SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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DEVON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1474008
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
MARIAN J. MOON
20 NORTH BROADWAY, SUITE 1500
OKLAHOMA CITY, OKLAHOMA 73102-8260
(405) 235-3611
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area and telephone number, including area
code, of registrant's principal code, of agent for service)
executive offices)
COPIES TO:
C. KEVIN BARNETTE
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE
WASHINGTON, D.C. 20005
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on the Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS AMOUNTS TO BE PROPOSED PROPOSED MAXIMUM
OF SECURITIES TO BE REGISTERED MAXIMUM AGGREGATE
REGISTERED OFFERING OFFERING PRICE AMOUNT OF
PRICE PER REGISTRATION
SHARE FEE
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<S> <C> <C> <C> <C>
Devon Common Stock (1) 16,090,376 Shares $22.28125 (2) $ 358,513,690.25 (2) $99,666.81 (3)
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</TABLE>
(1) Includes the stock purchase rights associated with the Devon Common
Stock.
(2) Estimated pursuant to Rule 457(c) solely for the purposes of computing
the registration fee based upon the average of the high and low prices of
the Devon Common Stock, as reported on the American Stock Exchange
Composite Transactions on November 2, 1998.
(3) In accordance with Rule 457 (b), the registration fee of $99,666.81 is
offset by the fee of $154,045, which was paid by the Registrant to the
Securities and Exchange Commission with respect to the Joint Proxy
Statement filed on July 29, 1998 with respect to this transaction.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
=========================================================================
Subject to Completion, November 6, 1998
PROSPECTUS
16,090,376 SHARES
COMMON STOCK
DEVON ENERGY CORPORATION
20 North Broadway, Suite 1500
Oklahoma City, OK 73202-8260
(405) 235-3611
This is an offering of shares of Common Stock of Devon Energy
Corporation, an Oklahoma corporation, to be issuable for the Exchangeable
Shares of Northstar Energy Corporation, an Alberta corporation. The
Exchangeable Shares will be issued to the shareholders of Northstar in
connection with Devon's merger with Northstar. Northstar is to become a
subsidiary of Devon. Each holder of an Exchangeable Share may exchange each
Exchangeable Share into one share of Devon Common Stock, plus declared and
unpaid dividends. Because the shares of Devon Common Stock offered by this
Prospectus will be issued only in exchange for the Exchangeable Shares,
Devon will not receive any cash proceeds from this offering. All expenses
of registration incurred in connection with this offering are being paid by
Devon.
The Devon Common Stock is listed on the American Stock Exchange
under the symbol "DVN." On November 4, 1998, the last reported sale price
of the Devon Common Stock as reported on the AMEX Composite Transactions
was $36.25 per share. Unless otherwise indicated, all dollar references in
this Prospectus are to United States dollars.
Holders of Exchangeable Shares should consider carefully the risk
factors beginning on page 5 .
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
passed upon the adequacy or accuracy of this Prospectus. Any representation
to the contrary is a criminal offense.
----------------------
The information in this Prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
This Prospectus is dated __________, 1998
TABLE OF CONTENTS
PAGE
RISK FACTORS ..................................................5
Taxability of the Exchange...........................................5
Differences in Canada and U.S. Trading Markets......................5
Foreign Property....................................................5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.........................5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.........................7
THE COMPANY.............................................................7
USE OF PROCEEDS.........................................................8
PLAN OF DISTRIBUTION....................................................8
CERTAIN INCOME TAX CONSIDERATIONS......................................14
CERTAIN LEGAL MATTERS..................................................22
EXPERTS................................................................22
RISK FACTORS
Investors should consider carefully the following factors, in
addition to the other information contained or incorporated by reference in
this Prospectus, before exchanging their Exchangeable Shares for the shares
of Devon Common Stock offered by this Prospectus.
TAXABILITY OF THE EXCHANGE
Based on the tax laws as of the date of this Prospectus, the
exchange of Exchangeable Shares for shares of Devon Common Stock is
generally a taxable event in Canada and the United States. A holder's tax
consequences can vary depending on a number of factors, including the
residency of the holder, the method of the exchange and the length of time
that the Exchangeable Shares were held prior to the exchange. See "Certain
Income Tax Considerations."
DIFFERENCES IN CANADA AND U.S. TRADING MARKETS
The Devon Common Stock is listed on the American Stock Exchange,
and the Exchangeable Shares are to be listed on the Toronto Stock Exchange.
We do not intend to list the Exchangeable Shares or Devon Common Stock on
any other stock exchange in Canada or the United States. As a result, the
price at which the Exchangeable Shares trade is expected to be based upon
the market for such shares on the Toronto Stock Exchange, and the price at
which the shares of Devon Common Stock trade is based upon the market for
such shares on the American Stock Exchange. Although Devon believes that
the market price of the Exchangeable Shares on the Toronto Stock Exchange
and the market price of the Devon Common Stock on the American Stock
Exchange should reflect essentially equivalent values, there can be no
assurance that the market price of the Devon Common Stock will be
identical, or even similar, to the market price of the Exchangeable Shares.
FOREIGN PROPERTY
So long as the Exchangeable Shares are listed on a prescribed stock
exchange in Canada (which currently includes the Toronto Stock Exchange)
and Northstar maintains a substantial presence in Canada, the Exchangeable
Shares will not be foreign property under the Income Tax Act (Canada) for
trusts governed by registered pension plans, registered retirement savings
plans, registered retirement income funds and deferred profit sharing plans
or for certain other tax-exempt persons. Devon Common Stock will, however,
be foreign property for such plans or persons.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Devon is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports,
proxy statements and other information filed by Devon with the SEC can be
inspected at the Public Reference Room of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional
offices of the SEC at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, New
York, New York 10048. Copies of such material may be obtained from the
Public Reference Room of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The public may
obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Devon Common Stock is listed on the AMEX and
reports, proxy statements and other information regarding Devon can be
inspected at the offices of the AMEX, 86 Trinity Place, New York, New York
10006. The SEC maintains a web site that contains all information filed
electronically. The address of the SEC's web site is http://www.sec.gov.
The address of Devon's web site is http://www.devonenergy.com.
The following documents previously filed by Devon with the SEC are
incorporated by reference herein:
(i) Annual Report on Form 10-K for the year ended December 31,
1997, filed on March 13, 1998;
(ii) Quarterly report on Form 10-Q for the quarter ended March
31, 1998, filed on April 27, 1998;
(iii) Quarterly report on Form 10-Q for the quarter ended June 30,
1998, filed on August 6, 1998;
(iv) First Amendment to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed on October 14, 1998;
(v) Current Report on Form 8-K dated January 20, 1998, filed on
January 20, 1998;
(vi) Current Report on Form 8-K dated January 26, 1998, filed on
January 27, 1998;
(vii) Current Report on Form 8-K dated June 29, 1998, filed on July
8, 1998;
(viii) Proxy Statement for Devon's 1998 Annual Meeting of
Shareholders, filed on March 30, 1998;
(ix) The Definitive Joint Proxy Statement of Devon and Management
Information Circular and Proxy Statement of Northstar (File
No 1-10067), filed with the SEC on November 6, 1998,
including any amendment or report for the purpose of
updating such material (the "Joint Proxy Statement"); and
(x) The description of the Devon Common Stock contained in
Devon's Registration Statement on Form 8-B, filed on June 7,
1995.
Each document filed by Devon pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, subsequent to the date of this Prospectus and
prior to the termination of the offering of Devon Common Stock made hereby
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such document. Any statement contained
herein or in a document all or a portion of which is incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
Devon will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the oral or written request of any such
person, a copy of any or all of the foregoing documents incorporated herein
by reference (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into such documents). Requests
should be directed to Devon at 20 North Broadway, Suite 1500, Oklahoma
City, Oklahoma 73102, Attention: Corporate Secretary (telephone: (405)
235-3611).
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included
or incorporated by reference in this Prospectus, including without
limitation statements in the Joint Proxy Statement under "Summary," "Risk
Factors," "The Combination--Reasons for the Combination," "Devon-Northstar
Unaudited Pro Forma Combined Financial Information," "Unaudited U.S. GAAP
Financial Information - Northstar," "The Company after the Combination,"
"Devon Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business of Devon," and "Business of Northstar"
regarding the planned capital expenditures, increases in oil and gas
production, the number of anticipated wells to be drilled in 1998 and
thereafter, estimates of increases in production and recoveries of reserves
from secondary recovery operations, Devon's pro forma financial
information, business strategy and other plans and objectives for future
operations, are forward-looking statements. When used or incorporated by
reference in this Prospectus, the words "estimate," "project," "expect,"
"intend," "anticipate," "believe," or other similar words, or statements
that certain events or conditions "will" or "may" occur, are intended to
identify forward-looking statements. Statements and calculations concerning
oil and gas reserves and their present value also may be deemed to be
forward-looking statements in that they reflect the determination, based on
certain estimates and assumptions, that oil and gas resources may be
profitably exploited in the future. Although the expectations reflected in
such forward-looking statements are believed to be reasonable, no assurance
can be given that such expectations will prove to have been correct. Devon
cautions its stockholders and option holders that actual results could differ
materially from those expected by Devon, depending on the outcome of certain
factors, including, without limitation: (i) factors discussed under "Risk
Factors" in the Joint Proxy Statement such as fluctuations in the prices of
oil and gas, uncertainties inherent in estimating quantities of oil and gas
reserves and projecting future rates of production and timing of development
expenditures, competition, operating risks, acquisition risk, liquidity and
capital requirements and the effects of governmental and environmental
regulation and (ii) adverse changes in the market for Devon's or Northstar's
oil and gas production. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of their respective dates.
Devon does not undertake any obligation to release publicly the result of any
revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof, including, without limitation,
changes in business strategy or planned capital expenditures or to reflect the
occurrence of unanticipated events.
THE COMPANY
Devon is an independent energy company engaged primarily in oil and
gas exploration, development and production, and in the acquisition of
producing properties. Through its predecessors, Devon began operations in
1971 as a privately-held company. In 1988, Devon Common Stock began trading
publicly on the AMEX under the symbol "DVN."
