<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A (RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
SANTA FE SNYDER CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: (5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
Amount Previously Paid:
Date Filed:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO] [LOGO]
Santa Fe Snyder Devon Energy
Corporation Corporation
JULY 21, 2000
PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT
Dear Stockholder:
On May 25, 2000, Devon Energy Corporation and Santa Fe Snyder Corporation
agreed to merge. The combined company will rank among the five largest
U.S.-based independent oil and gas companies in terms of oil and gas reserves,
oil and gas production, equity market capitalization and enterprise value. We
believe that the combined company will be able to create substantially more
stockholder value than could be achieved by either Devon or Santa Fe Snyder
individually. In the merger, Santa Fe Snyder stockholders will receive
0.22 shares of Devon's common stock for each share of Santa Fe Snyder common
stock they own.
The merger requires the approval of the stockholders of both Devon and Santa
Fe Snyder. Devon and Santa Fe Snyder have each scheduled special meetings of
their stockholders on August 29, 2000 to vote on the merger. Regardless of the
number of shares you own or whether you plan to attend a meeting, it is
important that your shares be represented and voted. Voting instructions are
inside.
This document provides you with detailed information about the proposed
merger. We encourage you to read this document carefully.
You can also get more information by visiting Santa Fe Snyder's web site at
HTTP://WWW.SANTAFE-SNYDER.COM. Web site materials are not part of this joint
proxy statement/prospectus. Santa Fe Snyder common stock is traded on the New
York Stock Exchange under the symbol "SFS."
<TABLE>
<S> <C>
SANTA FE SNYDER CORPORATION DEVON ENERGY CORPORATION
[SIG] [SIG]
James L. Payne J. Larry Nichols
Chief Executive Officer President and Chief Executive Officer
</TABLE>
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
This joint proxy statement/prospectus is dated July 21, 2000 and was first
mailed to stockholders on or about July 25, 2000.
<PAGE>
PLEASE SEE THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 15 FOR A
DISCUSSION OF POTENTIAL RISKS INVOLVED IN THE MERGER AND RELATED TRANSACTIONS.
<PAGE>
This document incorporates important business and financial information
about Devon and Santa Fe Snyder that is not included or delivered with this
document. The information incorporated by reference is available without charge
to stockholders upon written or oral request to:
<TABLE>
<S> <C>
Santa Fe Snyder Corporation Devon Energy Corporation
840 Gessner, Suite 1400 20 North Broadway
Houston, Texas 77024-4237 Oklahoma City, Oklahoma 73102-8260
Attention: Assistant Corporate
Attention: Investor Relations Secretary
Tel: (713) 547-5307 Tel: (405) 235-3611
[email protected] [email protected]
</TABLE>
If you would like to request documents from us, please do so by August 21,
2000, to receive them before the meetings.
<PAGE>
SANTA FE SNYDER CORPORATION
840 GESSNER, SUITE 1400
HOUSTON, TEXAS 77024
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 2000
------------------------
To the Stockholders of
Santa Fe Snyder Corporation:
A special meeting of stockholders of Santa Fe Snyder Corporation will be
held on August 29, 2000, at 10:00 a.m. (Houston time) in the Grand Salon, on the
first floor of the Omni Hotel, Four Riverway, Houston, Texas, for the following
purposes:
1. To consider and vote upon a proposal to approve the merger agreement
and the merger between Devon Energy Corporation and Santa Fe Snyder, and the
transactions contemplated by it; and
2. To transact other business as may properly be presented at the
special meeting or any adjournments of the meeting.
Santa Fe Snyder will not complete the merger unless its stockholders approve
the merger agreement and the merger.
Only stockholders of record at the close of business on July 21, 2000, are
entitled to notice of and to vote at the meeting and any adjournments of the
meeting. A list of stockholders entitled to vote at the meeting will be
available for inspection during normal business hours for the ten days before
the meeting at the offices of Santa Fe Snyder and at the time and place of the
meeting.
IMPORTANT
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY CARD SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND SO THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED. GIVING A PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE
IT IS EXERCISED AT THE MEETING.
By Order of the Board of Directors,
Mark A. Older
CORPORATE SECRETARY
Houston, Texas
July 21, 2000
YOUR VOTE IS IMPORTANT!
PLEASE READ THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Questions and Answers....................................... 1
Summary..................................................... 3
Summary Unaudited Pro Forma Combined Financial and Other
Information............................................. 8
Devon's Summary Selected Financial Data................... 13
Santa Fe Snyder's Summary Selected Financial Data......... 14
Risk Factors................................................ 15
Risks Relating to the Merger.............................. 15
Risks Relating to an Investment in Devon.................. 15
Devon After the Merger...................................... 18
Comparative Per Share Data.................................. 20
Comparative Market Price Data............................... 21
Unaudited Pro Forma Combined Financial Information.......... 22
Notes To Unaudited Pro Forma Combined Financial
Information............................................... 30
The Stockholder Meetings and Proxy Solicitations............ 38
The Merger.................................................. 43
The Merger Agreement........................................ 64
The Stock Option Agreements................................. 73
Properties of the Combined Company.......................... 76
Directors and Executive Officers of the Combined Company.... 81
Interests of Certain Executive Officers and Directors in the
Merger.................................................... 82
Material United States Federal Income Tax Considerations.... 82
Comparison of the Rights of Holders of Devon and Santa Fe
Snyder Stockholders....................................... 85
Proposed Stock Option Plan Amendment........................ 90
Auditors, Transfer Agent and Registrar...................... 93
Legal Matters............................................... 93
Experts..................................................... 93
Future Stockholder Proposals................................ 94
Where You Can Find More Information......................... 95
Cautionary Statement Concerning Forward-Looking
Statements................................................ 97
Commonly Used Oil and Gas Terms............................. 98
Annex A--Agreement and Plan of Merger and Amendment No. One
thereto................................................... A -1
Annex B--Opinion of Morgan Stanley & Co. Incorporated....... B -1
Annex C--Opinion of Chase Securities Inc.................... C -1
Annex D--Devon Energy Corporation Stock Option Agreement.... D -1
Annex E--Santa Fe Snyder Corporation Stock Option
Agreement................................................. E -1
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS
<TABLE>
<S> <C>
Q. WHAT IS BEING PROPOSED?
A. Devon and Santa Fe Snyder are proposing
to merge the two companies. Santa Fe
Snyder will become a wholly owned
subsidiary of Devon. Devon will remain
the publicly traded company.
Q. WHAT IS THE COMBINED COMPANY?
A. In this joint proxy
statement/prospectus, we sometimes
refer to Devon after the merger with
Santa Fe Snyder as "the combined
company." The term "Devon" generally
means Devon Energy Corporation, a
Delaware corporation, its consolidated
subsidiaries and its predecessor
entities. The term "Santa Fe Snyder"
generally means Santa Fe Snyder
Corporation, a Delaware corporation,
its consolidated subsidiaries and its
predecessor entities.
Q. WHY ARE THE COMPANIES MERGING?
A. The boards of directors of Devon and
Santa Fe Snyder believe that the merger
is in the best interest of
stockholders. The combined company
should benefit from:
- increased financial strength and
flexibility;
- an estimated $30 to $35 million in
annual cost savings;
- a larger and more diversified asset
base;
- improved capital efficiencies; and
- greater human and technological
resources.
See pages 47 through 50 for a more
complete discussion of the reasons for
the merger.
Q. WHAT WILL STOCKHOLDERS RECEIVE AS A
RESULT OF THE MERGER?
A. Santa Fe Snyder stockholders will
receive 0.22 shares of Devon common
stock for each share of Santa Fe Snyder
common stock that they own. Devon
stockholders will own the same number
of shares of Devon common stock that
they owned before the merger.
Q. WILL DEVON PAY DIVIDENDS IN THE FUTURE?
A. Devon pays a regular quarterly dividend
of $0.05 per share on its common stock.
We expect that Devon will pay the same
quarterly dividend per share after the
merger. However, the continued
declaration of dividends will be at the
sole discretion of Devon's board of
directors.
Q. WHAT DO THE BOARDS OF DIRECTORS
RECOMMEND?
A. The boards of directors of both
companies recommend that stockholders
vote FOR approval of the merger
agreement and the merger. Devon's board
of directors also recommends that Devon
stockholders vote FOR increasing the
number of shares of Devon common stock
available for issuance under the Devon
1997 Stock Option Plan.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully considering the
enclosed information, please mark,
sign, date and return your proxy card
or voting instruction card in the
enclosed envelope as soon as possible.
Devon stockholders also have the option
to vote using one of the following
voting methods:
- the toll-free telephone number
shown on the proxy card; or
- the internet web site shown on the
proxy card.
Your shares will then be voted at the
special meeting in accordance with your
instructions.
Q. IF MY SHARES ARE HELD IN "STREET NAME"
BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. No. You must instruct your broker how
to vote your shares. Otherwise, your
shares will not be voted.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Q. WHAT HAPPENS IF I DON'T VOTE MY SHARES?
A. The failure of a Santa Fe Snyder
stockholder to vote at the special
meeting will have the same effect as
voting against the merger. Abstentions
by Devon stockholders will be counted
and have the same effect as a vote
against the proposals. Broker non-votes
for Devon stockholders will have no
effect on the outcome of the Devon
vote.
Q. SHOULD I SEND IN MY SANTA FE SNYDER
CERTIFICATES NOW?
A. No. After the merger is approved, Santa
Fe Snyder stockholders will receive
instructions on how to exchange their
Santa Fe Snyder stock certificates for
Devon stock certificates. Devon
stockholders will not be required to
exchange their stock certificates.
Q. WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A. We expect to complete the merger within
one or two business days after
receiving stockholder approvals at the
special meetings.
Q. WHO CAN HELP ANSWER MY QUESTIONS OR
GIVE ME ASSISTANCE IN VOTING MY SHARES?
A. Devon Energy Corporation:
Morrow & Co., Inc.
Toll Free: 1-800-566-9061
Santa Fe Snyder Corporation:
Georgeson Shareholders Communications
Inc.
Toll Free: 1-800-223-2064
Q. WHO CAN HELP ANSWER ADDITIONAL
QUESTIONS THAT I MAY HAVE?
A. Devon Energy Corporation:
Nakita Rizzo
Investor Relations
(405) 552-4570
[email protected]
Santa Fe Snyder Corporation:
John O'Keefe
Investor Relations
(713) 507-5307
[email protected]
</TABLE>
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT. IT MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE MERGER AND RELATED TRANSACTIONS AND FOR A MORE DETAILED DESCRIPTION OF THE
LEGAL TERMS, YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO
WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON
PAGE 95.
THE COMPANIES
DEVON ENERGY CORPORATION
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
(405) 235-3611
Devon is an independent energy company engaged primarily in oil and gas
exploration, development and production, and in the acquisition of producing
properties. Devon currently owns oil and gas properties concentrated in four
operating divisions:
- the Northern Division, which encompasses properties in the Permian Basin,
Rocky Mountains and Mid-Continent;
- the Southern Division, which encompasses properties onshore Gulf Coast and
offshore Gulf of Mexico;
- Canada, which includes properties in the Western Canadian Sedimentary
Basin in Alberta and British Columbia; and
- the International Division, which includes properties in Azerbaijan,
Egypt, Venezuela, Qatar and Brazil.
SANTA FE SNYDER CORPORATION
840 Gessner, Suite 1400
Houston, Texas 77024-4237
(713) 507-5000
Santa Fe Snyder is an independent oil and gas exploration and development
company with domestic operations in the Permian Basin region of West Texas and
southeastern New Mexico, the Gulf of Mexico, the Rocky Mountains and northern
Louisiana. Santa Fe Snyder's international operations are located in five core
areas, including Indonesia, Argentina, Gabon, Brazil and China, with other
interests in Cote d'Ivoire, Malaysia, Thailand and Ghana. Santa Fe Snyder's
common stock is traded on the New York Stock Exchange under the symbol "SFS."
THE MERGER
WHAT SANTA FE SNYDER STOCKHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 64)
Santa Fe Snyder stockholders will receive 0.22 shares of Devon common stock
for each share of Santa Fe Snyder common stock that they own. Santa Fe Snyder
stockholders will not receive fractional shares. Instead, they will receive cash
equal to the market value of any fractional shares. Current Santa Fe Snyder
stockholders will own approximately 32% of the common stock of the combined
company.
DIRECTORS AND SENIOR MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER
(SEE PAGE 81)
The board of directors of the combined company will consist of 13 directors:
nine members designated by Devon and four designated by Santa Fe Snyder.
J. Larry Nichols, the President, Chief Executive Officer and a director of
Devon, will be President, Chief Executive Officer and a director of the combined
company. James L. Payne, the Chief Executive Officer of Santa Fe Snyder, will
serve as Vice Chairman of the board of the combined company and will also be
responsible for the combined company's international division. James L. Pate,
the current Chairman of the board of Devon, will serve as Chairman of the board
of the combined company. Devon's executive staff will continue in their current
capacities with the combined company. The combined company may select members of
Santa Fe Snyder's executive staff to augment its management team.
3
<PAGE>
VOTING
VOTES REQUIRED (SEE PAGE 39)
DEVON. The affirmative vote of the holders of a majority of the shares of
Devon voting stock present at the special meeting, in person or by proxy, and
entitled to vote is required to approve the merger agreement and the merger and
to approve the increase in the number of shares of Devon common stock available
for issuance under the Devon 1997 Stock Option Plan.
SANTA FE SNYDER. The affirmative vote of the holders of a majority of the
outstanding shares of Santa Fe Snyder common stock is required for approval of
the merger agreement at the Santa Fe Snyder meeting.
VOTING THE EXCHANGEABLE SHARES
Each exchangeable share is entitled to one vote at the Devon meeting through
a voting agreement. Under the voting agreement, the trustee exercises voting
rights on behalf of holders of the exchangeable shares. The trustee holds one
share of special voting stock of Devon. The special voting share is entitled to
one vote for each outstanding exchangeable share held by persons other than
Devon. The trustee will vote only as instructed by the holders of exchangeable
shares.
OUR RECOMMENDATIONS TO STOCKHOLDERS
DEVON (SEE PAGE 38)
Devon's board of directors recommends that Devon stockholders vote FOR the
approval of the merger agreement and the merger and FOR the stock option plan
amendment. Approximately 1.2% of Devon's outstanding voting shares are held by
Devon's directors, executive officers and affiliates, all of whom are expected
to vote their shares for approval of the proposals.
SANTA FE SNYDER (SEE PAGE 38)
Santa Fe Snyder's board of directors recommends that Santa Fe Snyder
stockholders vote FOR the approval of the merger agreement and the merger.
Approximately 3.0% of Santa Fe Snyder's outstanding shares entitled to vote are
held by Santa Fe Snyder's directors and executive officers, all of whom are
expected to vote their shares for approval of the proposals.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 50 THROUGH 63)
In deciding to approve the merger, the board of directors of Devon
considered the opinion of Morgan Stanley & Co. Incorporated, its financial
advisor, that, as of the date of its opinion, the exchange ratio pursuant to the
merger agreement was fair, from a financial point of view, to Devon.
In deciding to approve the merger, the board of directors of Santa Fe Snyder
considered the opinion of Chase Securities Inc., its financial advisor, to the
effect that, as of the date of its opinion, the exchange ratio pursuant to the
merger agreement was fair to the holders of Santa Fe Snyder common stock from a
financial point of view.
These opinions are attached as Annexes B and C to this joint proxy
statement/prospectus. We encourage you to read these opinions carefully, as well
as the descriptions of the analyses and assumptions on which the opinions were
based found on pages 51 and 58.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER THAT DIFFER FROM YOUR
INTERESTS (SEE PAGE 82)
Some of the officers and directors of Devon and Santa Fe Snyder have
agreements, stock options and other benefit plans that may provide them with
interests in the merger that are different from yours. The boards of both
companies were aware of these interests and considered them in approving the
merger.
4
<PAGE>
THE MERGER AGREEMENT
The merger agreement is attached as Annex A to this document. We encourage
you to read the merger agreement because it is the legal document that governs
the merger.
CONDITIONS TO THE MERGER (SEE PAGES 65 THROUGH 66)
In order to complete the merger, a number of customary conditions must be
satisfied, including the following:
- the approval by both the Devon and the Santa Fe Snyder stockholders;
- the absence of any law or court order prohibiting the merger and the
expiration of applicable regulatory waiting periods;
- the approval for listing on the American Stock Exchange of the Devon
shares to be issued in the merger;
- the continued accuracy of each company's representations and warranties,
and the compliance by each company with its covenants and agreements
contained in the merger agreement; and
- the receipt of legal opinions from counsel for each company as to the
tax-free qualification of the merger.
The board of directors of either Devon or Santa Fe Snyder may choose to
complete the merger even though a condition to that company's obligation has not
been satisfied if the stockholders have approved the merger and the law allows
the boards to do so.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 70)
Devon and Santa Fe Snyder can jointly agree to terminate the merger
agreement without completing the merger, even after stockholder approval. In
addition, either company can terminate the merger agreement on its own without
completing the merger if any of the following occurs:
- the merger is not completed by December 31, 2000, other than due to a
breach of the merger agreement by the terminating party;
- the stockholders of either Devon or Santa Fe Snyder fail to give the
required approvals;
- a court or other governmental authority permanently prohibits the merger;
- prior to receipt of Devon and Santa Fe Snyder stockholder approval, the
board of directors of the terminating company determines that proceeding
with the merger would be inconsistent with its fiduciary obligations
because of a superior offer from a third party, after providing the other
party prior notice and considering changes to the terms of the merger
agreement proposed by the other party;
- the other party has breached the merger agreement or any of its
representations and warranties in the merger agreement have become untrue;
or
- the board of directors of the other party withdraws or materially changes
its recommendation of the merger to its stockholders, or recommends an
alternative transaction to its stockholders.
TERMINATION FEES AND EXPENSES (SEE PAGES 71 THROUGH 72)
If the merger agreement is terminated by either party under specific
circumstances involving a proposed business transaction with a third party, the
party that would enter into the other transaction will be required to pay the
other party to the merger agreement a termination fee of up to $103 million,
plus expenses.
NO SOLICITATION
Devon and Santa Fe Snyder have each generally agreed not to initiate any
discussions with another party regarding a business combination while the merger
is pending or to engage in any such discussions unless required by fiduciary
obligations.
5
<PAGE>
THE STOCK OPTION AGREEMENTS
TERMS OF OPTIONS (SEE PAGES 73 THROUGH 75)
In connection with the merger agreement, Devon and Santa Fe Snyder each
granted the other an option to purchase 19.9% of its currently outstanding
common stock. The per share exercise price for the option granted by Devon to
Santa Fe Snyder is $56.4875. The per share exercise price for the option granted
by Santa Fe Snyder to Devon is $10.6625. These exercise prices were based on the
average closing prices of Devon's common stock and Santa Fe Snyder's common
stock, respectively, during the 10 consecutive trading days preceding May 25,
2000, the day Devon and Santa Fe Snyder executed the stock option agreements.
The options are exercisable under the circumstances described on page 73. The
total profit under either stock option agreement may not exceed $103 million,
which includes amounts received on repurchase or sale of option shares and any
termination fees paid.
OPTIONS COULD HAVE THE EFFECT OF DETERRING COMPETING BIDDERS
The stock option agreements were intended to increase the likelihood that
Devon and Santa Fe Snyder will complete the merger. The stock option agreements
have the effect of making an acquisition of either company by a third party more
costly and likely preventing a competing acquiror of either company from
accounting for the acquisition using the pooling-of-interests accounting method
for up to two years. Accordingly, the stock option agreements, together with the
termination fees, may have the effect of discouraging a third party from
proposing a competing transaction, including one that might be more favorable to
stockholders than the merger.
