tax credits, and other
items that do not fit the definition of crude oil and natural gas activities
but have been included above to reconcile to the Statements of Revenues and
Direct Operating Expenses.
8
<PAGE> 9
4. SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED):
Crude Oil, Condensate and Natural Gas Net Reserves
The estimates of proved reserves have been prepared by Kerr-McGee
Corporation's geologists and engineers. Such estimates include reserves on
certain properties that are partially undeveloped and reserves that may be
obtained in the future by secondary recovery operations now in operation or for
which successful testing has been demonstrated. The following table summarizes
the changes in the estimated quantities of the Properties' crude oil, natural
gas liquids and natural gas reserves for the three years ended December 31,
1995:
<TABLE>
<CAPTION>
CRUDE OIL NATURAL GAS LIQUIDS NATURAL GAS
(IN THOUSANDS OF BARRELS) (IN THOUSANDS OF BARRELS) (IN MILLIONS OF CUBIC FEET)
-------------------------- ------------------------- ----------------------------
DOMESTIC CANADA TOTAL DOMESTIC CANADA TOTAL DOMESTIC CANADA TOTAL
-------- ------ ------ -------- ------ ----- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved developed and undeveloped
reserves --
Balance December 31, 1992......... 19,008 9,210 28,218 1,087 852 1,939 183,300 81,300 264,600
Revisions of previous estimates,
extensions, discoveries and
other additions............... 1,164 1,119 2,283 (118) 241 123 (3,800) 10,135 6,335
Production...................... (2,886) (1,227) (4,113) (166) (215) (381) (25,500) (13,600) (39,100)
------ ----- ------ ----- ---- ----- ------- ------- -------
Balance December 31, 1993......... 17,286 9,102 26,388 803 878 1,681 154,000 77,835 231,835
Revisions of previous estimates,
extensions, discoveries and
other additions............... 772 1,060 1,832 (25) 50 25 19,400 (918) 18,482
Production...................... (2,120) (1,146) (3,266) (138) (192) (330) (24,300) (13,700) (38,000)
------ ----- ------ ----- ---- ----- ------- ------- -------
Balance December 31, 1994......... 15,938 9,016 24,954 640 736 1,376 149,100 63,217 212,317
Revisions of previous estimates,
extensions, discoveries and
other additions............... 3,618 1,268 4,886 (19) -- (19) 14,723 (930) 13,793
Production...................... (2,189) (1,250) (3,439) (134) (175) (309) (24,800) (12,600) (37,400)
------ ----- ------ ----- ---- ----- ------- ------- -------
Balance December 31, 1995......... 17,367 9,034 26,401 487 561 1,048 139,023 49,687 188,710
====== ===== ====== ===== ==== ===== ======= ======= =======
Proved developed reserves --
December 31, 1992................. 10,987 9,207 20,194 977 852 1,829 155,200 80,600 235,800
December 31, 1993................. 14,123 9,099 23,222 798 878 1,676 152,200 77,135 229,335
December 31, 1994................. 13,500 9,013 22,513 635 736 1,371 147,600 62,517 210,117
December 31, 1995................. 14,286 9,031 23,317 486 561 1,047 138,100 48,987 187,087
</TABLE>
9
<PAGE> 10
Standardized Measure of and Reconciliation of Changes in Discounted Future Net
Cash Flows (Unaudited)
The standardized measure of future net cash flows presented in the
following table was computed using the year-end prices and costs and a 10%
discount factor. No future income tax expense was computed as taxable income
arising from the operations of the Properties accrues to the owner. Kerr-McGee
Corporation cautions that actual future net cash flows may vary considerably
from these estimates. Although the estimates of total reserves, development
costs, and production rates for the Properties were based upon the best
information available, the development and production of the oil and gas
reserves may not occur in the periods assumed. Actual prices realized and costs
incurred may vary significantly from those used. Therefore, such estimated
future net cash flow computations should not be considered to represent
Kerr-McGee Corporation's estimate of the expected revenues or the current value
of existing proved reserves of the Properties.
<TABLE>
<CAPTION>
FUTURE STANDARDIZED
FUTURE DEVELOPMENT MEASURE OF
CASH AND PRODUCTION FUTURE NET 10% ANNUAL DISCOUNTED FUTURE
INFLOWS COSTS CASH FLOWS DISCOUNT NET CASH FLOWS
-------- -------------- ---------- ---------- -----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1993 --
Domestic.......................... $535,324 $312,250 $223,074 $ 82,474 $ 140,600
Canada............................ 246,370 56,666 189,704 69,904 119,800
-------- -------- -------- -------- ---------
Total..................... $781,694 $368,916 $412,778 $152,378 $ 260,400
======== ======== ======== ======== =========
1994 --
Domestic.......................... $490,704 $256,839 $233,865 $ 90,765 $ 143,100
Canada............................ 218,045 47,514 170,531 69,031 101,500
-------- -------- -------- -------- ---------
Total..................... $708,749 $304,353 $404,396 $159,796 $ 244,600
======== ======== ======== ======== =========
1995 --
Domestic.......................... $535,547 $200,509 $335,038 $149,834 $ 185,204
Canada............................ 230,454 69,787 160,667 58,367 102,300
-------- -------- -------- -------- ---------
Total..................... $766,001 $270,296 $495,705 $208,201 $ 287,504
======== ======== ======== ======== =========
</TABLE>
The changes in the standardized measure of future net cash flows are
presented below for each of the three years in the period ended December 31,
1995:
<TABLE>
<CAPTION>
1993 1994 1995
--------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net change in sales, transfer prices, and production
costs.................................................... $ (55,091) $ 970 $ 28,524
Changes in estimated future development costs.............. (290) (7,435) (17,761)
Sales and transfers less production costs.................. (102,499) (86,650) (73,860)
Changes due to extensions, discoveries, revisions of
quantity estimates, etc. ................................ 28,289 36,182 67,772
Current period development costs........................... 22,870 20,648 23,546
Accretion of discount...................................... 33,900 26,040 24,470
Timing and other........................................... (5,779) (5,555) (9,787)
--------- -------- --------
Net change............................................... (78,600) (15,800) 42,904
Total at beginning of year................................. 339,000 260,400 244,600
--------- -------- --------
Total at end of year....................................... $ 260,400 $244,600 $287,504
========= ======== ========
</TABLE>
10
<PAGE> 11
PRO FORMA FINANCIAL INFORMATION
Set forth below is certain unaudited pro forma financial information with
respect to the KMG-NAOS Properties including an unaudited pro forma balance
sheet as of September 30, 1996, and unaudited pro forma statements of
operations for the year ended December 31, 1995, and the nine months ended
September 30, 1996. The balance sheet has been prepared on the basis that the
Transaction occurred on September 30, 1996. The statements of operations have
been prepared on the basis that the Transaction occurred on January 1, 1995.
The Transaction is being accounted for under the purchase method of accounting.
The unaudited pro forma financial statements should be read in conjunction with
the notes thereto immediately following such pro forma financial statements,
and the statements of revenues and direct operating expenses of the KMG-NAOS
Properties and related notes, which are included elsewhere herein. The pro
forma results of operations are not necessarily indicative of the future
operations of Devon.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
RELATED TO
THE KMG-NAOS
DEVON PROPERTIES DEVON
HISTORICAL (NOTE 4) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Assets:
Current assets........................ $ 28,347 -- $ 28,347
Property and equipment, net........... 424,612 $221,576(a) 678,397
32,209(c)
Other assets, net..................... 8,398 -- 8,398
--------- -------- ---------
Total assets.................. $ 461,357 $253,785 $ 715,142
========= ======== =========
Liabilities:
Current liabilities................... 13,304 800(b) 14,104
Revenues and royalties payable........ 1,051 -- 1,051
Other liabilities..................... 10,258 -- 10,258
Long-term debt........................ 5,000 -- 5,000
Deferred income taxes................. 44,998 32,209(c) 77,207
Company-obligated mandatorily redeemable
convertible preferred securities of
susidiary trust holding solely
6.5% convertible junior subordinated
debentures of Devon Energy
Corporation........................... 149,500 -- 149,500
Stockholders' equity:
Preferred stock....................... -- -- --
Common stock.......................... 2,213 995(b) 3,208
Additional paid-in capital............ 167,588 219,781(b) 387,369
Retained earnings..................... 67,445 -- 67,445
--------- -------- ---------
Total stockholders' equity......... 237,246 220,776 458,022
--------- -------- ---------
Total liabilities and stockholders'
equity........................... $ 461,357 $253,785 $ 715,142
========= ======== =========
</TABLE>
See accompanying notes to pro forma financial statements.
11
<PAGE> 12
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA EFFECTS OF ADJUSTMENTS
--------------------------------------- RELATED TO
TCP KMG-NAOS THE KMG-NAOS
DEVON WORLAND SECURITIES PROPERTIES PROPERTIES DEVON
HISTORICAL PROPERTIES (NOTE 2) OFFERING (NOTE 2) HISTORICAL (NOTE 4) PRO FORMA
---------- ------------------- ----------------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil sales................. $ 55,290 $ 931 $ -- $ 56,651 -- $112,872
Gas sales................. 50,732 2,143 -- 44,222 -- 97,097
Natural gas liquids
sales................... 6,404 2,275 -- 3,659 -- 12,338
Other..................... 877 -- -- 3,747 -- 4,624
-------- ------- ------- -------- -------- --------
Total revenues...... 113,303 5,349 -- 108,279 -- 226,931
-------- ------- ------- -------- -------- --------
Costs and expenses:
Lease operating
expenses................ 27,289 1,609 -- 26,265 -- 55,163
Production taxes.......... 6,832 221 -- 6,658 -- 13,711
Depreciation, depletion
and amortization........ 38,090 2,284 166 -- 45,182(d) 85,722
General and administrative
expenses................ 8,419 -- -- -- 5,000(e) 13,419
Interest expense.......... 7,051 3,025 (9,501) -- -- 575
Distributions on preferred
securities of subsidiary
trust................... -- -- 9,718 -- -- 9,718
-------- ------- ------- -------- -------- --------
Total costs and
expenses.......... 87,681 7,139 383 32,923 50,182 178,308
-------- ------- ------- -------- -------- --------
Earnings (loss) before
income taxes.............. 25,622 (1,790) (383) 75,356 (50,182) 48,623
Income tax expense
(benefit):
Current................... 4,495 (358) (77) -- 4,511(f) 8,571
Deferred.................. 6,625 (27) (69) -- 6,328(f) 12,857
-------- ------- ------- -------- -------- --------
Total income tax
expense
(benefit)......... 11,120 (385) (146) -- 10,839(f) 21,428
-------- ------- ------- -------- -------- --------
Net earnings (loss)......... $ 14,502 $(1,405) $ (237) $ 75,356 $(61,021) $ 27,195
======== ======= ======= ======== ======== ========
Net earnings (loss) per
average common share
outstanding............... $ 0.66 $ 0.85
======== ========
Weighted average common
shares outstanding........ 22,074 32,028
======== ========
</TABLE>
See accompanying notes to pro forma financial statements.
12
<PAGE> 13
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS
EFFECTS OF RELATED TO
TCP KMG-NAOS THE KMG-NAOS
DEVON SECURITIES PROPERTIES PROPERTIES DEVON
HISTORICAL OFFERING (NOTE 2) HISTORICAL (NOTE 4) PRO FORMA
---------- ----------------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Oil sales.................................... $ 55,995 $ -- $ 50,319 $ -- $106,314
Gas sales.................................... 44,124 -- 42,664 -- 86,788
Natural gas liquids sales.................... 9,366 -- 3,166 -- 12,532
Other........................................ 1,335 -- 2,226 -- 3,561
-------- ------- -------- -------- --------
Total revenues......................... 110,820 -- 98,375 -- 209,195
-------- ------- -------- -------- --------
Costs and expenses:
Lease operating expenses..................... 22,796 -- 19,399 -- 42,195
Production taxes............................. 7,075 -- 6,183 -- 13,258
Depreciation, depletion and amortization..... 31,635 83 -- 34,158(d) 65,876
General and administrative expenses.......... 6,664 -- -- 3,750(e) 10,414
Interest expense............................. 5,173 (4,577) -- -- 596
Distributions on preferred securities of
subsidiary trust........................... 2,324 4,964 -- -- 7,288
-------- ------- -------- -------- --------
Total costs and expenses............... 75,667 470 25,582 37,908 139,627
-------- ------- -------- -------- --------
Earnings (loss) before income taxes............ 35,153 (470) 72,793 (37,908) 69,568
Income tax expense (benefit):
Current...................................... 4,570 (94) -- 7,036(f) 11,512
Deferred..................................... 10,546 (85) -- 6,807(f) 17,268
-------- ------- -------- -------- --------
Total income tax expense (benefit)..... 15,116 (179) -- 13,843(f) 28,780
-------- ------- -------- -------- --------
Net earnings (loss)............................ $ 20,037 $ (291) $ 72,793 $(51,751) $ 40,788
======== ======= ======== ======== ========
Net earnings (loss) per average common share
outstanding.................................. $ 0.91 $ 1.27
======== ========
Weighted average common shares outstanding..... 22,122 32,076
======== ========
</TABLE>
See accompanying notes to pro forma financial statements.