Under the terms of the Combination Agreement, Devon is to be
combined with Northstar, resulting in Northstar becoming a subsidiary of
Devon. Under the terms of the Combination Agreement, holders of Northstar
Common Shares will receive shares of a newly issued class of Exchangeable
Shares of Northstar for each of their Northstar Common Shares based on an
exchange ratio of 0.227 Exchangeable Share for each Northstar Common Share
(the "Exchange Ratio"), subject to the Exchange Ratio Adjustment (as
defined below), and holders of options to acquire shares of Northstar
Common Shares will be converted into options to acquire shares of Devon
Common Stock on a 0.227 to 1 basis, subject to the Exchange Ratio
Adjustment. The "Exchange Ratio Adjustment" means the adjustment to be made
to the Exchange Ratio as follows: if the Pre-Meeting Average Price (as
defined below) multiplied by 0.227 shall be less than Cdn. $11.00, the
Exchange Ratio shall be adjusted to the lesser of (i) 0.235; or (ii) the
number obtained by dividing Cdn. $11.00 by the Pre-Meeting Average Price.
The Exchange Ratio Adjustment would come into effect if the Pre-Meeting
Average Price of Devon Common Stock on the AMEX during the period of 10
consecutive trading days ending on the second trading day prior to the
earlier of (i) the date of the special meeting of Devon stockholders to
approve the Combination Agreement or (ii) the date of the special meeting
of Northstar shareholders to approve the Combination Agreement (the
"Measurement Period") multiplied by 0.227 is less than Cdn. $11.00 per
share, in which case the Exchange Ratio is adjusted to a maximum of 0.235.
"Pre-Meeting Average Price" means the weighted average trading price of
shares of Devon Common Stock on the AMEX (as reported by the AMEX and
converted to Canadian dollars and expressed to the fourth decimal place)
during the Measurement Period. For this purpose, the U.S. dollar/Canadian
dollar exchange rate for determining the Pre-Meeting Average price shall be
based upon the average of the noon buying rate (expressed to the fourth
decimal place) for each of the trading days in the Measurement Period, as
reported by the Federal Reserve Bank of New York. For this purpose,
"weighted average trading price" shall be determined by dividing the
aggregate sale price of all shares of Devon Common Stock sold on the AMEX
during the Measurement Period by the total number of shares of Devon Common
Stock sold. The Exchangeable Shares will entitle holders to dividends and
other rights economically equivalent to the Devon Common Stock, including
the right through a voting trust to vote at Devon stockholder meetings. The
Exchangeable Shares will be exchangeable at the holder's option into Devon
Common Stock on a one-for-one basis.
Devon's corporate office is located at 20 North Broadway, Suite
1500, Oklahoma City, Oklahoma 73102- 8260. Northstar's corporate office is
located at 3000, 400-3rd Avenue S.W., Calgary, Alberta, Canada T2P 4H2.
USE OF PROCEEDS
Because the shares of Devon Common Stock will be issued for the
Exchangeable Shares, Devon will not receive any cash proceeds upon such
issuance.
PLAN OF DISTRIBUTION
The Devon Common Stock may be issued to holders of Exchangeable
Shares as follows: (i) holders of Exchangeable Shares may require at any
time that such shares be exchanged for an equivalent number of shares of
Devon Common Stock, plus declared but unpaid dividends, if any; (ii) Devon
or Northstar may, under certain circumstances, purchase or redeem such
Exchangeable Shares by exchanging them for an equal number of shares of
Devon Common Stock, plus declared and unpaid dividends, if any, and (iii)
upon liquidation of Devon or Northstar, holders of Exchangeable Shares may
be required to, or may elect to, exchange such Exchangeable Shares for an
equal number of shares of Devon Common Stock, plus declared and unpaid
dividends, if any. No broker, dealer or underwriter has been engaged in
connection with the offering of the Devon Common Stock made hereby.
The following is a description of the terms on which Devon Common
Stock may be issued in exchange for the Exchangeable Shares. Such terms are
set forth in the form of Plan of Arrangement Under Section 186 of the
Business Corporations Act (Alberta) Involving and Affecting Northstar and
the Holders of its Common Shares and Options (the "Plan of Arrangement"),
the form of the Provisions Attaching to the Exchangeable Shares (the
"Exchangeable Share Provisions") as set forth in Appendix A to the Plan of
Arrangement, and the form of Voting and Exchange Trust Agreement (the
"Voting and Exchange Trust Agreement") to be entered into by Devon,
Northstar and CIBC Mellon Trust Company, as trustee (the "Trustee"). The
Plan of Arrangement and the Voting and Exchange Trust Agreement are
included in the Joint Proxy Statement as Annexes E and G. The following
description is qualified in its entirety by reference to Combination
Agreement, the Plan of Arrangement (including the Exchangeable Shares
Provisions) and the Voting and Exchange Trust Agreement.
Procedures for Issuance of Devon Common Stock
The primary rights relating to the Exchangeable Shares are: (a) the
rights ("Exchange Put Rights" and "Retraction Rights") to require an
exchange by Devon or redemption by Northstar of Exchangeable Shares for
shares of Devon Common Stock; and (b) overriding rights granted to Devon
("Call Rights") to require an exchange with Devon if a holder exercises
Retraction Rights or in any circumstances where Northstar would redeem the
Exchangeable Shares. Devon anticipates that it will exercise its Call
Rights, when available, and currently foresees no circumstances under which
it would not exercise its Call Rights. Therefore it is expected that
holders of Exchangeable Shares will only receive shares of Devon Common
Stock through an exchange, as opposed to a redemption, of Exchangeable
Shares for shares of Devon Common Stock. While the economic result of an
exchange or a redemption will be the same, the tax consequences would be
substantially different. See "Income Tax Considerations to Northstar
Shareholders and Optionholders - Canadian Federal Income Tax Consequences
to Northstar Shareholders and Optionholders" in the Joint Proxy Statement.
Certain automatic or event triggered rights (Automatic Redemption, Optional
Exchange Right, Automatic Exchange Right, Liquidation Call Right and
Redemption Call Right) will result in the exchange or redemption of
Exchangeable Shares for shares of Devon Common Stock, without any action by
the holders of Exchangeable Shares.
Under the Voting and Exchange Trust Agreement, Devon will grant
exchange rights, including the Exchange Put Right described below, to the
Trustee for the benefit of the holders of the Exchangeable Shares. Pursuant
to the Exchangeable Share Provisions, the holders of Exchangeable Shares
will have the right to retract (i.e., require Northstar to redeem) any or
all of their Exchangeable Shares.
Exchange Put Right of Holders
A holder of Exchangeable Shares will be entitled at any time at or
following the effective time of the combination of Devon and Northstar to
require Devon to exchange (the "Exchange Put Right") all or any part of
such holder's Exchangeable Shares for an equivalent number of shares of
Devon Common Stock, plus the Dividend Amount (as defined below), if any. A
holder of Exchangeable Shares may exercise the Exchange Put Right by
presenting written notice (which may be in the form of the panel, if any,
on the certificates for Exchangeable Shares or by completing the Northstar
Letter of Transmittal) to the Trustee or accompanied by presentation and
surrender of a certificate or certificates representing the Exchangeable
Shares the holder desires to have Devon redeem, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares as provided in the Exchangeable Share Provisions, at
the principal offices in Calgary, Alberta or Toronto, Ontario of the
Trustee and at such other places as may be determined from time to time. An
exchange pursuant to this right will be completed not later than the close
of business on the 3rd business day following receipt by the Trustee of the
notice, the certificates and such other required documents. "Dividend
Amount" means, with respect to the Exchangeable Shares at a particular
time, the amount of all declared, payable and unpaid, and all undeclared
but payable, dividends.
Retraction Rights
Holders of the Exchangeable Shares are entitled at any time to
retract (i.e., to require Northstar to redeem) any or all Exchangeable
Shares owned by them and to receive an equivalent number of shares of Devon
Common Stock plus the Dividend Amount, if any (the "Retraction Price"),
subject to the right (the "Retraction Call Right") of Devon described
below. Holders of Exchangeable Shares may effect such retraction by
presenting a certificate or certificates representing the number of
Exchangeable Shares the holder desires to retract to Northstar or the
Trustee, together with a duly executed retraction request (the "Retraction
Request") (i) specifying the number of the Exchangeable Shares the holder
desired to retract (the "Retracted Shares"); (ii) stating the business day
on which the holder desires to have Northstar redeem such shares (the
"Retraction Date") (which shall not be less than 5 business days nor more
than 10 business days after the date on which the Retraction Request is
received by Northstar and if no business day is specified by the holder
shall be deemed to be the 10th business day after the Retraction Request is
received by Northstar); and (iii) acknowledging the Retraction Call Right
of Devon to purchase all but not less than all the Retracted Shares
directly from the holder and that the Retraction Request will be deemed to
be a revocable offer by the holder to sell the Retracted Shares to Devon in
accordance with the Retraction Call Right on the terms and conditions
described below.
Upon receipt by Northstar of a Retraction Request, Northstar will
promptly notify Devon of the Retraction Request. In order to exercise its
Retraction Call Right, Devon must notify Northstar of its determination to
do so (the "Devon Call Notice") within 2 business days of such notification
to Devon. If Devon delivers the Devon Call Notice within such 2 business
days, and provided that the Retraction Request is not revoked by the holder
in the manner described below, Northstar will not redeem the Retracted
Shares and Devon will purchase from such holder and such holder will sell
to Devon on the Retraction Date the Retracted Shares for the Retraction
Price. In the event that Devon does not deliver to Northstar a Devon Call
Notice within such 2 business days period, and provided that the Retraction
Request is not revoked by the holder in the manner described below,
Northstar will redeem the Retracted Shares on the Retraction Date for the
Retraction Price.