OTHER INFORMATION
ACCOUNTING TREATMENT
We expect that the merger will be accounted for as a pooling-of-interests,
which means that we will treat our companies as if they had always been combined
for accounting and financial reporting purposes. Pooling-of-interests treatment
is not a condition to the merger. If pooling-of-interests treatment is not
available, the merger will be accounted for as a purchase of Santa Fe Snyder by
Devon.
ANTITRUST APPROVAL REQUIRED TO COMPLETE THE MERGER
The merger is subject to antitrust laws. We have made the required filings
with the Department of Justice and the Federal Trade Commission. We are not
permitted to complete the merger until the applicable waiting period has expired
or terminated. We expect that the applicable waiting period will expire at
11:59 p.m. Eastern time on July 23, 2000.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 21)
On May 25, 2000, the last full trading day prior to the public announcement
of the proposed merger, Devon common stock closed at $58.6875 per share and
Santa Fe Snyder common stock closed at $11.00 per share. On July 20, 2000, Devon
common stock closed at $47.06 per share and Santa Fe Snyder common stock closed
at $10.25 per share.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS (SEE PAGES 82 THROUGH 84)
We have structured the merger so that, in general, Santa Fe Snyder
stockholders will not recognize any gain or loss for federal income tax purposes
as a result of the merger, except for taxes payable by Santa Fe Snyder
stockholders as a result of receiving cash instead of fractional shares.
As a condition to the merger, both Devon and Santa Fe Snyder must receive an
opinion from their respective tax counsels that the merger will be tax free
unless these conditions are waived. Neither Devon nor Santa Fe Snyder intends to
waive these conditions.
TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD SEEK TAX ADVICE FOR A
FULL UNDERSTANDING OF THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO YOU.
6
<PAGE>
LISTING OF DEVON'S COMMON STOCK
Devon expects to obtain approval to list the additional shares to be issued
in the merger on the American Stock Exchange.
DISSENTER'S RIGHTS
No dissenters' rights of appraisal exist in connection with the merger.
RECENT DEVELOPMENTS
On June 22, 2000, Devon announced that it priced a private placement of
20-year maturity zero-coupon convertible debentures. The debentures are
convertible into shares of Devon common stock at a fixed conversion rate of
5.7593 shares per debenture, which is a 40 percent premium to Devon's closing
stock price on the day before the pricing. The debentures were issued on
June 27, 2000 at a price of $464.13 per debenture. This represents a yield to
maturity of 3.875 percent per annum. The debentures will reach an accreted value
at maturity of $1,000.00 per debenture.
Devon has the right to redeem the debentures after five years. The
redemption price will be equal to the issuance price plus accrued original issue
discount through the date of redemption. Holders of the debentures have the
right to require Devon to repurchase the debentures on the fifth, tenth, and
fifteenth anniversaries of the issue date. The repurchase price will be the
accreted value of the debentures through the repurchase date. The repurchase
payment can be made in either cash, shares of Devon common stock or a
combination of cash and shares of common stock at Devon's option.
Devon intends to use the $345.7 million in net proceeds to repay existing
Devon indebtedness and for general corporate purposes.
FOR DEFINITIONS OF OIL AND GAS TERMS USED IN THIS DOCUMENT, SEE "COMMONLY
USED OIL AND GAS TERMS" ON PAGE 98.
7
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL AND OTHER INFORMATION
The following unaudited pro forma combined financial information has been
prepared to assist in your analysis of the financial effects of the merger. This
pro forma information is based on the historical financial statements of Devon
and Santa Fe Snyder.
The information was prepared based on the following:
- The merger is expected to be accounted for as a pooling-of-interests of
Devon and Santa Fe Snyder. Therefore, the summary unaudited pro forma
combined balance sheet has been prepared as if Devon and Santa Fe Snyder
were combined on March 31, 2000. The summary unaudited pro forma combined
statements of operations have been prepared as if Devon and Santa Fe
Snyder were combined as of the beginning of the earliest period presented.
If the merger is ultimately accounted for under the purchase method of
accounting, historical results for the two companies would not be combined
and the impact of the merger would be included in the statements of
operations only in periods subsequent to the closing of the merger. Under
the purchase method of accounting, the assets acquired and liabilities
assumed would be recorded at their estimated fair values rather than at
their historical book costs. This increase to fair value generally would
result in significantly higher depreciation, depletion and amortization
expenses and therefore significantly lower net earnings in future periods.
- The combined company will utilize the full cost method of accounting for
its oil and gas activities.
- The historical financial results of Santa Fe Snyder, which were prepared
using the successful efforts method of accounting, have been restated to
the full cost method to conform to Devon's method of accounting.
- Expected annual cost savings of $30 to $35 million have not been reflected
as an adjustment to the historical data. These cost savings are expected
to result from the consolidation of the corporate headquarters of Devon
and Santa Fe Snyder and the elimination of duplicate staff and expenses.
Some of the cost savings will relate to items that, under the full cost
method of accounting, are capitalized rather than expensed in the
consolidated financial statements. Therefore, not all of the $30 to
$35 million of expected savings will result in reductions to expenses as
reported in the accompanying unaudited pro forma combined statements of
operations.
There are several unusual items in each company's historical results that
should be considered when making period-to-period comparisons. These items
include:
- Devon merged with PennzEnergy Company on August 17, 1999. This merger was
accounted for as a purchase. Accordingly, Devon's results for the year
1999 include the results of the PennzEnergy merger for only the last 4 1/2
months of the year.
- Santa Fe Snyder was formed on May 5, 1999, as a result of the merger of
Santa Fe Energy Resources, Inc. and Snyder Oil Corporation. This merger
was accounted for as a purchase by Santa Fe Energy Resources, Inc. of
Snyder. Accordingly, Santa Fe Snyder's results for the year 1999 include
the results of the Snyder merger for only the last eight months of the
year.
- Santa Fe Snyder's results for the year 1999 include $16.8 million of costs
related to the Snyder merger.
- Devon's results for the year 1998 include $13.1 million of costs related
to its December 1998 merger with Northstar Energy Corporation. This merger
was accounted for as a pooling-of-interests. Accordingly, Northstar's
results are included in Devon's results for all periods presented.
- In 1998 and 1997, Devon reduced the carrying value of its oil and gas
properties by $126.9 million and $625.5 million ($88.0 million and
$397.9 million after tax), respectively, due
8
<PAGE>
to the full cost ceiling limitation. The 1998 reduction related to Devon's
domestic properties. The 1997 reduction related to the Canadian properties
acquired in the Northstar merger.
- In 1999, 1998 and 1997, Santa Fe Snyder reduced the carrying value of its
oil and gas properties by $476.1 million, $295.6 million and
$16.2 million ($309.7 million, $211.2 million and $23.1 million after-tax,
which includes the establishment of an $11.0 million and a $9.9 million
valuation allowance relating to deferred tax assets in 1998 and 1997),
respectively, due to the full cost ceiling limitation.
- On July 25, 1997, Santa Fe Energy Resources, Inc. spun off its subsidiary
Monterey Resources, Inc. At the time of the spin off, Santa Fe Energy
Resources, Inc. owned approximately 83% of Monterey. The Santa Fe Snyder
results for the year 1997 include the results for Monterey for only the
first seven months prior to the spin off.
The unaudited pro forma information is presented for illustrative purposes
only. If the merger had occurred in the past, the combined company's financial
position or operating results might have been different from those presented in
the unaudited pro forma information. You should not rely on the unaudited pro
forma information as an indication of the financial position or operating
results that the combined company would have achieved if the merger had occurred
in the past. You also should not rely on the unaudited pro forma information as
an indication of the future results that the combined company will achieve after
the merger.
<TABLE>
<CAPTION>
COMBINED COMPANY
PRO FORMA AS OF
MARCH 31, 2000
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
BALANCE SHEET DATA:
Investment in common stock of Chevron Corporation...... $ 655,606
Total assets........................................... 6,286,257
Debentures exchangeable into shares of Chevron
Corporation common stock............................. 760,313
Other long-term debt................................... 1,693,004
Stockholders' equity................................... 2,557,835
Book value per share................................... 20.20
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
COMBINED COMPANY UNAUDITED PRO FORMA
----------------------------------------------------------
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ------------------------------------
2000 1999(1) 1999(1) 1998 1997
-------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
OPERATING RESULTS
Oil sales.................................. $267,944 $ 69,313 $ 553,834 $ 306,924 $ 552,525
Gas sales.................................. 233,032 78,351 603,225 328,444 357,559
NGL sales.................................. 37,370 5,629 67,944 24,692 35,820
Other revenues............................. 12,065 2,573 20,596 24,248 48,255
-------- -------- ---------- ---------- ----------
Total revenues........................... 550,411 155,866 1,245,599 684,308 994,159
-------- -------- ---------- ---------- ----------
Lease operating expenses................... 109,393 56,720 303,248 229,884 266,197
Production taxes........................... 18,520 4,869 42,355 22,816 31,027
Depreciation, depletion and amortization of
property and equipment................... 165,252 59,758 406,375 243,144 285,308
Amortization of goodwill................... 10,332 -- 16,111 -- --
General and administrative expenses........ 24,850 11,923 80,645 45,454 53,081
Expenses related to prior mergers.......... -- -- 16,800 13,149 --
Interest expense........................... 40,076 13,164 109,613 43,532 41,488
Deferred effect of changes in foreign
currency exchange rate on subsidiary's
long-term debt........................... 2,408 (3,161) (13,154) 16,104 5,860
Distributions on preferred securities of
subsidiary trust......................... -- 2,429 6,884 9,717 9,717
Reduction of carrying value of oil and gas
properties............................... -- -- 476,100 422,500 641,714
-------- -------- ---------- ---------- ----------
Total costs and expenses................. 370,831 145,702 1,444,977 1,046,300 1,334,392
-------- -------- ---------- ---------- ----------
Earnings (loss) before income tax expense
(benefit) and minority interest.......... 179,580 10,164 (199,378) (361,992) (340,233)
Income tax expense (benefit):
Current.................................. 36,147 2,603 23,056 (3,713) 35,757
Deferred................................. 38,246 981 (72,490) (101,094) (146,299)
-------- -------- ---------- ---------- ----------
Total income tax expense............... 74,393 3,584 (49,434) (104,807) (110,542)
-------- -------- ---------- ---------- ----------
Earnings (loss) before minority interest... 105,187 6,580 (149,944) (257,185) (229,691)
Minority interest in Monterey Resources,
Inc...................................... -- -- -- -- (4,700)
-------- -------- ---------- ---------- ----------
Net earnings (loss)........................ 105,187 6,580 (149,944) (257,185) (234,391)
Preferred stock dividends.................. 2,434 -- 3,651 -- 12,000
-------- -------- ---------- ---------- ----------
Net earnings (loss) applicable to common
stockholders............................. $102,753 $ 6,580 $ (153,595) $ (257,185) $ (246,391)
======== ======== ========== ========== ==========
Net earnings (loss) per share:
Basic.................................... $ 0.81 $ 0.09 $ (1.64) $ (3.62) $ (3.58)
Diluted.................................. 0.80 0.09 (1.64) (3.62) (3.58)
Cash dividends per share................... 0.03 0.03 0.14 0.10 0.09
Weighted average common shares
outstanding--basic....................... 126,336 70,954 93,653 70,948 68,732
CASH FLOW DATA:
Net cash provided by operating
activities............................... $345,970 $ 92,467 $ 532,228 $ 334,471 $ 530,156
Net cash used in investing activities...... (432,511) (144,748) (768,217) (607,260) (545,683)
Net cash provided (used) by financing
activities............................... (25,271) 45,984 377,198 256,518 34,859
OTHER DATA:
Modified EBITDA(2)(4)...................... 397,648 82,354 802,551 373,005 643,854
Cash margin(3)(4).......................... 321,425 64,158 662,998 323,469 556,892
</TABLE>
--------------------------
(1) The 1999 operating results include the historical results of Devon and Santa
Fe Snyder (excluding the $4.2 million extraordinary loss, net of
$2.3 million of taxes, resulting from Santa Fe Snyder's early
10
<PAGE>
extinguishment of debt). The 1999 operating results do not include the pro
forma results of PennzEnergy Company and Snyder Oil Corporation prior to
their respective purchase dates of August 17, 1999 and May 5, 1999,
respectively. (See Unaudited Pro Forma Combined Statement of Operations for
the three months ended March 31, 1999 and the year ended December 31, 1999
included herein.)
(2) Modified EBITDA represents earnings before interest (including deferred
effect of changes in foreign currency exchange rate on subsidiary's
long-term debt, and distributions on preferred securities of subsidiary
trust), taxes, depreciation, depletion and amortization and reduction of
carrying value of oil and gas properties.
(3) "Cash margin" equals total revenues less cash expenses. Cash expenses are
all expenses other than the non-cash expenses of depreciation, depletion and
amortization, deferred effect of changes in foreign currency exchange rate
on subsidiary's long-term debt, reduction of carrying value of oil and gas
properties and deferred income tax expense. Cash margin measures the net
cash which is generated by a company's operations during a given period,
without regard to the period such cash is actually physically received or
spent by the company. This margin ignores the non-operational effect on a
company's "net cash provided by operating activities", as measured by
generally accepted accounting principles, from a company's activities as an
operator of oil and gas wells. Such activities produce net increases or
decreases in temporary cash funds held by the operator which have no effect
on net earnings of the company.
(4) Modified EBITDA is presented because it is commonly accepted in the oil and
gas industry as a financial indicator of a company's ability to service or
incur debt. Cash margin is presented because it is commonly accepted in the
oil and gas industry as a financial indicator of a company's ability to fund
capital expenditures or service debt. Modified EBITDA and cash margin are
also presented because investors routinely request such information.
Management interprets the trends of modified EBITDA and cash margin in a
similar manner as trends in net earnings.
Modified EBITDA and cash margin should be used as supplements to, and not as
substitutes for, net earnings and net cash provided by operating activities
determined in accordance with generally accepted accounting principles as
measures of Devon's profitability or liquidity. There may be operational or
financial demands and requirements that reduce management's discretion over
the use of modified EBITDA and cash margin. Modified EBITDA and cash margin
may not be comparable to similarly titled measures used by other companies.
11
<PAGE>
<TABLE>
<CAPTION>
COMBINED COMPANY PRO FORMA
----------------------------------------------------
THREE
MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRODUCTION, PRICE AND OTHER DATA:
Production:
Oil (MMBbls)........................... 10,915 6,355 31,756 25,628 32,565
Gas (MMcf)............................. 103,767 51,412 304,203 198,051 186,239
NGL (MBbls)............................ 1,934 748 5,111 3,054 2,842
MBoe................................... 30,144 15,672 87,568 61,691 66,447
Average prices:
Oil (per Bbl).......................... $ 24.55 $ 10.91 $ 17.44 $ 11.98 $ 16.97
Gas (per Mcf).......................... 2.25 1.52 1.98 1.66 1.92
NGL (per Bbl).......................... 19.32 7.53 13.29 8.09 12.60
Per Boe................................ 17.86 9.78 13.99 10.70 14.24
Costs per Boe:
Operating costs........................ 4.24 3.93 3.95 4.10 4.47
Depreciation depletion and amortization
of oil and gas properties............ 5.27 3.64 4.46 3.74 4.16
General and administrative expenses.... 0.82 0.76 0.92 0.74 0.80
</TABLE>
<TABLE>
<CAPTION>
COMBINED COMPANY
PRO FORMA AS OF
DECEMBER 31, 1999
-----------------
<S> <C>
PROPERTY DATA:
Proved reserves:
Oil (MMBbls)........................................... 496.7
Gas (Bcf).............................................. 2,949.6
NGL (MMBbls)........................................... 67.8
Total (MMBoe).......................................... 1,056.1
SEC 10% present value (millions)....................... $ 5,812
Standardized measure of discounted future net cash
flows (millions)..................................... $ 4,768
</TABLE>
12
<PAGE>
DEVON'S SUMMARY SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- --------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Oil, gas and NGL
revenues........... $ 336,346 $ 85,393 $ 715,503 $ 369,660 $ 452,104 $ 256,765 $ 195,891
Other revenues....... 11,365 1,873 18,996 17,848 47,555 34,570 14,252
---------- --------- ---------- ---------- ---------- ---------- ----------
Total revenues..... 347,711 87,266 734,499 387,508 499,659 291,335 210,143
Net earnings
(loss)............. 61,087 5,980 94,556 (60,285) (299,991) 67,603 (25,893)
Net earnings (loss)
applicable to
common
stockholders....... 58,653 5,980 90,905 (60,285) (299,991) 67,603 (25,893)
Net earnings (loss)
per share:
Basic.............. 0.68 0.12 1.51 (1.25) (6.38) 2.06 (0.80)
Diluted............ 0.67 0.12 1.46 (1.25) (6.38) 1.99 (0.80)
Cash dividends per
common share....... 0.05 0.05 0.20 0.15 0.14 0.15 0.14
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in common
stock of Chevron
Corporation....... $ 655,606 $ -- $ 614,382 $ -- $ -- $ -- $ --
Total assets........ 4,561,157 1,267,505 4,623,160 1,226,356 1,248,986 1,183,290 715,510
Debentures
exchangeable into
shares of Chevron
Corporation....... 760,313 -- 760,313 -- -- -- --
Other long-term
debt.............. 842,004 422,293 1,026,808 405,271 305,337 83,000 220,137
Convertible
preferred
securities of
subsidiary
trust............. -- 149,500 -- 149,500 149,500 149,500 --
Stockholders'
equity............ 2,115,835 529,798 2,025,520 522,963 596,546 678,772 394,647
</TABLE>
13
<PAGE>
SANTA FE SNYDER'S SUMMARY SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- -------- ---------- -------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS(1):
Oil, gas and NGL
revenues......... $ 202,000 $ 67,900 $ 509,500 $290,400 $493,800 $561,200 $429,500
Other revenues..... -- 300 800 300 20,300 21,100 18,300
---------- -------- ---------- -------- -------- -------- --------
Total revenues... 202,000 68,200 510,300 290,700 514,100 582,300 447,800
Net earnings (loss)
before
extraordinary
item............. 30,700 (12,100) (120,700) (98,700) 54,700 42,400 26,600
Net earnings
(loss)........... 30,700 (12,100) (124,900) (98,700) 54,700 36,400 26,600
Net earnings (loss)
applicable to
common
stockholders..... 30,700 (12,100) (124,900) (98,700) 42,700 (10,800) 11,800
Net earnings (loss)
per share before
extraordinary
item--Basic and
diluted.......... 0.17 (0.12) (0.79) (0.96) 0.43 (0.05) 0.13
Net earnings (loss)
per share--basic
and diluted...... 0.17 (0.12) (0.82) (0.96) 0.43 (0.12) 0.13
Cash dividends per
common share..... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- -------- ---------- -------- -------- ---------- ----------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA(1):
Total assets....... $2,105,600 $844,000 $1,862,800 $859,000 $788,900 $1,129,100 $1,073,800
Long-term debt..... 794,000 361,900 629,400 330,600 121,700 278,500 344,400
Stockholders'
equity........... 765,200 336,500 741,200 348,400 454,700 526,800 437,700
</TABLE>
------------------------
(1) Amounts are based upon Santa Fe Snyder's financial statements prepared using
the successful efforts method of accounting.
14
<PAGE>
RISK FACTORS
IN DECIDING WHETHER TO APPROVE THE MERGER, YOU SHOULD CONSIDER THE FOLLOWING
RISKS RELATED TO THE MERGER AND TO YOUR INVESTMENT IN THE COMBINED COMPANY
FOLLOWING THE MERGER. YOU SHOULD CAREFULLY CONSIDER THESE RISKS ALONG WITH THE
OTHER INFORMATION CONTAINED IN THIS DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE
REFERRED YOU.