13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma financial information is presented to
reflect the consummation of the Transaction as described elsewhere herein. The
unaudited pro forma balance sheet is presented as if the Transaction occurred on
September 30, 1996. The unaudited pro forma statements of operations are
presented as if the Transaction occurred on January 1, 1995.
The accompanying unaudited pro forma financial information has been
prepared based on estimates and assumptions deemed by Devon to be appropriate
and does not purport to be indicative of the financial position or results of
operations which would actually have been attained if the Transaction had
occurred as presented in such statements or which may be obtained in the future.
In addition, future results may vary significantly from the results reflected in
such statements due to normal oil and natural gas production declines, changes
in prices received for oil, gas and NGLs, future acquisitions and other factors.
The pro forma financial information should be read in conjunction with the
statements of revenues and direct operating expenses of the KMG-NAOS Properties
which are included elsewhere herein.
2. ADJUSTMENTS TO DEVON'S HISTORICAL OPERATING RESULTS
The TCP Securities Offering. The historical Devon statements of operations
for the year ended December 31, 1995 and the nine months ended September 30,
1996, have been adjusted for the pro forma effects of the offering on July 10,
1996, of $149.5 million of certain trust convertible preferred securities (the
"TCP Securities"). The net proceeds from the TCP Securities offering of $145
million, along with $10 million of excess cash on hand, were used on July 10,
1996, to retire Devon's outstanding long-term debt.
The adjustments to the historical statements of operations for the TCP
Securities offering assume that the offering was completed on January 1, 1995,
and that the proceeds were used to retire long-term debt on that date.
Therefore, the applicable amount of interest expense has been reduced, and
replaced with the distributions required on the TCP Securities at the
distribution rate of 6.5% per year. The increase to depreciation, depletion and
amortization expense represents the amortization of the $5 million of offering
costs.
The TCP Securities offering is not related to the Transaction. However, it
is being adjusted for in the accompanying pro forma statements due to the effect
which the offering has on Devon's future capital resources by increasing the
unused portion of Devon's credit lines.
The Worland Properties. The historical Devon statement of operations used
in preparing the pro forma statement of operations for the year ended December
31, 1995, has been adjusted for the pro forma effects of the acquisition by
Devon of certain properties located in Wyoming (the "Worland Properties"). The
acquisition of the Worland Properties closed on December 18, 1995. The pro forma
effects of the Worland Properties presented in the 1995 pro forma statement of
operations reflect the effects of the Worland Properties as if they had been
acquired on January 1, 1995. The pro forma effects of the Worland Properties
represent their historical operating results, adjusted for three factors. First,
an additional $2.3 million of depreciation, depletion and amortization expense
is included. This amount is based on the purchase price paid for the Worland
Properties, and the pro forma oil and gas reserves and production amounts.
Second, an
14
<PAGE> 15
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 -- (CONTINUED)
additional $3.0 million of interest expense is included. This amount is based on
the amount of the purchase price financed through Devon's credit lines and
Devon's 1995 average interest rates. And third, income tax expense has been
reduced by $0.4 million. This amount is based on the pre-tax effects of the pro
forma assumptions and their pro forma effect on Devon's tax attributes.
The pro forma 1995 effects of the Worland Properties do not include the
expected impact from Devon's future drilling and development plans for such
properties. Therefore, such pro forma results are not indicative of the future
impact which the Worland Properties are expected to have on Devon's operations.
3. METHOD OF ACCOUNTING FOR THE TRANSACTION
The assets acquired will be accounted for at their estimated "fair
values," as required by the purchase method of accounting for business
combinations.
4. PRO FORMA ADJUSTMENTS RELATED TO THE KMG-NAOS PROPERTIES
The accompanying pro forma balance sheet includes the following
adjustments:
(a) To record the purchase of the KMG-NAOS Properties based on the
fair value of the Devon Common Stock issued as described in adjustment (b).
Included in the total value recorded for the KMG-NAOS Properties is $29
million for undeveloped leasehold.
(b) To increase Devon's common stock and additional paid-in capital
amounts for the issuance of 9,954,000 shares of Devon Common Stock. Current
liabilities have been increased, and additional paid-in capital has been
decreased, by $0.8 million of costs estimated to be incurred in connection
with issuing the additional shares of Devon Common Stock to Kerr-McGee.
(c) To increase the recorded value of the oil and gas properties
acquired by $32 million of deferred income taxes. This adjustment equals
the deferred income tax effect of the difference between the fair value
assigned to the oil and gas properties and their basis for income tax
purposes. Devon's basis for income tax purposes in the acquired properties
is the same as the KMG-NAOS Properties' tax basis.
The accompanying pro forma statements of operations include the following
adjustments:
(d) To adjust depreciation, depletion and amortization ("DD&A") for
the additional amounts associated with the oil and gas properties being
acquired.
(e) To adjust Devon's general and administrative expenses by an
expected annual increase of $5 million as a result of the Transaction. The
additional expenses to be incurred primarily include salaries and related
benefits for additional personnel, rent expense for additional office space
to be leased, increased professional fees and other office costs. The pro
forma adjustment is net of additional overhead reimbursements which Devon
will receive from working interest owners in certain of the acquired
properties for which Devon will serve as the operator.
(f) To adjust income tax expense for the effect of the preceding pro
forma adjustments.
15
<PAGE> 16
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 -- (CONTINUED)
5. COMMON SHARES OUTSTANDING
Net earnings per average share outstanding have been calculated based upon
the pro forma weighted average number of shares outstanding during the year
ended December 31, 1995, and the nine months ended September 30, 1996, as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Actual Devon average shares outstanding.................... 22,073,550 22,121,757
Shares issued to consummate the Transaction................ 9,954,000 9,954,000
---------- -----------
Pro Forma weighted average Devon shares outstanding........ 32,027,550 32,075,757
========== ===========
</TABLE>
Shares outstanding at September 30, 1996, assuming consummation of the
Transaction, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
------------
<S> <C>
Actual Devon shares outstanding.......................................... 22,130,896
Shares issued to consummate the Transaction.............................. 9,954,000
------------
Pro Forma Devon shares outstanding....................................... 32,084,896
============
</TABLE>
6. DD&A RATE
Devon's DD&A rates per Boe before and after consummation of the Transaction
are as follows:
<TABLE>
<CAPTION>
NINE
YEAR ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Rate prior to the Transaction............................. $ 3.65 3.83
Pro Forma rate after the Transaction...................... $ 4.08 4.20
</TABLE>
7. SUPPLEMENTAL PRO FORMA INFORMATION ON OIL AND GAS OPERATIONS
The following pro forma supplemental information regarding oil and gas
activities is presented pursuant to the disclosure requirements promulgated by
the Securities and Exchange Commission and Statement of Financial Accounting
Standards No. 69, "Disclosures About Oil and Gas Producing Activities."
Pro Forma Capitalized Costs
The following table sets forth the aggregate amount of pro forma
capitalized costs relating to oil and gas producing activities and the aggregate
amount of related accumulated DD&A assuming the Transaction was consummated as
of December 31, 1995:
<TABLE>
<S> <C>
Oil and gas properties:
Subject to amortization............................................. $ 828,180,000
Not subject to amortization......................................... 49,451,000
-------------
877,631,000
Accumulated DD&A...................................................... (237,386,000)
-------------
Net capitalized costs................................................. $ 640,245,000
=============
</TABLE>
16
<PAGE> 17
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 -- (CONTINUED)
Pro Forma Results of Operations for Oil and Gas Producing Activities
The following table includes pro forma revenues and expenses associated
directly with oil and gas producing activities for the year ended December 31,
1995, assuming the Transaction was consummated as of January 1, 1995. It does
not include any allocation of pro forma interest costs or general corporate
overhead and, therefore, is not necessarily indicative of the contribution to
net earnings of oil and gas operations. Income tax expense has been calculated
by applying statutory income tax rates to oil and gas sales after deducting
costs, including DD&A, and after giving effect to permanent differences and tax
credits:
<TABLE>
<CAPTION>
TOTAL DOMESTIC CANADA
------------ ------------ -----------
<S> <C> <C> <C>
Oil, gas and NGL sales.................... $222,307,000 $187,477,000 $34,830,000
Production and operating expenses......... 68,874,000 61,666,000 7,208,000
DD&A...................................... 84,106,000 69,742,000 14,364,000
Income tax expense........................ 28,178,000 21,829,000 6,349,000
------------ ------------ -----------
Results of operations for oil and gas
producing activities.................... $ 41,149,000 $ 34,240,000 $ 6,909,000
============ ============ ===========
</TABLE>
Quantities of Oil and Gas Reserves
Set forth below is a pro forma summary of the changes in the net quantities
of crude oil, natural gas and NGL reserves for the year ended December 31, 1995,
as estimated by independent petroleum consultants and Devon's and Kerr-McGee's
in-house petroleum reservoir engineers and geologists, assuming the Transaction
was consummated as of January 1, 1995:
<TABLE>
<CAPTION>
TOTAL
--------------------------------------
OIL (BBLS) GAS (MCF) NGL (BBLS)
---------- ----------- -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31,
1994........................................... 42,165,000 347,560,000 5,442,000
Purchase of reserves through the Transaction... 29,088,000 238,981,000 1,391,000
Revisions of previous estimates................ 1,127,000 (7,431,000) 535,000
Extensions and discoveries..................... 2,959,000 9,645,000 472,000
Purchase of reserves........................... 1,916,000 61,695,000 3,860,000
Production..................................... (6,742,000) (73,897,000) (1,138,000)
Sale of reserves............................... (337,000) (8,627,000) (45,000)
---------- ----------- ----------
Pro forma proved reserves as of December 31,
1995........................................... 70,176,000 567,926,000 10,517,000
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC
--------------------------------------
OIL (BBLS) GAS (MCF) NGL (BBLS)
---------- ----------- -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31,
1994........................................... 42,165,000 347,560,000 5,442,000
Purchase of reserves through the Transaction... 18,804,000 176,694,000 655,000
Revisions of previous estimates................ 1,127,000 (7,431,000) 535,000
Extensions and discoveries..................... 2,959,000 9,645,000 472,000
Purchase of reserves........................... 1,916,000 61,695,000 3,860,000
Production..................................... (5,492,000) (61,297,000) (963,000)
Sale of reserves............................... (337,000) (8,627,000) (45,000)
---------- ----------- ---------
Pro forma proved reserves as of December 31,
1995........................................... 61,142,000 518,239,000 9,956,000
========== =========== =========
</TABLE>
17
<PAGE> 18
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 -- (CONTINUED)
<TABLE>
<CAPTION>
CANADA
--------------------------------------
OIL (BBLS) GAS (MCF) NGL (BBLS)
---------- ----------- -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31,
1994........................................... -- -- --
Purchase of reserves through the Transaction... 10,284,000 62,287,000 736,000
Revisions of previous estimates................ -- -- --
Extensions and discoveries..................... -- -- --
Purchase of reserves........................... -- -- --
Production..................................... (1,250,000) (12,600,000) (175,000)
Sale of reserves............................... -- -- --
---------- ----------- --------
Pro forma proved reserves as of December 31,
1995........................................... 9,034,000 49,687,000 561,000
========== =========== ========
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The accompanying table reflects the pro forma standardized measure of
discounted future net cash flows relating to Devon's interests in proved oil,
gas and NGL reserves as of December 31, 1995, assuming consummation of the
Transaction as of December 31, 1995:
<TABLE>
<CAPTION>
TOTAL DOMESTIC CANADA
-------------- -------------- ------------
<S> <C> <C> <C>
Future cash inflows..................... $2,254,397,000 $2,023,945,000 $230,452,000
Future costs:
Development........................... (85,632,000) (82,508,000) (3,124,000)
Production............................ (729,576,000) (662,914,000) (66,662,000)
Future income tax expense............... (294,758,000) (240,262,000) (54,496,000)
-------------- -------------- ------------
Future net cash flows................... 1,144,431,000 1,038,261,000 106,170,000
10% discount to reflect timing of cash
flows................................. (460,242,000) (421,832,000) (38,410,000)
-------------- -------------- ------------
Standardized measure of discounted
future net cash flows................. $ 684,189,000 $ 616,429,000 $ 67,760,000
============== ============== ============
Discounted future net cash flows before
income taxes.......................... $ 863,431,000 $ 760,890,000 $102,541,000
============== ============== ============
</TABLE>
Future cash inflows are computed by applying year-end prices (average
$18.08 per barrel of oil, adjusted for transportation and other charges, $1.40
per Mcf of gas and $12.63 per barrel of NGL) to the year-end pro forma
quantities of those reserves, except in those instances where fixed and
determinable oil, gas and NGL price adjustments are provided by contractual
arrangements in existence at year-end. In addition to the future gas revenues
calculated at $1.40 per Mcf, Devon's total future gas revenues also include the
future tax credit payments to be received and recorded as gas revenues pursuant
to the San Juan Basin Transaction described in note 3 to Devon's consolidated
financial statements for 1995. Devon's future cash inflows shown in the table
above include $58.2 million related to these tax credit payments from 1996
through 2002. This amount has been calculated using the assumption that the
year-end 1995 tax credit rate of $1.01 per MMBtu remains constant. Future
development and production costs are computed by estimating the expenditures to
be incurred in developing and producing proved oil and gas reserves at the end
of the year, based on year-end costs and assuming continuation of existing
economic conditions.