A holder of Retracted Shares may, by notice in writing given by the
holder to Northstar before the close of business on the business day
immediately preceding the Retraction Date, withdraw its Retraction Request,
in which event such Retraction Request will be null and void and the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to Devon will be deemed to have been revoked.
If, as a result of liquidity or solvency requirements or other
provisions of applicable law, Northstar is not permitted to redeem all
Exchangeable Shares tendered by a retracting holder, Northstar will redeem
only those Exchangeable Shares tendered by the holder (rounded down to a
whole number of shares) as would not be contrary to such provisions of
applicable law. This right is subject to Devon's Liquidation Call Right
described below. The holder of any Exchangeable Shares not redeemed by
Northstar as a consequence of such applicable law or purchased by Devon
will be deemed to have required Devon to purchase such unretracted shares
in exchange for an equal number of shares of Devon Common Stock, plus the
Dividend Amount, if any, on the Retraction Date pursuant to the exchange
right provided for in the Voting and Exchange Trust Agreement described
below.
Redemption of Exchangeable Shares
Subject to applicable law and the Redemption Call Rights of Devon
described below, on an Automatic Redemption Date (defined below), Northstar
will redeem all but not less than all of the then outstanding Exchangeable
Shares in exchange for an equal number of shares of Devon Common Stock,
plus the Dividend Amount, if any. Notwithstanding any proposed redemption
of the Exchangeable Shares, Devon will, pursuant to Redemption Call Rights,
have the overriding right to acquire on an Automatic Redemption Date all
but not less than all of the outstanding Exchangeable Shares in exchange
for one share of Devon Common Stock for each such Exchangeable Share, plus
the Dividend Amount, if any. An Automatic Redemption Date is the first to
occur of: (i) the 10th anniversary of the effective date of the Plan of
Arrangement (the "Effective Date"); (ii) the date selected by the Northstar
Board of Directors (such date to be no earlier than the 3rd anniversary of
the Effective Date) at a time when less than 5% of the number of
Exchangeable Shares issuable on the Effective Date (other than shares held
by Devon and its Subsidiaries, and as such number may be adjusted as deemed
appropriate by the Northstar Board of Directors to give effect to any
subdivision or consolidation of or stock dividend on Exchangeable Shares,
any issuance or distribution of rights to acquire Exchangeable Shares or
securities exchangeable for or convertible into or carrying rights to
acquire Exchangeable Shares, any issue or distribution of other securities
or rights or evidences of indebtedness or assets, or any other capital
reorganization or other transaction involving or affecting the Exchangeable
Shares) are outstanding; (iii) the business day prior to the record date
for any meeting or vote of the Northstar shareholders to consider any
matter on which the holders of Exchangeable Shares would be entitled to
vote as Northstar shareholders, but excluding any meeting or vote as
described in clause (iv) below; (iv) the business day following the day on
which the holders of Exchangeable Shares fail to take the necessary action
at a meeting or other vote of holders of Exchangeable Shares, if and to the
extent such action is required, to approve or disapprove, as applicable any
change to, or in the rights of the holders of, Exchangeable Shares, if the
approval or disapproval, as applicable, of such change would be required to
maintain the economic and legal equivalence of the Exchangeable Shares and
the Devon Common Stock; or (v) that the date on which the share purchase
rights issued pursuant to the Rights Agreement dated as of April 17, 1995,
as amended, between Devon and the First National Bank of Boston (the
"Rights Agreement") (or any successor or replacement rights agreement)
separate from the Devon Common Stock and become exercisable. At least 45
days before an Automatic Redemption Date or before a possible Automatic
Redemption Date which may result from a failure of holders of Exchangeable
Shares to take necessary action as described in clause (iv) above,
Northstar shall provide the registered holders of Exchangeable Shares with
written notice of the proposed redemption or possible redemption of the
Exchangeable Shares by Northstar. In the case of any notice given in
connection with a possible Automatic Redemption Date, such notice will be
given contingently and will be withdrawn if the contingency does not occur.
Optional Exchange Right
Subject to Devon's Liquidation Call Right described below, upon the
occurrence and during the continuance of a Northstar Insolvency Event
(defined below), a holder of Exchangeable Shares will be entitled to
instruct the Trustee to exercise the right (the "Optional Exchange Right")
with respect to any or all of such holder's Exchangeable Shares, thereby
requiring Devon to acquire such Exchangeable Shares from the holder.
Immediately upon the occurrence of a Northstar Insolvency Event or any
event which may with the passage of time or the giving of notice, become a
Northstar Insolvency Event, Northstar and Devon will give written notice
thereof to the Trustee. As soon as practicable thereafter, the Trustee will
notify each holder of Exchangeable Shares of such event or potential event
and will advise the holder of its rights with respect to the Optional
Exchange Right. The consideration for each Exchangeable Share to be
required under the Optional Exchange Right will be one share of Devon
Common Stock plus the Dividend Amount, if any.
"Northstar Insolvency Event" means the institution of, or the
consent of Northstar to the institution of, any proceeding for Northstar to
be adjudicated bankrupt or insolvent or to be dissolved or wound-up, or the
filing of a petition, answer or consent seeking dissolution or winding-up
under bankruptcy insolvency or analogous laws, the failure of Northstar to
contest in good faith any such proceeding commenced against it within 15
days of becoming aware thereof, the consent of Northstar to the filing of
any such petition or appointment of a receiver, the making by Northstar of
a general assignment for the benefit of creditors, or the admission in
writing of its inability to pay its debts generally as they become due, or
Northstar's not being permitted, pursuant to liquidity or solvency
requirements of applicable law, to redeem any Exchangeable Shares pursuant
to a Retraction Request.
If, as a result of liquidity or solvency requirements or other
provisions of applicable law, Northstar is not permitted to redeem all of
the Exchangeable Shares tendered for retraction by a holder in accordance
with the Exchangeable Share Provisions as described under "-Retraction
Rights" above, the holder will be deemed to have exercised the Optional
Exchange Right with respect to the unredeemed Exchangeable Shares, and
Devon will be required to purchase such shares from the holder in the
manner described above under "-Retraction Rights."
Automatic Exchange Right
In the event of a Devon Liquidation Event (defined below), Devon
will be deemed to have purchased each outstanding Exchangeable Share and
each holder of Exchangeable Shares will be deemed to have sold the
Exchangeable Shares held by it on the basis of one share of Devon Common
Stock, plus the Dividend Amount, if any, for each Exchangeable Share.
"Devon Liquidation Event" means (i) any determination by the Devon Board of
Directors to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Devon or to effect any other distribution of
assets of Devon among its stockholders for the purpose of winding-up its
affairs or (ii) the earlier of (A) receipt of notice of and (B) Devon's
otherwise becoming aware of, any threatened or instituted claim or other
proceeding with respect to the involuntary liquidation, dissolution or
winding-up of Devon or to effect any other distribution of assets of Devon
among its stockholders for the purpose of winding-up its affairs.
Call Rights
In the circumstances described below, Devon will have certain
overriding rights to acquire Exchangeable Shares from holders thereof by
delivering one share of Devon Common Stock, plus the Dividend Amount, if
any, for each Exchangeable Share acquired. Different Canadian federal
income tax consequences to a holder of Exchangeable Shares and to Northstar
may arise depending upon whether the Call Rights are exercised by Devon or
whether the relevant Exchangeable Shares are redeemed by Northstar pursuant
to the Exchangeable Share Provisions. See "Income Tax Considerations to
Northstar Shareholders and Optionholders" in the Joint Proxy Statement.
Retraction Call Right
Pursuant to the Exchangeable Share Provisions, a holder requesting
Northstar to redeem the Exchangeable Shares will be deemed to offer such
shares to Devon, and Devon will have an overriding Retraction Call Right to
acquire all, but not less than all, of the Exchangeable Shares that the
holder has requested Northstar to redeem in exchange for one share of Devon
Common Stock, plus the Dividend Amount, if any, in exchange or each
Exchangeable Share. See"- Retraction Rights" above.
Liquidation Call Right
Pursuant to the Plan of Arrangement, Devon will be granted an
overriding Liquidation Call Right, in the event of and notwithstanding a
proposed liquidation, dissolution or winding-up of Northstar or any other
distribution of the assets of Northstar among its shareholders for the
purpose of winding-up its affairs, to acquire all, but not less than all,
of the Exchangeable Shares then outstanding in exchange for Devon Comon
Stock, plus the Dividend Amount, if any. Upon the exercise by Devon of the
Liquidation Call Right, the holders of the Exchangeable Shares will be
obligated to transfer such shares to Devon. The acquisition by Devon of all
of the outstanding Exchangeable Shares upon the exercise of the Liquidation
Call Right will occur on the effective date of the voluntary or involuntary
liquidation, dissolution or winding-up of Northstar.
Redemption Call Right
Pursuant to the Plan of Arrangement, Devon will be granted an
overriding Redemption Call Right, notwithstanding the proposed automatic
redemption of the Exchangeable Shares by Northstar pursuant to the
Exchangeable Share Provisions, to acquire on the Automatic Redemption Date
all, but not less than all, of the Exchangeable Shares then outstanding in
exchange for Devon Common Stock, plus the Dividend Amount, if any, and,
upon the exercise by Devon of the Redemption Call Right, the holders of the
Exchangeable Shares will be obligated to transfer such shares to Devon.
Effect of Call Right Exercise
If Devon exercises one or more of its Call Rights, it will directly
issue Devon Common Stock to holders of Exchangeable Shares and will become
the holder of such Exchangeable Shares. Devon will not be entitled to
exercise any voting rights attached to the Exchangeable Shares it so
acquires. If Devon declines to exercise its Call Rights when applicable, it
will be required, pursuant to the Support Agreement to be entered into by
Devon and Northstar (the "Support Agreement"), to issue Devon Common Stock
as Northstar directs, including to Northstar, which will, in turn, transfer
such stock to the holders of Exchangeable Shares in consideration for the
return and cancellation of such Exchangeable Shares. In the event Devon
does not exercise its Call Rights when applicable and instead delivers
shares of Devon Common Stock as Northstar directs, including to Northstar
in accordance with the Support Agreement, the economic result for holders
of the Exchangeable Shares would be the same, while the Canadian tax
consequences would be substantially different. See "Income Tax
Considerations to Northstar Shareholders and Optionholders - Canadian
Federal Income Tax Considerations to Northstar Shareholders and
Optionholders" in the Joint Proxy Statement. However, Devon anticipates
that it will exercise its Call Rights, when available, and currently
foresees no circumstances under which it would not exercise its Call
Rights. In addition, Devon does not anticipate any restriction or
limitation on the number of Exchangeable Shares it would acquire upon the
exercise of its Call Rights.