RISKS RELATING TO THE MERGER
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE THE OPERATIONS OF DEVON AND SANTA
FE SNYDER AND MAY NOT REALIZE EXPECTED COST SAVINGS
We may encounter difficulties in integrating the previously separate
organizations and operations of Devon and Santa Fe Snyder. The management of the
combined company will have to devote substantial attention and resources to the
integration of the two companies. The diversion of management's attention and
any difficulties it encounters in the transition and integration processes could
have an adverse effect on the revenues, levels of expenses and operating results
of the combined company. The combined company may also experience operational
interruptions or the loss of key employees, customers or suppliers. As a result,
we may not realize any of the anticipated benefits of the merger, including the
expected cost savings of $30 to $35 million per year.
THE VALUE OF CONSIDERATION TO SANTA FE SNYDER STOCKHOLDERS IN THE MERGER COULD
DECREASE, DEPENDING ON THE TRADING PRICE OF DEVON COMMON STOCK
Santa Fe Snyder stockholders will not receive consideration in the merger
with a set market value or a minimum market value. The number of shares of Devon
common stock that Santa Fe Snyder stockholders will receive in the merger is
fixed. The value of these shares will depend on the trading price of Devon
common stock. No adjustment will be made to the number of shares of Devon common
stock to be received by Santa Fe Snyder stockholders in the event of any
increase or decrease in the market price of Santa Fe Snyder common stock or
Devon common stock. For historical and current market prices of Devon and Santa
Fe Snyder common stock, see "Comparative Market Price Data" on page 21.
SIGNIFICANT CHARGES AND EXPENSES WILL BE INCURRED AS A RESULT OF THE MERGER
Devon and Santa Fe Snyder expect to incur approximately $57 million of costs
related to the merger. These expenses will include investment banking expenses,
severance, legal and accounting fees, printing expenses and other related
charges. The companies may also incur additional unanticipated expenses in
connection with the merger. These expenses and charges are expected to initially
offset the estimated cost savings of $30 to $35 million per year.
RISKS RELATING TO AN INVESTMENT IN DEVON
THE COMBINED COMPANY'S BUSINESS WILL EXPOSE DEVON AND SANTA FE SNYDER
STOCKHOLDERS TO DIFFERENT RISKS THAN THEY CURRENTLY HAVE ALONE
Devon has reserves and production in Canada, Azerbaijan and Venezuela, where
Santa Fe Snyder has no properties. Therefore, the Santa Fe Snyder stockholders
will be exposed to more risks associated with the concentration of properties in
Canada, Azerbaijan and Venezuela than they were prior to the merger. On the
other hand, Santa Fe Snyder has production and reserves located in Indonesia,
Argentina, Gabon, Brazil and China. Additionally, a larger portion of its
reserves are proved undeveloped reserves. Therefore, the assets of the combined
company will expose current Devon stockholders to more risks associated with the
concentration of reserves in different countries, as well
15
<PAGE>
as the costs and risks of bringing undeveloped properties to producing status
than they were exposed to prior to the merger.
THE COMBINED COMPANY WILL BE SUBJECT TO OTHER UNCERTAINTIES OF FOREIGN
OPERATIONS
The combined company will have international operations in Argentina,
Azerbaijan, Brazil, Canada, China, Congo, Cote d'Ivoire, Egypt, Gabon, Ghana,
Indonesia, Malaysia, Qatar, Thailand, and Venezuela. Local political, economic
and other uncertainties may adversely affect these operations. These
uncertainties include:
- the risk of war, general strikes, civil unrest, expropriation, forced
renegotiation or modification of existing contracts, and import, export
and transportation regulations and tariffs;
- taxation policies, including royalty and tax increases and retroactive tax
claims;
- exchange controls, currency fluctuations, devaluation or other activities
that limit or disrupt markets and restrict payments or the movement of
funds, and other uncertainties arising out of foreign government
sovereignty over international operations;
- laws and policies of the United States affecting foreign trade, taxation
and investment;
- the possibility of being subject to the exclusive jurisdiction of foreign
courts in connection with legal disputes and the possible inability to
subject foreign persons to the jurisdiction of courts in the United
States; and
- difficulties in enforcing the combined company's rights against a
governmental agency because of the doctrine of sovereign immunity.
DEVON HAS CHARTER AND OTHER PROVISIONS THAT MAY MAKE IT DIFFICULT TO CAUSE A
CHANGE OF CONTROL
Some provisions of Devon's certificate of incorporation and by-laws and of
the Delaware General Corporation Law, as well as Devon's stockholder rights
plan, may make it difficult for stockholders to cause a change in control of
Devon and replace incumbent management. These provisions include:
- a classified board, the members of which serve staggered three-year terms
and may be removed by stockholders only for cause;
- a prohibition against stockholders calling special meetings and acting by
written consent; and
- rights issued under its rights plan, which would "flip in" if a hostile
bidder acquired 15% of the combined company's common stock.
THE COMBINED COMPANY WILL BE SUBJECT TO FEDERAL ACREAGE LIMITATIONS AND AS A
RESULT MAY BE REQUIRED TO REDUCE ITS ACREAGE IN WYOMING
Current United States law restricts the amount of federal acreage that can
be controlled by individual parties within each state. This controlled acreage
is considered "chargeable" to individual parties. The current federal limit
within Wyoming is approximately 246,000 chargeable acres. Controlled leasehold
acreage that is part of a federally authorized drilling or production unit is,
however, not considered chargeable acreage for the purposes of this limitation.
As a result of the merger, the combined company will have approximately
382,000 chargeable acres within Wyoming. Assuming that no changes are made to
the current law, the combined company will be required to reduce its chargeable
acreage within 180 days after the merger. The combined company may petition the
Bureau of Land Management for additional time to restructure its leasehold
acreage. However, we cannot assure you that any extra time would be allowed.
Currently there are only two ways available to reduce the combined company's
chargeable acreage. One way is to sell or divest a
16
<PAGE>
portion of our acreage. The other way is to apply to the Bureau of Land
Management to "unitize" a portion of the acreage. If approved, the acreage
included in these federally authorized drilling or production units would not be
counted as chargeable acreage. If we have to sell or divest to reduce our
chargeable acreage in Wyoming, we will have less acreage in Wyoming on which to
drill, which could have a negative impact on future production, cash flow and
earnings.
DEVON MAY INCUR A TAX LIABILITY FOR A PRIOR PENNZENERGY TRANSACTION AS A RESULT
OF THE 1999 MERGER OF DEVON WITH PENNZENERGY
If PennzEnergy's distribution to its stockholders of the stock of
Pennzoil-Quaker State Company in December 1998 were to be considered part of a
plan or series of related transactions that includes the merger of Devon with
PennzEnergy, Devon would recognize gain under Section 355(e) of the Internal
Revenue Code. Devon believes the distribution and the merger with PennzEnergy
should not be considered part of such a plan or series of related transactions
because, among other things, prior to the distribution neither party
contemplated a business combination with the other and until April 1999 the
parties had no discussions regarding a business combination. However, any
transaction within a four-year period beginning two years before the
distribution is presumed to be part of such a plan. We cannot assure you we will
be able to overcome this presumption. We currently estimate Devon's potential
tax liability upon such transaction at $16 million in additional tax for 1998
and the elimination of approximately $183 million in net operating loss
carryovers.
17
<PAGE>
DEVON AFTER THE MERGER
Following the merger, Devon will rank in the top five of all publicly-traded
United States based independent oil and gas producers in terms of total proved
oil and gas reserves, annual oil and gas production, equity market
capitalization and enterprise value. We expect the merger to provide Devon with
the following advantages:
INCREASED FINANCIAL STRENGTH. Our equity market capitalization is expected
to exceed $7.0 billion. As a result, we believe the combined company will have
more liquidity and more efficient access to capital, at a lower cost, than
either Devon or Santa Fe Snyder has individually. In addition, we should have an
enhanced ability, as compared with either company on a stand-alone basis, to
pursue mergers and acquisitions among other independent oil and gas companies.
LARGER ASSET BASE. At the end of 1999, Devon and Santa Fe Snyder combined
had aggregate proved reserves of approximately 1.1 billion barrels of oil
equivalent. The combined company's North American reserves, including both the
United States and Canada, totaled 800 million barrels of oil equivalent,
weighted 58% to natural gas. Our North American reserves will be concentrated in
six core areas grouped in three operating divisions:
- the Northern Division, which includes the Permian Basin, the Rocky
Mountains, and the Mid-Continent;
- the Southern Division, which includes onshore Gulf Coast and offshore Gulf
of Mexico; and
- Canada, which includes properties in the Western Canadian Sedimentary
Basin in Alberta and British Columbia.
Our proved reserves outside of North America totaled 256 million barrels of
oil equivalent. International activities will be concentrated in three core
areas:
- South America, which includes Argentina, Brazil and Venezuela;
- Southeast Asia, which includes Indonesia, China, Malaysia, and Thailand;
and
- Azerbaijan.
We will also have activities in Congo, Cote d'Ivoire, Egypt, Gabon, Ghana
and Qatar.
In addition to proved oil and gas properties, we will have a substantial
inventory of exploration acreage totaling approximately 32.0 million net acres,
including 5.6 million net acres in North America.
COMPLEMENTARY NORTH AMERICAN OPERATIONS. The combined company's North
American operations are concentrated in the Permian Basin, the Rocky Mountains,
the Gulf of Mexico and the Mid-Continent in the United States; and in western
Canada. In our United States core areas, operations will approximately double in
size compared to the individual separate operations of Devon and Santa Fe
Snyder. We expect to realize significant savings from expanding our operations
without proportionate expansion in overhead costs.
EXPANDING INTERNATIONAL OPERATIONS. The scope of our international
exploration and production activities will also be expanded after the merger.
Also, our international portfolio will be larger and more diversified.
International proved reserves will represent 24% of total combined company
reserves. As a result of the merger, we will have enhanced international
operating and project development experience and exploration expertise.
COST SAVINGS. As a result of the merger, we expect to realize $30 to
$35 million in annual cost savings. We plan to consolidate our corporate
headquarters, eliminate duplicative administrative staff and expenses, achieve
benefits from our larger scale purchasing and marketing presence, realize
operating expense efficiencies and implement other cost saving measures. Some of
the cost savings will
18
<PAGE>
relate to items that, under the full cost method of accounting, are capitalized
rather than expensed in the consolidated financial statements. Therefore, not
all of the $30 to $35 million of expected savings will result in reductions to
expenses as reported in the accompanying pro forma combined statements of
operations.
SHARED TECHNOLOGIES. The combined company will have expertise in various
oilfield technologies and operating practices, including coalbed methane
exploitation, enhanced oil recovery, directional drilling, offshore deepwater
drilling and production, and other exploration, production and processing
technologies. We will have a significant international presence and the
accompanying experience and expertise necessary to operate in a broad range of
geographical locations. We will also have an enhanced ability to acquire,
explore for, develop, and exploit oil and natural gas reserves in North America
and internationally.
19
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents historical per share data for Devon and Santa
Fe Snyder individually and pro forma per share data after giving effect to the
merger. The combined company pro forma per share data was derived by combining
information from the historical consolidated financial statements of Devon and
Santa Fe Snyder using the pooling-of-interests method of accounting for the
merger. You should read this table in conjunction with the historical
consolidated financial statements of Devon and Santa Fe Snyder that are filed
with the SEC and incorporated by reference in this document. See "Where You Can
Find More Information" on page 94. You should not rely on the pro forma per
share data as being necessarily indicative of actual results had the merger
occurred in the past, or of future results.
<TABLE>
<CAPTION>
SANTA FE SNYDER
COMBINED --------------------------------------------
DEVON COMPANY RESTATED EQUIVALENT
HISTORICAL PRO FORMA(1) HISTORICAL(2) HISTORICAL(3) PRO FORMA(4)
---------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net earnings (loss) per share before
extraordinary item--basic:
Three months ended March 31, 2000... $ 0.68 $ 0.81 $ 0.17 $ 0.24 $ 0.18
Three months ended March 31,
1999(5)........................... 0.12 0.09 (0.12) 0.01 0.02
Year ended December 31, 1999(5)..... 1.51 (1.64) (0.79) (1.60) (0.36)
Year ended December 31, 1998........ (1.25) (3.62) (0.96) (1.92) (0.80)
Year ended December 31, 1997........ (6.38) (3.58) 0.43 0.54 (0.79)
Net earnings (loss) per share before
extraordinary item--diluted:
Three months ended March 31, 2000... 0.67 0.80 0.17 0.24 0.18
Three months ended March 31,
1999(5)........................... 0.12 0.09 (0.12) 0.01 0.02
Year ended December 31, 1999(5)..... 1.46 (1.64) (0.79) (1.60) (0.36)
Year ended December 31, 1998........ (1.25) (3.62) (0.96) (1.92) (0.80)
Year ended December 31, 1997........ (6.38) (3.58) 0.43 0.53 (0.79)
Cash dividends per share:(6)
Three months ended March 31, 2000... 0.05 0.03 -- -- 0.01
Three months ended March 31, 1999... 0.05 0.03 -- -- 0.01
Year ended December 31, 1999........ 0.20 0.14 -- -- 0.03
Year ended December 31, 1998........ 0.15 0.10 -- -- 0.02
Year ended December 31, 1997........ 0.14 0.09 -- -- 0.02
Book value per share:
As of March 31, 2000................ 24.45 20.20 4.20 2.65 4.44
As of December 31, 1999............. 23.53 20.23 4.05 2.43 4.45
</TABLE>
------------------------
(1) The combined company's pro forma data include the effect of the merger on
the basis described in the notes to the unaudited pro forma combined
financial statements included elsewhere in this document.
(2) These are historical amounts reported by Santa Fe Snyder without any
adjustments to conform its accounting policies to those of Devon.
(3) These are restated historical amounts after conforming Santa Fe Snyder's
accounting policies to those followed by Devon. See note 4 to the unaudited
pro forma combined financial information included elsewhere in this document
for explanations of these restated amounts.
20
<PAGE>
(4) Santa Fe Snyder's equivalent pro forma amounts have been calculated by
multiplying the combined company's pro forma net earnings (loss), cash
dividends and book value per share amounts by the exchange ratio of 0.22
shares of Devon common stock for each share of Santa Fe Snyder common stock,
so that the Santa Fe Snyder equivalent pro forma per share amounts are
comparable to the respective values presented with respect to one share of
Santa Fe Snyder common stock.
(5) The 1999 operating results include the historical results of Devon and Santa
Fe Snyder (excluding the $4.2 million extraordinary loss, net of
$2.2 million of taxes, resulting from Santa Fe Snyder's early extinguishment
of debt). The 1999 operating results do not include the pro forma results of
PennzEnergy Company and Snyder Oil Corporation prior to their respective
purchase dates of August 17, 1999 and May 5, 1999, respectively.
(6) Dividends on Devon's common stock were paid in 2000, 1999, 1998, and 1997 at
a per share rate of $0.05 per quarter. No dividends on Northstar's common
stock were paid in 1998 or 1997 prior to the December 1998 business
combination. As adjusted for the Northstar business combination's
pooling-of-interests method of accounting, annual dividends per share for
1998 and 1997 were $0.15 and $0.14, respectively. Additionally, no dividends
on Santa Fe Snyder's common stock were paid during 2000, 1999, 1998, or
1997. As adjusted for the proposed Santa Fe Snyder business combination
expected to be accounted for using the pooling-of-interests method of
accounting, dividends per share are decreased on a pro forma basis.
COMPARATIVE MARKET PRICE DATA
The following table sets forth the high and low sales prices and average
daily trading volumes of the shares of Devon common stock, on the American Stock
Exchange, and of the Santa Fe Snyder common stock, on the New York Stock
Exchange, for the periods indicated. The sales prices and trading volumes are as
reported in published financial sources.
<TABLE>
<CAPTION>
DEVON SANTA FE SNYDER
------------------------------------ ------------------------------------
AVERAGE DAILY AVERAGE DAILY
HIGH LOW VOLUME HIGH LOW VOLUME
-------- -------- -------------- -------- -------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1998:
Quarter Ended March 31, 1998........ $41.13 $32.88 90,867 $11.69 $8.81 513,492
Quarter Ended June 30, 1998......... 40.50 32.63 97,527 11.56 9.38 333,902
Quarter Ended September 30, 1998.... 36.63 26.13 158,909 11.00 6.84 360,970
Quarter Ended December 31, 1998..... 36.69 27.75 140,888 9.19 5.38 353,911
1999:
Quarter Ended March 31, 1999........ 31.75 20.13 233,954 7.88 4.75 669,746
Quarter Ended June 30, 1999......... 37.44 25.94 225,938 9.50 6.38 562,625
Quarter Ended September 30, 1999.... 44.94 33.00 624,356 10.88 7.88 737,536
Quarter Ended December 31, 1999..... 42.00 29.50 486,409 9.38 6.75 665,919
2000:
Quarter Ended March 31, 2000........ 48.56 31.69 23,700 9.88 6.75 691,019
Quarter Ended June 30, 2000......... 60.94 43.75 611,341 13.06 7.88 1,102,597
Quarter Ending September 30, 2000
through July 20................... 55.63 46.25 661,854 12.00 10.13 629,175
</TABLE>
On May 25, 2000, the last full trading day prior to the joint public
announcement by Devon and Santa Fe Snyder of the proposed merger, the last
reported sales price on the American Stock Exchange of shares of Devon common
stock was $58.69. The last reported sales price of Santa Fe Snyder common stock
on the New York Stock Exchange on the same day was $11.00. On July 20, 2000, the
last reported sales price for Devon common stock on the American Stock Exchange
was $47.06 and $10.25 for Santa Fe Snyder common stock on the New York Stock
Exchange. DEVON AND SANTA FE SNYDER STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
QUOTATIONS BEFORE DECIDING HOW TO VOTE.
Devon has paid a quarterly dividend of $0.05 per share of common stock for
each of the quarters presented. We expect to continue paying a regular quarterly
dividend of $0.05 per share after the merger, subject to approval and
declaration by the combined company's board of directors.
21
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared to
assist in your analysis of the financial effects of the merger. This pro forma
information is based on the historical financial statements of Devon and Santa
Fe Snyder.
The information was prepared based on the following:
- The merger is expected to be accounted for as a pooling-of-interests of
Devon and Santa Fe Snyder. Therefore, the unaudited pro forma combined
balance sheet has been prepared as if Devon and Santa Fe Snyder were
combined on March 31, 2000. The unaudited pro forma combined statements of
operations have been prepared as if Devon and Santa Fe Snyder were
combined as of the beginning of the earliest period presented. If the
merger is ultimately accounted for under the purchase method of
accounting, historical results for the two companies would not be combined
and the impact of the merger would be included in the statements of
operations only in periods subsequent to the closing of the merger. Under
the purchase method of accounting, the assets acquired and liabilities
assumed would be recorded at their estimated fair values rather than at
their historical book costs. This increase to fair value generally would
result in significantly higher depreciation, depletion and amortization
expenses and therefore significantly lower net earnings in future periods.
- The combined company will utilize the full cost method of accounting for
its oil and gas activities.
- The historical financial results of Santa Fe Snyder, which were prepared
using the successful efforts method of accounting, have been restated to
the full cost method to conform to Devon's method of accounting.
- Expected annual cost savings of $30 to $35 million have not been reflected
as an adjustment to the historical data. These cost savings are expected
to result from the consolidation of the corporate headquarters of Devon
and Santa Fe Snyder and the elimination of duplicate staff and expenses.
Some of the cost savings will relate to items that, under the full cost
method of accounting, are capitalized rather than expensed in the
consolidated financial statements. Therefore, not all of the $30 to
$35 million of expected savings will result in reductions to expenses as
reported in the accompanying unaudited pro forma combined statements of
operations.
There are several unusual items in each company's historical results that
should be considered when making period-to-period comparisons. These items
include:
- Devon merged with PennzEnergy Company on August 17, 1999. This merger was
accounted for as a purchase. Accordingly, Devon's results for the year
1999 include the results of the PennzEnergy merger for only the last 4 1/2
months of the year.