Future income tax expenses are computed by applying the appropriate
statutory tax rates to the future pretax net cash flows relating to proved
reserves, net of the tax basis of the properties involved. The future income tax
expenses give effect to permanent differences and tax credits, but do not
reflect the impact of future operations.
18
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 -- (CONTINUED)
Changes Relating to the Standardized Measure of Discounted Future Net Cash
Flows
Principal changes in the pro forma standardized measure of discounted
future net cash flows attributable to pro forma reserves for the year ended
December 31, 1995 are as follows, assuming consummation of the Transaction as of
January 1, 1995:
<TABLE>
<S> <C>
Devon's actual beginning balance as of December 31, 1994.............. $ 358,206,000
Purchase of reserves through the Transaction.......................... 265,630,000
Sales of oil, gas and NGLs, net of production costs................... (153,433,000)
Net changes in prices and production costs............................ 60,498,000
Extensions, discoveries, and improved recovery, net of future
development costs................................................... 22,308,000
Purchase of reserves, net of future development costs................. 53,519,000
Development costs incurred during the period which reduced future
development costs................................................... 43,810,000
Revisions of quantity estimates....................................... 7,397,000
Sales of reserves in place............................................ (7,933,000)
Accretion of discount................................................. 66,384,000
Net change in income taxes............................................ (30,641,000)
Other, primarily changes in timing.................................... (1,556,000)
-------------
Pro Forma ending balance.............................................. $ 684,189,000
=============
</TABLE>
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Page
- ------- ----
<S> <C> <C>
2 Agreement and Plan of Merger among Registrant, Devon Energy
Corporation (Nevada), Kerr-McGee Corporation, Kerr-McGee North
American Onshore Corporation and Kerr-McGee Canada Onshore
Ltd., dated October 17, 1996 (incorporated by reference to
Addendum A to Registrant's definitive proxy statement for a
special meeting of shareholders, filed on November 6, 1996). *
3 Certificate of Amendment of Certificate of Incorporation 21
4.1 First Amendment to Rights Agreement between Registrant and the
First National Bank of Boston, dated October 16, 1996
(incorporated by reference to Exhibit H-1 to Addendum A to
Registrant's definitive proxy statement for a special meeting
of shareholders, filed on November 6, 1996). *
4.2 Second Amendment to Rights Agreement between Registrant and the
First National Bank of Boston, dated December 31, 1996. 22
4.3 Stock Rights and Restrictions Agreement, dated as of December
31, 1996, between Registrant and Kerr-McGee Corporation. 23
4.4 Registration Rights Agreement, dated December 31, 1996, by and
between Registrant and Kerr-McGee Corporation. 36
23 Consent of Arthur Andersen LLP. 46
* Incorporated by reference.
</TABLE>
20
<PAGE> 1
EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
DEVON ENERGY CORPORATION, an Oklahoma corporation (the "Corporation"),
hereby certifies:
FIRST. The Corporation's board of directors, by unanimous written consent,
filed with the minutes of the board, duly adopted resolutions setting forth a
proposed amendment of the Certificate of Incorporation declaring the amendment
advisable and called a meeting of the shareholders to consider such amendment.
The first paragraph of Article Fourth of the Corporation's Certificate of
Incorporation is proposed to be amended to read in its entirety as follows:
The total number of shares of capital stock which the corporation shall
have authority to issue is 403,000,000 shares, consisting of 3,000,000
shares of Preferred Stock, par value $1.00 per share; 400,000,000 shares
of Common Stock, par value $.10 per share. The preferences,
qualifications, limitations, restrictions and the special or relative
rights in respect of the shares of each class are as follows:
SECOND. A majority of the Corporation's shareholders entitled to vote
thereon voted in favor of the proposed amendments at a special meeting called
and held upon notice in accordance with the provisions of Section 1067 of the
Oklahoma General Corporation Act.
THIRD. The amendment duly adopted in accordance with the provisions of
Section 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and its Secretary this 31st day of December, 1996.
/s/ J. LARRY NICHOLS
------------------------------------
J. Larry Nichols, President
ATTEST:
/s/ MARIAN J. MOON
- ------------------------------
Marian J. Moon, Secretary
21
<PAGE> 1
EXHIBIT 4.2
SECOND AMENDMENT TO RIGHTS AGREEMENT
The Rights Agreement dated April 17, 1995 between Devon Energy Corporation
and The First National Bank of Boston (Massachusetts), as amended on October 16,
1996, is hereby amended this 31st day of December, 1996 by the amendment of
Section 1(a) as follows:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall hereafter become
the Beneficial Owner of 15% or more of the Voting Shares of the
Company then outstanding, but shall not include the Company, any
Subsidiary of the Company or any employee benefit plan of the Company
or any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company or a Subsidiary of the Company
for or pursuant to the terms of any employee benefit plan; provided, a
Person who or which does no more than (i) become an Affiliate or
Associate of a Person who or which (together with all Affiliates or
Associates) is now a Beneficial Owner of 15% or more of the Voting
Shares now outstanding, and/or (ii) become, by operation of clause
(ii) or clause (iii) of Section 1(c), the Beneficial Owner of shares
beneficially owned by a Person who or which (together with all
Affiliates or Associates) is now a Beneficial Owner of 15% or more of
the Voting Shares now outstanding, is not an Acquiring Person.
Further, no Person shall become an Acquiring Person solely as the
result of a reduction in the number of Voting Shares outstanding due
to an acquisition of Voting Shares by the Company which increases the
proportionate number of such Voting Shares Beneficially Owned by such
Person to 15% or more unless and until that Person shall purchase or
otherwise become (as a result of actions by such Person or its
Affiliates or Associates) the Beneficial Owner of any additional
Voting Shares of the Company; provided, further, that Kerr-McGee
Corporation and its affiliates shall not be deemed an Acquiring Person
pursuant to this Section solely as a result of the acquisition of
Common Stock of the Company (i) upon consummation of the transactions
pursuant to the Agreement and Plan of Merger among Devon Energy
Corporation, Devon Energy Corporation (Nevada), Kerr-McGee
Corporation, Kerr-McGee North American Onshore Corporation, and
Kerr-McGee Canada Onshore Ltd. of even date herewith (the "Merger
Agreement"); (ii) pursuant to transactions permitted by a Stock Rights
and Restrictions Agreement substantially in the form of Exhibit F to
the Merger Agreement, as such agreement may be amended from time to
time (the "Stock Agreement"); and (iii) subsequent to termination of
the Stock Agreement pursuant to Subsections 4.8(iii) (unless the Stock
Agreement is reinstated pursuant to that Subsection), 4.8(iv), 4.8(v)
or 4.8(vi).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
DEVON OKLAHOMA CORPORATION
By /s/ J. LARRY NICHOLS
---------------------------------
J. Larry Nichols, President
and Chief Executive Officer
ATTEST:
/s/ MARIAN J. MOON
- -------------------------
Marian J. Moon, Secretary
THE FIRST NATIONAL BANK OF BOSTON
(MASSACHUSETTS)
By /s/ COLLEEN SHEA KEATING
---------------------------------
Administration Manager
ATTEST:
- -------------------------
Secretary
22
<PAGE> 1
EXHIBIT 4.3
STOCK RIGHTS AND RESTRICTIONS AGREEMENT
STOCK RIGHTS AND RESTRICTIONS AGREEMENT, dated as of December 31, 1996,
between DEVON ENERGY CORPORATION, an Oklahoma corporation ("Devon"), and
KERR-McGEE CORPORATION, a Delaware corporation ("Kerr-McGee").
RECITALS:
A. As of the Effective Date (as defined below) and after giving effect to
the Closing (as defined below), Kerr-McGee will be the record and Beneficial
Owner (as defined below) of 9,954,000 Voting Shares (as defined below) (together
with any additional Voting Shares which Kerr-McGee may from time to time own of
record or Beneficially Own, the "Shares"), consisting of common stock, par value
$.10 per share, of Devon (the "Common Stock"), representing 30.9695% of the
outstanding Voting Shares and 26.1938% of the Fully Diluted Shares (as
defined below) as of the Effective Date and after giving effect to the Closing.
B. As of the Effective Date and after giving effect to the Closing, the
number of directors constituting the whole Board of Directors of Devon is nine
(9) and the following persons are the Kerr-McGee Designees (as defined below):
Luke R. Corbett, Tom J. McDaniel and Lawrence H. Towell.
C. The Boards of Directors of Devon and Kerr-McGee deem it advisable to
establish certain rights and restrictions with respect to the Shares.
ACCORDINGLY, premises considered, the parties have entered into this
Agreement.
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings indicated:
(a) "Acquiring Person" shall have the meaning assigned to such term in
the Rights Plan, as in effect on the date hereof.
(b) "Affiliate" shall have the meaning assigned to such term in Rule
12b-2 under the Exchange Act, as in effect on the date hereof; provided
that, for purposes of this Agreement, neither Kerr-McGee nor any Affiliate
of Kerr-McGee shall be deemed to be an Affiliate of Devon.
(c) "Applicable Percentage" shall mean, for the period from the date
hereof until the second anniversary of the date hereof, 26.1938% and,
thereafter, 31.1938%, subject, in each case, to adjustment in
accordance with Section 2.4(d)(i)(A).
(d) "Beneficially Own" shall have the meaning assigned to such term in
Rule 13d-3 under the Exchange Act, as in effect on the date hereof.
"Beneficial Owner" and "Beneficial Ownership" shall have correlative
meanings.
(e) "Business Combination Transaction" shall mean a merger,
consolidation, Share Acquisition (as defined below), recapitalization or
other transaction in which Devon is a constituent corporation or to which
Devon is a party, and pursuant to which the Voting Shares are exchanged for
cash, securities or other property, or a sale of all or substantially all
of the assets of Devon and its Subsidiaries taken as a whole; provided that
none of the following shall be deemed a Business Combination Transaction
for purposes of this Agreement: (i) a merger, consolidation, Share
Acquisition, recapitalization or other transaction in which the Beneficial
Ownership of the capital stock of Devon or the surviving corporation
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<PAGE> 2
of the transaction (or of the ultimate parent of Devon or of such surviving
corporation) immediately after the consummation of such transaction is
substantially the same as the Beneficial Ownership of the capital stock of
Devon immediately prior to the consummation of the transaction or (ii) a
merger (A) in which Devon is the surviving corporation, (B) in which all
Voting Shares immediately prior to the consummation of such merger remain
outstanding immediately after the consummation thereof, (C) as a result of
the consummation of which no Person will Beneficially Own a majority of the
Fully Diluted Shares and (D) following the consummation of which the
Continuing Directors will represent a majority of the Board of Directors of
Devon.