Support Agreement
The Support Agreement provides, among other things, that Devon will
take all actions and do all things necessary to ensure that Northstar is
able to provide the holders of the Exchangeable Shares the equivalent
number of shares of Devon Common Stock, plus the Dividend Amount, if any,
in the event of a liquidation, dissolution or winding-up of Northstar, a
Retraction Request by a holder of Exchangeable Shares or a redemption of
Exchangeable Shares by Northstar. The foregoing description of the Support
Agreement is qualified in its entirety by reference thereto.
CERTAIN INCOME TAX CONSIDERATIONS
Canadian Federal Income Tax Considerations
In the opinion of Burnet, Duckworth & Palmer, Canadian counsel for
Devon ("Counsel"), the following are the material Canadian federal income
tax considerations under the Income Tax Act (Canada) (the "Canadian Tax
Act") that are generally applicable to holders of Exchangeable Shares who
hold their Exchangeable Shares and shares of Devon Common Stock as capital
property, deal at arm's length with Northstar and Devon and are not, and
will at all relevant times not be, affiliated with Northstar or Devon. This
summary does not apply to: (i) a holder of Exchangeable Shares with respect
to whom Devon is or will be a foreign affiliate within the meaning of the
Canadian Tax Act; (ii) a holder of Exchangeable Shares who at any time
holds more than 10% of the issued and outstanding Exchangeable Shares;
(iii) a holder of Exchangeable Shares which is a "financial institution" as
defined in the Canadian Tax Act for purposes of the "mark-to-market" rules;
or (iv) a holder that is a specified financial institution as defined in
the Canadian Tax Act.
Exchangeable Shares will generally be considered to be capital
property to a shareholder unless held in the course of carrying on a
business in an adventure in the nature of trade or as "mark-to-market"
property for purposes of the Canadian Tax Act. Holders of Exchangeable
Shares should consult their own tax advisors regarding whether, as a matter
of fact, they hold their Exchangeable Shares and shares of Devon Common
Stock as capital property for the purposes of the Canadian Tax Act. Holders
of Exchangeable Shares who are resident in Canada and whose Exchangeable
Shares might not otherwise qualify as capital property may be entitled to
have them treated as capital property by making the irrevocable election
provided by subsection 39(4) of the Canadian Tax Act. Holders of
Exchangeable Shares who do not hold their shares as capital property should
consult their own tax advisors regarding their particular circumstances
and, in the case of certain "financial institutions" (as defined in the
Canadian Tax Act), the potential application to them of the special
"mark-to-market" rules in the Canadian Tax Act.
This opinion is based on the current provisions of the Canadian Tax
Act, the regulations thereunder, the Canada-United States Income Tax
Convention, 1980, as amended (the "Tax Treaty"), and Counsel's
understanding of the current administrative practices published by Revenue
Canada, Customs, Excise and Taxation ("Revenue Canada"). This opinion takes
into account specific proposals to amend the Canadian Tax Act and
regulations publicly announced by the Minister of Finance prior to the date
hereof (the "Tax Proposals") and assumes that all Tax Proposals will be
enacted in their present form. However, no assurances can be given that the
Tax Proposals will be enacted in the form proposed, or at all. Except for
the foregoing, this opinion does not take into account or anticipated any
changes in law, whether by judicial, administrative or legislative action
or decision, nor does it take into account provincial, territorial or
foreign income tax legislation or considerations, which may differ from the
Canadian federal income tax considerations described herein. No advance
income tax ruling has been obtained from Revenue Canada to confirm the tax
consequences of any of the transactions described herein.
HOLDERS OF EXCHANGEABLE SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN IN
THEIR PARTICULAR CIRCUMSTANCES.
In computing a holder's liability for tax under the Canadian Tax
Act, any cash amounts received in U.S. dollars must be converted into the
Canadian dollar equivalent, and the amount of any non-cash consideration
received must be expressed in Canadian dollars, generally determined by
reference to the fair market value at the time such consideration is
received.
Holders of Exchangeable Shares Resident in Canada
The following portion of the summary is applicable only to holders
of Exchangeable Shares who, for purposes of the Canadian Tax Act and any
relevant bilateral tax treaty, are resident or deemed to be resident in
Canada.
Dividends
Dividends on Exchangeable Shares. In the case of a holder of
Exchangeable Shares who is in individual, dividends received or deemed to
be received on the Exchangeable Shares will be included in computing the
holder's income and will be subject to the gross-up and dividend tax credit
rules normally applicable to taxable dividends received from taxable
Canadian corporations.
Subject to the discussion below as to the denial of the dividend
deduction, in the case of a holder of Exchangeable Shares that is a
corporation, dividends received or deemed to be received on the
Exchangeable Shares will be included in computing the corporation's income
and will normally be deductible in computing its taxable income. A holder
of Exchangeable Shares that is a "private corporation" (as defined in the
Canadian Tax Act) or any other corporation resident in Canada and
controlled or deemed to be controlled directly or indirectly in any manner
whatsoever by or for the benefit of an individual (other than a trust) or a
related group of individuals (other than trusts) may be liable under Part
IV of the Canadian Tax Act to pay a refundable tax of 331/3% on dividends
received or deemed to be received on the Exchangeable Shares to the extent
that such dividends are deductible in computing the shareholder's taxable
income.
If Devon or any other person with whom Devon does not deal at arm's
length is a specified financial institution under the Canadian Tax Act when
a dividend is paid on an Exchangeable Share, then, subject to the exemption
described below, dividends received or deemed to be received by a holder of
Exchangeable Shares that is a corporation will not be deductible in
computing taxable income, but will be fully includable in computing income
under Part I of the Canadian Tax Act.
This denial of the dividend deduction for a corporate shareholder
will not apply if, at the time a dividend is received or deemed to be
received, the Exchangeable Shares are listed on a prescribed stock exchange
in Canada (which currently includes the TSE), Devon controls Northstar, and
the recipient (together with persons with whom the recipient does not deal
at arm's length or any partnership or trust of which the recipient or
person is a member or beneficiary, respectively) does not receive (and is
not deemed to receive) dividends in respect of more than 10% of the issued
and outstanding Exchangeable Shares.
A holder of Exchangeable Shares that is a "Canadian-controlled
private corporation" (as defined in the Canadian Tax Act) may be liable to
pay an additional refundable tax of 62/3% on dividends or deemed dividends
that are not deductible in computing taxable income.
The Exchangeable Shares will be "taxable preferred shares" and
"short-term preferred shares" for purposes of the Canadian Tax Act.
Accordingly, Northstar will be subject to a 662/3% tax under Part VI.1 of
the Canadian Tax Act on dividends paid or deemed to be paid on the
Exchangeable Shares and will be entitled to deduct an amount equal to 9/4
of the tax payable in computing its taxable income under Part I of the
Canadian Tax Act. Dividends received or deemed to be received on the
Exchangeable Shares will not be subject to the 10% tax under Part IV.1 of
the Canadian Tax Act applicable to certain corporations.
Dividends on Devon Common Stock. Dividends on Devon Common Stock
will be included in the recipient's income for the purposes of the Canadian
Tax Act. Such dividends received by an individual will not be subject to
the gross-up and dividend tax credit rules in the Canadian Tax Act. A
corporation that is a shareholder will include such dividends in computing
its income and generally will not be entitled to deduct the amount of such
dividends in computing its taxable income. A Canadian-controlled private
corporation may be liable to pay an additional refundable tax of 62/3% on
such dividends. United States non-resident withholding tax on such
dividends will be eligible for foreign tax credit or deduction treatment
where applicable under the Canadian Tax Act.
Redemption or Exchange of Exchangeable Shares. On the redemption
(including a retraction) of an Exchangeable Share by Northstar, the holder
of an Exchangeable Shares will be deemed to have received a dividend equal
to the amount, if any, by which the redemption proceeds (the fair market
value at the time of the shares of Devon Common Stock received by the
shareholder from Northstar on the redemption plus the Dividend Amount, if
any) exceeds the paid-up capital (for purposes of the Canadian Tax Act) at
that time of the Exchangeable Share so redeemed. Immediately after the
Effective Time, the paid-up capital of the Exchangeable Shares will be
approximately Cdn. $8.66 per share. The amount of any such deemed dividend
will be subject to the tax treatment accorded to dividends described above
under "-- Dividends -- Dividends on Exchangeable Shares." On the
redemption, the holder of an Exchangeable Share will also be considered to
have disposed of the Exchangeable Share for proceeds of disposition equal
to the redemption proceeds less the amount of any such deemed dividend. A
holder will in general realize a capital loss (or a capital gain) equal to
the amount by which the adjusted cost base to the holder of the
Exchangeable Share exceeds (or is less than) such proceeds of disposition.
See "-- Taxation of Capital Gain or Capital Loss" below. In the case of a
shareholder that is a corporation, in some circumstances the amount of any
such deemed dividend may be treated as proceeds of disposition and not as a
dividend.
On the exchange of an Exchangeable Share by the holder thereof with
Devon for Devon Common Stock, the holder will in general realize a capital
gain (or a capital loss) equal to the amount by which the proceeds of
disposition for the Exchangeable Share exceed (or are less than) the
adjusted cost base to the holder of the Exchangeable Share. For these
purposes, the proceeds of disposition will be the fair market value of a
share of Devon Common Stock at the time of the exchange plus the Dividend
Amount, if any, received by the holder as part of the exchange
consideration. See "-- Taxation of Capital Gain or Capital Loss" below.