- Santa Fe Snyder was formed on May 5, 1999, as a result of the merger of
Santa Fe Energy Resources, Inc. and Snyder Oil Corporation. This merger
was accounted for as a purchase by Santa Fe Energy Resources, Inc. of
Snyder. Accordingly, Santa Fe Snyder's results for the year 1999 include
the results of the Snyder merger for only the last eight months of the
year.
- Santa Fe Snyder's results for the year 1999 include $16.8 million of costs
related to the Snyder merger.
- Devon's results for the year 1998 include $13.1 million of costs related
to its December 1998 merger with Northstar Energy Corporation. This merger
was accounted for as a pooling-of-interests. Accordingly, Northstar's
results are included in Devon's results for all periods presented.
22
<PAGE>
- In 1998 and 1997, Devon reduced the carrying value of its oil and gas
properties by $126.9 million and $625.5 million ($88.0 million and
$397.9 million after-tax), respectively, due to the full cost ceiling
limitation. The 1998 reduction related to Devon's domestic properties. The
1997 reduction related to the Canadian properties acquired in the
Northstar merger.
- In 1999, 1998 and 1997, Santa Fe Snyder reduced the carrying value of its
oil and gas properties by $476.1 million, $295.6 million and
$16.2 million ($309.7 million, $211.2 million and $22.7 million after-tax,
which includes the establishment of an $11.0 million and $9.9 million
valuation allowance relating to deferred tax assets in 1998 and 1997),
respectively, due to the full cost ceiling limitation.
- On July 25, 1997, Santa Fe Energy Resources, Inc. spun off its subsidiary
Monterey Resources, Inc. At the time of the spin off, Santa Fe Energy
Resources, Inc. owned approximately 83% of Monterey. The Santa Fe Snyder
results for the year 1997 include the results for Monterey for only the
first seven months prior to the spin off.
The unaudited pro forma information is presented for illustrative purposes
only. If the merger had occurred in the past, the combined company's financial
position or operating results might have been different from those presented in
the unaudited pro forma information. You should not rely on the unaudited pro
forma information as an indication of the financial position or operating
results that the combined company would have achieved if the merger had occurred
in the past. You also should not rely on the unaudited pro forma information as
an indication of the future results that the combined company will achieve after
the merger.
23
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED PRO FORMA COMPANY
DEVON (NOTE 4) ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Current assets.............................. $ 313,563 $ 203,800 $ 517,363
Oil and gas properties, net................. 3,110,031 1,480,900 4,590,931
Other properties, net....................... 51,913 16,700 68,613
Investment in common stock of Chevron
Corporation............................... 655,606 -- 655,606
Goodwill, net............................... 314,955 -- 314,955
Other assets................................ 115,089 23,700 138,789
---------- ---------- --------- ----------
Total assets.............................. $4,561,157 $1,725,100 $ -- $6,286,257
========== ========== ========= ==========
LIABILITIES:
Current liabilities......................... $ 245,141 $ 214,000 $ 459,141
Debentures exchangeable into shares of
Chevron Corporation common stock.......... 760,313 -- 760,313
Other long-term debt........................ 842,004 794,000 $ 57,000 (a) 1,693,004
Deferred revenue............................ -- 158,200 158,200
Other long-term liabilities................. 173,680 75,400 249,080
Deferred income taxes....................... 424,184 500 (16,000)(a) 408,684
STOCKHOLDERS' EQUITY:
Preferred stock............................. 1,500 -- 1,500
Common stock................................ 8,652 1,800 2,208 (b) 12,660
Additional paid-in capital.................. 2,257,795 1,247,300 (2,208)(b) 3,486,287
(16,600)(c)
Accumulated deficit......................... (110,362) (750,100) (41,000)(a) (901,462)
Accumulated other comprehensive earnings
(loss).................................... (41,750) 1,700 -- (40,050)
Treasury stock.............................. -- (16,600) 16,600 (c) --
Unamortized restricted stock awards......... -- (1,100) -- (1,100)
---------- ---------- --------- ----------
Total stockholders' equity................ 2,115,835 483,000 (41,000) 2,557,835
---------- ---------- --------- ----------
Total liabilities and stockholders'
equity.................................. $4,561,157 $1,725,100 $ -- $6,286,257
========== ========== ========= ==========
</TABLE>
24
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
-------- ------------ ---------
<S> <C> <C> <C>
REVENUES:
Oil sales............................................... $145,544 $122,400 $267,944
Gas sales............................................... 155,532 77,500 233,032
NGL sales............................................... 35,270 2,100 37,370
Other................................................... 11,365 700 12,065
-------- -------- --------
Total revenues........................................ 347,711 202,700 550,411
-------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses................................ 65,893 43,500 109,393
Production taxes........................................ 10,420 8,100 18,520
Depreciation, depletion and amortization of property and
equipment............................................. 108,552 56,700 165,252
Amortization of goodwill................................ 10,332 -- 10,332
General and administrative expenses..................... 16,650 8,200 24,850
Interest expense........................................ 25,276 14,800 40,076
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt................... 2,408 -- 2,408
-------- -------- --------
Total costs and expenses.............................. 239,531 131,300 370,831
-------- -------- --------
Earnings (loss) before income tax expense (benefit)....... 108,180 71,400 179,580
INCOME TAX EXPENSE (BENEFIT):
Current................................................. 29,847 6,300 36,147
Deferred................................................ 17,246 21,000 38,246
-------- -------- --------
Total income tax expense (benefit).................... 47,093 27,300 74,393
-------- -------- --------
Net earnings (loss)....................................... 61,087 44,100 105,187
Preferred stock dividends................................. 2,434 -- 2,434
-------- -------- --------
Net earnings (loss) applicable to common shareholders..... $ 58,653 $ 44,100 $102,753
======== ======== ========
Net earnings (loss) per average common share outstanding:
Basic................................................... $ 0.68 $ 0.24 $ 0.81
======== ======== ========
Diluted................................................. $ 0.67 $ 0.24 $ 0.80
======== ======== ========
Weighted average common shares outstanding--basic......... 86,208 182,400 126,336
======== ======== ========
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(NOTE 5)
SANTA FE -----------------------
SNYDER ADJUSTMENTS FOR MERGERS COMBINED
HISTORICAL COMBINED ----------------------- COMPANY
RESTATED COMPANY PENNZENERGY SNYDER PRO FORMA
DEVON (NOTE 4) PRO FORMA MERGER MERGER AS ADJUSTED
-------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil sales......................... $27,913 $41,400 $ 69,313 $ 37,001 $ 25,000 $ 131,314
Gas sales......................... 53,551 24,800 78,351 69,428 5,000 152,779
NGL sales......................... 3,929 1,700 5,629 8,884 -- 14,513
Other............................. 1,873 700 2,573 7,517 600 10,690
------- ------- -------- -------- --------- ---------
Total revenues.................. 87,266 68,600 155,866 122,830 30,600 309,296
------- ------- -------- -------- --------- ---------
COSTS AND EXPENSES:
Lease operating expenses.......... 27,420 29,300 56,720 38,916 7,500 103,136
Production taxes.................. 2,969 1,900 4,869 2,968 1,500 9,337
Depreciation, depletion and
amortization of property and
equipment....................... 33,558 26,200 59,758 84,485 24,900 169,143
Amortization of goodwill.......... -- -- -- 11,767 -- 11,767
General and administrative
expenses........................ 6,223 5,700 11,923 22,068 4,500 38,491
Expenses related to prior
merger.......................... -- -- -- -- 16,800 16,800
Interest expense.................. 6,664 6,500 13,164 20,337 4,200 37,701
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt............................ (3,161) -- (3,161) -- -- (3,161)
Distributions on preferred
securities of subsidiary
trust........................... 2,429 -- 2,429 -- -- 2,429
Reduction of carrying value of oil
and gas properties.............. -- -- -- -- 240,500 240,500
------- ------- -------- -------- --------- ---------
Total costs and expenses........ 76,102 69,600 145,702 180,541 299,900 626,143
------- ------- -------- -------- --------- ---------
Earnings (loss) before income tax
expense (benefit)................. 11,164 (1,000) 10,164 (57,711) (269,300) (316,847)
INCOME TAX EXPENSE (BENEFIT):
Current........................... 1,903 700 2,603 (11,957) (100) (9,454)
Deferred.......................... 3,281 (2,300) 981 (16,128) (94,200) (109,347)
------- ------- -------- -------- --------- ---------
Total income tax expense
(benefit)..................... 5,184 (1,600) 3,584 (28,085) (94,300) (118,801)
------- ------- -------- -------- --------- ---------
Net earnings (loss)................. $ 5,980 $ 600 $ 6,580 (29,626) (175,000) (198,046)
Preferred stock dividends........... -- -- -- 2,434 -- 2,434
------- ------- -------- -------- --------- ---------
Net earnings (loss) applicable to
common shareholders............... $ 5,980 $ 600 $ 6,580 $(32,060) $(175,000) $(200,480)
======= ======= ======== ======== ========= =========
Net earnings (loss) per average
common share outstanding:
Basic............................. $ 0.12 $ 0.01 $ 0.09 $ (1.70)
======= ======= ======== =========
Diluted........................... $ 0.12 $ 0.01 $ 0.09 $ (1.70)
======= ======= ======== =========
Weighted average common shares
outstanding--basic................ 48,470 102,200 70,954 47,888 68,800 117,852
======= ======= ======== ======== ========= =========
</TABLE>
26
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(NOTE 5)
SANTA FE ------------------------
SNYDER ADJUSTMENTS FOR MERGERS COMBINED
HISTORICAL COMBINED ------------------------ COMPANY
RESTATED COMPANY PENNZENERGY SNYDER PRO FORMA
DEVON (NOTE 4) PRO FORMA MERGER MERGER AS ADJUSTED
-------- ---------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil sales....................... $273,234 $ 280,600 $ 553,834 $116,743 $ 31,900 $ 702,477
Gas sales....................... 385,925 217,300 603,225 196,012 7,100 806,337
NGL sales....................... 56,344 11,600 67,944 25,885 -- 93,829
Other........................... 18,996 1,600 20,596 66,157 700 87,453
-------- --------- ---------- -------- -------- ----------
Total revenues................ 734,499 511,100 1,245,599 404,797 39,700 1,690,096
-------- --------- ---------- -------- -------- ----------
COSTS AND EXPENSES:
Lease operating expenses........ 166,848 136,400 303,248 96,107 10,200 409,555
Production taxes................ 23,055 19,300 42,355 8,951 2,200 53,506
Depreciation, depletion and
amortization of property and
equipment..................... 254,275 152,100 406,375 215,990 43,500 665,865
Amortization of goodwill........ 16,111 -- 16,111 30,210 -- 46,321
General and administrative
expenses...................... 53,845 26,800 80,645 55,483 10,900 147,028
Expenses related to prior
mergers....................... -- 16,800 16,800 -- -- 16,800
Interest expense................ 66,913 42,700 109,613 43,500 5,700 158,813
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt.......................... (13,154) -- (13,154) -- -- (13,154)
Distributions on preferred
securities of subsidiary
trust......................... 6,884 -- 6,884 -- -- 6,884
Reduction of carrying value of
oil and gas properties........ -- 476,100 476,100 -- -- 476,100
-------- --------- ---------- -------- -------- ----------
Total costs and expenses...... 574,777 870,200 1,444,977 450,241 72,500 1,967,718
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before income tax
expense (benefit)............... 159,722 (359,100) (199,378) (45,444) (32,800) (277,622)
INCOME TAX EXPENSE (BENEFIT):
Current......................... 24,656 (1,600) 23,056 5 200 23,261
Deferred........................ 40,510 (113,000) (72,490) (8,983) (11,700) (93,173)
-------- --------- ---------- -------- -------- ----------
Total income tax expense
(benefit)................... 65,166 (114,600) (49,434) (8,978) (11,500) (69,912)
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before
extraordinary item.............. 94,556 (244,500) (149,944) (36,466) (21,300) (207,710)
Preferred stock dividends......... 3,651 -- 3,651 6,085 -- 9,736
-------- --------- ---------- -------- -------- ----------
Earnings (loss) before
extraordinary item applicable to
common shareholders (Note 6).... $ 90,905 $(244,500) $ (153,595) $(42,551) $(21,300) $ (217,446)
======== ========= ========== ======== ======== ==========
Earnings (loss) before
extraordinary item per average
common share outstanding:
Basic........................... $ 1.51 $ (1.60) $ (1.64) $ (1.81)
======== ========= ========== ==========
Diluted......................... $ 1.46 $ (1.60) $ (1.64) $ (1.81)
======== ========= ========== ==========
Weighted average common shares
outstanding--basic.............. 60,015 152,900 93,653 30,029 23,400 119,988
======== ========= ========== ======== ======== ==========
</TABLE>
27
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
-------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Oil sales............................................... $143,624 $ 163,300 $ 306,924
Gas sales............................................... 209,344 119,100 328,444
NGL sales............................................... 16,692 8,000 24,692
Other................................................... 17,848 6,400 24,248
-------- --------- ----------
Total revenues........................................ 387,508 296,800 684,308
-------- --------- ----------
COSTS AND EXPENSES:
Lease operating expenses................................ 113,484 116,400 229,884
Production taxes........................................ 13,916 8,900 22,816
Depreciation, depletion and amortization of property and
equipment............................................. 123,844 119,300 243,144
General and administrative expenses..................... 23,554 21,900 45,454
Expenses related to prior merger........................ 13,149 -- 13,149
Interest expense........................................ 22,632 20,900 43,532
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt................... 16,104 -- 16,104
Distributions on preferred securities of subsidiary
trust................................................. 9,717 -- 9,717
Reduction of carrying value of oil and gas properties... 126,900 295,600 422,500
-------- --------- ----------
Total costs and expenses.............................. 463,300 583,000 1,046,300
-------- --------- ----------
Earnings (loss) before income tax expense (benefit)....... (75,792) (286,200) (361,992)
INCOME TAX EXPENSE (BENEFIT):
Current................................................. 7,687 (11,400) (3,713)
Deferred................................................ (23,194) (77,900) (101,094)
-------- --------- ----------
Total income tax expense (benefit).................... (15,507) (89,300) (104,807)
-------- --------- ----------
Net earnings (loss) applicable to common shareholders..... $(60,285) $(196,900) $ (257,185)
======== ========= ==========
Net earnings (loss) per average common share outstanding:
Basic................................................... $ (1.25) $ (1.92) $ (3.62)
======== ========= ==========
Diluted................................................. $ (1.25) $ (1.92) $ (3.62)
======== ========= ==========
Weighted average common shares outstanding--basic......... 48,376 102,600 70,948
======== ========= ==========
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SNYDER
HISTORICAL COMBINED
RESTATED COMPANY
DEVON (NOTE 4) PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Oil sales................................................. $ 207,725 $344,800 $ 552,525
Gas sales................................................. 219,459 138,100 357,559
NGL sales................................................. 24,920 10,900 35,820
Other..................................................... 47,555 700 48,255
--------- -------- ---------
Total revenues.......................................... 499,659 494,500 994,159
--------- -------- ---------
COSTS AND EXPENSES:
Lease operating expenses.................................. 100,897 165,300 266,197
Production taxes.......................................... 19,227 11,800 31,027
Depreciation, depletion and amortization of property and
equipment............................................... 169,108 116,200 285,308
General and administrative expenses....................... 24,381 28,700 53,081
Interest expense.......................................... 18,788 22,700 41,488
Deferred effect of changes in foreign currency exchange
rate on subsidiary's long-term debt..................... 5,860 -- 5,860
Distributions on preferred securities of subsidiary
trust................................................... 9,717 -- 9,717
Reduction of carrying value of oil and gas properties..... 625,514 16,200 641,714
--------- -------- ---------
Total costs and expenses................................ 973,492 360,900 1,334,392
--------- -------- ---------
Earnings (loss) before income tax expense (benefit) and
minority interest......................................... (473,833) 133,600 (340,233)
INCOME TAX EXPENSE (BENEFIT):
Current................................................... 26,857 8,900 35,757
Deferred.................................................. (200,699) 54,400 (146,299)
--------- -------- ---------
Total income tax expense (benefit)...................... (173,842) 63,300 (110,542)
--------- -------- ---------
Earnings (loss) before minority interest.................... (299,991) 70,300 (229,691)
Minority interest in Monterey Resources, Inc................ -- (4,700) (4,700)
--------- -------- ---------
Net earnings (loss)......................................... (299,991) 65,600 (234,391)
Preferred stock dividends................................... -- 12,000 12,000
--------- -------- ---------
Net earnings (loss) applicable to common shareholders....... $(299,991) $ 53,600 $(246,391)
========= ======== =========
Net earnings (loss) per average common share outstanding:
Basic..................................................... $ (6.38) $ 0.54 $ (3.58)
========= ======== =========
Diluted................................................... $ (6.38) $ 0.53 $ (3.58)
========= ======== =========
Weighted average common shares outstanding--basic........... 47,040 98,600 68,732
========= ======== =========
</TABLE>
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997
1. METHOD OF ACCOUNTING FOR THE MERGER
Devon expects to account for the merger using the pooling-of-interests
method of accounting for business combinations. Accordingly, Devon's and Santa
Fe Snyder's historical balance sheets and statements of operations will be
combined as if the two companies had always been combined. Santa Fe Snyder's
historical financial data will be restated to conform to Devon's accounting
policies. The estimated effect of this restatement of Santa Fe Snyder's
historical results is included in note 4.
In the merger, Devon will issue 0.22 shares of Devon common stock for each
outstanding share of Santa Fe Snyder common stock. This will result in Devon
issuing approximately 40.1 million shares of its common stock to Santa Fe Snyder
stockholders.
2. PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined balance sheet includes the
following adjustments:
(a) To record the payment of $57.0 million ($41.0 million net of tax) of
estimated business combination costs. These costs include investment
banking expenses, severance, legal and accounting fees, printing expenses
and other costs directly related to the merger. These one-time merger
costs are not reflected in the unaudited pro forma combined statements of
operations since they are non-recurring in nature. The combined company
will expense these costs in the quarter in which the merger is
consummated.
(b) To record the issuance of 40.1 million shares, par value $0.10 per
share, of Devon common stock in exchange for all 182.2 million shares of
Santa Fe Snyder common stock, par value $0.01 per share, outstanding on
March 31, 2000. This is based on the exchange ratio of 0.22 shares of
Devon common stock for each share of Santa Fe Snyder common stock.
(c) To retire all 2.3 million shares of Santa Fe Snyder treasury stock
outstanding on March 31, 2000.
The unaudited pro forma combined statements of operations include no
adjustments to the historical statements of Devon or the restated historical
statements of Santa Fe Snyder. The adjustments necessary to restate Santa Fe
Snyder's historical statements to conform to Devon's accounting policies are
explained in note 4.
3. COMMON SHARES OUTSTANDING
Net earnings (loss) per average common share outstanding have been
calculated based upon the pro forma weighted average number of shares
outstanding for each period presented. To compute the combined company pro forma
basic and diluted net earnings (loss) per share, Devon's historical weighted
average number of basic and diluted shares outstanding were increased in each
period by the historical weighted average number of Santa Fe Snyder basic and
diluted common shares outstanding, multiplied by the exchange ratio of 0.22.
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES
Devon and Santa Fe Snyder have certain different accounting policies upon
which their respective historical results are based. The primary difference is
that Devon follows the full cost method of accounting for its oil and gas
activities, while Santa Fe Snyder follows the successful efforts method of
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
accounting. To present the accompanying unaudited pro forma combined financial
statements, Santa Fe Snyder's historical results have been restated to conform
its accounting policies to those which Devon follows. The following tables
present Santa Fe Snyder's balances as presented in its historical financial
statements, and the restated balances which are included in the accompanying
unaudited pro forma combined financial statements. The tables also include a
separate column for various reclassifications to conform Santa Fe Snyder's
presentation of certain revenues and expenses to Devon's presentation.