(f) "Closing" shall have the meaning assigned to such term in the
Merger Agreement.
(g) "Common Stock" shall have the meaning set forth in paragraph A of
this Agreement.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of Devon, while such person is a member of such Board of
Directors, (A) who is not an Acquiring Person, or an Affiliate or Associate
(each as defined in the Rights Plan as in effect on the date hereof) of an
Acquiring Person or a representative or nominee of an Acquiring Person or
of any such Affiliate or Associate, and (B) who (1) was a member of the
Board of Directors of Devon prior to the Effective Time or (2) is
recommended or elected to the Board of Directors by a majority of the
Continuing Directors to fill a vacancy arising as a result of an increase
in the number of directors of Devon occurring after the date hereof, and
(ii) any successor of a Continuing Director, while such successor is a
member of the Board of Directors of Devon, who is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person or a representative or
nominee of an Acquiring Person or of any such Affiliate or Associate and is
recommended or elected to succeed the Continuing Director by a majority of
the Continuing Directors. Notwithstanding anything to the contrary in this
definition, for purposes of this Agreement, the Kerr-McGee Designees shall
not be considered Continuing Directors.
(i) "Current Market Price" shall mean, as of any date of
determination, with respect to Voting Shares or any other security to be
valued hereunder (the Voting Shares and/or such other security, the
"Valuation Securities"):
(i) if the Valuation Securities are listed or admitted to trading
on a national securities exchange, the closing price on such exchange's
consolidated or composite tape reporting transactions thereon (or any
successor composite tape reporting transactions on national securities
exchanges) or, if such a composite tape shall not be in use or shall not
report transactions in the Valuation Securities, the last reported sales
price regular way on the principal national securities exchange on which
the Valuation Securities are listed or admitted to trading (which shall
be the national securities exchange on which the greatest number of
Valuation Securities has been traded during the 20 consecutive trading
days preceding the date of determination), or, if there is no
transaction on any such day in any such situation, the mean of the bid
and asked prices on such day; or
(ii) if the Valuation Securities are not listed or admitted to
trading on any such exchange, the closing price, if reported, or, if the
closing price is not reported, the average of the closing bid and asked
prices, as reported by the automated quotation system of the National
Association of Securities Dealers, Inc. or a similar source selected
from time to time by Devon for this purpose; or
(iii) if all of the prices referred to in clauses (i) and (ii) are
unavailable, including because the Valuation Securities are not traded
on a national securities exchange, an automated quotation system of the
National Association of Securities Dealers, Inc. or a similar source,
the Current Market Price shall be deemed to be the value of the
Valuation Securities as determined by agreement between Devon and
Kerr-McGee or, if Devon and Kerr-McGee are unable to agree, by an
investment banking firm of national reputation selected by Kerr-McGee
with the consent of a majority of the Continuing Directors, which
consent shall not be unreasonably withheld. Any determination of the
value of the Valuation Securities shall be made within three business
days of the date of selection of the investment banking firm. The costs
and expenses of any such investment banking firm shall be borne by
Devon.
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<PAGE> 3
(j) "Devon" shall have the meaning set forth in the first paragraph of
this Agreement.
(k) "Distribution Date" shall have the meaning assigned to such term
in the Rights Plan, as in effect on the date hereof.
(l) "Effective Date" shall have the meaning assigned to such term in
the Merger Agreement.
(m) "Equity Market Capitalization" shall mean, with respect to any
Person in connection with the commencement of an exchange offer, the amount
determined by multiplying (i) the number of outstanding "equity securities"
(as defined in Section 3 of the Exchange Act) of such Person required to be
registered pursuant to Section 12 of the Exchange Act at the time of the
determination by (ii) the Current Market Price of such equity securities at
such time of determination.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, as in effect from time to time.
(o) "Exchangeable Security" shall mean a security of any type,
including but not limited to debt, equity, warrants or other rights, issued
by Kerr-McGee at any time after the second anniversary of this Agreement
and which includes or represents the right to acquire Voting Shares from
Kerr-McGee upon exchange, conversion or exercise thereof.
(p) "Fully Diluted Shares" shall mean, at any time, the sum of (i) the
Voting Shares then outstanding plus (ii) the number of Voting Shares
reserved for issuance or issuable in connection with the exercise, exchange
or conversion of employee stock options or securities of Devon then
outstanding which are exercisable or exchangeable for Voting Shares or are
convertible into Voting Shares.
(q) "Merger Agreement" shall mean the Agreement and Plan of Merger
dated October , 1996 among Devon, Devon Energy Corporation (Nevada),
Kerr-McGee, Kerr-McGee Oklahoma Corporation and Kerr-McGee Sub, Inc.
(r) "Person" shall mean any individual, firm, partnership,
association, group (as such term is defined in Section 13(d)(3) of the
Exchange Act, as in effect on the date hereof), corporation, trust,
business trust or other entity and includes any successor (by merger or
otherwise) of any such entity.
(s) "Public Offering" shall mean a firm commitment underwritten public
offering pursuant to a registration statement which has been declared
effective by the SEC under the Securities Act.
(t) "Qualified Tender Offer" shall mean a tender or exchange offer for
Voting Shares (i) that is for more than 50% of the then outstanding Voting
Shares, (ii) that is for a price per Voting Share at least 10% greater than
the average of the Current Market Prices of the Voting Shares determined
for each of the 10 consecutive trading days ending on the last full trading
day prior to the date of the public announcement of such tender or exchange
offer, (iii) the Tender Offer Statement on Schedule 14D-1 filed by the
Person making such tender or exchange offer for which discloses that such
Person has available to it, or will have available to it upon consummation
of such tender or exchange offer, the consideration to be paid or exchanged
in such tender or exchange offer for the Voting Shares tendered therein,
and (iv) in the case of an exchange offer, (A) in which the Person making
such exchange offer has, as of the date of commencement of such exchange
offer, an Equity Market Capitalization equal to or greater than the Equity
Market Capitalization of Devon, or (B) if the Equity Market Capitalization
of such Person is less than the Equity Market Capitalization of Devon,
which otherwise is a credible exchange offer.
(u) "Rights" shall mean, at any time, the rights to purchase capital
stock of Devon issued under the Rights Plan.
(v) "Rights Plan" shall mean the Rights Agreement dated as of April
17, 1995 between Devon and The First National Bank of Boston, as rights
agent, as amended, supplemented or otherwise modified from time to time,
and any successor agreement or plan to which Devon shall be a party.
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<PAGE> 4
(w) "Rule 144" shall mean Rule 144 adopted by the SEC under the
Securities Act, or any successor rule.
(x) "SEC" shall mean the Securities and Exchange Commission.
(y) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, as in effect from time to time.
(z) "Share Acquisition" shall mean a share acquisition under Section
1090.1 of the Oklahoma General Corporation Act (or any successor provision
of the Oklahoma General Corporation Act).
(aa) "Subsidiary" shall mean, with respect to any Person, any other
Person of which at least a majority of the voting power of the voting
equity securities or voting equity interest is owned, directly or
indirectly, by such Person.
(ab) "Kerr-McGee" shall have the meaning set forth in the first
paragraph hereof; provided, however, that the term "Kerr-McGee" shall
include Kerr-McGee and its Affiliates unless the context otherwise
requires.
(ac) "Kerr-McGee Designees" shall have the meaning set forth in
Section 2.3(b) hereof.
(ad) "Transfer" shall have the respective meanings set forth in
Section 2.5 hereof.
(ae) "Voting Shares" shall mean the Common Stock and any other
securities of Devon having voting power under ordinary circumstances with
respect to the election of directors of Devon.
2. SHARE RIGHTS AND RESTRICTIONS.
2.1 Limitation on Certain Business Combination Transactions. (a) Except as
otherwise permitted by this Agreement, Kerr-McGee agrees that Kerr-McGee shall
not, during the period from the date of this Agreement until its termination,
engage in any Business Combination Transaction with Devon, unless such Business
Combination Transaction shall have been approved by a majority of the Continuing
Directors.
(b) Except as otherwise permitted by this Agreement, Kerr-McGee agrees that
Kerr-McGee shall not, during the period from the date of this Agreement until
its termination, (i) request or solicit any Person (A) to make a tender or
exchange offer for Voting Shares or (B) to make a proposal for a Business
Combination Transaction, or (ii) make any proposal, written or oral, to Devon,
the Board of Directors of Devon or the shareholders of Devon with respect to a
Business Combination Transaction, a tender offer or exchange offer for Voting
Shares, or a liquidation of Devon, which proposal would be required by
applicable law to be publicly disclosed, unless, in either case referred to in
clause (i) or (ii) above, a majority of the Continuing Directors shall have
requested Kerr-McGee to take such action.
(c) In the event that Kerr-McGee shall receive any proposal from any Person
with respect to any matter referred to in Section 2.1(b), either with respect to
a proposal to be made by Kerr-McGee or such other Person, Kerr-McGee shall
immediately notify Devon thereof.
(d) In the event that Kerr-McGee shall receive any proposal from any Person
to acquire Voting Shares from Kerr-McGee which would exceed 5% of the
outstanding Voting Shares, Kerr-McGee shall immediately notify Devon; provided
that Kerr-McGee shall not be required to provide such notice if the proposal is
in connection with a Transfer permitted under Section 2.5 hereof.
2.2 [Intentionally omitted.]
2.3 Devon Board of Directors. (a) From and after the date hereof until the
termination of this Agreement, the number of directors constituting the Board of
Directors of Devon shall not be decreased to a number less than six (6), without
the prior written consent of Kerr-McGee.
(b) From and after the date hereof until the termination of this Agreement,
in connection with each election of directors of Devon, whether at an annual or
special meeting, Devon will nominate in accordance with its procedures for the
nomination of directors as provided in its by-laws and applicable law, a number
of persons designated by Kerr-McGee (all such persons who, at any time, are or
were designated by Kerr-
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<PAGE> 5
McGee for purposes of this Agreement are referred to herein as the "Kerr-McGee
Designees") such that, after giving effect to the election of such persons to
the Board of Directors of Devon, the number of Kerr-McGee Designees then serving
on the Board of Directors of Devon shall equal the product (rounded to the
nearest whole number, but, in any event, not less than one) of (i) the total
number of directors constituting the entire Board of Directors multiplied by
(ii) the lesser of (A) 36% and (B) the percentage that the aggregate number of
Voting Shares owned by Kerr-McGee (determined without regard to Shares acquired
as permitted by Section 2.4(d)(i)(B) hereof) bears to the total number of Voting
Shares then outstanding (such lesser percentage, the "Director Percentage").
(c) If at any time the Director Percentage shall decrease so that
Kerr-McGee would be entitled to designate fewer directors than are currently
serving as Kerr-McGee Designees, Kerr-McGee shall cause one or more of the
Kerr-McGee Designees serving as Devon directors to resign so that the percentage
of the board of directors consisting of Kerr-McGee Designees does not exceed the
Director Percentage. Further, upon termination of this Agreement in accordance
with its terms, Kerr-McGee shall cause all Kerr-McGee Designees then serving as
directors of Devon to resign immediately.
(d) (i) In the event that any Kerr-McGee Designee shall cease to serve as a
director for any reason (other than as set forth in Section 2.3(c)), the vacancy
resulting thereby shall be filled by the remaining directors of the Company in
accordance with its Certificate of Incorporation, by-laws and applicable law by
a new Kerr-McGee Designee and such new Kerr-McGee Designee shall thereafter
serve until the expiration of the term of the Kerr-McGee Designee replaced by
such new Kerr-McGee Designee.