BECAUSE OF THE POTENTIALLY ADVERSE TAX CONSEQUENCES OF THE RECEIPT
OF A DEEMED DIVIDEND UPON THE REDEMPTION (INCLUDING A RETRACTION) OF AN
EXCHANGEABLE SHARE BY NORTHSTAR, HOLDERS OF EXCHANGEABLE SHARES SHOULD
CONSULT WIT THEIR OWN TAX ADVISORS CONCERNING THE POSSIBLE BENEFITS IN
THEIR PARTICULAR CIRCUMSTANCES OF EXCHANGING WITH DEVON FOR SHARES OF DEVON
COMMON STOCK OR OTHERWISE DISPOSING OF THEIR EXCHANGEABLE SHARES.
Taxation of Capital Gain or Capital Loss. Three-quarters of any
capital gain (the "taxable capital gain") realized on a retraction,
redemption, exchange or other disposition of Exchangeable Shares or
disposition of Devon Common Stock will be included in the holder's income
for the year of disposition. Three-quarters of any capital loss so realized
(the "allowable capital loss") may be deducted by the holder against
taxable capital gains for the year of disposition. Any excess of allowable
capital losses over taxable capital gains of the holder of Exchangeable
Shares for the year of disposition may be carried back up to three taxation
years or forward indefinitely and deducted against net taxable capital
gains in those other years.
Capital gains realized by an individual or trust, other than
certain specified trust, may give rise to alternative minimum tax under the
Canadian Tax Act. A holder of Exchangeable Shares that is a Canadian
controlled private corporation may be liable to pay an additional
refundable tax of 62/3% on taxable capital gains.
If the holder of Exchangeable Shares is a corporation, the amount
of any capital loss arising from a disposition or deemed disposition of
Exchangeable Shares may be reduced by the amount of dividends received or
deemed to have been received by it on such or on the Northstar Common
Shares previously owned by such holder, to the extent and under
circumstances prescribed by the Canadian Tax Act. Similar rules may apply
where a corporation is a member of a partnership or a beneficiary of a
trust that owns Exchangeable Shares or where a trust or partnership of
which a corporation is a beneficiary or a member is a member of a
partnership or a beneficiary of a trust that owns Exchangeable Shares.
Acquisition and Disposition of Devon Common Stock. The cost of
Devon Common Stock received on the redemption (including a retraction) or
exchange of Exchangeable Shares will be equal to the fair market value of
shares of Devon Common Stock at the time of such event.
A disposition or deemed disposition of shares of Devon Common Stock
by a holder will generally result in a capital gain (or capital loss) equal
to the amount by which the proceeds of disposition, net of any reasonable
costs of disposition, exceed (or are less than) the adjusted cost base to
the holder of shares of Devon Common Stock.
Foreign Property Information Reporting. A holder of shares of Devon
Common Stock who is a "specified Canadian entity" for a taxation year or
fiscal period and whose total cost amount of "specified foreign property,"
including such shares, at any time in the year or fiscal period exceeds
Canadian $100,000 will be required to file an information return for the
year or period disclosing prescribed information, including the holder's
cost amount, any dividends received in the year and any gains or losses
realized in the year in respect of such property. A specified Canadian
entity means a taxpayer resident in Canada in the year, other than a person
exempt from tax under Part I of the Canadian Tax Act, a non-resident-owned
investment corporation, a mutual fund corporation, a mutual fund trust and
certain other trusts, corporations and partnerships.
Foreign Property. Provided that they are listed on a prescribed
stock exchange in Canada (which currently includes the TSE), the
Exchangeable Shares will not be foreign property under the Canadian Tax Act
for trusts governed by registered pension plans, registered retirement
savings plans, registered retirement income funds and deferred profit
sharing plans or for certain other tax-exempt persons. The Voting Rights
and the Exchange Rights will be foreign property under the Canadian Tax
Act. However, as indicated above, Northstar is of the view that the fair
market value of these rights is nominal. Shares of Devon Common Stock will
be foreign property under the Canadian Tax Act.
Qualified Investments. Provided that they are listed on a
prescribed stock exchange in Canada (which currently includes the TSE), the
Exchangeable Shares will be qualified investments under the Canadian Tax
Act for trusts governed by registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans. Devon Common
Stock will be a qualified investment under the Canadian Tax Act for such
plans as long as such shares remain listed on the AMEX (or are listed on
certain other prescribed exchanges). The Voting Rights and the Exchange
Rights will not be qualified investments under the Canadian Tax Act.
However, as indicated above, Northstar is of the view that the fair market
value of these rights is nominal.
Holders of Exchangeable Shares Not Resident in Canada
The following is applicable to holders of Exchangeable Shares who,
for purposes of the Canadian Tax Act, have not been and will not be
resident or deemed to be resident in Canada at any time during which they
have held Exchangeable Shares or Devon Common Stock and to whom such shares
are not "taxable Canadian property" (as defined in the Canadian Tax Act)
and who do not use or hold and are not deemed to use or hold such shares in
connection with carrying on a business in Canada.
Generally, Exchangeable Shares and shares of Devon Common Stock
will not be taxable Canadian property provided that such shares are listed
on a prescribed stock exchange (which currently includes the TSE and the
AMEX), the holder does not use or hold, and is not deemed to use or hold,
such shares in connection with carrying on a business in Canada and the
holder, persons with whom the holder does not deal at arm's length, or the
holder and such persons, has not owned (or had under option) 25% or more of
the issued shares of any class or series of the capital stock of Northstar
or Devon at any time within five years preceding the date of disposition.
Northstar has applied for the listing of the Exchangeable Shares on the
TSE, and Devon has indicated that it intends to use its best efforts to
cause Northstar to maintain such listing. Devon has indicated that it will
maintain the listing of the shares of Devon Common Stock on the AMEX.
A holder of Northstar Common Shares will not be subject to tax
under the Canadian Tax Act on the exchange of an Exchangeable Share for
shares of Devon Common Stock (except to the extent the exchange takes place
by way of a redemption of an Exchangeable Share) or on the sale or other
disposition of an Exchangeable Share or Devon Common Stock. A holder whose
Exchangeable Shares are redeemed (either under Northstar's redemption right
or pursuant to the holder's retraction rights) will be deemed to receive a
dividend as described above for shareholders resident in Canada under "-
Shareholders Resident in Canada Redemption or Exchange of Exchangeable
Shares." The amount of such deemed dividend will be subject to the tax
treatment accorded to dividends described below.
Dividends paid or deemed to be paid on the Exchangeable Shares are
subject to nonresident withholding tax under the Canadian Tax Act at the
rate of 25%, although such rate may be reduced under the provisions of an
applicable income tax treaty. Under the Tax Treaty, the rate is generally
reduced to 15% in respect of dividends paid to a person who is the
beneficial owner and who is resident in the United States for purposes of
the Tax Treaty.
United States Federal Income Tax Considerations to Northstar Shareholders
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, United
States counsel to Devon, the following are the material United States
federal income tax consequences generally applicable to holders of
Exchangeable Shares that are "United States persons" as defined for United
States federal income tax purposes and that hold their Exchangeable Shares
as capital assets ("United States Holders") with respect to the exchange of
Exchangeable Shares for shares of Devon Common Stock pursuant to the Plan
of Arrangement. For United States federal income tax purposes, "United
States persons" are United States citizens or residents, corporations or
partnerships organized under the laws of the United States or any state
thereof, estates subject to United States federal income tax on their
income regardless of source and trusts subject to the primary supervision
of a court within the United States and control of a United States
fiduciary as described in Section 7701(a)(30) of the Internal Revenue Code
of 1986, as amended (the "U.S. Code").
This summary is based upon the U.S. Code, laws, regulations,
rulings and decisions in effect as of the date hereof, all of which are
subject to change, possibly with retroactive effect. No statutory,
judicial, or administrative authority exists which directly addresses
certain of the United States federal income tax consequences of the
issuance and ownership of instruments and rights comparable to the
Exchangeable Shares, the Voting Rights, the Exchange Rights and the Call
Rights. Consequently (as discussed more fully below), the United States
federal income tax treatment of the exchange of Exchangeable Shares for
shares of Devon Common Stock is not certain. No advance income tax ruling
has been sought or obtained from the United States Internal Revenue Service
("IRS") regarding the United States federal income tax consequences of any
of the transactions described herein.
This summary does not address aspects of United States taxation
other than United States federal income taxation, nor does it address all
aspects of United States federal income taxation that may be applicable to
particular United States Holders, including, without limitation, United
States Holders that own, or have owned during a five-year lookback period,
10% or more of the voting power of the voting stock of Northstar. In
addition, this summary does not address the United States state or local
tax consequences or the foreign tax consequences of the exchange of
Exchangeable Shares for shares of Devon Common Stock.
UNITED STATES HOLDERS ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF EXCHANGING EXCHANGEABLE
SHARES FOR SHARES OF DEVON COMMON STOCK AND THE OWNERSHIP OF DEVON COMMON
STOCK.
Shareholders that are United States Holders
Exchange of Exchangeable Shares. It is anticipated that (subject to
certain exceptions described below) a United States Holder who exchanges
the Exchangeable Shares for shares of Devon Common Stock (including an
exchange upon the occurrence of an Automatic Redemption Date) generally
will recognize gain or loss on the receipt of the shares of Devon Common
Stock in exchange for such Exchangeable Shares. The gain or loss will be
equal to the difference between the fair market value of the shares of
Devon Common Stock received and the United States Holder's tax basis in the
Exchangeable Shares exchanged therefor. The gain or loss will be capital
gain or loss, except that, with respect to any Dividend Amount, ordinary
income may be recognized by the holder thereof. Under current law, the tax
rate applicable to capital gains of an individual taxpayer varies depending
on the taxpayer's holding period for the shares. In the case of an
individual holder of Exchangeable Shares, any such capital gain will be
subject to a maximum United States federal income tax rate of 20% if the
individual held the Exchangeable Shares for more than 12 months at the time
of the exchange. The deductibility of capital losses is subject to
limitations for both individuals and corporations. Gain recognized on the
exchange of Exchangeable Shares for shares of Devon Common Stock generally
will be treated as United States source gain. The United States Holder's
tax basis in the shares of Devon Common Stock will be the fair market value
of the shares of Devon Common Stock received by the United States Holder in
the exchange, and the holding period will begin on the day after the
exchange.