UNAUDITED RESTATED SANTA FE SNYDER BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RESTATED
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Current assets....................................... $ 203,800 $ 203,800
Oil and gas properties, net.......................... 1,828,900 $(348,000)(a) 1,480,900
Other properties, net................................ 40,900 (24,200)(a) 16,700
Other assets, net.................................... 32,000 (8,300)(b) 23,700
---------- --------- ----------
Total assets....................................... $2,105,600 $(380,500) $1,725,100
========== ========= ==========
LIABILITIES:
Current liabilities.................................. $ 214,000 $ 214,000
Deferred revenue..................................... 166,500 (8,300)(b) 158,200
Other liabilities.................................... 75,400 75,400
Long-term debt....................................... 794,000 794,000
Deferred income taxes................................ 90,500 (90,000)(a) 500
STOCKHOLDERS' EQUITY:
Common stock......................................... 1,800 1,800
Additional paid-in capital........................... 1,247,300 1,247,300
Accumulated deficit.................................. (467,900) (282,200)(a) (750,100)
Accumulated other comprehensive earnings (loss)...... 1,700 1,700
Treasury stock....................................... (16,600) (16,600)
Unamortized restricted stock awards.................. (1,100) (1,100)
---------- --------- ----------
Total stockholders' equity......................... 765,200 (282,200) 483,000
---------- --------- ----------
Total liabilities and stockholders' equity......... $2,105,600 $(380,500) $1,725,100
========== ========= ==========
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales................................... $122,400 $122,400
Gas sales................................... 77,500 77,500
NGL sales................................... 2,100 2,100
Other....................................... -- $ 700 700
-------- -------- -------- --------
Total revenues............................ 202,000 -- 700 202,700
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses.................... 41,900 1,600 43,500
Production and other taxes.................. 11,400 (3,300) 8,100
Exploration................................. 10,100 $(10,100)(c) --
Depreciation, depletion and amortization of
property and equipment.................... 68,900 (12,200)(e) 56,700
General and administrative expenses......... 7,100 (600)(c) 1,700 8,200
Interest expense............................ -- 14,800 14,800
Loss (gain) on disposition of assets........ (200) 200 (d) --
-------- -------- -------- --------
Total costs and expenses.................. 139,200 (22,700) 14,800 131,300
-------- -------- -------- --------
Income (loss) from operations................. 62,800 22,700 (14,100) 71,400
Interest income............................... 700 (700) --
Interest expense.............................. (15,000) 15,000 --
Interest capitalized.......................... 1,500 (1,300)(c) (200) --
-------- -------- -------- --------
Income (loss) before income taxes............. 50,000 21,400 -- 71,400
INCOME TAX EXPENSE (BENEFIT):
Current..................................... 6,300 6,300
Deferred.................................... 13,000 8,000 (g) 21,000
-------- -------- -------- --------
Total income tax expense (benefit)........ 19,300 8,000 -- 27,300
-------- -------- -------- --------
Net earnings (loss) applicable to common
shareholders................................ $ 30,700 $ 13,400 $ -- $ 44,100
======== ======== ======== ========
Net earnings (loss) per average common share
outstanding:
Basic....................................... $ 0.17 $ 0.24
======== ========
Diluted..................................... $ 0.17 $ 0.24
======== ========
Weighted average common shares outstanding--
basic....................................... 182,400 182,400
======== ========
</TABLE>
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales.................................... $ 41,400 $41,400
Gas sales.................................... 24,800 24,800
NGL sales.................................... 1,700 1,700
Other........................................ 300 $ 400 700
-------- -------- ------- -------
Total revenues............................. 68,200 -- 400 68,600
-------- -------- ------- -------
COSTS AND EXPENSES:
Lease operating expenses..................... 28,300 1,000 29,300
Production and other taxes................... 3,500 (1,600) 1,900
Exploration.................................. 11,200 $(11,200)(c) --
Depreciation, depletion and amortization of
property and equipment..................... 31,900 (5,700)(e) 26,200
General and administrative expenses.......... 5,400 (300)(c) 600 5,700
Interest expense............................. -- 6,500 6,500
Loss (gain) on disposition of assets......... 100 (100)(d) --
-------- -------- ------- -------
Total costs and expenses................... 80,400 (17,300) 6,500 69,600
-------- -------- ------- -------
Income (loss) from operations.................. (12,200) 17,300 (6,100) (1,000)
Interest income................................ 400 (400) --
Interest expense............................... (6,800) 6,800 --
Interest capitalized........................... 1,300 (1,000)(c) (300) --
-------- -------- ------- -------
Income (loss) before income taxes.............. (17,300) 16,300 -- (1,000)
INCOME TAX EXPENSE (BENEFIT):
Current...................................... 700 700
Deferred..................................... (5,900) 3,600 (g) (2,300)
-------- -------- ------- -------
Total income tax expense (benefit)......... (5,200) 3,600 -- (1,600)
-------- -------- ------- -------
Net earnings (loss) applicable to common
shareholders................................. $(12,100) $ 12,700 $ -- $ 600
======== ======== ======= =======
Net earnings (loss) per average common share
outstanding:
Basic........................................ $ (0.12) $ 0.01
======== =======
Diluted...................................... $ (0.12) $ 0.01
======== =======
Weighted average common shares outstanding--
basic........................................ 102,200 102,200
======== =======
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales........................................ $ 280,600 $ 280,600
Gas sales........................................ 217,300 217,300
NGL sales........................................ 11,600 11,600
Other............................................ 800 $ (300)(c) $ 1,100 1,600
--------- --------- ------------ ---------
Total revenues................................. 510,300 (300) 1,100 511,100
--------- --------- ------------ ---------
COSTS AND EXPENSES:
Lease operating expenses......................... 132,100 4,300 136,400
Production and other taxes....................... 26,600 (7,300) 19,300
Exploration...................................... 54,200 (54,200)(c) --
Depreciation, depletion and amortization of
property and equipment......................... 185,800 (33,700)(e) 152,100
Impairment of oil and gas properties............. 196,400 (196,400)(f) --
General and administrative expenses.............. 26,200 (2,400)(c) 3,000 26,800
Expenses related to prior merger................. 16,800 16,800
Interest expense................................. -- 42,700 42,700
Reduction of carrying value of oil and gas
properties..................................... -- 476,100 (f) 476,100
Loss (gain) on disposition of assets............. 1,000 (1,000)(d) --
--------- --------- ------------ ---------
Total costs and expenses....................... 639,100 188,400 42,700 870,200
--------- --------- ------------ ---------
Income (loss) from operations...................... (128,800) (188,700) (41,600) (359,100)
Interest income.................................... 1,100 (1,100) --
Interest expense................................... (43,600) 43,600 --
Interest capitalized............................... 6,000 (5,100)(c) (900) --
--------- --------- ------------ ---------
Income (loss) before income tax expense (benefit)
and extraordinary item........................... (165,300) (193,800) -- (359,100)
INCOME TAX EXPENSE (BENEFIT):
Current.......................................... (1,600) (1,600)
Deferred......................................... (43,000) (70,000)(g) (113,000)
--------- --------- ------------ ---------
Total income tax expense (benefit)............. (44,600) (70,000) -- (114,600)
--------- --------- ------------ ---------
Income (loss) before extraordinary item............ (120,700) (123,800) -- (244,500)
Extraordinary item--debt extinguishment costs.... (4,200) (4,200)
--------- --------- ------------ ---------
Net earnings (loss) applicable to common
shareholders..................................... $(124,900) $(123,800) $ -- $(248,700)
========= ========= ============ =========
Net earnings (loss) per average common share
outstanding:
Basic and diluted:
Before extraordinary item...................... $ (0.79) $ (1.60)
Extraordinary item............................. (0.03) (0.03)
--------- ---------
Per common share................................. $ (0.82) $ (1.63)
========= =========
Weighted average common shares
outstanding--basic............................. 152,900 152,900
========= =========
</TABLE>
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT HISTORICAL
HISTORICAL ADJUSTMENTS RECLASSIFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales.................................. $163,300 $ 163,300
Gas sales.................................. 119,100 119,100
NGL sales.................................. 8,000 8,000
Other...................................... 300 $ (100)(c) $ 6,200 6,400
-------- --------- ------------ ---------
Total revenues........................... 290,700 (100) 6,200 296,800
-------- --------- ------------ ---------
COSTS AND EXPENSES:
Lease operating expenses................... 112,500 3,900 116,400
Production and other taxes................. 16,300 (7,400) 8,900
Exploration................................ 71,100 (71,100)(c) --
Depreciation, depletion and amortization of
property and equipment................... 136,100 (16,800)(e) 119,300
Impairment of oil and gas properties....... 87,800 (87,800)(f) --
General and administrative expenses........ 19,700 (1,300)(c) 3,500 21,900
Interest expense........................... -- -- 20,900 20,900
Reduction of carrying value of oil and gas
properties............................... -- 295,600 (f) 295,600
Loss (gain) on disposition of assets....... 1,500 (1,500)(d) --
-------- --------- ------------ ---------
Total costs and expenses................. 445,000 117,100 20,900 583,000
-------- --------- ------------ ---------
Income (loss) from operations................ (154,300) (117,200) (14,700) (286,200)
Interest income.............................. 6,200 (6,200) --
Interest expense............................. (22,000) 22,000 --
Interest capitalized......................... 7,200 (6,100)(c) (1,100) --
-------- --------- ------------ ---------
Income (loss) before income taxes............ (162,900) (123,300) -- (286,200)
INCOME TAX EXPENSE (BENEFIT):
Current.................................... (11,400) (11,400)
Deferred................................... (52,800) (25,100)(g) (77,900)
-------- --------- ------------ ---------
Total income tax expense (benefit)....... (64,200) (25,100) -- (89,300)
-------- --------- ------------ ---------
Net earnings (loss) applicable to common
shareholders............................... $(98,700) $ (98,200) $ -- $(196,900)
======== ========= ============ =========
Net earnings (loss) per average common share
outstanding:
Basic...................................... $ (0.96) $ (1.92)
======== =========
Diluted.................................... $ (0.96) $ (1.92)
======== =========
Weighted average common shares
outstanding--basic....................... 102,600 102,600
======== =========
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
UNAUDITED RESTATED SANTA FE SNYDER STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE
SANTA FE SNYDER
SNYDER RESTATEMENT RECLASS- HISTORICAL
HISTORICAL ADJUSTMENTS IFICATIONS RESTATED
---------- ----------- --------------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil sales................................................ $344,800 $344,800
Gas sales................................................ 138,100 138,100
NGL sales................................................ 10,900 10,900
Crude oil purchased...................................... 20,500 $ (20,500) --
Other.................................................... (200) $ (100)(c) 1,000 700
-------- -------- ------------ --------
Total revenues......................................... 514,100 (100) (19,500) 494,500
-------- -------- ------------ --------
COSTS AND EXPENSES:
Lease operating expenses................................. 158,900 6,400 165,300
Production and other taxes............................... 21,600 (9,800) 11,800
Cost of crude oil purchased.............................. 22,000 (22,000) --
Exploration.............................................. 49,100 (49,100)(c) --
Depreciation, depletion and amortization of property and
equipment.............................................. 127,800 (11,600)(c) 116,200
General and administrative expenses...................... 28,100 (2,800)(c) 3,400 28,700
Merger related costs..................................... -- --
Interest expense......................................... -- 22,700 22,700
Reduction of carrying value of oil and gas properties.... -- 16,200 (f) 16,200
Loss (gain) on disposition of assets..................... (3,600) 3,600 (d) --
-------- -------- ------------ --------
Total costs and expenses............................... 403,900 (43,700) 700 360,900
-------- -------- ------------ --------
Income (loss) from operations.............................. 110,200 43,600 (20,200) 133,600
Interest income............................................ 2,500 (2,500) --
Interest expense........................................... (23,800) 23,800 --
Interest capitalized....................................... 6,700 (5,600)(c) (1,100) --
-------- -------- ------------ --------
Income (loss) before income tax expense (benefit) and
minority interest........................................ 95,600 38,000 -- 133,600
INCOME TAX EXPENSE (BENEFIT):
Current.................................................. 8,900 8,900
Deferred................................................. 27,300 27,100 (g) 54,400
-------- -------- ------------ --------
Total income tax expense (benefit)..................... 36,200 27,100 -- 63,300
-------- -------- ------------ --------
Income (loss) before minority interest..................... 59,400 10,900 -- 70,300
Minority interest in Monterey Resources, Inc............. (4,700) -- -- (4,700)
-------- -------- ------------ --------
Net earnings (loss)........................................ 54,700 10,900 -- 65,600
Preferred stock dividends.................................. 3,600 -- 3,600
Convertible preferred repurchase premium................... 8,400 8,400
-------- -------- ------------ --------
Net earnings (loss) applicable to common shareholders...... $ 42,700 $ 10,900 $ -- $ 53,600
======== ======== ============ ========
Net earnings (loss) per average common share outstanding:
Basic.................................................... $ 0.43 $ 0.54
======== ========
Diluted.................................................. $ 0.43 $ 0.53
======== ========
Weighted average common shares outstanding--basic.......... 98,600 98,600
======== ========
</TABLE>
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
MARCH 31, 2000 AND 1999, AND DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED)
4. SANTA FE SNYDER HISTORICAL AND RESTATED BALANCES (CONTINUED)
Following are explanations of the conforming adjustments to restate Santa Fe
Snyder's historical balances:
(a) To record the cumulative effect of adjusting the historical property and
equipment, deferred taxes and accumulated deficit balances, prepared
using the successful efforts method, to the restated balances using the
full cost method followed by Devon.
(b) To record the cumulative effect of adjusting the historical accounts
receivable and deferred revenue prepared using the "entitlements method"
of accounting for natural gas imbalances, to the restated balances using
the "sales method" followed by Devon. Adjustments to natural gas sales
for the periods presented as a result of conforming to the sales method
are immaterial and are not included in the unaudited pro forma combined
statements of operations.
(c) To capitalize under the full cost method certain costs that are expensed
under the successful efforts method of accounting.
(d) To capitalize under the full cost method gains or losses from property
sales that are recognized under the successful efforts method.
(e) To adjust the depreciation, depletion and amortization expense
recognized under the successful efforts method to the restated expense
recognized under the full cost method.
(f) To adjust oil and gas property impairment expense recognized under the
successful efforts method to the restated expense recognized under the
full cost method.
(g) To adjust the historical deferred income tax expense for the effects of
adjustments (c) through (f).
5. 1999 ACQUISITIONS
On May 5, 1999, Santa Fe Energy Resources, Inc. closed its merger with
Snyder Oil Corporation thus forming Santa Fe Snyder. On August 17, 1999, Devon
closed its merger with PennzEnergy Company. Both of these transactions were
accounted for using the purchase method of accounting. Therefore, the historical
statements of operations for Devon and Santa Fe Snyder for the year 1999 do not
include any effects from the PennzEnergy and Snyder mergers, respectively, prior
to the closing dates noted above. Devon's and Santa Fe Snyder's historical
statements for the first quarter of 1999 do not include any effects of the
PennzEnergy or Snyder mergers since both transactions closed subsequent to
March 31, 1999. The Adjustments for Mergers columns include the effects of these
two purchases as if the combined company closed the mergers as of January 1,
1999. The information is provided for illustrative purposes only.
6. EXTRAORDINARY LOSS
In connection with the retirement of certain debt in 1999, Santa Fe Snyder
recorded a $4.2 million extraordinary loss, net of $2.3 million of taxes. The
extraordinary loss represents the write-off of certain debt issue costs and
prepayment penalties pertaining to the retirement of 11% Senior Subordinated
Debentures, net of related tax benefits.
37
<PAGE>
THE STOCKHOLDER MEETINGS AND PROXY SOLICITATIONS
<TABLE>
DEVON SANTA FE SNYDER
<S> <C> <C>
TIME, PLACE & DATE August 29, 2000 August 29, 2000
10:00 a.m. (Oklahoma City time) 10:00 a.m. (Houston time)
Egbert Room Grand Salon
Renaissance Oklahoma City Hotel, The Omni Hotel,
Second Floor, First Floor,
10 North Broadway, Four Riverway,
Oklahoma City, Oklahoma Houston, Texas
PURPOSE Consider and vote upon: Consider and vote upon:
- a proposal to approve the merger agreement - a proposal to approve the merger agreement
and the merger, and the merger, and
- a proposal to approve the Devon 1997 stock - any other business that may be presented at
option plan amendment, and the meeting.
- any other business that may be presented at We know of no other matters to be brought before
the meeting. the meeting.
We know of no other matters to be brought before
the meeting.
QUORUM Presence, in person or by proxy, of stockholders Presence, in person or by proxy, of stockholders
holding a majority of the voting shares entitled holding a majority of the outstanding shares of
to vote at the meeting. common stock entitled to vote at the meeting.
RECORD DATE Close of business on July 21, 2000. Close of business on July 21, 2000.
RECOMMENDATION THE DEVON BOARD OF DIRECTORS BELIEVES THAT THE THE SANTA FE SNYDER BOARD OF DIRECTORS BELIEVES
OF THE BOARD OF MERGER AGREEMENT AND THE MERGER ARE IN THE BEST THAT THE MERGER AGREEMENT AND THE MERGER ARE IN
DIRECTORS INTERESTS OF THE STOCKHOLDERS AND RECOMMENDS THE BEST INTERESTS OF SANTA FE SNYDER AND ITS
THAT THEY VOTE FOR APPROVAL OF THE MERGER STOCKHOLDERS AND RECOMMENDS THAT THE SANTA FE
AGREEMENT AND THE MERGER. The Devon board also SNYDER STOCKHOLDERS VOTE FOR APPROVAL OF THE
recommends that the stockholders vote FOR the MERGER AGREEMENT AND THE MERGER.
stock option plan amendment.
</TABLE>
38
<PAGE>
<TABLE>
DEVON SANTA FE SNYDER
<S> <C> <C>
SHARES HELD IN STREET If you hold your Devon shares in the name of a If you hold your Santa Fe Snyder shares in the
NAME bank, broker or other nominee, you should follow name of a bank, broker or other nominee, you
the instructions provided by your bank, broker should follow the instructions provided by your
or nominee when voting your shares or when bank, broker or nominee when voting your shares
granting or revoking a proxy. or when granting or revoking a proxy. Under the
Brokers who hold shares in street name for rules of the New York Stock Exchange, brokers
customers have the authority to vote on certain who hold shares in street name for customers
"routine" proposals when they have not received have the authority to vote on certain "routine"
instructions from beneficial owners. Under these proposals when they have not received
rules, such brokers are precluded from instructions from beneficial owners.
exercising their voting discretion with respect Under these rules, such brokers are precluded
to proposals for nonroutine matters such as the from exercising their voting discretion with
merger agreement and the merger. Thus, absent respect to proposals for nonroutine matters such
specific instructions from you, your broker is as the merger agreement and the merger. Thus,
not empowered to vote your shares with respect absent specific instructions from you, your
to the approval and adoption of the merger broker is not empowered to vote your shares with
agreement and the merger (I.E., "broker respect to the approval and adoption of the
non-votes"). A broker non-vote will have the merger agreement and the merger (I.E., "broker
same effect as a vote against the merger non-votes"). A broker non-vote will have the
agreement and the merger. same effect as a vote against the merger
agreement and the merger.
VOTES REQUIRED - The affirmative vote of the holders of a - Approval of the merger agreement and the
majority of the outstanding shares of Devon merger requires the affirmative vote of the
common stock and the outstanding exchangeable holders of a majority of the outstanding
shares, voting as a single class, represented shares of Santa Fe Snyder common stock.
in person or by proxy at the meeting and - Abstentions will have the same effect as
entitled to vote, is required to approve the votes against the merger agreement and the
merger agreement and the merger and to merger.
approve the Devon 1997 Stock Option Plan - The failure of a stockholder to vote in
amendment. If the merger is not approved, the person or by proxy will also have the effect
stock option plan amendment will not be of a vote against the merger agreement and
implemented. the merger.