(ii) If there shall exist at any time any vacancy or vacancies on the Board
of Directors of Devon as a result of any increase in the number of directors
that constitutes the entire Board of Directors of Devon, which the directors of
Devon then in office intend to fill in accordance with Devon's Certificate of
Incorporation, by-laws and applicable law, Kerr-McGee shall be entitled to
designate one or more persons as Kerr-McGee Designees to fill such vacancy or
vacancies if and to the extent necessary so that, after giving effect to the
filling of such vacancy or vacancies, the number of Kerr-McGee Designees then
serving on the Board of Directors of Devon shall equal the Director Percentage.
Devon agrees to take all actions appropriate or necessary to ensure that any
Kerr-McGee Designees designated pursuant to the preceding sentence are appointed
to the Board of Directors to fill any such vacancy or vacancies filled by the
Board of Directors of Devon as provided in the preceding sentence.
(e) Notwithstanding anything to the contrary contained herein, no
Kerr-McGee Designee may be a person who previously has been a director of Devon
and was properly removed for cause from the Board of Directors of Devon or a
person who has been convicted of a felony or a crime involving moral turpitude.
(f) The Kerr-McGee Designees will be furnished with all information that is
provided to all other directors of Devon (in their capacities as such) at the
same time as such information is furnished to such other directors (in their
capacities as such).
(g) Kerr-McGee shall cause all Kerr-McGee Designees serving as directors of
Devon to comply with the retirement policies of Devon as in effect on the date
hereof or as hereafter amended or modified from time to time by the Board of
Directors of Devon or its shareholders; provided that no such amendment or
modification shall be binding upon Kerr-McGee or the Kerr-McGee Designees unless
at least one Kerr-McGee Designee shall have voted in favor of such amendment or
modification at the meeting, or in the action in lieu of a meeting, of the Board
of Directors of Devon at or in which it is considered.
2.4 Limitation on Acquisition of Additional Shares by Kerr-McGee. (a)
Except as permitted by any of Section 2.4(b), (c) or (d), from and after the
date hereof until the termination of this Agreement, Kerr-McGee shall not
acquire Beneficial Ownership of any Voting Shares, other than the Voting Shares
Beneficially Owned by Kerr-McGee as of the Effective Time and after giving
effect to the Closing, without the prior written consent of a majority of the
Continuing Directors.
(b) Kerr-McGee may purchase Voting Shares, or securities exercisable or
exchangeable for Voting Shares or convertible into Voting Shares, in market,
private or other transactions (including without limitation brokerage
transactions involving the solicitation of seller's orders and block trades off
the American Stock
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<PAGE> 6
Exchange or any other national securities exchange on which the Voting Shares
are then listed) or in public offerings of Voting Shares (including Public
Offerings of Voting Shares); provided that, after giving effect to any such
purchase, Kerr-McGee shall not Beneficially Own more than the Applicable
Percentage of the Fully Diluted Shares; provided, further, that in no event
shall Kerr-McGee acquire Beneficial Ownership of additional Voting Shares which
would, based on the then most recent information contained in documents filed by
Devon or Kerr-McGee pursuant to Section 13(a), 13(c), 13(e), 14 or 15(d) of the
Exchange Act, reduce the number of shares of Common Stock held by Persons other
than Kerr-McGee, Devon or any Affiliate of either Kerr-McGee or Devon to less
than 15,000,000, unless such acquisition of Beneficial Ownership by Kerr-McGee
is necessary in order that, after giving effect thereto, Kerr-McGee shall
Beneficially Own 20% of the Fully Diluted Shares.
(c) Kerr-McGee may acquire Beneficial Ownership of Voting Shares without
regard to the Applicable Percentage of the Fully Diluted Shares if any Person
(other than Kerr-McGee, Devon or any Affiliate of Kerr-McGee or Devon) shall
have commenced a tender or exchange offer for Voting Shares (i) that is
recommended or approved by a majority of the Continuing Directors, (ii) with
respect to which a majority of the Continuing Directors has taken a position
contemplated by Rule 14e-2(a)(2) under the Exchange Act, (iii) with respect to
which a majority of the Continuing Directors has resolved to redeem the Rights
or has amended the Rights Plan so that the Person making such tender or exchange
offer will not become an Acquiring Person or trigger a Distribution Date, or
(iv) that is a Qualified Tender Offer and in connection with which (A) a final
and non-appealable court order has declared the Rights Plan invalid or
inapplicable, or required that the Rights issued under the Rights Plan be
redeemed, and (B) the Person making such Qualified Tender Offer will be
permitted under applicable law to accept for payment or exchange the Voting
Shares tendered in such Qualified Tender Offer.
(d) (i) Notwithstanding anything to the contrary in this Agreement,
Kerr-McGee shall not be deemed to be in violation of this Section 2.4 if its
Beneficial Ownership of Voting Shares exceeds the Applicable Percentage of the
Fully Diluted Shares as a result of (A) an acquisition by Devon or any of its
Affiliates of Voting Shares then outstanding, or securities then outstanding
exercisable or exchangeable for Voting Shares or convertible into Voting Shares,
or a recapitalization by Devon, or any other transaction or action by Devon, or
any expiration or termination of the right to exercise, exchange or convert
securities exercisable or exchangeable for Voting Shares or convertible into
Voting Shares, which, in any such case, by reducing the number of Fully Diluted
Shares, increases Kerr-McGee's Beneficial Ownership of the Fully Diluted Shares
to more than the Applicable Percentage, and, in the event of any such reduction
in the number of Fully Diluted Shares as provided in this Section 2.4(d)(i)(A),
the Applicable Percentage shall thereafter be deemed to have been increased to
the percentage of the Fully Diluted Shares Beneficially Owned by Kerr-McGee
after giving effect to such reduction, provided that, in the case of any such
increase in Kerr-McGee's Beneficial Ownership of the Fully Diluted Shares due to
an expiration or termination of the right to exercise, exchange or convert
securities exercisable or exchangeable for Voting Shares or convertible into
Voting Shares pursuant to this clause (A), Kerr-McGee shall, to the extent
permitted by Rule 144, Transfer a number of Shares (or securities of Devon
exercisable or exchangeable for or convertible into a number of Voting Shares)
as promptly as is commercially reasonable so that, following such Transfer,
Kerr-McGee shall Beneficially Own a number of Voting Shares not in excess of the
Applicable Percentage immediately prior to such reduction in the number of Fully
Diluted Shares and, following each such Transfer, the Applicable Percentage
shall be reduced to the percentage of the Fully Diluted Shares then Beneficially
Owned by Kerr-McGee, and, provided, further, that Kerr-McGee shall not be
required to Transfer Shares (or such securities) pursuant to the immediately
preceding proviso at any time when it would be required to pay any profit
realized upon such Transfer to Devon pursuant to Section 16(b) under the
Exchange Act, or (B) a transaction whereby, directly or indirectly, control of
(by merger, tender offer or otherwise), or all or substantially all of the
assets of, any Person is transferred to Kerr-McGee or any of its Subsidiaries
(an "Acquisition Transaction"), provided that, in the case of clause (B) above,
Kerr-McGee shall comply with the provisions of Section 2.4(d)(ii), except that
Kerr-McGee shall not be obligated to comply with Section 2.4(d)(ii), and any
Voting Shares the Beneficial Ownership of which is acquired by Kerr-McGee in an
Acquisition Transaction shall not be deemed to violate this Agreement, solely to
the extent that such Voting Shares were held by the other Person that is a party
to such Acquisition Transaction as part of the assets of a pension plan
maintained by such other Person
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for the benefit of its employees and retirees, and, provided, further, that, in
the case of clause (B) above, the ownership of Voting Shares by the Person in
the Acquisition Transaction is incidental to the conduct of an active trade or
business other than investing in securities and in no event shall such Person
own more than 1,000,000 Voting Shares. For purposes hereof, "control" means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management policies of a Person, including
the power to direct or cause the direction of the disposition of the assets of
such Person.
(ii) (A) No later than five business days following the consummation of an
Acquisition Transaction which results in Kerr-McGee Beneficially Owning more
than the Applicable Percentage of the Fully Diluted Shares, Kerr-McGee shall
provide written notice (the "Offer Notice") to Devon offering Devon the right
(the "Purchase Right"), exercisable in whole or in part, to purchase a number of
Shares (such Shares, the "Purchase Right Shares") equal to the difference
between (1) the number of Shares minus (2) the product, rounded to the nearest
whole Voting Share, of the Applicable Percentage multiplied by the Fully Diluted
Shares, at a price per Purchase Right Share equal to the average of the Current
Market Prices of the Voting Shares determined for each of the 10 consecutive
trading days ending on the last full trading day prior to the date of the Offer
Notice (the "Purchase Price"). Devon shall have five business days from the date
of its receipt of the Offer Notice to provide written notice to Kerr-McGee of
its exercise of the Purchase Right (the "Exercise Notice"). The Exercise Notice
shall indicate the number of Purchase Right Shares with respect to which Devon
exercises the Purchase Right (such number of Purchase Right Shares, the "Sale
Shares"). If the Exercise Notice shall not have been delivered to Kerr-McGee
within five business days from the date of Devon's receipt of the Offer Notice
or if Devon shall have delivered to Kerr-McGee written notice that it is not
exercising the Purchase Right, then Devon will be deemed not to have exercised
the Purchase Right. If Devon exercises the Purchase Right by delivery to
Kerr-McGee of an Exercise Notice as provided above, then, on the fifth business
day after the receipt by Kerr-McGee of such Exercise Notice, Devon shall
purchase from Kerr-McGee, and Kerr-McGee shall sell to Devon, the Sale Shares.
At the closing of any such purchase and sale, Kerr-McGee shall deliver to Devon
a certificate or certificates representing the Sale Shares, duly endorsed for
transfer or accompanied by a stock power or powers duly executed in blank,
against delivery by Devon to Kerr-McGee of the aggregate Purchase Price for the
Sale Shares, by wire transfer in immediately available funds. Any exercise of
the Purchase Right as provided in this Section 2.4(d)(ii)(A) shall be
irrevocable and shall constitute a commitment by Devon to purchase from
Kerr-McGee, and by Kerr-McGee to sell to Devon, the Sale Shares at the Purchase
Price per Sale Share. Notwithstanding anything to the contrary contained in this
Section 2.4(d)(ii)(A), if the Current Market Price is required to be determined
pursuant to clause (iii) of the definition thereof and, on or prior to the fifth
business day after Devon's receipt of the Offer Notice, the Current Market Price
shall not have been so determined, then the time period for the delivery of the
Exercise Notice shall be extended until such time as the Current Market Price
shall have been so determined.
(B) If Devon shall not have exercised the Purchase Right in accordance with
Section 2.4(d)(ii)(A) or shall have exercised the Purchase Right in part, then,
to the extent permitted by Rule 144, Kerr-McGee shall Transfer the Purchase
Right Shares then held by it as promptly as is commercially reasonable; provided
that Kerr-McGee shall not be required to Transfer Purchase Right Shares under
this Section 2.4(d)(ii)(B) at any time when it would be required to pay any
profit realized upon such Transfer to Devon pursuant to Section 16(b) under the
Exchange Act.