In view of the likelihood of the recognition of gain or loss upon
the exchange of the Exchangeable Shares for shares of Devon Common Stock,
United States Holders may wish to consider delaying the exchange until such
time as they intend to dispose of the shares of Devon Common Stock
receivable in exchange for their Exchangeable Shares or (as discussed
below) until such time as Devon will own at least 80% of all of the then
issued and outstanding Exchangeable Shares either at the time of or as a
result of the exchange.
Under certain limited circumstances, the exchange by a United
States Holder of Exchangeable Shares for shares of Devon Common Stock may
be characterized as a tax-free exchange. An exchange of Exchangeable Shares
for shares of Devon Common Stock generally may be characterized as a
tax-free exchange if, at the time of such exchange: (i) at least 80% of the
then outstanding Exchangeable Shares are held by Devon; and (ii) in such
exchange, Devon, rather than Northstar, acquires the Exchangeable Shares in
exchange for shares of Devon Common Stock pursuant to the exercise of its
Call Rights. In any case, the exchange would not be tax free unless certain
other requirements are satisfied, which, in turn, will depend upon facts
and circumstances existing at the time of the exchange and cannot be
accurately predicted as of the date hereof. If such exchange did qualify as
a tax-free exchange, a United States Holder's tax basis in the shares of
Devon Common Stock received would be equal to such holder's tax basis in
the Exchangeable Shares exchanged therefor. The holding period of the
shares of Devon Common Stock received by the United States Holder should
include the holding period of the Exchangeable Shares exchanged therefor,
which in turn, should include the holding period of the Northstar Common
Shares exchanged pursuant to the Plan of Arrangement, provided that such
Northstar Common Shares and Exchangeable Shares have been held as capital
assets immediately prior to the Arrangement and the subsequent exchange,
respectively.
Passive Foreign Investment Company Considerations. For United
States federal income tax purposes, Northstar generally will be classified
as a passive foreign investment company (a "PFIC") for any taxable year
during which either: (i) 75% or more of its gross income is passive income
(as defined for United States federal income tax purposes); or (ii) on
average for a taxable year, 50% or more of its assets (by value) produce or
are held for the production of passive income. For purposes of applying the
foregoing tests, Northstar's proportionate share of the assets and gross
income of corporations with respect to which Northstar owns at least 25% of
the stock (by value) will be attributed to Northstar.
While there can be no assurance with respect to the classification
of Northstar as a PFIC, Northstar believes that it did not constitute a
PFIC during its taxable years ending prior to consummation of the
Arrangement. At the present time, Northstar and Devon intend to endeavor to
cause Northstar to avoid PFIC status in the future, although there can be
no assurance that they will be able to do so or that their intent will not
change.
For purposes of applying the 50% asset test following the
Arrangement, Northstar's assets must be measured by their adjusted tax
bases (as calculated in order to compute earnings and profits for United
States federal income tax purposes) instead of by value, subject to certain
adjustments. As a result, it is possible that Northstar will be a PFIC for
taxable years ending after the Arrangement even though less than 50% of
Northstar's assets (measured by the fair market value of such assets)
constitute passive assets. After the Arrangement, Northstar intends to
monitor its status regularly, and promptly following the end of each
taxable year Northstar will notify United States Holders of Exchangeable
Shares if it believes that Northstar was a PFIC for that taxable year.
Although the matter is not free from doubt, if Northstar is a PFIC
following the Arrangement during a United States Holder's holding period
for such holder's Exchangeable Shares, and the United States Holder has not
made an election to treat Northstar as a qualified electing fund (a "QEF")
under Section 1295 of the U.S. Code (a "QEF Election"), then: (i) the
United States Holder will be required to allocate gain recognized upon the
exchange of the United States Holder's Exchangeable Shares for shares of
Devon Common Stock ratably over the United States Holder's holding period
for the Exchangeable Shares; (ii) the amount allocated to each year other
than: (x) the year of the exchange of the Exchangeable Shares or (y) any
year prior to the beginning of the first taxable year of Northstar for
which it was a PFIC, will be subject to tax at the highest rate applicable
to individuals or corporations, as the case may be, for the taxable year to
which such income is allocated, and an interest charge will be imposed upon
the resulting tax attributable to each such year (which charge will accrue
from the due date of the return for the taxable year to which such tax was
allocated); and (iii) amounts allocated to periods described in (x) and (y)
will be taxable to the United States Holder as ordinary income.
In addition, although the matter is not free from doubt, if the
exchange of Exchangeable Shares for shares of Devon Common Stock otherwise
qualified as a non-recognition exchange (as described above) and if
Northstar were a PFIC at any time during a particular United States
Holder's holding period for its Exchangeable Shares and the United States
Holder had not made a QEF Election, then the United States Holder might be
required to recognize gain upon the exchange of its Exchangeable Shares for
Exchangeable Shares. In the event that gain recognition is required, then:
(i) the amount of the gain would be equal to the difference between the
fair market value of the shares of Devon Common Stock at the time of the
exchange and the United States Holder's tax basis in the Exchangeable
Shares exchanged therefor; and (ii) any exchange of Exchangeable Shares for
shares of Devon Common Stock would be taxable under the rules described
above.
If the United States Holder has made a QEF Election, then the
United States Holder generally will be currently taxable on the holder's
pro rata share of Northstar's ordinary earnings and net capital gains (at
ordinary income and capital gains rates, respectively) for each taxable
year of Northstar in which Northstar is classified as a PFIC, even if no
dividend distributions are received by the United States Holder, unless the
United States Holder makes an election to defer the taxes. If Northstar
believes that it was a PFIC for a taxable year, it will provide United
States Holders of Exchangeable Shares with information sufficient to allow
eligible holders to make a QEF Election and report and pay any current or
deferred taxes due with respect to their pro rata shares of Northstar's
ordinary earnings and profits and net capital gains for the taxable year.
United States Holders should consult their tax advisors concerning the
merits and mechanics of making a QEF Election and other relevant tax
considerations if Northstar is a PFIC for any taxable year.
The foregoing summary of the possible application of the PFIC rules
to Northstar and the United States Holders of Northstar Common Shares is
only a summary of certain material aspects of those rules. Because the
United States federal income tax consequences to a United States Holder of
Exchangeable Shares under the PFIC provisions are significant, United
States Holders of Exchangeable Shares are urged to discuss those
consequences with their tax advisors.
Shareholders that are Not United States Holders
The following summary is applicable to holders of Exchangeable
Shares that are not United States Holders ("non-United States Holders").
A non-United States Holder generally will not be subject to United
States federal income tax on gain (if any) recognized on the exchange of
the Exchangeable Shares or the receipt or sale of shares of Devon Common
Stock, unless: (i) such gain is attributable to an office or fixed place of
business and is effectively connected with a trade or business of the
non-United States Holder in the United States, or, if a tax treaty applies,
is attributable to a permanent establishment maintained by the non-United
States Holder in the United States; or (ii) the non-United States Holder is
an individual who holds the Northstar Common Shares, the Exchangeable
Shares or the shares of Devon Common Stock, as the case may be, as capital
assets and is present in the United States for 183 days or more in the
taxable year of disposition, and certain other conditions are satisfied.
Northstar and Devon intend to treat dividends, if any, received by
a non-United States Holder with respect to the Exchangeable Shares as
dividends from Northstar rather than from Devon and as not subject to
United States withholding tax, and Northstar and Devon do not intend that
Northstar or Devon will withhold any amounts for tax from those dividends.
There is some possibility, however, that the IRS may assert that United
States withholding tax is payable with respect to any dividends paid on the
Exchangeable Shares to non-United States Holders. In such case, a
non-United States Holder of Exchangeable Shares could be subject to United
States withholding tax at a rate of 30%, which rate may be reduced by an
applicable income tax treaty in effect between the United States and the
non-United States Holder's country of residence (generally 15% on dividends
paid to eligible residents of Canada under the Tax Treaty).
Dividends received by non-United States Holders with respect to the
shares of Devon Common Stock generally will be subject to United States
withholding tax at a rate of 30%, which rate may be subject to reduction by
an applicable income tax treaty (generally 15% on dividends paid to
eligible residents of Canada under the Tax Treaty).
THE DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET
FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS THAT MAY APPLY TO
A UNITED STATES HOLDER OF EXCHANGEABLE SHARES. UNITED STATES HOLDERS OF
EXCHANGEABLE SHARES ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF HOLDING AND EXCHANGING
EXCHANGEABLE SHARES, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CERTAIN LEGAL MATTERS
The validity of the Devon Common Stock offered hereby will be
passed upon for Devon by McAfee & Taft a Professional Corporation. Certain
U.S. federal income tax matters have been passed upon for Devon by Skadden,
Arps, Slate, Meagher & Flom LLP, Washington, D.C. and certain Canadian
federal income tax matters have been passed upon for Devon by Burnet,
Duckworth & Palmer, Calgary, as set forth under "Certain Income Tax
Considerations."
EXPERTS
The consolidated financial statements of Devon as of and for the
years ended December 31, 1997, 1996 and 1995 have been incorporated by
reference herein and in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Northstar as of and for
the years ended December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997 included in the Joint Proxy Statement
have been audited by Deloitte & Touche, chartered accountants, as set forth
in their reports included therein, in reliance upon the authority of said
firm as experts in accounting and auditing.
LaRoche Petroleum Consultants, Ltd., independent petroleum
engineers, has prepared a report of approximately 92% of the estimated U.S.
proved oil and gas reserves of Devon as of December 31, 1997. Information
from such report has been included or incorporated by reference in this
Prospectus in reliance upon the conclusions set forth in such report and
upon such firm's experience in preparing independent petroleum engineers'
reports on oil and gas reserves.