- Abstentions will have the same effect as
votes against the proposals.
- The failure of a stockholder to vote in
person or by proxy will have no effect on the
outcome of the vote.
SHARES OUTSTANDING As of the record date, there were 87,015,045 As of the record date, there were 184,343,425
Devon shares outstanding and entitled to vote at shares of Santa Fe Snyder common stock
the meeting, of which 83,414,859 were shares of outstanding and entitled to vote.
common stock and 3,600,186 were exchangeable
shares.
</TABLE>
39
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DEVON SANTA FE SNYDER
<S> <C> <C>
VOTING PROCEDURES AND GENERAL MATTERS GENERAL MATTERS
PROXIES A proxy card will be sent to each Devon A proxy card will be sent to each Santa Fe
stockholder as of the record date. If you Snyder stockholder as of the record date. If you
received a proxy card, you may grant a proxy received a proxy card, you may grant a proxy to
vote on the proposal to approve the merger vote on the proposal to approve the merger
agreement by marking your proxy card agreement by marking your proxy card
appropriately, executing it in the space appropriately, executing it in the space
provided, and returning it to Devon. If you hold provided, and returning it to Santa Fe Snyder.
your Devon shares in the name of a bank, broker If you hold your Santa Fe Snyder shares in the
or other nominee, you should follow the name of a bank, broker or other nominee, you
instructions provided by your bank, broker or should follow the instructions provided by your
nominee when voting your shares. bank, broker or nominee when voting your shares.
If you have timely submitted a properly executed If you have timely submitted a properly executed
proxy card, clearly indicated your votes, and proxy card, clearly indicated your vote, and
have not revoked your proxy, your shares will be have not revoked your proxy, your shares will be
voted as indicated. If you have timely submitted voted as indicated. If you have timely submitted
a properly executed proxy card and have not a properly executed proxy card and have not
clearly indicated your vote, your shares will be clearly indicated your vote, your shares will be
voted FOR the proposal to approve the merger voted FOR the proposal to approve the merger
agreement and merger and FOR the proposal to agreement and merger.
approve the stock option plan amendment. If any other matters are properly presented at
If any other matters are properly presented at the meeting for consideration, the persons named
the meeting for consideration, the persons named in the proxy card will have the discretion to
in the proxy card will have the discretion to vote on these matters in accordance with their
vote on these matters in accordance with their best judgment. Proxies voted against the
best judgment. Proxies voted against the proposal to approve the merger agreement will
proposal to approve the merger agreement will not be voted in favor of any adjournment of the
not be voted in favor of any adjournment of the meeting for the purpose of soliciting additional
meeting for the purpose of soliciting additional proxies.
proxies. VOTING BY HOLDERS OF COMMON STOCK
VOTING BY HOLDERS OF COMMON STOCK Each share of Santa Fe Snyder common stock is
Each share of Devon common stock is entitled to entitled to one vote at the meeting. You may
one vote at the meeting. You may vote in any one vote by marking, signing, dating and returning
of the following ways: (a) use the toll-free the enclosed proxy card in the postage-paid
telephone number shown on the proxy card; (b) envelope. Each proxy that is received in time
use the internet web site shown on the proxy for the meeting, and not revoked, will be voted
card; or (c) mark, sign, date and return the in accordance with the instructions contained in
enclosed proxy card in the postage-paid that proxy.
envelope. Each proxy that is received in time
for the meeting, and not revoked, will be voted
in accordance with the instructions contained in
that proxy.
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DEVON SANTA FE SNYDER
<S> <C> <C>
VOTING BY HOLDERS OF EXCHANGEABLE SHARES
Each exchangeable share is also entitled to one
vote at the meeting through a voting and
exchange trust agreement. Under the voting
agreement, CIBC Mellon Trust Company, the
trustee, is entitled to exercise voting rights
on behalf of holders of the exchangeable shares.
The trustee holds one share of special voting
stock of Devon. The share of special voting
stock is entitled to a number of votes equal to
the number of exchangeable shares outstanding
that are held by persons other than Devon. Each
holder of exchangeable shares, other than Devon,
is entitled to give the trustee voting
instructions for a number of votes equal to the
number of that holder's exchangeable shares. A
voting direction card is a means by which a
holder of exchangeable shares may authorize the
voting of his or her voting rights at the
meeting. The trustee will exercise each vote
only as directed by the relevant holders on the
voting direction card. In the absence of
instructions from a holder as to voting, the
trustee will not exercise those votes. A holder
may also instruct the trustee to give him or her
a proxy entitling him or her to vote personally
the relevant number of votes or to grant to
Devon's management a proxy to vote those votes.
REVOCATION REVOCATION
You may revoke your proxy card at any time prior You may revoke your proxy card at any time prior
to its exercise by: to its exercise by:
- giving written notice of such revocation to - giving written notice of such revocation to
the secretary of Devon; the secretary of Santa Fe Snyder;
- appearing and voting in person at the - appearing and voting in person at the
meeting; or meeting; or
- properly completing and executing a later - properly completing and executing a later
dated proxy and delivering it to the dated proxy and delivering it to the
secretary of Devon at or before the meeting. secretary of Santa Fe Snyder at or before the
Your presence without voting at the meeting will meeting.
not automatically revoke your proxy, and any Your presence without voting at the meeting will
revocation during the meeting will not affect not automatically revoke your proxy, and any
votes previously taken. revocation during the meeting will not affect
votes previously taken.
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DEVON SANTA FE SNYDER
<S> <C> <C>
VALIDITY VALIDITY
The inspectors of election will determine all The inspectors of election will determine all
questions as to the validity, form, eligibility questions as to the validity, form, eligibility
(including time of receipt) and acceptance of (including time of receipt) and acceptance of
proxy cards. Their determination will be final proxy cards. Their determination will be final
and binding. The board of directors of Devon has and binding. The board of directors of Santa Fe
the right to waive any irregularities or Snyder has the right to waive any irregularities
conditions as to the manner of voting. Devon may or conditions as to the manner of voting. Santa
accept your proxy by any form of communication Fe Snyder may accept your proxy by any form of
permitted by Delaware law so long as Devon is communication permitted by Delaware law so long
reasonably assured that the communication is as Santa Fe Snyder is reasonably assured that
authorized by you. the communication is authorized by you.
SOLICITATION OF The accompanying proxy is being solicited on The accompanying proxy is being solicited on
PROXIES behalf of the board of directors of Devon. The behalf of the board of directors of Santa Fe
expenses of preparing, printing and mailing the Snyder. The expenses of preparing, printing and
proxy and the materials used in the solicitation mailing the proxy and the materials used in the
will be borne by Devon. solicitation will be borne by Santa Fe Snyder.
Morrow & Co., Inc., New York, New York, has been Georgeson Shareholder Communications, Inc. has
retained by Devon to aid in the solicitation of been retained by Santa Fe Snyder to aid in the
proxies, for a fee of $6,000 and the solicitation of proxies, for a fee of $10,000
reimbursement of out-of-pocket expenses. Proxies and the reimbursement of out-of-pocket expenses.
may also be solicited by personal interview, Proxies may also be solicited by personal
telephone and telegram by directors, officers interview, telephone and telegram by directors,
and employees of Devon, who will not receive officers and employees of Santa Fe Snyder, who
additional compensation for performing that will not receive additional compensation for
service. Arrangements also may be made with performing that service. Arrangements also may
brokerage houses and other custodians, nominees be made with brokerage houses and other
and fiduciaries for the forwarding of proxy custodians, nominees and fiduciaries for the
materials to the beneficial owners of Devon forwarding of solicitation materials to the
shares held by those persons, and Devon will beneficial owners of Santa Fe Snyder shares held
reimburse them for reasonable expenses they by such persons, and Santa Fe Snyder will
incur. reimburse them for reasonable expenses they
incur.
AUDITORS KPMG LLP serves as the independent auditors of PricewaterhouseCoopers LLP serves as the
Devon. Representatives of KPMG LLP plan to independent public accountants of Santa Fe
attend the Devon meeting and will be available Snyder. Representatives of
to answer appropriate questions. Its PricewaterhouseCoopers LLP plan to attend the
representatives will also have an opportunity to Santa Fe Snyder meeting and will be available to
make a statement at the meeting if they so answer appropriate questions. Its
desire, although it is not expected that any representatives will also have an opportunity to
statement will be made. make a statement at the meeting if they so
desire, although it is not expected that any
statement will be made.
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THE MERGER
THIS SECTION OF THE JOINT PROXY STATEMENT/PROSPECTUS DESCRIBES THE PROPOSED
MERGER. WHILE WE BELIEVE THAT THE DESCRIPTION COVERS THE MATERIAL TERMS OF THE
MERGER AND THE RELATED TRANSACTIONS, IT MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. IN ADDITION, WE INCORPORATE IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT EACH OF DEVON AND SANTA FE SNYDER INTO THIS JOINT
PROXY STATEMENT/PROSPECTUS BY REFERENCE. YOU MAY OBTAIN THE INFORMATION
INCORPORATED BY REFERENCE INTO THIS JOINT PROXY STATEMENT/ PROSPECTUS WITHOUT
CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU CAN FIND
MORE INFORMATION" ON PAGE 95.
BACKGROUND OF THE MERGER
On May 3, 2000, in a telephone conversation, Devon's chief executive
officer, J. Larry Nichols, discussed the possibility of pursuing a strategic
combination with James L. Payne, Santa Fe Snyder's chief executive officer.
The two executives met on May 4, 2000 at the corporate headquarters of Santa
Fe Snyder to discuss, in general terms, the benefits of a possible strategic
combination of the two companies. The two executives agreed to consider an
exchange of certain technical and financial data to allow each company to
conduct a preliminary review of the other's oil and gas reserve data and certain
financial information before proceeding further. Mr. Payne advised Mr. Nichols
that, although Santa Fe Snyder was not for sale, Mr. Payne would discuss Devon's
interest with the Santa Fe Snyder board at its May 15 meeting and would advise
Mr. Nichols as to whether Santa Fe Snyder was interested in further pursuing the
proposed business combination.
On May 9, 2000, Devon and Santa Fe Snyder executed a mutual confidentiality
and standstill agreement and on May 10, 2000 exchanged certain technical and
financial data. At about this time, Devon engaged Morgan Stanley & Co.
Incorporated to act as its financial advisor in connection with the potential
transaction.
On May 10, 2000, Mr. Payne met with a senior executive of another oil and
gas company ("Company One") regarding Company One's interest in a possible
strategic combination with Santa Fe Snyder. On May 12, 2000, Mr. Payne met with
a senior executive of a second such company ("Company Two") to discuss Company
Two's interest in a possible strategic combination with Santa Fe Snyder.
On May 12, 2000, in a telephone conversation, Messrs. Payne and Nichols
concluded that the results of each company's preliminary technical and financial
review were favorable and agreed that representatives of each company should
meet to further the due diligence process. It was proposed that the due
diligence meetings commence on May 17.
On May 15, 2000 the Santa Fe Snyder board held a meeting to discuss, among
other matters, a possible transaction with Devon. Santa Fe Snyder's management
provided its board with an update on Santa Fe Snyder's operations and an
overview of the exploration and production industry, during which the increasing
industry trend toward consolidation was discussed as well as the apparent focus
of the institutional investment community on the larger, well capitalized
companies. In order to reduce the risks inherent in pursuing the Santa Fe Snyder
operating plan while concurrently preserving the benefits of achieving the goals
of the operating plan for the Santa Fe Snyder stockholders, management advised
the board of its conclusion that a strategic business combination with a large
independent would be beneficial to the Santa Fe Snyder stockholders.
Mr. Payne advised the Santa Fe Snyder board of his conversations with
Mr. Nichols and the general terms on which Mr. Payne believed such a strategic
business combination between Devon and
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Santa Fe Snyder could be achieved. Members of Santa Fe Snyder management and
representatives from Chase Securities Inc. then reviewed with the Santa Fe
Snyder board information including:
- Santa Fe Snyder's and Devon's business and operations, financial
condition, prospects, properties, production, proved reserves,
capitalization and stock price performance as compared to each other and
as compared with a peer group; and
- the potential advantages to Santa Fe Snyder and its stockholders of a
possible strategic business combination with Devon.
Representatives from Chase Securities also discussed with the Santa Fe
Snyder board the trend in the industry toward increased consolidation. During
that meeting, the Santa Fe Snyder board also approved the engagement of
Andrews & Kurth L.L.P. as counsel for Santa Fe Snyder in connection with its
possible business combination with Devon. Andrews & Kurth advised the Santa Fe
Snyder board of its fiduciary obligations under Delaware law. Following a
thorough discussion of the matter, the Santa Fe Snyder board concluded that:
- although Santa Fe Snyder was not for sale, Mr. Payne should continue his
discussions with Mr. Nichols regarding a possible stock-for-stock
strategic business combination of Devon and Santa Fe Snyder; and
- Santa Fe Snyder should formally retain Chase Securities to assist it in
discussions, and its financial evaluation of a possible combination, with
Devon. The Santa Fe Snyder board also directed Santa Fe Snyder's legal and
financial advisors to analyze further the benefits that a strategic
combination with Devon might provide.
Mr. Payne then advised the Santa Fe Snyder board of preliminary discussions
he had had recently with Company Two regarding Company Two's interest in
pursuing a strategic business combination with Santa Fe Snyder. Santa Fe Snyder
management and representatives of Chase Securities reviewed with the Santa Fe
Snyder board information substantially similar to that described above for Devon
comparing Santa Fe Snyder and Company Two to each other and as compared to a
peer group and describing the possible advantages of a strategic combination
with Company Two. Mr. Payne advised that although a pooling-of-interests
combination with Company Two appeared, on a preliminary basis, to be beneficial,
preliminary reports were that Company Two did not currently qualify for pooling.
Following a thorough discussion of this matter among the Santa Fe Snyder board,
the Santa Fe Snyder board directed Mr. Payne:
- to advise Company Two that Santa Fe Snyder was not for sale; and
- to continue discussions with Company Two and to determine if Company Two
could qualify for a pooling-of-interests transaction.
Mr. Payne also advised the Santa Fe Snyder board that Company One had
expressed interest in a strategic combination with Santa Fe Snyder, but that
further discussions were necessary to determine the level of Company One's
interest in an all stock strategic combination. The Santa Fe Snyder board
directed Mr. Payne:
- to advise Company One that Santa Fe Snyder was not for sale; and
- to conduct further discussions with Company One to determine Company One's
interest in pursuing an all stock strategic combination.
Following the adjournment of the May 15, 2000 meeting of the Santa Fe Snyder
board, Mr. Payne contacted Mr. Nichols to advise him that although Santa Fe
Snyder was not for sale, he was authorized to continue discussions with
Mr. Nichols regarding a possible strategic business combination and that the
Santa Fe Snyder board was interested in further evaluating the possibility of a
strategic combination with Devon. Mr. Payne also advised Mr. Nichols that Santa
Fe Snyder had formally engaged Chase
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Securities to assist Santa Fe Snyder with its analysis of a possible strategic
business combination with Devon. Mr. Payne and other members of Santa Fe Snyder
management also contacted Company One and Company Two to continue discussions
and preliminary investigations with respect to those companies.
On May 17, 2000, representatives of the financial and technical staffs of
Devon and Santa Fe Snyder, and representatives of each company's financial
advisors, met in Houston and exchanged detailed technical and financial
information. Devon's and Santa Fe Snyder's chief executive officers participated
in the meetings.
On May 18, 2000, Devon's annual stockholders' meeting was held in Oklahoma
City. Mr. Nichols returned to Oklahoma City from Houston on May 18 to attend the
annual stockholders' meeting and returned to Houston the same day. The due
diligence meetings concluded on May 18. However, discussions between company
representatives and their respective financial advisors continued telephonically
on May 19, 20 and 21. During this period, Devon provided Santa Fe Snyder with an
initial draft of a proposed merger agreement and related stock option
agreements.
On May 19, 2000, the Santa Fe Snyder board continued telephonically the
previously adjourned meeting and was provided an update on discussions with
Company One, Company Two and Devon. Mr. Payne advised the board that Company One
believed that Santa Fe Snyder's shares were fairly valued in the market and was
not prepared to pursue further discussions regarding a strategic combination
that reflected a premium exchange ratio for Santa Fe Snyder. Mark Jackson, Santa
Fe Snyder's Executive Vice President and Chief Financial Officer, then advised
the Santa Fe Snyder board that Company Two had advised him that it would not be
able to enter into a combination utilizing pooling. Based upon such advice, the
Santa Fe Snyder board directed management to discontinue further pursuit of a
strategic combination with either Company One or Company Two.
Mr. Payne then discussed with the Santa Fe Snyder board the results of the
due diligence efforts conducted on May 17 and 18 by Santa Fe Snyder and Devon.
Mr. Payne advised the Santa Fe Snyder board that he had discussed the results of
the due diligence with Mr. Nichols and had advised him that if discussions
regarding a strategic combination with Devon were to proceed, Devon must be
prepared to submit an offer with an exchange ratio reflecting a significant
premium for Santa Fe Snyder's stockholders. The board was advised that
negotiations on the definitive agreements had commenced and that the principal
open issues would be discussed at a subsequent meeting. The board directed Santa
Fe Snyder's advisors to continue negotiations with Devon on the definitive
agreements.
On May 18, 2000, Santa Fe Snyder's general counsel and members of Andrews &
Kurth provided to Devon's general counsel and members of Devon's legal counsel,
McAfee & Taft, their initial written comments on the drafts of the definitive
agreements furnished by Devon. Among the principal issues left unresolved were
the following:
- the exchange ratio;
- the amount of the fee payable upon termination, if any, and the
circumstances, if any, under which the termination fee would be payable;
- the stock option agreements, if any, and the terms, if any, under which
options could be exercised and the unexercised options put to the issuer
for repurchase;
- whether treatment of the combination as a pooling-of-interests transaction
for accounting purposes would be a condition to consummation of the
combination; and
- the level of representation on Devon's board by persons designated by
Santa Fe Snyder.
On May 20, 2000, a telephonic meeting was held among Santa Fe Snyder's
general counsel and Andrews & Kurth, on the one hand, and Devon's general
counsel and McAfee & Taft, on the other
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hand, to discuss the revised versions of the definitive agreements. The
principal unresolved issues after such discussions were the same as described
above.
On May 22, 2000, the Santa Fe Snyder board again telephonically continued
its meeting. Mr. Payne advised the Santa Fe Snyder board that he was to have
further discussions with Mr. Nichols later that day regarding various matters,
including the exchange ratio, the termination fee and the stock option
agreements. Mr. Jackson then provided the Santa Fe Snyder board with a financial
update based upon due diligence conducted up to that date. Mr. Jackson
discussed, among other things, cash flow models and production, possible cost
savings from the combination and possible levels of accretion under various
hypotheticals and using different assumptions. Janet Clark, Santa Fe Snyder's
Executive Vice President-Corporate Development and Administration, then reviewed
selected combinations effected since January 1, 1997, noting that a 15 percent
premium was the median and a 12 percent premium was the mean. Ms. Clark further
advised the Santa Fe Snyder board that a combination with Devon would provide
additional liquidity. Duane Radtke, Santa Fe Snyder's Executive Vice President-
Production, then discussed with the Santa Fe Snyder board the strategic fit of
Santa Fe Snyder's properties with those of Devon, noting that the combined
company would be a major participant in the Rocky Mountain, Permian Basin and
Gulf of Mexico areas. Scott Baxter, Segment Head--Americas from Chase
Securities' Global Energy Group, then reviewed the possible combination,
discussing the range of premiums that could be proposed and the potential range
of accretion to EBITDA (earnings before interest, taxes, depreciation and
amortization) and cash flow per share based on that range. A thorough discussion
of the possible strategic combination was then held among the members of the
Santa Fe Snyder board. The board then directed Santa Fe Snyder's management and
advisors to continue negotiations with Devon.