2.5 Restrictions on Transfer. From and after the date hereof until the
termination of this Agreement, Kerr-McGee shall not sell, transfer or otherwise
convey (when used as a verb, "Transfer" and, any sale, transfer or other
conveyance, a "Transfer") Beneficial Ownership of any Shares (including Shares
subject to Exchangeable Securities), without the prior written consent of a
majority of the Continuing Directors, which consent shall not be unreasonably
withheld, except that, in any event, any of the following shall be permitted:
(a) a Transfer in accordance with Rule 144;
(b) a Transfer in a Public Offering or in a public offering (other
than a Public Offering) made pursuant to a registration statement which has
been declared effective by the SEC under the Securities Act (any such
Public Offering or public offering, a "Registered Transaction"); provided,
however, that, in
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<PAGE> 8
connection with any such Registered Transaction, Kerr-McGee shall obtain
from the managing underwriter of such Public Offering or from each broker
through which such public offering is made, as the case may be, a
commitment to use its reasonable best efforts to make a broad public
distribution of the Shares (including an indirect distribution of Shares as
a result of a distribution of Exchangeable Securities) to be Transferred in
such Registered Transaction. The managing underwriter or broker, as the
case may be, will be advised that, for purposes of this Agreement, a "broad
public distribution" means a distribution such that no Person is allocated
for purchase in such Registered Transaction:
(i) a number of Shares in excess of (A) 14.9% of the Voting Shares
(after giving effect to the offering of the Shares and any other
securities being offered by Devon concurrently therewith in such
Registered Offering) or (B) in the case of a Public Offering, in excess
of 20% of the number of Shares being offered in such Public Offering,
provided that, in the case of this clause (B), Shares allocated for
purchase by a mutual fund, a pension fund or an investment advisers
(which investment adviser shall be registered under the Investment
Advisers Act of 1940, as amended) for any mutual fund or pension fund
shall be disregarded;
(ii) a number or amount of Exchangeable Securities which would
represent the right to acquire in excess of 14.9% of the Voting Shares;
or
(iii) any combination of (i) and (ii) above;
(c) a Transfer to a direct or indirect Subsidiary of Kerr-McGee;
(d) a Transfer to Devon or a to a direct or indirect Subsidiary of
Devon (pursuant to a tender offer or otherwise);
(e) a Transfer pursuant to a merger, consolidation or Share
Acquisition, in which Devon is a constituent corporation;
(f) a Transfer made as a pro rata dividend or distribution to the
holders of the common stock of Kerr-McGee; or
(g) a Transfer to any Person (other than Kerr-McGee, Devon or any
Affiliate of Kerr-McGee or Devon) who shall have commenced a tender or
exchange offer for Voting Shares (i) that is recommended or approved by a
majority of the Continuing Directors, (ii) with respect to which a majority
of the Continuing Directors has taken a position contemplated by Rule
14e-2(a)(2) under the Exchange Act, (iii) with respect to which a majority
of the Continuing Directors has resolved to redeem the Rights or has
amended the Rights Plan so that the Person making such tender or exchange
offer will not become an Acquiring Person or trigger a Distribution Date,
or (iv) that is a Qualified Tender Offer and in connection with which (A) a
final and non-appealable court order has declared the Rights Plan invalid
or inapplicable, or required that the Rights issued under the Rights Plan
be redeemed, and (B) the Person making such Qualified Tender Offer will be
permitted under applicable law to accept for payment or exchange the Voting
Shares tendered in such Qualified Tender Offer.
2.6 Voting for Directors. Kerr-McGee agrees to vote all of the Shares in
favor of the Devon Board of Director's nominees for election to the Board of
Directors; provided that, in connection with any such vote, the provisions of
Section 2.3(b) shall have been complied with.
2.7 Right to Participate in Certain Issuances by Devon. (a) Devon shall
not issue any security exercisable or exchangeable for or convertible into
Voting Shares, other than employee stock options ("Devon Convertible
Securities"), whether in a public or private offering for cash, unless Devon
shall have first complied with, in the case of an issuance other than pursuant
to Public Offering, the provisions of Section 2.7(b) or, in the case of a Public
Offering, the provisions of Section 2.7(c).
(b) If Devon determines to issue any Devon Convertible Security in a public
offering or otherwise, other than in a Public Offering, then Devon shall provide
written notice of such determination to Kerr-McGee, which notice shall include
all the terms of such issuance and shall offer to Kerr-McGee the right to
purchase, at the same price and on the same terms as Devon proposes to issue
such Devon Convertible Security to others
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(or, if Devon proposes to issue such Devon Convertible Security other than for
cash, at a cash price equal to the value of the consideration for which Devon
proposes to issue such Devon Convertible Security, such value to be determined
by agreement between Devon or Kerr-McGee, or if the parties are unable to agree,
by an investment banking firm or other asset valuation firm of national
reputation selected by Kerr-McGee with the consent of a majority of the
Continuing Directors, which consent shall not be unreasonably withheld, the cost
of which shall be borne by Devon) a number or amount of the Devon Convertible
Securities proposed to be issued that represents the right to acquire upon
exercise, exchange or conversion of such Devon Convertible Securities a number
of Voting Shares equal to the Applicable Percentage (the "Offer Notice"). If
Kerr-McGee determines to accept the offer contained in the Offer Notice,
Kerr-McGee shall deliver a written notice to Devon indicating its acceptance
within 10 days after its receipt of the Offer Notice, which notice shall
indicate whether Kerr-McGee has accepted such offer in whole or in part, and, if
accepted in part, the number or amount of Devon Convertible Securities as to
which such offer has been accepted (an "Acceptance Notice"). Any acceptance of
the offer contained in an Offer Notice by delivery of an Acceptance Notice shall
be irrevocable and shall constitute a commitment by Kerr-McGee to purchase from
Devon, and by Devon to sell to Kerr-McGee, the number or amount of Devon
Convertible Securities covered by such Acceptance Notice upon the terms
contained in the Offer Notice.
(c) If Devon determines to issue any Devon Convertible Security in a Public
Offering, then Devon shall provide written notice of such determination to
Kerr-McGee no later than the time that Devon commences the process to make such
Public Offering, which notice shall include the proposed size and other terms of
such issuance, to the extent then known, the name or names of the managing
underwriter for such Public Offering, if then known and the date when it is
proposed that such Public Offering will be made, and shall cause the
underwriters of such Public Offering to offer to Kerr-McGee the right to
purchase from the underwriters of such Public Offering, at the public offering
price set forth on the cover page of the prospectus or prospectus supplement for
such Public Offering, a number or amount of the Devon Convertible Securities
proposed to be issued that represents the right to acquire upon exercise,
exchange or conversion of such Devon Convertible Securities a number of Voting
Shares equal to the Applicable Percentage.
3. STOCK CERTIFICATES AND OTHER RESTRICTIONS.
3.1 Endorsement of Certificates. (a) All certificates representing Shares
shall, subject to Section 3.1(c), bear the following legend:
"THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF A STOCK RIGHTS AND
RESTRICTIONS AGREEMENT BETWEEN DEVON ENERGY CORPORATION AND KERR-McGEE
CORPORATION DATED AS OF DECEMBER 31, 1996. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL BUSINESS OFFICE OF DEVON ENERGY CORPORATION."
(b) All certificates representing Shares shall, subject to Section 3.1(c),
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE CONVEYED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO RULE 144 UNDER THE ACT,
UNLESS THE COMPANY SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL,
WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR DEVON ENERGY
CORPORATION, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED."
(c) After such time as either of the legends set forth in Sections 3.1(a)
and (b) is no longer required hereunder (including without limitation as a
result of the termination of this Agreement in accordance with its terms) or if
the securities represented by a certificate have been registered under the
Securities Act pursuant to an effective registration statement or are to be sold
pursuant to Rule 144, or if the Company shall have been furnished with an
opinion of counsel, which opinion shall be reasonably satisfactory to counsel
for Devon, that registration under the Securities Act is not required, as the
case may be, then, in any such event, upon the
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request of Kerr-McGee, Devon shall cause such certificate or certificates to be
exchanged for a certificate or certificates that do not bear any legend.
3.2 Improper Transfer. Any attempt by Kerr-McGee or its Affiliates to
Transfer any Shares other than in accordance with this Agreement shall be null
and void and neither Devon nor any transfer agent for such securities shall be
required to give any effect to such attempted Transfer in its stock records.
4. GENERAL PROVISIONS.
4.1 Representations and Warranties. (a) Devon represents and warrants to
Kerr-McGee that (i) Devon is a corporation duly organized, validly existing and
in good standing under the laws of the State of Oklahoma and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (ii) the execution and delivery of this Agreement by
Devon and the consummation by Devon of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Devon and
no other corporate proceedings on the part of Devon are necessary to authorize
this Agreement or any of the transactions contemplated hereby, and (iii) this
Agreement has been duly executed and delivered by Devon and constitutes a valid
and binding obligation of Devon, and, assuming this Agreement constitutes a
valid and binding obligation of Kerr-McGee, is enforceable against Devon in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally from time to time and to general principles of
equity.
(b) Kerr-McGee represents and warrants to Devon that (i) Kerr-McGee is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (ii) the execution
and delivery of this Agreement by Kerr-McGee and the consummation by Kerr-McGee
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Kerr-McGee and no other corporate
proceedings on the part of Kerr-McGee are necessary to authorize this Agreement
or any of the transactions contemplated hereby, and (iii) this Agreement has
been duly executed and delivered by Kerr-McGee and constitutes a valid and
binding obligation of Kerr-McGee, and, assuming this Agreement constitutes a
valid and binding obligation of Devon, is enforceable against Kerr-McGee in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally from time to time and to general principles of
equity.
4.2 Amendment and Modification; Waiver of Compliance. This Agreement may
be amended or waived only by written instrument duly executed by the parties. In
the event of the amendment or modification of this Agreement in accordance with
its terms, the Board of Directors of Devon shall adopt any amendment to the
by-laws of Devon that may be required as a result of such amendment or
modification to this Agreement, and, if required, shall propose any amendment to
the Certificate of Incorporation that may be required as a result of such
amendment or modification to this Agreement to the Devon shareholders entitled
to vote thereon at a meeting duly called and held for such purpose, and shall
recommend that the Devon shareholders vote in favor of such amendment to the
Certificate of Incorporation.
4.3 Injunctive Relief. Each of the parties hereto hereby acknowledges that
in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy of law. Each of
the parties therefore agrees that in the event of a breach of any material
provision of this Agreement the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as to
obtain damages for breach of this Agreement. By seeking or obtaining any such
relief, the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may be entitled in equity or at law.
4.4 Bylaws. At all times while this Agreement shall be in effect, Devon
shall cause its Bylaws to conform to the provisions of this Agreement, including
by causing its Bylaws to be amended.
4.5 No Amendment of Rights Plan. Devon's Board of Directors shall not
adopt any Rights Plan or amend the Rights Plan as in effect on the date hereof
without the approval of a majority of the Kerr-McGee
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Designees then on the Board of Directors of Devon, unless such Rights Plan or
amendment would not adversely affect the rights or interests of Kerr-McGee or
its Affiliates.
4.6 Limitation on Reductions of Public Float by Devon. Devon shall not
take any action, including without limitation an acquisition by Devon or any of
its Affiliates of Voting Shares then outstanding, or a recapitalization by
Devon, which would reduce the number of shares of Common Stock held by Persons
other than Kerr-McGee, Devon or any Affiliate of either Kerr-McGee or Devon to
less than 15,000,000, without the prior written consent of Kerr-McGee.
4.7 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Oklahoma, without regard to the principles of conflicts of law thereof.
4.8 Termination. (a) This Agreement may be terminated:
(i) by the mutual written consent of the parties hereto;
(ii) by Kerr-McGee or Devon if Kerr-McGee shall have become the
Beneficial Owner of less than 5% of the Voting Shares;
(iii) by Kerr-McGee if any Person (other than Kerr-McGee or any
Affiliate) shall have proposed to Devon a Business Combination Transaction
and a majority of the Continuing Directors shall have approved such
proposal or shall have retained (or authorized Devon to retain) the
services of an investment banking firm and shall have instructed such
investment banking firm to solicit indications of interest with respect to
a Business Combination Transaction; provided that, if a proposal with
respect to a Business Combination Transaction referred to in this clause
(iii) shall have been terminated or withdrawn by the Person who made such
proposal and Kerr-McGee shall have withdrawn, terminated or permitted to
expire any tender or exchange offer or proposal with respect to a Business
Combination Transaction made by Kerr-McGee, then the provisions of this
Agreement shall thereafter be reinstated (without liability to any party
for any failure to have complied with the terms and provisions of this
Agreement during the period when it shall have been terminated in
accordance with this Section 4.8(a)(iii)) and this Agreement shall
thereafter continue in full force and effect in accordance with its terms.
(iv) by Kerr-McGee if (A) any Person other than Kerr-McGee or its
Affiliates shall have acquired Beneficial Ownership of 15% or more of the
Voting Shares at a time when the Rights Plan is in effect and a majority of
the Continuing Directors shall have approved such acquisition or otherwise
taken action so that such acquisition would not result in such Person
becoming an Acquiring Person, or triggering a Distribution Date, under the
Rights Plan or (B) any Person other than Kerr-McGee or its Affiliates shall
have acquired Beneficial Ownership of 20% or more of the Voting Shares at a
time when the Rights Plan is not in effect, and, in any event referred to
in clause (A) or (B) above, such Person shall not have entered into an
agreement with Devon containing restrictions and other provisions at least
as favorable to Devon as those contained in this Agreement;
(v) by Kerr-McGee if the Continuing Directors shall not constitute a
majority of the Board of Directors of Devon; or
(vi) by Kerr-McGee if Devon shall have materially breached any
provision of this Agreement and Kerr-McGee shall have delivered a written
notice of such breach to Devon; provided that, if such material breach is
reasonably susceptible of cure and Devon shall proceed diligently to cure
such material breach, then this Agreement shall not be terminated unless
such material breach shall not have been cured on or prior to the fifth day
after the delivery of written notice by Kerr-McGee to Devon that Devon has
materially breached this Agreement.