AMH Group Ltd., independent petroleum engineers, has prepared a
report of the estimated proved oil and gas reserves of Devon in Canada as
of December 31, 1997. Information from such report has been included or
incorporated by reference in this Prospectus in reliance upon the
conclusions set forth in such report and upon such firm's experience in
preparing independent petroleum engineers' reports on oil and gas reserves.
John P. Hunter & Associates Ltd. ("Hunter"), independent petroleum
engineers, has prepared a report of estimated proved and probable oil and
gas reserves of Northstar as of December 31, 1997, which relates to
properties held by Northstar prior to March 1997. Information from such
report has been included or incorporated by reference in this Prospectus in
reliance upon the conclusions set forth in such report and upon such firm's
experience in preparing independent petroleum engineers' reports on oil and
gas reserves.
Paddock Lindstrom & Associates Ltd. ("Paddock"), independent
petroleum engineers, has prepared a report of estimated proved and probable
oil and gas reserves of Northstar as of December 31, 1997, which relates to
properties acquired directly or indirectly by Northstar in March 1997 and
subsequent to that date. Information from such report has been included or
incorporated by reference in this Prospectus in reliance upon the
conclusions set forth in such report and upon such firm's experience in
preparing independent petroleum engineers' reports on oil and gas reserves.
16,090,376 Shares
DEVON ENERGY CORPORATION
Common Stock
PROSPECTUS
You should rely only on the information contained or incorporated
by reference in this Prospectus. We have not authorized anyone to provide
you with different information.
We are not offering shares of Devon Common Stock in any
jurisdiction where the offer is not permitted.
November 6, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred in
connection with the shares of Devon Common Stock being registered hereby.
Devon will pay for the fees and expenses of the offering of the shares of
Devon Common Stock offered hereby.
SEC Registration Fee...................................$ 0
Legal Fees and Expenses................................ 100,000
Printing and Engraving Expenses........................ 70,000
Accounting Fees and Expenses........................... 20,000
Transfer Agent and Registrar Fees and Expenses......... 10,000
Blue Sky Fees and Expenses (including legal fees)...... 5,000
Miscellaneous.......................................... 10,000
--------
Total................................... $215,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Oklahoma General Corporation Act (the "OGCA"), under which
Devon is incorporated, permits indemnification against expenses, including
attorneys' fees, actually and reasonably incurred by a director, officer or
agent of a corporation in connection with the defense of any action, suit
or proceeding in which such a person is a party by reason of such person
being or having been a director, employee or agent of the corporation, or
of any corporation, partnership, joint venture, trust or other enterprise
in which he served as such at the request of the corporation, provided that
he acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, and provided further (if the threatened, pending or
completed action or suit is by or in the right of the corporation) that he
shall not have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation (unless the court determines
that indemnity would nevertheless be proper under the circumstances).
Article Ninth of Registrant's Certificate of Incorporation, provides for
the elimination of directors' liability for monetary damages for a breach
of certain fiduciary duties and for indemnification of directors, officers,
employees or agents of Devon as permitted by the OGCA. These provisions
cannot be amended without the affirmative vote of the holders of at least
80% of the outstanding shares entitled to vote. Under Devon's Certificate
of Incorporation, even though Devon's directors stand in a fiduciary
relation to Devon, they are not liable to stockholders of Devon for damages
for breach of any such fiduciary duty, except that a director will be
personally liable for (i) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (ii) the
payment of dividends or redemption or purchase of stock in violation of the
OGCA, (iii) any breach of the duty of loyalty to Devon or its stockholders
or (iv) any transaction from which the director derived an improper
personal benefit. Article Thirteenth of Devon's Certificate of
Incorporation, also provides for indemnification of Devon's directors and
officers. Such Article also permits Devon to purchase and maintain
insurance on behalf of Devon's directors and officers against any liability
arising out of their status as such, whether or not Registrant would have
the power to indemnify such directors and officers against such liability.
These provisions may be sufficiently broad to indemnify such persons for
liabilities arising under the Securities Act of 1933.
ITEM 16. EXHIBITS
EXHIBIT NO. DOCUMENT
2.1 Amended and Restated Combination Agreement dated as of June 29,
1998 between Devon Energy Corporation and Northstar Energy
Corporation (incorporated by reference to Exhibit B to the
Registrant's definitive Joint Proxy Statement filed on November
6, 1998).
5.1 Opinion of McAfee & Taft A Professional Corporation.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8.2 Opinion of Burnet, Duckworth & Palmer.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of LaRoche Petroleum Consultants, Ltd.
23.4 Consent of AMH Group Ltd.
23.5 Consent of John P. Hunter & Associates Ltd.
23.6 Consent of Paddock Lindstrom & Associates Ltd.
26.7 Consent of McAfee & Taft A Professional Corporation (contained
in its opinion in Exhibit 5.1).
26.8 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained
in its opinion in Exhibit 8.1).
26.9 Consent of Burnet, Duckworth & Palmer (contained in its opinion
in Exhibit 8.2).
24.1 Power of Attorney.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registrations Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Sections 13 or 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement;
(2) That, for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(5) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the undersigned registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective;
(6) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offer of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(7) For purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(8) To deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest annual
report, to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
any such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether or not such
indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the November 6, 1998.
DEVON ENERGY CORPORATION
By: /s/ J. Larry Nichols
________________________________
J. Larry Nichols, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 6, 1998.
/s/ John W. Nichols /s/ J. Larry Nichols
_____________________________ _____________________________
John W. Nichols, Chairman of J. Larry Nichols, President, Chief
the Board and Director Executive Officer and Director
/s/ William T. Vaughn /s/ Danny J. Heatly
_______________________________ ______________________________
William T. Vaughn, Vice President Danny J. Heatly, Controller
- Finance
/s/ Luke R. Corbett /s/ Thomas F. Ferguson
________________________________ ______________________________
Luke R. Corbett, Director Thomas F. Ferguson, Director
/s/ David M. Gavrin /s/ Michael E. Gellert
________________________________ _______________________________
David M. Gavrin, Director Michael E. Gellert, Director
/s/ Tom J. McDaniel /s/ H.R. Sanders, Jr.
________________________________ _______________________________
Torn J. McDaniel, Director H.R. Sanders, Jr., Director
/s/ Lawrence H. Towell
________________________________
Lawrence H. Towell, Director
EXHIBIT INDEX
2.1 Amended and Restated Combination Agreement dated as of June 29,
1998 between Devon Energy Corporation and Northstar Energy
Corporation (incorporated by reference to Exhibit B to the
Registrant's definitive Joint Proxy Statement filed on
November 6, 1998).
5.1 Opinion of McAfee & Taft A Professional Corporation.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8.2 Opinion of Burnet, Duckworth & Palmer.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of LaRoche Petroleum Consultants, Ltd.
23.4 Consent of AMH Group Ltd.
23.5 Consent of John P. Hunter & Associates Ltd.
23.6 Consent of Paddock Lindstrom & Associates Ltd.
26.7 Consent of McAfee & Taft A Professional Corporation (contained in
its opinion in Exhibit 5.1).
26.8 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in
its opinion in Exhibit 8.1).
26.9 Consent of Burnet, Duckworth & Palmer (contained in its opinion in
Exhibit 8.2).
24.1 Power of Attorney.
Exhibit 5.1
[Letterhead of McAfee & Taft A Professional Corporation]
November 6, 1998
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Ladies and Gentlemen:
We have reviewed the Amended and Restated Certificate of
Incorporation of Devon Energy Corporation, an Oklahoma corporation (the
"Company"), the Company's By-laws, as amended, and the Company's
Registration Statement on Form S-3 registering up to 16,090,376 shares of
Company Common Stock to be issuable for the Exchangeable Shares of
Northstar Energy Corporation (the "Registration Statement"), as initially
filed with the Securities and Exchange Commission, and have generally
conducted such investigations as we have deemed appropriate to satisfy
ourselves with respect to the opinions expressed herein.
Based upon the foregoing, it is our opinion that:
1. The Company has been duly incorporated and is validly
existing under the laws of the State of Oklahoma.
2. The shares of Common Stock described in the Registration
Statement have been duly and validly authorized for issuance and, when
issued pursuant to and in accordance with the Plan of Arrangement and the
Voting and Exchange Trust Agreement (as those terms are defined in the
Prospectus which is part of the Registration Statement), will be validly
issued, fully paid and nonassessable.
We hereby consent to the inclusion of this opinion as an exhibit to
the Registration Statement and to the reference to our firm under the
caption "Certain Legal Matters" in the Prospectus.
Very truly yours,
/s/ McAfee & Taft
A Professional Corporation
Exhibit 8.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
November 6, 1998
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Ladies and Gentlemen:
We have acted as counsel to Devon Energy Corporation, an
Oklahoma corporation ("Devon"), in connection with the preparation and
filing of the Registration Statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), on
November 6, 1998 for the purpose of registering 16,090,376 shares of Devon
Common Stock to be issuable for the Exchangeable Shares of Northstar Energy
Corporation, an Alberta corporation. Unless otherwise indicated, each
capitalized term used herein has the meaning ascribed to it in the
Registration Statement.
In connection with this opinion, we have examined the
Registration Statement and such other documents and corporate records as we
have deemed necessary or appropriate in order to enable us to render the
opinion below. For purposes of this opinion, we have assumed (i) the
validity and accuracy of the documents and corporate records that we have
examined and the facts and representations concerning the registration of
shares of Devon Common Stock that have come to our attention during our
engagement and (ii) that the issuance of shares of Devon Common Stock
pursuant to the Registration Statement will be consummated in the manner
described in the Registration Statement.