On May 23, 2000, Mr. Nichols telephoned Mr. Payne to reiterate Devon's
interest in pursuing a merger transaction. Following negotiations between the
two chief executive officers, Mr. Nichols proposed that the exchange ratio for
the merger be 0.22 Devon common shares for each Santa Fe Snyder common share
outstanding, which would result in Santa Fe Snyder stockholders owning
approximately 32% of the total common equity of the combined company.
Mr. Nichols proposed that the board of directors of the combined company be
structured to reflect the proportional equity ownership of Devon and Santa Fe
Snyder stockholders. In addition, Mr. Nichols proposed a termination fee equal
to $103 million. Mr. Nichols conditioned his proposal on the approval of the
Devon board.
On May 23, 2000, the Santa Fe Snyder board again telephonically continued
its meeting. Mr. Payne advised the Santa Fe Snyder board that based upon
discussions with Mr. Nichols, Mr. Nichols was prepared to recommend an exchange
ratio of 0.22 shares of Devon common stock for each share of Santa Fe Snyder
common stock, which ratio represented a premium of 21% based on current prices.
He also advised the Santa Fe Snyder board that the provisions dealing with other
acquisition proposals, the board's fiduciary obligations, the termination fee
and stock option arrangements would be substantially similar to those proposed
by Devon. David Hicks, Santa Fe Snyder's Vice President-Law and General Counsel,
then described in more detail to the Santa Fe Snyder board certain provisions of
the definitive agreements, including the provisions dealing with other
acquisition proposals, the board's fiduciary obligation exception to providing
information to and engaging in discussions with other interested parties, the
termination fee, outside termination date, material adverse changes and the
mutual stock option agreements. Following a thorough discussion, the Santa Fe
Snyder board directed management and its advisors to continue negotiations with
Devon.
On May 24, 2000, the Santa Fe Snyder board continued its meeting. During
that meeting, Scott Baxter and other representatives of Chase Securities
provided an overview to the Santa Fe Snyder board of the proposed strategic
combination, reviewed several provisions of the definitive agreements and
discussed the valuation analysis prepared by Chase Securities. Chase Securities
then delivered its oral opinion, subsequently confirmed in writing in an opinion
dated as of May 25, 2000, to Santa Fe
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Snyder's board of directors, to the effect that the exchange ratio pursuant to
the merger agreement was fair to the holders of Santa Fe Snyder common stock
from a financial point of view. For a discussion of Chase Securities' opinion,
see "--Fairness Opinions of Financial Advisors--Fairness Opinion of Chase
Securities Inc." The Santa Fe Snyder board then reviewed its reasons for the
business combination and, based upon the information presented, the Santa Fe
Snyder board unanimously approved the merger, the merger agreement, the stock
option agreements and the consummation of the transactions related to such
agreements as fair to and in the best interests of the Santa Fe Snyder
stockholders. The board also agreed to recommend to the Santa Fe Snyder
stockholders that they vote "FOR" approval and adoption of the merger agreement
and the merger.
On May 25, 2000, the Devon board of directors met to discuss the proposed
transaction. At that meeting, the board members discussed the proposed
transaction, received the fairness opinion of Morgan Stanley and unanimously
approved the merger, the merger agreement, and the stock option agreements. For
a discussion of Morgan Stanley's Opinion see "--Fairness Opinions of Financial
Advisors--Fairness Opinion of Morgan Stanley & Co. Incorporated."
The merger agreement and the stock option agreements were signed after the
close of trading on May 25, 2000. A joint press release announcing the merger
was issued the following morning before the stock markets opened.
REASONS FOR THE MERGER
DEVON'S REASONS FOR THE MERGER. Devon's board of directors considered
various factors, including the following, in unanimously approving the merger:
- EARNINGS AND CASH FLOW ACCRETION--Devon's board of directors and
management believe that the merger will be immediately accretive to both
earnings and cash flow per share.
- COMPLEMENTARY NORTH AMERICAN ASSETS--Santa Fe Snyder's North American
operations are concentrated in three basins that are core Devon operating
areas: the Permian Basin, the Rocky Mountains and the Gulf of Mexico. The
merger will significantly expand Devon's operations in each of these core
areas. The combined company's North American reserve base will include
proved reserves of 800 million barrels of oil equivalent of which 73% are
developed. The combined company expects to realize significant savings
from expanding its operations without proportionate expansion in overhead
costs.
- INTERNATIONAL GROWTH PLATFORM--The scope of Devon's international
exploration and production activities will be greatly expanded as a result
of the merger. The combined company's international portfolio will be
larger and more diversified and will include producing properties in
Indonesia, Argentina, Venezuela, Azerbaijan and Gabon, development
projects in Brazil, Egypt and China and exploration activities in
Malaysia, Thailand, Qatar, Ghana, Congo and Cote d'Ivoire. The combined
company's international proved reserves will represent 24% of total
reserves, up from 19% for Devon stand-alone. In addition to proved oil and
gas properties, the combined company has a substantial inventory of
exploration acreage outside of North America totaling approximately
26.4 million net acres. Devon's board of directors and management believe
that the combined company will have the international operating and
project development experience and the exploration expertise necessary to
accelerate Devon's international expansion that began with its 1999 merger
with PennzEnergy.
- INDUSTRY LEADERSHIP POSITION--At the end of 1999, Devon had proved
reserves of approximately 670 million barrels of oil equivalent. The
merger with Santa Fe Snyder will add approximately 386 million barrels of
oil equivalent proved reserves to Devon, on a pro forma basis, increasing
total aggregate proved reserves to 1.1 billion barrels of oil equivalent.
The combined company will be an international oil and gas company with a
pro forma enterprise value expected to be
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approximately $9.5 billion. The combined company will rank among the five
largest United States-based independent oil and gas companies in terms of
oil and gas reserves, oil and gas production, equity market capitalization
and enterprise value. Devon's board of directors and management believe
that the combined company's larger scale should allow Devon to consider
future merger and acquisition transactions that would not otherwise be
possible.
- IMPROVED EFFICIENCY AND COST SAVINGS--Devon's board of directors and
management expect the combined company to realize $30 to $35 million in
annual cost savings. The combined company will consolidate its corporate
headquarters, eliminate duplicative administrative staff and expenses, and
is expected to achieve benefits from its larger scale purchasing and
marketing presence.
- TAX FREE NATURE OF THE MERGER--The merger is structured to be tax free to
Devon, Santa Fe Snyder and their respective stockholders, for U.S. Federal
income tax purposes, except for cash Santa Fe Snyder stockholders will
receive in lieu of fractional shares of Devon common stock.
- FAIRNESS OPINION OF FINANCIAL ADVISOR--The Devon board of directors also
considered the presentation and opinion of Morgan Stanley & Co.
Incorporated described below providing that, subject to and based upon the
various considerations set forth in its opinion, the exchange ratio
pursuant to the merger agreement was fair, from a financial point of view,
to Devon.
Based on these and other factors that the members of the Devon board deemed
relevant, the Devon board unanimously approved the merger agreement and the
merger.
The Devon board believes that the merger agreement and the merger are in the
best interest of the Devon stockholders (including the holders of exchangeable
shares) and recommends that the Devon stockholders (including the holders of
exchangeable shares) approve the merger agreement and the merger.
The above discussion of the information and factors considered and given
weight by the Devon board is not intended to be exhaustive. However, the
discussion is believed to include all material factors considered by the Devon
board. In reaching the decision to approve and recommend approval to Devon
stockholders of the merger, the Devon board did not assign any relative or
specific weights to the factors considered. In addition, individual directors
may have given differing weights to different factors.
The Devon board realizes that there are risks associated with the merger.
These risks include the prospect that some of the potential benefits set forth
above may not be realized or that there may be high costs associated with
realizing those benefits. These factors are discussed more fully in this joint
proxy statement/prospectus under "Risk Factors." However, the Devon board
believes that the positive factors should outweigh any negative factors,
although the Devon board can give no assurances in this regard.
SANTA FE SNYDER'S REASONS FOR THE MERGER. The Santa Fe Snyder board
considered various factors, including the following, in unanimously approving
the merger:
- INDUSTRY LEADERSHIP POSITION--The combined company will rank among the
five largest U.S. based independent oil and gas companies in terms of oil
and gas reserves, oil and gas production, equity market capitalization and
enterprise value. Based on year end 1999 reserve information and on a pro
forma basis, Santa Fe Snyder's merger with Devon will add approximately
386 million barrels of oil equivalent proved reserves to Devon's
670 million barrels of oil equivalent, resulting in total aggregate proved
reserves of 1.1 billion barrels of oil equivalent. The combined company
will be an international oil and gas company with a pro forma enterprise
value expected to be approximately $9.5 billion. Santa Fe Snyder's board
of directors and management believe that the combined company's larger
scale should allow the potential for
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appreciation of the value of Devon common stock, and the ability of Santa
Fe Snyder stockholders to participate in any such appreciation through
their initial ownership of approximately 32% of the common stock of Devon.
- EXPERIENCED MANAGEMENT--Devon's management team is highly experienced and
well regarded. Santa Fe Snyder's board of directors and management believe
that the strength and experience of the combined company's proposed
management team will benefit from the substantially larger executive and
technical talent pool available to the combined company.
- INCREASED LIQUIDITY--The combined company's common stock will be listed
for trading on the American Stock Exchange in substantially greater dollar
volumes than that of Santa Fe Snyder on the New York Stock Exchange,
providing greater liquidity for Santa Fe Snyder stockholders and for new
institutional investors.
- COMPLEMENTARY NORTH AMERICAN ASSETS--Santa Fe Snyder's North American
operations are concentrated in three basins that are core Devon operating
areas: the Permian Basin, the Rocky Mountains and the Gulf of Mexico. The
merger will significantly expand Devon's operations in each of these core
areas. The combined company's North American reserve base will include
proved reserves of 800 million barrels of oil equivalent of which
73 percent is developed. The combined company expects to benefit from its
larger scale operations as a consequence of combining its operations in
these core operating areas.
- COMPLEMENTARY ACQUISITION AND GROWTH STRATEGIES--The scope of the combined
company's international exploration and production activities will be
greatly expanded as a consequence of the merger. As a result of the
addition of Santa Fe Snyder's assets, the combined company's international
portfolio will be larger and more diversified and will include producing
properties in Indonesia, Argentina, Azerbaijan and Gabon, development
projects in Brazil, Egypt and China and exploration activities in
Malaysia, Thailand, Qatar, Ghana, Congo and Cote d'Ivoire.
- STRONGER PRO FORMA FINANCIAL PROFILE--The combined company would have a
significantly improved balance sheet. Santa Fe Snyder's board believes
that this will result in an improved ability to increase reserves through
expanded exploration and development drilling program and through
acquisitions.
- TAX CONSEQUENCES OF THE MERGER--The merger is structured to be tax free,
for U.S. Federal income tax purposes, to Devon, Santa Fe Snyder and their
respective stockholders, except with respect to cash Santa Fe Snyder
stockholders will receive instead of fractional shares of Devon common
stock.
- POOLING-OF-INTERESTS ACCOUNTING TREATMENT--The merger is expected to be
accounted for as a pooling-of-interests, which the Santa Fe Snyder board
believes to be more attractive than the purchase method of accounting.
- FULL COST METHOD OF ACCOUNTING--Santa Fe Snyder's board expects a more
attractive valuation of Santa Fe Snyder's assets under Devon's method of
full cost accounting. Santa Fe Snyder's historical financial results,
which were prepared using the successful efforts method of accounting,
will be restated to conform to the combined company's full cost method of
accounting.
- OPINION OF FINANCIAL ADVISOR--The Santa Fe Snyder board of directors also
considered the presentation and opinion of Chase Securities Inc. described
below to the effect that, based upon its review and assumptions and
subject to specific matters stated in the opinion, the exchange ratio
pursuant to the merger agreement was fair, from a financial point of view,
to the holders of Santa Fe Snyder common stock.
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<PAGE>
Based on these factors, and other factors the members of the Santa Fe Snyder
board deemed relevant, the Santa Fe Snyder board unanimously approved the merger
agreement and the merger.
The Santa Fe Snyder board believes that the merger agreement is in the best
interests of the Santa Fe Snyder stockholders and recommends that the Santa Fe
Snyder stockholders approve the merger agreement and the merger.
The above discussion of the information and factors considered and given
weight by the Santa Fe Snyder board is not intended to be exhaustive. However,
the Santa Fe Snyder board believes that the discussion includes all material
factors it considered. In reaching the decision to approve and recommend
approval to Santa Fe Snyder stockholders of the merger agreement and the merger,
the Santa Fe Snyder board did not assign any relative or specific weights to the
factors considered. In addition, individual directors may have given differing
weights to different factors.
The Santa Fe Snyder board realizes that there are risks associated with the
merger, including:
- risk that the operations of the two companies may not be successfully
integrated;
- risk that anticipated cost savings may not be realized to the degree
anticipated; and
- risk that the business combination might not be completed as a result of a
failure to satisfy the conditions to the merger agreement.
These factors and additional factors are discussed more fully in this joint
proxy statement/prospectus under "Risk Factors." However, the Santa Fe Snyder
board believes that the positive factors should outweigh any negative factors,
although the Santa Fe Snyder board can give no assurances in this regard.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
FAIRNESS OPINION OF MORGAN STANLEY & CO. INCORPORATED
Devon retained Morgan Stanley to provide it with financial advisory services
and a financial fairness opinion in connection with the merger. Morgan Stanley
was selected to act as Devon's financial advisor based on Morgan Stanley's
qualifications, expertise and reputation and its knowledge of the business and
affairs of Devon. At the meeting of the Devon board on May 25, 2000, Morgan
Stanley rendered its oral opinion, subsequently confirmed in writing, that as of
May 25, 2000, and subject to and based on the various considerations set forth
in its opinion, the exchange ratio pursuant to the merger agreement was fair
from a financial point of view to Devon.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION, DATED AS OF MAY 25, 2000,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY
MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS. HOLDERS OF DEVON COMMON STOCK ARE URGED TO, AND
SHOULD, READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S
OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF DEVON, ADDRESSES ONLY THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO PURSUANT TO THE
MERGER AGREEMENT TO DEVON, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER
OR CONSTITUTE A RECOMMENDATION TO ANY DEVON STOCKHOLDER AS TO HOW TO VOTE AT THE
SPECIAL MEETING. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Santa Fe Snyder and Devon;
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<PAGE>
- reviewed certain internal financial statements and other financial and
operating data, including internal oil and gas reserve estimates,
concerning Santa Fe Snyder and Devon prepared by the managements of Santa
Fe Snyder and Devon;
- reviewed certain financial forecasts prepared by the managements of Santa
Fe Snyder and Devon;
- discussed the past and current operations and financial condition and the
prospects of Santa Fe Snyder, including information relating to strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Santa Fe Snyder;
- discussed the past and current operations and financial condition and the
prospects of Devon, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Devon;
- reviewed the pro forma impact of the merger on Devon's earnings per share,
cash flow, oil and gas reserves and production, consolidated
capitalization and financial ratios;
- reviewed the reported prices and trading activity for Santa Fe Snyder
common stock and Devon common stock;
- compared the financial performance of Santa Fe Snyder and Devon and the
prices and trading activity of Santa Fe Snyder common stock and Devon
common stock with that of other publicly-traded companies, comparable with
Santa Fe Snyder and Devon, respectively, and their securities;
- reviewed certain reserve reports prepared by Devon and Devon's independent
reserve engineers;
- reviewed certain reserve reports prepared by Santa Fe Snyder and Santa Fe
Snyder's independent reserve engineers;
- reviewed the financial terms, to the extent publicly available, of
comparable business combination transactions deemed relevant;
- participated in discussions and negotiations among representatives of
Santa Fe Snyder and Devon and their financial and legal advisors;
- reviewed the draft of the merger agreement and certain related documents;
and
- performed such other analyses and considered such other factors as it
deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
forecasts, including information relating to certain strategic, financial and
operational benefits anticipated from the merger, Morgan Stanley assumed that
the financial forecasts and information provided were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of Santa Fe Snyder and Devon, respectively. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities of Santa Fe Snyder or Devon, nor was Morgan Stanley furnished with
any appraisals of those assets and liabilities. With respect to the reserve
estimates and reports referred to above, Morgan Stanley is not an expert in the
engineering evaluation of oil and gas properties and, with Devon's consent,
relied, without independent verification, solely upon the internal reserve
estimates of Santa Fe Snyder and Devon. In addition, Morgan Stanley assumed that
the merger would be consummated in accordance with the terms set forth in the
merger agreement. Morgan Stanley also assumed that the merger will be accounted
for as a "pooling-of-interests" business combination in accordance with U.S.
generally accepted accounting principles and that the merger will be treated as
a tax-free reorganization pursuant to the Internal Revenue Code of 1986. The
opinion of Morgan Stanley is necessarily based on
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<PAGE>
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, May 25, 2000.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its written opinion letter dated May 25, 2000. These summaries of
financial analyses include information presented in tabular format. In order to
fully understand the financial analyses used by Morgan Stanley, the tables must
be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
HISTORICAL SHARE PERFORMANCE. Morgan Stanley conducted a historical
analysis of the Santa Fe Snyder common stock performance as measured by closing
prices and trading volumes from January 2, 1998 to May 23, 2000. During this
period, based on trading prices on the New York Stock Exchange, the Santa Fe
Snyder common stock traded at a high of $11.50 and low of $4.88 per share. The
Santa Fe Snyder common stock closed at a price of $10.50 per share on May 23,
2000. Based on the exchange ratio of 0.22 and Devon's common stock closing price
of $57.81 per share on May 23, 2000, the implied acquisition price per Santa Fe
Snyder common share of $12.72 represented a premium of approximately 21%.
Morgan Stanley also compared historical closing prices of the Santa Fe
Snyder common stock to an index of comparable companies for the six month, one
year, two year and five year periods ended May 23, 2000. The index of comparable
companies included Apache Corporation, Barrett Resources Corporation, Burlington
Resources Inc., EOG Resources, Inc., Forest Oil Corporation, Noble
Affiliates, Inc., Ocean Energy Inc. and Pioneer Natural Resources Company. Santa
Fe Snyder performed in line with the index of comparable companies for the one
year and two year periods, outperformed the index of comparable companies for
the five year period and underperformed the index of comparable companies for
the six month period.
HISTORICAL EXCHANGE RATIO ANALYSIS. Morgan Stanley reviewed the daily
historical ratios of the closing prices of Santa Fe Snyder common stock divided
by the corresponding closing prices of Devon common stock for the period from
May 23, 1998 to May 23, 2000. Morgan Stanley calculated the average of the
historical ratios and computed the premium represented by the exchange ratio of
0.22 over the averages of the historical ratios for various periods. The
following table presents the range of historical ratios over the periods covered
compared to the exchange ratio in the merger.