(b) Unless this Agreement shall have been earlier terminated as provided in
Section 4.8(a), this Agreement shall terminate twenty-one years from and after
the death of the last survivor of J. Larry Nichols and Luke R. Corbett.
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4.9 Notices. All notices, requests, demands or other communications
required or permitted by this Agreement shall be in writing and effective when
received, and delivery shall be made personally or by registered or certified
mail, return receipt requested, postage prepaid, or overnight courier or
confirmed facsimile transmission, addressed as follows:
(a) If to Devon:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: J. Larry Nichols, President
and Chief Executive Officer
Facsimile No.: (405) 236-4258
with a copy to:
McAfee & Taft
A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Attention: Jerry A. Warren, Esq.
Facsimile No.: (405) 235-0439
(b) If to Kerr-McGee:
Kerr-McGee Corporation
Kerr-McGee Center
P.O. Box 25861
Oklahoma City, Oklahoma 73125
Attention: Russel G. Horner, Jr.
Vice President and General Counsel
Facsimile No.: (405) 270-4211
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David B. Chapnick, Esq.
Facsimile No.: (212) 455-2502
4.10 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
4.11 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof. This Agreement shall not
be assigned by operation of law or otherwise.
4.12 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
4.13 Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
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4.14 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS
--------------------------------
Name: J. Larry Nichols
Title: President and Chief Executive Officer
KERR-McGEE CORPORATION
By: /s/ LUKE R. CORBETT
--------------------------------
Name: Luke R. Corbett
Title: President and Chief Operating Officer
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EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated December 31, 1996 by and between
Devon Energy Corporation, an Oklahoma corporation (the "Company"), and
Kerr-McGee Corporation, a Delaware corporation ("Security Holder").
W I T N E S S E T H:
WHEREAS, the Company and Security Holder have entered into an Agreement and
Plan of Merger dated as of October 17, 1996 (the "Merger Agreement") which
provides, among other things, for the execution of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement the parties hereto agree as follows:
Section 1. Definitions. The terms defined in this Section, whenever used in
this Agreement, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Terms not defined in this Agreement,
and defined in the Merger Agreement have the meanings assigned them in the
Merger Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the Company's authorized Common Stock, par value
$.10 per share.
"Company" shall mean Devon Energy Corporation, an Oklahoma corporation, and
any successor corporation by merger, consolidation or otherwise and any parent
corporation resulting from the merger or consolidation of the Company with or
into a subsidiary of another corporation.
"Evergreen Registration Statement" shall mean a Registration Statement
filed pursuant to Rule 415, or any successor rule under the Securities Act,
relating to an offering on a continuous or delayed basis and which may, in lieu
of filing a post-effective amendment that (x) includes any prospectus required
by Section 10(a)(3) of the Securities Act or (y) reflects facts or events
representing a material or fundamental change in the information set forth in
the Registration Statement, be amended by the incorporation by reference of
information required to be included in (x) or (y) above contained in periodic
reports filed pursuant to Section 13 or 15 (d) of the Exchange Act in the
Registration Statement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Exchangeable Security" shall mean a security of any type, including but
not limited to debt, equity, warrants or other rights, issued by Security Holder
at any time after the second anniversary of this Agreement and which includes or
represents the right to acquire Registrable Securities from Security Holder upon
exchange, conversion or exercise thereof; provided that such security shall
confer on Security Holder the right to suspend the right of the holder of such
security to exchange, convert or exercise such security to the extent necessary
for Security Holder to comply with the terms of Section 2.D. of this Agreement;
and provided further that the right to exchange or convert into, or exercise
for, Registrable Securities shall be limited to a period of seven years
commencing upon issuance of the Exchangeable Security.
"Person" shall mean an individual, a corporation, a partnership, a trust,
an unincorporated organization or a government or any agency or political
subdivision thereof.
"Public Offering" shall mean a firm commitment underwritten public offering
pursuant to a registration statement under the Securities Act.
"Registrable Securities" shall have the meaning subscribed thereto in
Section 2.A.
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"Registration" shall mean the registration under the Securities Act of
Registrable Securities pursuant to either Section 2.A hereof or 2.B hereof.
"Registration Statement" shall mean a registration statement filed under
the Securities Act or a similar document filed pursuant to any other statute
then in effect corresponding to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Security Holder" shall mean Kerr-McGee Corporation, a Delaware
corporation, its permitted assigns, or any affiliate thereof holding Common
Stock or any successor corporation to any of the foregoing by merger or
consolidation or otherwise.
Section 2. Registration Rights.
A. Required Registration. If the Company shall receive a written request
from Security Holder requesting that the Company file a Registration Statement
relating to a Public Offering of shares of Common Stock owned by Security Holder
("Registrable Securities"), the Company will as promptly as practicable prepare
and file a Registration Statement and use its best efforts to cause the
Registration Statement to become effective; subject, however, to the following
provisions:
(1) the Company shall be required to file no more than three (3)
Registration Statements on behalf of Security Holder pursuant to this
Section 2.A;
(2) the Company shall not be obligated to file a requested
Registration:
(i) in the event that the aggregate number of Registrable
Securities to be included in such requested Registration is less than
five percent (5%) of the issued and outstanding Common Stock;
(ii) from the time it gives notice to Security Holder, provided
such notice is given prior to time of receipt by Devon of Security
Holder's request to file a Registration Statement, that it is preparing
to file a Registration Statement other than for the account of Security
Holder until 60 days after the Registration Statement has been declared
effective by the SEC; provided, the Company shall use its best efforts
to cause such Registration Statement to be declared effective as
promptly as practicable; and, provided further, the obligation to file a
Registration Statement on behalf of Security Holder shall be reinstated
if the Company does not file a Registration Statement within 30 days
after giving the notice referred to above; or
(iii) for a period from the time the Company gives Security Holder
notice, provided such notice is given prior to time of receipt by Devon
of Security Holder's request to file a Registration Statement, that the
Company is conducting negotiations for a material business combination
or that there is a material development or event pending which has not
yet been publicly disclosed and as to which the Company believes
disclosure will be prejudicial to the Company until the earlier of (a)
120 days after the notice with respect to a material business
combination or 90 days after the notice with respect to a material
development or event; (b) the public announcement of the combination,
development or event referred to above; or (c) the time the Company
gives Security Holder notice that suspension of its obligation is no
longer required.
(3) a Registration Statement filed pursuant to a request of Security
Holder shall first include all Registrable Securities requested to be
included by Security Holder and, only after such inclusion, may, include
securities of the Company being sold for the account of the Company or
other security holders; provided, however, that securities to be offered on
behalf of the Company or such other security holders will be included in
such Registration Statement only to the extent that, in the reasonable
opinion of the managing underwriter for the Public Offering of Registrable
Securities on behalf of Security Holder, such inclusion will not materially
adversely affect the distribution of Registrable Securities on behalf of
Security Holder;
(4) the selection of an underwriter for a Public Offering of
Registrable Securities by Security Holder shall be subject to the approval
of the Company, which shall not be unreasonably withheld; and
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<PAGE> 3
(5) for purposes of paragraph (1) of this Subsection A, if a requested
Registration Statement is filed and the Company otherwise complies with its
obligations hereunder, but the Registration Statement is withdrawn by
Security Holder due to a delay in the offering requested by the Company,
then no requested Registration Statement shall be deemed to have been
filed.
B. Incidental/"Piggy-back" Registration. If the Company at any time
proposes to file a Registration Statement (other than a Registration Statement
filed pursuant to Subsection A of this Section) under the Securities Act
relating to a Public Offering of Common Stock to be sold for cash that would
permit the registration of Registrable Securities, it will give Security Holder
as much advance notice, in writing, as is reasonably practicable under the
circumstances, but in any event not less than 5 days, before the filing with the
Commission of such Registration Statement, which notice shall set forth the
intended method of disposition of the securities proposed to be registered. The
notice shall offer to include in such filing such amount of Registrable
Securities as Security Holder may request. If Security Holder wishes to have
Registrable Securities registered pursuant to this Subsection B, it shall advise
the Company in writing within 20 days after the date of receipt of such offer
from the Company (or such shorter period, but in any event not less than 5 days,
as the Company shall specify in its notice to Security Holder), setting forth
the amount of Registrable Securities for which Registration is requested. If the
managing underwriter of the proposed Public Offering of Common Stock by the
Company shall advise the Company in writing that, in the reasonable opinion of
the managing underwriter, the distribution of the Registrable Securities
requested by Security Holder to be included in the Registration Statement
concurrently with securities being registered for sale by the Company would
materially adversely affect the distribution of such securities by the Company,
then the Company shall so advise the Security Holder and the number of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to the Company and then pro rata among the shareholders
(including Security Holder) whose shares are to be included in such Registration
Statement. If any Person does not agree to the terms of any such underwriting,
such Person shall be excluded therefrom by written notice from the Company or
the underwriter.
Any Registrable Securities excluded or withdrawn from such underwriting
shall nevertheless be included in any Registration Statement (but not the
underwriting) filed pursuant to this Subsection B during the first two years
after the date of this Agreement in an amount not to exceed 5% of the issued and
outstanding Common Stock; provided, the Registrable Securities so included may
be offered and sold only during a 90 day period commencing on the last day of
any period during which "Affiliates" (as that term is defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended) of the Company have agreed not to dispose of Common Stock in accordance
with the underwriting agreement.
Any obligation of the Company to effect a Registration pursuant to this
Subsection B shall be conditioned upon Security Holder entering into an
underwriting agreement with the Company and the managing underwriters of the
registered offering of the type described in paragraph (10) of Subsection C.
C. Registration Procedures. If the Company is required by the provisions of
Subsections A or B of this Section 2 to effect the Registration of any of the
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(1) Prepare and file with the Commission a Registration Statement with
respect to such securities and use its best efforts to cause such
Registration Statement to become and, subject to paragraph (2) of this
Subsection C, remain effective.
(2) Keep such Registration effective, and the prospectus used in
connection therewith, current for a period of ninety (90) days or until the
Security Holder has completed the distribution described in the
Registration Statement relating thereto, whichever first occurs (the
"Selling Period"); provided, however, that (a) the Selling Period shall be
extended for a period of time equal to any period that Security Holder
refrains from selling any securities included in such registration (i)
pursuant to an agreement between Security Holder and an underwriter of
Common Stock at the request of the Company in order to facilitate the
Company's offering thereunder or (ii) pursuant to paragraph 8 of this
Subsection C and in the case of a registration which includes Registrable
Securities in accordance with
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the penultimate paragraph in Subsection B of this Section 2, the Selling
Period shall be extended for the period contemplated thereby; provided that
Rule 415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis; and provided further that
applicable rules under the Securities Act governing the obligation to file
a post-effective amendment permit, in lieu of filing a post-effective
amendment that (i) includes any prospectus required by Section 10(a)(3) of
the Securities Act or (ii) reflects facts or events representing a material
or fundamental change in the information set forth in the Registration
Statement, the incorporation by reference of information required to be
included in (i) and (ii) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the Registration
Statement.
(3) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and such prospectus current in compliance with Section
10 of the Securities Act, and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Common
Stock covered by such Registration Statement whenever Security Holder shall
desire to sell or otherwise dispose of the same, and provide Security
Holder with copies of any correspondence with the Commission, or copies of
memoranda relating to oral communications with the Commission, with respect
to any request by the Commission for any amendment of or supplement to the
Registration Statement or the prospectus included therein or for additional
information; provided, however, that the Company shall have no obligation
under this paragraph (3) after the period required by paragraph (2) of this
Subsection C has lapsed.