Subject to the assumptions set forth above, the assumptions
and qualifications set forth in the Registration Statement under the
heading "INCOME TAX CONSIDERATIONS United States Federal Income Tax
Considerations to Northstar Shareholders" (the "Discussion") and the fact
that the Discussion is a summary and does not purport to discuss all
possible United States federal income tax consequences of exchanging
Exchangeable Shares, we are of the opinion that the Discussion states the
material United States federal income tax consequences generally applicable
to United States Holders of Exchangeable Shares with respect to the
exchange of Exchangeable Shares for shares of Devon Common Stock pursuant
to the Plan of Arrangement. In addition, we express no opinion as to the
United States federal, state, local, foreign or other tax consequences,
other than as set forth in the Discussion. Further, there can be no
assurances that the opinion expressed herein will be accepted by the
Internal Revenue Service (the "IRS") or, if challenged, by a court. We also
note that the Registration Statement does not relate to a specific exchange
of Exchangeable Shares for shares of Devon Common Stock. Accordingly, the
above-referenced description of United States federal income tax
considerations may, under certain circumstances, require modification in
the context of an actual exchange of Exchangeable Shares for shares of
Devon Common Stock after the date hereof. This opinion is delivered in
accordance with the requirements of Item 601(b)(8) of Regulation S-K under
the Securities Act.
In rendering our opinion, we have considered the applicable
provisions of the Code, Treasury Department regulations promulgated
thereunder, pertinent judicial authorities, interpretive rulings of the IRS
and such other authorities as we have considered relevant. It should be
noted that statutes, regulations, judicial decisions and administrative
interpretations are subject to change at any time (possibly with
retroactive effect). A change in the authorities or the accuracy or
completeness of any of the information, documents, corporate records,
covenants, statements, representations or assumptions on which our opinion
is based could affect our conclusions. This opinion is expressed as of the
date hereof, and we are under no obligation to supplement or revise our
opinion to reflect any changes (including changes that have retroactive
effect) (i) in applicable law or (ii) in any information, document,
corporate record, covenant, statement, representation or assumption stated
herein which becomes untrue or incorrect.
This letter is furnished to you solely for use in connection
with the Registration Statement, and is not to be used, circulated, quoted
or otherwise referred to for any other purpose without our express written
permission. In accordance with the requirements of Item 601(b)(23) of
Regulation S-K under the Securities Act, we hereby consent to the filing of
this opinion as an exhibit to the Registration Statement, to the references
to our firm name under the headings "CERTAIN LEGAL MATTERS" and "INCOME TAX
CONSIDERATIONS - United States Federal Income Tax Considerations to
Northstar Shareholders" in the Registration Statement. In giving such
consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit 8.2
[Letterhead of Burnet, Duckworth & Palmer]
November 6, 1998
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Ladies and Gentlemen:
We have acted as Canadian counsel to Devon Energy Corporation, an Oklahoma
corporation ("Devon"), in connection with the preparation and filing of the
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), on November 6, 1998 for the
purpose of registering 16,090,376 shares of Devon Common Stock to be
issuable for the Exchangeable Shares of Northstar Energy Corporation, an
Alberta corporation. Unless otherwise indicated, each capitalized term used
herein has the meaning ascribed to it in the Registration Statement.
In connection with this opinion, we have examined the Registration
Statement and such other documents and corporate records as we have deemed
necessary or appropriate in order to enable us to render the opinion below.
For purposes of this opinion, we have assumed: (i) the validity and
accuracy of the documents and corporate records that we have examined and
the facts and representations concerning the registration of shares of
Devon Common Stock that have come to our attention during our engagement;
and (ii) that the issuance of shares of Devon Common Stock pursuant to the
Registration Statement will be consummated in the manner described in the
Registration Statement.
Subject to the assumptions set forth above, the assumptions and
qualifications set forth in the Registration Statement under the heading
"Income Tax Considerations - Canadian Federal Income Tax Considerations"
(the "Discussion") and the fact that the Discussion is a summary and does
not purport to discuss all possible Canadian federal income tax
consequences of exchanging Exchangeable Shares, we are of the opinion that
the Discussion states the material Canadian federal income tax consequences
generally applicable to Canadian Holders of Exchangeable Shares with
respect to the exchange of Exchangeable Shares for shares of Devon Common
Stock pursuant to the Plan of Arrangement. In addition, we express no
opinion as to the Canadian federal, provincial, local, foreign or other tax
consequences, other than as set forth in the Discussion. Further, there can
be no assurances that the opinion expressed herein will be accepted by
Revenue Canada, Customs, Excise and Taxation ("Revenue Canada") or, if
challenged, by a court. We also note that the Registration Statement does
not relate to a specific exchange of Exchangeable Shares for shares of
Devon Common Stock. Accordingly, the above-referenced description of
Canadian federal income tax considerations may, under certain
circumstances, require modification in the context of an actual exchange of
Exchangeable Shares for shares of Devon Common Stock after the date hereof.
This opinion is delivered in accordance with the requirements of Item
601(b)(8) of Regulation S-K under the Securities Act.
In rendering our opinion, we have considered the applicable provisions of
the Income Tax Act (Canada) (the "Canadian Tax Act"), the regulations
thereunder, the Canada-United States Income Tax Convention, 1980, as
amended (the "Tax Treaty"), pertinent judicial authorities, and our
understanding of the current administrative practices published by Revenue
Canada and such other authorities as we have considered relevant. Our
opinion takes into account specific proposals to amend the Canadian Tax Act
and regulations publicly announced by the Minister of Finance prior to the
date hereof (the "Tax Proposals") and assumes that all Tax Proposals will
be enacted in their present form. However, no assurances can be given that
the Tax Proposals will be enacted in the form proposed, or at all. Except
for the foregoing, this opinion does not take into account or anticipated
any changes in law, whether by judicial, administrative or legislative
action or decision, nor does it take into account provincial, territorial
or foreign income tax legislation or considerations, which may differ from
the Canadian federal income tax considerations described in our opinion. No
advance income tax ruling has been obtained from Revenue Canada to confirm
the tax consequences of any of the transactions described herein. It should
be noted that statutes, regulations, judicial decisions and administrative
interpretations are subject to change at any time (possibly with
retroactive effect). A change in the authorities or the accuracy or
completeness of any of the information, documents, corporate records,
covenants, statements, representations or assumptions on which our opinion
is based could affect our conclusions. This opinion is expressed as of the
date hereof, and we are under no obligation to supplement or revise our
opinion to reflect any changes (including changes that have retroactive
effect): (i) in applicable law; or (ii) in any information, document,
corporate record, covenant, statement, representation or assumption stated
herein which becomes untrue or incorrect.
This letter is furnished to you solely for use in connection with the
Registration Statement, and is not to be used, circulated, quoted or
otherwise referred to for any other purpose without our express written
permission. In accordance with the requirements of Item 601(b)(23) of
Regulation S-K under the Securities Act, we hereby consent to the filing of
this opinion as an exhibit to the Registration Statement, to the references
to our firm name under the headings "Certain Legal Matters" and "Income Tax
Considerations - Canadian Federal Income Tax Considerations" in the
Registration Statement. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the
Commission thereunder.
Yours very truly,
BURNET, DUCKWORTH & PALMER
/s/ Burnet, Duckworth & Palmer
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Devon Energy Corporation:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
November 6, 1998
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement on Form S-3 of Devon
Energy Corporation of our report dated March 19, 1998 (except as to Note 12
which is as of July 31, 1998) to the shareholders of Northstar Energy
Corporation, appearing in the Joint Management Information Circular and
Proxy Statement with Respect to an Arrangement Involving Devon Energy
Corporation and Northstar Energy Corporation (the "Circular and Proxy
Statement), which is a part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in the
Circular and Proxy Statement.
Calgary, Alberta /s/ Deloitte & Touche LLP
Canada Chartered Accountants
November 6, 1998
Exhibit 23.3
ENGINEER'S CONSENT
We consent the reference to our appraisal report for Devon Energy
Corporation as of the years ended December 31, 1993, 1994, 1995, 1996 and
1997, incorporated herein by reference.
/s/ LAROCHE PETROLEUM CONSULTANTS, LTD.
November 6, 1998
Exhibit 23.4
ENGINEER'S CONSENT
We consent the reference to our appraisal report for Devon Energy
Corporation as of the years ended December 31, 1996 and 1997, incorporated
herein by reference.
/s/ AMH GROUP LTD.
November 6, 1998
Exhibit 23.5
ENGINEER'S CONSENT
We consent reference to our appraisal for Northstar Energy
Corporation as of December 31, 1997, incorporated herein by reference.
/s/ JOHN P. HUNTER & ASSOCIATES LTD.
November 6, 1998
Exhibit 23.6
Paddock Lindstrom & Associates Ltd.
ENGINEER'S CONSENT
We consent reference to our appraisal for Northstar Energy
Corporation as of December 31, 1997, incorporated herein by reference.
Paddock Lindstrom & Associates Ltd.
/s/ D.L. Paddock, P. Eng.
____________________________________
D.L. Paddock, P.Eng.
Vice-President
November 6, 1998
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints J. Larry Nichols, H. Allen
Turner and Marian J. Moon, and each or any one of them, his true and lawful
attorney-in-fact and agent, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any or all amendments (including
post-effective amendments) and supplements to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, each acting alone or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/ John W. Nichols /s/ J. Larry Nichols
_______________________________ _____________________________
John W. Nichols J. Larry Nichols
Chairman of the Board and Director President, Chief Executive
Officer and Director
/s/ William T. Vaughn /s/ Danny J. Heatly
________________________________ _____________________________
William T. Vaughn Danny J. Heatly
Vice President Finance Controller
/s/ Luke R. Corbett /s/ Thomas F. Ferguson
________________________________ ____________________________
Luke R. Corbett Thomas F. Ferguson
Director Director
/s/ David M. Gavrin /s/ Michael E. Gellert
________________________________ ____________________________
David M. Gavrin Michael E. Gellert
Director Director
/s/ Tom J. McDaniel /s/ H.R. Sanders, Jr.
________________________________ ___________________________
Tom J. McDaniel H.R. Sanders, Jr.
Director Director
/s/ Lawrence H. Towell
_______________________________
Lawrence H. Towell
Director