(4) Furnish to Security Holder such number of copies of such
Registration Statement and of each amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
included in such Registration Statement (including each preliminary
prospectus, summary prospectus and prospectus supplement), in conformity
with the requirements of the Securities Act, and such other documents, as
Security Holder may reasonably require in order to facilitate the public
offering, sale or other disposition of the Registrable Securities owned by
Security Holder.
(5) Use its best efforts to register or qualify the Common Stock
covered by such Registration Statement under such other securities or blue
sky laws of such jurisdictions as Security Holder shall reasonably request
(excluding however any jurisdiction in which the filing would subject the
Company to additional tax liability, and any jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such Registration or qualification which consent would
not be required but for this paragraph (5)), and do such other acts and
things as may be required to enable Security Holder to consummate the
public sale or other disposition in such jurisdictions of the Registrable
Securities owned by Security Holder.
(6) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least 12 months, but not more than 18 months, beginning
with the first month after the effective date of the Registration
Statement, which earnings statement shall ratify the provisions of Section
11(a) of the Securities Act.
(7) Immediately notify Security Holder at any time when a prospectus
is required to be delivered under the Securities Act within the Selling
Period referred to in paragraph (2) of this Subsection C, of the Company
becoming aware that the prospectus included in the Registration Statement,
or as such prospectus may be amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading in light of the circumstances then existing, and at the
request of Security Holder to promptly prepare and furnish to Security
Holder a number of copies of an amended or supplemental prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading in the light of the circumstances then existing. In the event
the Company shall give any such
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<PAGE> 5
notice, Security Holder shall immediately suspend use of the prospectus and
the Selling Period shall be extended by the number of days during the
period from and including the date of the giving of such notice to and
including the date when Security Holder shall have received the copies of
such supplemented or amended prospectus.
(8) In the event that, in the judgment of the Company, it is advisable
to suspend use by Security Holder of a prospectus relating to an offering
of Registrable Securities, other than a Public Offering, because the
Company is conducting negotiations for a material business combination or
due to pending material developments or events that have not yet been
publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver notice in
writing to the effect of the foregoing and, upon receipt of such notice,
the Security Holder shall not use the prospectus, and the Selling Period
shall cease to run or will not commence, until such Security Holder has
received copies of the supplemented or amended prospectus provided for in
paragraph 3 of this Section C, or until it is advised in writing by the
Company that the prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed
incorporated by reference in such prospectus; provided that the duration of
such suspension shall not exceed 30 days. The Company will use its best
efforts to ensure that the use of the prospectus may be resumed, and the
Selling Period will commence, as promptly as is practicable and, in any
event, promptly after the earlier of (x) public disclosure of such material
business combination or pending material development or event sufficient to
permit an affiliate of the Company to sell Common Stock or (y) in the
judgment of the Company, public disclosure of such material business
combination or material development or event would not be prejudicial to
the Company.
(9) Use its best efforts to list such Registrable Securities on the
primary securities exchange or other trading market on which the Common
Stock is then listed, if such Registrable Securities are not already so
listed and if such listing is then permitted under the rules of such
exchange or other trading market, and to provide a transfer agent and
registrar for such Registrable Securities covered by such Registration
Statement not later than the effective date of such Registration Statement.
(10) Enter into such agreements (including an underwriting agreement
in customary form and containing customary provisions relating to legal
opinions and accountants' letters and customary representations and
warranties and customary provisions for mutual indemnification and
contribution between the Company and the underwriters for Security Holder)
and take such other actions as Security Holder may reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities.
(11) Make available for inspection by Security Holder, by any
underwriter participating in any disposition to be effected pursuant to
such Registration Statement and by any attorney, accountant or other agent
retained by Security Holder or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information requested by Security Holder, such
underwriter, attorney, accountant or agent, as is reasonably needed in
connection with such Registration Statement.
D. Exchangeable Securities. In lieu of one of the Registration Statements
to which Security Holder is entitled pursuant to Section 2.A. hereof, after
written request from Security Holder the Company shall file one Evergreen
Registration Statement for registration of Registrable Securities deliverable by
Security Holder pursuant to the terms of an offering of Exchangeable Securities
(including the sale of the Registrable Securities by Security Holder on the
redemption or maturity of the Exchangeable Securities), and use its best efforts
to cause the Registration Statement to become effective.
The terms of the Exchangeable Securities will provide that the conversion,
exercise or exchange right may only be utilized (x) during the calendar month of
April in any year that the Exchangeable Securities are outstanding and (y)
during the 30 days ending on the maturity or redemption of the Exchangeable
Securities; provided, there shall be only one conversion, exercise or exchange
period in any calendar year.
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<PAGE> 6
E. Expenses; Limitations on Registration. All Commission and blue sky
filing fees and underwriting discounts and commissions attributable to
securities offered on behalf of Security Holder, and the fees and expenses of
separate counsel for Security Holder, incurred in connection with effecting a
Registration pursuant to this Section 2 shall be borne by Security Holder.
Printing expenses of a prospectus which includes Registrable Securities shall be
borne by the Company and each shareholder (including Security Holder) whose
shares are included in the Registration Statement in proportion to the number of
shares being offered by each. All other expenses incurred in connection with the
Registration Statement shall be borne by the Company.
It shall be a condition precedent to the obligation of the Company to take
any action pursuant to this Section 2 in respect of the Registrable Securities
which are to be registered at the request of Security Holder that Security
Holder shall furnish to the Company such information regarding the securities
held by it and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company.
F. Indemnification. (1) In the event of any Registration of any Registrable
Securities under the Securities Act pursuant to this Section 2, the Company
agrees to indemnify and hold harmless Security Holder, its directors, officers
and employees, and each other Person, if any, who controls Security Holder
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which Security Holder or
any such director, officer, employee or controlling Person may become subject
under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse Security Holder or such director, officer, employee or
controlling Person for legal or any other expenses reasonably incurred by
Security Holder or such director, officer, employee or controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any alleged untrue statement or alleged omission
made in such Registration Statement, preliminary prospectus, prospectus, or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
Security Holder stating that it is specifically for use therein; and provided,
further, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus if such untrue statement or alleged untrue
statement or omission or alleged omission has been the subject of a notice given
to Security Holder pursuant to paragraph (7) of Subsection (C) if Security
Holder after receipt of such notice and prior to the receipt of a corrected
prospectus sold a Registrable Security to the Person asserting such loss, claim,
damage, liability or expense who purchased such Registrable Security which is
the subject thereof form Security Holder. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
Security Holder or such director, officer, employee or participating Person or
controlling Person, and shall survive the transfer of such securities by
Security Holder.
(2) Security Holder agrees to indemnify and hold harmless the Company, its
directors, officers and employees and each other Person, if any, who controls
the Company against any losses, claims, damages or liabilities joint or several,
to which the Company or any such director, officer, or employee or any such
Person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained, on the effective date thereof, in any
Registration Statement under which Registrable Securities were registered under
the Securities Act at the request of Security Holder, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such alleged untrue
41
<PAGE> 7
statement or alleged omission was made in such Registration Statement,
preliminary prospectus, prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by Security Holder specifically stating it is for use
therein, and shall reimburse the Company or such director, officer, employee or
other Person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action.
(3) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraphs of this Subsection E, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligation under this
Subsection E to the extent the indemnifying party is not materially prejudiced
by such failure. In case any such action is brought against an indemnified
party, the indemnified party shall permit the indemnifying party to assume the
defense of such action or proceeding, provided that counsel for the indemnifying
party, who shall conduct the defense of such action or proceeding shall be
approved by the indemnified party (whose approval shall not be unreasonably
withheld) and the indemnified party may participate in such defense at such
indemnified party's expense unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, in which event the indemnifying
party shall pay the reasonable fees and expense of separate counsel for the
indemnified party. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation. The
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm for all indemnified parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent.
(4) Indemnification similar to that specified in the preceding paragraphs
of this Subsection E shall be given by the Company and Security Holder (with
such modifications as shall be appropriate) with respect to liability related to
any required registration or other qualification of Registrable Securities under
any Federal or state law or regulation of governmental authority other than the
Securities Act.
(5) If the indemnification provided for in this Subsection E is unavailable
or insufficient to hold harmless an indemnified party under paragraphs (1) or
(2) above, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraphs (1) or (2) above, in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
Security Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equity considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or Security Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and Security
Holder agree that it would not be just and equitable if contributions pursuant
to this paragraph (5) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph (5). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this paragraph (5) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in paragraph (3) above if the
indemnifying party has assumed the defense of any such action in accordance with
the provisions thereof) which is the subject of this paragraph (5).
Notwithstanding the provisions of this paragraph (5), in respect of any loss,
claim, damage or liability based upon any untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact which
relates to information other than information supplied by Security Holder,
Security Holder shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable
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<PAGE> 8
Securities offered by it and distributed to the public were offered to the
public exceeds the amount of any damages which Security Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
paragraph (5) of notice of the commencement of any action against such party in
respect of which a claim for contribution may be made against an indemnifying
party under this paragraph (5), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof if the notice
specified in paragraph (3) above has not been given with respect to such action;
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party under this paragraph
(5) to the extent such omission is not prejudicial.
G. Public Availability of Information. The Company shall comply with all
public information reporting requirements of the Commission, to the extent
required from time to time to enable Security Holder to sell Registrable
Securities without Registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of Security Holder, the
Company will deliver to Security Holder a written statement as to whether it has
complied with such requirements.
H. Supplying Information. The Company shall cooperate with Security Holder
in supplying such information as may be necessary for Security Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Registrable Securities.
I. Specific Performance. Each party hereto acknowledges and agrees that
each other party hereto would be irreparably harmed and would have no adequate
remedy of law if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly, it
is agreed that, in addition to any other remedies by law or in equity which may
be available, the parties hereto shall be entitled to obtain temporary and
permanent injunctive relief with respect to any breach or threatened breach of,
or otherwise obtain specific performance of the covenants and other agreements
contained in this Agreement.
Section 3. Representations and Warranties of the Company. The Company
represents and warrants to Security Holder that (a) the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby, and (c) this Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, and, assuming this Agreement constitutes a valid and
binding obligation of Security Holder is enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws affecting
creditors, rights generally from time to time and to general principles of
equity, and except as the enforceability thereof may be limited by
considerations of public policy.
Section 4. Representations and Warranties of Security Holder. Security
Holder represents and warrants to the Company that (a) it is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Security Holder and the consummation by Security Holder of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Security Holder and no other corporate
proceedings on the part of Security Holder are necessary to authorize this
Agreement or any of the transactions contemplated hereby, and (c) this Agreement
has been duly executed and delivered by Security Holder and constitutes a valid
and
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<PAGE> 9
binding obligation of Security Holder, and, assuming this Agreement constitutes
a valid and binding obligation of the Company, is enforceable against Security
Holder in accordance with its terms subject to applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and similar laws
affecting creditors' rights generally from time to time and to general
principles of equity, and except as the enforceability thereof may be limited by
considerations of public policy.
Section 5. Stock Rights and Restrictions Agreement. This Agreement shall be
in all respects subject to the terms and conditions of the Stock Rights and
Restrictions Agreement between the parties hereto and of even date herewith.
Section 6. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or transmitted by
telex, telegram or facsimile transmission or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Security Holder, to:
Kerr-McGee Corporation
P.O. Box
Oklahoma City, Oklahoma 73125
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: David Chapnick
Facsimile No: (212) 455-2502
(b) if to the Company, to:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: J. Larry Nichols, President
Facsimile No.: (405) 552-4550
with a copy to:
McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102-7103
Attention: Jerry A. Warren, Esq.
Facsimile No.: (405) 235-0439
Section 5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oklahoma.
Section 6. Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute a single agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their officers thereunto duly authorized.
DEVON ENERGY CORPORATION
By
/s/ J. LARRY NICHOLS
--------------------------------
J. Larry Nichols
President and Chief Executive
Officer
KERR-MCGEE CORPORATION
By /s/ LUKE R. CORBETT
--------------------------------
Luke R. Corbett, President and
Chief Operating Officer
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<PAGE> 1
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 8-K, into Devon Energy Corporation's
previously filed Registration Statements File Nos. 33-32378, 33-67924, and
333-00815.
ARTHUR ANDERSEN LLP
January 14, 1997
Oklahoma City, Oklahoma
46