<TABLE>
<CAPTION>
PERCENTAGE PREMIUM
REPRESENTED BY
AVERAGE EXCHANGE RATIO OF
HISTORICAL 0.22 VS. HISTORICAL
TRADING PERIOD RATIO RATIO
-------------- ---------- -------------------
<S> <C> <C>
Last 2 years.................................... 0.238 -8%
Last 1 year..................................... 0.220 0%
Last 9 months................................... 0.213 3%
Last 6 months................................... 0.205 7%
Last 3 months................................... 0.196 12%
Last 30 days.................................... 0.193 14%
As of May 23, 2000.............................. 0.182 21%
</TABLE>
CONTRIBUTION ANALYSIS. Morgan Stanley reviewed certain historical and
projected operating and financial information (including, among other things,
oil and gas production volumes and proved reserves, equity market
capitalization, market capitalization of equity plus total debt and preferred
stock minus cash, EBITDAX (earnings before interest, taxes, depreciation,
amortization and exploration costs), net income and cash flow) for Devon, Santa
Fe Snyder and the pro forma combined entity resulting from the merger, without
giving effect to any potential synergies that may result from the
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<PAGE>
transaction and excluding non-recurring integration related costs or charges or
changes which may result from the adoption of the full cost method of accounting
by Santa Fe Snyder. The analysis was performed utilizing publicly available
information and securities research analyst estimates for the fiscal years ended
2000 and 2001 for Devon and Santa Fe Snyder as well as results based on
estimates from the management of Santa Fe Snyder and Devon for the fiscal years
ended 2000 and 2001. The analysis indicated that Santa Fe Snyder, the
shareholders of which will receive approximately 32% of the pro forma combined
equity market capitalization of the combined company, would represent 35% of the
pro forma combined equity market capitalization plus total debt and preferred
stock minus cash of the combined company, assuming a 0.22 exchange ratio and the
closing stock price as of May 23, 2000 for Devon. This analysis indicated the
following exchange ratios based on the equity contribution for Santa Fe Snyder
to the combined company on a pro forma basis:
<TABLE>
<CAPTION>
IMPLIED
EXCHANGE
RATIOS
-------------------
<S> <C>
Based On Actual Results:
1999 EBITDAX and Cash Flow................................ 0.210--0.238
Proved Reserves (Pro forma as of 12/31/99)................ 0.258
Based On Securities Research Analysts' Estimates:
2000--2001 Earnings....................................... 0.282--0.312
2000--2001 Cash Flow...................................... 0.295--0.304
2000--2001 EBITDAX........................................ 0.258--0.265
2000--2001 Production..................................... 0.244--0.251
Based On Management Estimates:
2000--2001 Earnings....................................... 0.108--0.258
2000--2001 Cash Flow...................................... 0.278--0.295
2000--2001 EBITDAX........................................ 0.205--0.237
2000--2001 Production..................................... 0.223--0.244
</TABLE>
PEER GROUP COMPARISON. Morgan Stanley reviewed selected financial
information, ratios and public market multiples for the following publicly
traded companies:
- Apache Corporation;
- Barrett Resources Corporation;
- Burlington Resources Inc.;
- EOG Resources, Inc.;
- Forest Oil Corporation;
- Noble Affiliates, Inc.;
- Ocean Energy Inc.; and
- Pioneer Natural Resources Company
The selected companies were chosen because they are publicly traded companies
that for purposes of this analysis may be considered similar to Devon and Santa
Fe Snyder.
The multiples and ratios for each of the selected companies were based on
the most recent publicly available information and on closing prices as of
May 23, 2000.
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<PAGE>
The results of these analyses are as follows:
<TABLE>
<CAPTION>
PEER GROUP MEDIAN
RANGE MULTIPLES
-------------------- -------------
<S> <C> <C>
Price / 2000 Estimated Earnings.............. 13.6--27.5 18.6
Price / 2001 Estimated Earnings.............. 14.6--26.9 18.7
Price / 2000 Estimated Cash Flow............. 3.7--7.5 5.2
Price / 2001 Estimated Cash Flow............. 3.5--6.3 5.1
Adjusted Market Capitalization / 2000
Estimated EBITDA........................... 5.0--8.0 6.2
Adjusted Market Capitalization / 2001
Estimated EBITDA........................... 4.8--6.9 6.1
Adjusted Market Capitalization / Proved
BOE........................................ $ 4.99--$10.92 $8.42
Adjusted Market Capitalization / Pretax SEC
10 Value................................... 87%--197% 145%
</TABLE>
Morgan Stanley applied the median multiples in the table above to estimates
prepared by the management of Devon. The analysis resulted in an implied
exchange ratio range of 0.20 to 0.25. Morgan Stanley also applied the median
multiples in the table above to estimates from equity research analysts. The
analysis resulted in an implied exchange ratio range of 0.22 to 0.26. Morgan
Stanley defined adjusted market capitalization as the sum of equity market
capitalization, total debt and preferred stock, minus cash and cash equivalents.
Cash flow was defined as the sum of net income plus deferred taxes, depletion,
depreciation, amortization and dry hole expense. BOE was defined as a barrel of
oil equivalent assuming a conversion ratio of six thousand cubic feet of natural
gas to one barrel of oil.
No company utilized in the peer group comparison analysis as a comparable
company is identical to Santa Fe Snyder or Devon. In evaluating the comparable
companies, Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Santa Fe Snyder or Devon,
such as the impact of competition on the business of Santa Fe Snyder, Devon and
the industry generally, industry growth and the absence of any adverse material
change in the financial condition and prospects of Santa Fe Snyder, Devon or the
industry or in the financial markets in general.
NET ASSET VALUE ANALYSIS. Morgan Stanley estimated, at a range of discount
rates and hydrocarbon pricing scenarios, the present value of the future pre-tax
cash flows that Santa Fe Snyder and Devon could be expected to generate from its
proved, probable and possible reserves as of December 31, 1999. In the analysis,
Morgan Stanley assumed four alternative cases for future oil and natural gas
prices. The first scenario was generated using commodity prices as estimated by
Morgan Stanley. The second scenario was generated using the average futures
prices listed on NYMEX on May 23, 2000. The third and fourth scenarios were
calculated using prices as estimated by the managements of Devon and Santa Fe
Snyder. For each of the four scenarios, Morgan Stanley calculated the unlevered
free cash flows that Santa Fe Snyder and Devon would be expected to generate
from its proved, probable and possible reserves during the fiscal years 2000
through 2014 and the value of the remaining proved, probable and possible
reserves projected at 2014 based upon engineering projections prepared by the
management of Santa Fe Snyder and Devon. The unlevered free cash flows and
remaining value of proved, probable and possible reserves were then discounted
to obtain a present value using a range of discount rates from 8% to 12%. Morgan
Stanley further adjusted downward the present value of probable reserves by 50%
and possible reserves by 90%. Morgan Stanley added to those estimated values for
proved, probable and possible reserves assessments of the value of certain other
assets and liabilities of Santa Fe Snyder and Devon, including, but not limited
to, other land, acreage and other assets, working capital and the book value of
debt and preferred stock. These assessments of the value of certain other assets
and liabilities were made by Morgan Stanley based on information and assumptions
provided by Santa Fe Snyder's and Devon's managements. The analysis resulted in
an implied exchange ratio range of 0.20 to 0.22.
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<PAGE>
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Using publicly available
information, Morgan Stanley performed an analysis of the following precedent
corporate transactions that were comparable to the merger in certain respects:
- Anadarko Petroleum Corporation / Union Pacific Resources Group Inc.
- Talisman Energy Inc. / Rigel Energy Corporation
- Burlington Resources Inc. / Poco Petroleums Ltd.
- Devon Energy Corporation / PennzEnergy Company
- Santa Fe Energy Resources / Snyder Oil Corporation
- Ocean Energy Inc. / Seagull Energy Corporation
- Kerr-McGee Corporation / Oryx Energy Company
- ARCO / Union Texas Petroleum
- Union Pacific Resources Group Inc. / Norcen Energy Resources Limited
The results of these analyses are as follows:
<TABLE>
<CAPTION>
COMPARABLE
TRANSACTIONS MEDIAN
RANGE MULTIPLES
------------------- ---------
<S> <C> <C>
Price / Current Year Cash Flow...................... 3.5--8.1 4.5
Price / One Year Forward Cash Flow.................. 2.6--6.7 3.9
Adjusted Market Capitalization / Current Year
EBITDA............................................ 4.2--8.6 6.1
Adjusted Market Capitalization / One Year Forward
EBITDA............................................ 3.5--7.1 5.6
Adjusted Price / Proved BOE......................... $ 3.60--$7.28 $5.28
Premium to Stock Price.............................. (5%)--51% 21%
Adjusted Price / Pretax SEC 10 Value................ 90%--140% 100%
</TABLE>
Morgan Stanley applied the median multiples in the table above to estimates
prepared by the managements of Santa Fe Snyder and Devon. The analysis resulted
in an implied exchange ratio range of 0.19 to 0.24. Morgan Stanley also applied
the median multiples in the table above to median estimates of equity research
analysts. The analysis resulted in an implied exchange ratio range of 0.21 to
0.26.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the transactions listed
above, Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Santa Fe Snyder or Devon,
such as the impact of competition on Santa Fe Snyder, Devon and the industry
generally, industry growth and the absence of any adverse material change in the
financial condition and prospects of Santa Fe Snyder, Devon or the industry or
in the financial markets in general.
PRO FORMA MERGER CONSEQUENCES ANALYSIS. Morgan Stanley analyzed the pro
forma impact of the merger on Devon's projected earnings per share and cash flow
per share for the fiscal years ended 2000 and 2001 without giving effect to any
potential synergies that may result from the transaction in 2000 and giving
effect to $30 million of synergies in 2001. The analysis was performed utilizing
estimates prepared by Santa Fe Snyder and Devon management and publicly
available securities research analyst estimates for the fiscal years ended 2000
and 2001 for Devon and Santa Fe Snyder. Based on these forecasts, and assuming
that the merger is treated as a pooling-of-interests transaction, the merger
would be expected to be accretive to Devon's earnings per share and cash flow
per share in 2000 and
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<PAGE>
2001, excluding non-recurring integration related costs or charges which may
result from the adoption of the full cost method of accounting by Santa Fe
Snyder.
In connection with the review of the merger by the Devon board, Morgan
Stanley performed a variety of financial and comparative analyses for purposes
of its opinion given in connection therewith. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any particular analysis or factor considered by it.
Furthermore, Morgan Stanley believes that selecting any portion of its analyses
or factors considered by it, without considering all analyses and factors as a
whole, would create an incomplete view of the process underlying its opinion. In
addition, Morgan Stanley may have given various analyses and factors more or
less weight than other analyses and factors and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described above should
therefore not be taken to be Morgan Stanley's view of the actual value of Santa
Fe Snyder or Devon.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Santa Fe Snyder or Devon.
Any estimates contained in Morgan Stanley's analysis are not necessarily
indicative of future results or actual values, which may be significantly more
or less favorable than those suggested by such estimates. The analyses were
prepared solely as part of Morgan Stanley's analysis of the fairness from a
financial point of view of the exchange ratio, pursuant to the merger agreement,
to Devon and were conducted in connection with the delivery by Morgan Stanley of
its opinion dated May 25, 2000 to the Devon board of directors. The analyses do
not purport to be appraisals or to reflect the prices at which Santa Fe Snyder
common stock or Devon common stock actually may be valued or the prices at which
their shares or stock may actually trade in the marketplace. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.
In addition, as described above, Morgan Stanley's opinion and presentation
to the Devon board of directors was one of many factors taken into consideration
by the Devon board of directors in making its decision to approve the merger.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as determinative of the opinion of the Devon board of directors with
respect to the value of Devon or of whether the Devon board of directors would
have been willing to agree to a different exchange ratio. The exchange ratio
pursuant to the merger agreement and other terms of the merger agreement were
determined through arm's-length negotiations between Santa Fe Snyder and Devon
and were approved by the Devon board of directors. Morgan Stanley provided
advice to Devon during the course of such negotiations; however, the decision to
enter into the merger agreement and to offer the exchange ratio pursuant to the
merger agreement was solely that of the Devon board of directors. Morgan Stanley
did not recommend any specific exchange ratio to Devon or that any given
exchange ratio constituted the only appropriate exchange ratio for the merger.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of Morgan Stanley's trading, brokerage and
financing activities, Morgan Stanley or its affiliates may at any time hold long
or short positions, trade or otherwise effect transactions, for its own account
or for the account of customers, in the equity or debt securities or senior
loans of Santa Fe Snyder or Devon.
Pursuant to an engagement letter dated May 24, 2000, between Morgan Stanley
and Devon, Morgan Stanley provided a financial opinion in connection with the
merger, and Devon agreed to pay Morgan Stanley a fee of approximately
$3.5 million. Devon has also agreed to reimburse Morgan
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<PAGE>
Stanley for its expenses incurred in performing its services. In addition, Devon
has agreed to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against certain liabilities and
expenses, including certain liabilities under the federal securities laws,
related to or arising out of Morgan Stanley's engagement and any related
transactions. In the past, Morgan Stanley and its affiliates have provided
financial advisory services for Devon and have received fees for the rendering
of these services.
FAIRNESS OPINION OF CHASE SECURITIES INC.
At the May 24, 2000 meeting of Santa Fe Snyder's board of directors, Chase
Securities delivered its oral opinion, subsequently confirmed in writing in an
opinion dated as of May 25, 2000, to Santa Fe Snyder's board of directors, to
the effect that, as of that date and based upon the assumptions made, matters
considered and limits of review set forth in its opinion, the exchange ratio
pursuant to the merger agreement was fair to the holders of the Santa Fe Snyder
common stock, from a financial point of view.
THE FULL TEXT OF CHASE SECURITIES' WRITTEN OPINION DATED AS OF MAY 25, 2000,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND CERTAIN
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY CHASE SECURITIES, IS ATTACHED
AS ANNEX C TO THIS JOINT PROXY STATEMENT-PROSPECTUS. STOCKHOLDERS ARE URGED TO
READ THIS OPINION IN ITS ENTIRETY. CHASE SECURITIES' OPINION WAS PROVIDED FOR
THE USE AND BENEFIT OF SANTA FE SNYDER'S BOARD OF DIRECTORS IN ITS EVALUATION OF
THE MERGER, WAS DIRECTED ONLY TO THE FAIRNESS TO THE HOLDERS OF THE SANTA FE
SNYDER COMMON STOCK OF THE EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT FROM
A FINANCIAL POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER OR ANY OTHER MATTERS
RELATING TO THE MERGER. THIS SUMMARY OF CHASE SECURITIES' OPINION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS OPINION, WHICH IS ATTACHED
TO THIS PROXY STATEMENT AS ANNEX C.
In arriving at its opinion, Chase Securities, among other things:
- reviewed the merger agreement;
- reviewed certain publicly available business and financial information
Chase Securities deemed relevant relating to Santa Fe Snyder and Devon and
the industries in which they operate;
- reviewed certain internal non-public financial and operating data and
forecasts provided to Chase Securities by the managements of Santa Fe
Snyder and Devon relating to their respective businesses, as well as the
amount and timing of the cost savings and related expenses and synergies
expected to result from the merger, which are referred to as the
"synergies," furnished to Chase Securities by Santa Fe Snyder and Devon;
- discussed, with members of the senior management of Santa Fe Snyder and
Devon, Santa Fe Snyder's and Devon's operations, historical financial
statements and future prospects, before and after giving effect to the
merger and the synergies;
- compared the financial and operating performance of Santa Fe Snyder and
Devon with publicly available information concerning certain other
companies Chase Securities deemed comparable and reviewed the relevant
historical stock prices of the Santa Fe Snyder common stock and the Devon
common stock and certain publicly traded securities of such other
companies;
- compared the proposed financial terms of the merger with the financial
terms of certain recent acquisition transactions Chase Securities deemed
reasonably comparable to the merger and otherwise relevant to Chase
Securities' inquiry; and
- made such other analyses and examinations as Chase Securities deemed
necessary or appropriate.
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In rendering its opinion, Chase Securities assumed and relied upon, without
assuming any responsibility for verification, the accuracy and completeness of
all of the financial and other information provided to, discussed with or
reviewed by or for Chase Securities, or publicly available, for purposes of its
opinion, and have further relied upon the assurance of the managements of Santa
Fe Snyder and Devon that they were not aware of any facts that would make such
information inaccurate or misleading. Chase Securities has neither made nor
obtained any independent evaluations or appraisals of the assets or liabilities
of Santa Fe Snyder or Devon, nor did Chase Securities conduct a physical
inspection of the properties or facilities of Santa Fe Snyder or Devon. Chase
Securities assumed that the financial forecasts and the synergies provided to or
discussed with Chase Securities by Santa Fe Snyder had been reasonably
determined on bases reflecting the best currently available estimates and
judgments of the management of Santa Fe Snyder and Devon as to the future
financial performance of their respective companies and the synergies. Chase
Securities expressed no view as to such forecast or projection information or
the assumptions on which they were based.
For purposes of rendering its opinion, Chase Securities assumed that, in all
respects material to its analysis, the representations and warranties of each
party contained in the agreement were true and correct, that each party would
perform all of the covenants and agreements required to be performed by it under
the merger agreement and that all conditions to the consummation of the merger
would be satisfied without waiver thereof. Chase Securities further assumed that
all material governmental, regulatory or other consents and approvals would be
obtained and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either Santa Fe Snyder or Devon is a party, as
contemplated by the merger agreement, no restrictions would be imposed or
amendments, modifications or waivers made that would have any material adverse
effect on the contemplated benefits of the merger. In addition, Chase Securities
further assumed that the merger would qualify as a tax-free reorganization for
U.S. federal income tax purposes. Chase Securities further assumed, with Santa
Fe Snyder's consent, that the merger would be accounted for as a pooling of
interests under United States generally accepted accounting principles.
In connection with the preparation of its opinion, Chase Securities was not
authorized by Santa Fe Snyder or its board of directors to solicit, nor did it
solicit, third-party indications of interest for the acquisition of all or any
part of Santa Fe Snyder.
Chase Securities' opinion was necessarily based on market, commodity price,
economic and other conditions as they existed and could be evaluated on the date
of its opinion. Chase Securities' opinion was limited to the fairness, from a
financial point of view, to the holders of Santa Fe Snyder common stock of the
exchange ratio, and Chase Securities expressed no opinion as to the merits of
the underlying decision by Santa Fe Snyder to engage in the merger. Chase
Securities expressed no opinion as to the prices at which the Santa Fe Snyder
common stock or the Devon common stock would trade following the announcement or
the consummation of the merger, as the case may be.
The following is a summary of certain financial and comparative analyses
performed by Chase Securities in arriving at its opinion. Some of these
summaries of financial analyses include information presented in tabular format.
In order to understand fully the financial analyses used by Chase Securities,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial analyses.
HISTORICAL EXCHANGE RATIO ANALYSIS. Chase Securities reviewed the per share
daily closing market price movements of the Santa Fe Snyder common stock and the
Devon common stock for various time periods ending on May 23, 2000, and
calculated the historical exchange ratios during this period implied by dividing
the daily closing prices per share of the Santa Fe Snyder common stock by those
of the Devon common stock and the averages of those historical trading ratios
for the one-week, one-month, 3-month, 6-month, 9-month and 1-year periods ending
May 23, 2000. The analysis resulted
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<PAGE>
in the following average historical trading ratios for the periods indicated
(rounded to the nearest thousandth), compared to the proposed exchange ratio of
0.22:
<TABLE>
<CAPTION>
PERIOD ENDING MAY 23, 2000 IMPLIED EXCHANGE RATIO
-------------------------- ----------------------
<S> <C>
May 23, 2000............................................ 0.182x
Last 1 Week............................................. 0.187x
Last 1 Month............................................ 0.193x
Last 3 Months........................................... 0.195x
Last 6 Months........................................... 0.203x
Last 9 Months........................................... 0.212x
Last 1 Year............................................. 0.219x
</TABLE>
COMPARABLE PUBLIC COMPANIES ANALYSIS. Using publicly available information,
Chase Securities compared certain financial and operating information and ratios
for Santa Fe Snyder with corresponding financial and operating information and
ratios for the following four companies in lines of business believed to be
generally comparable to those of Santa Fe Snyder, as follows:
- Noble Affiliates, Inc.
- Ocean Energy Inc.
- Pioneer Natural Resources Company
- Vintage Petroleum, Inc.
The analysis indicated that:
- the ratio of the firm value, meaning the market value of equity plus total
debt and preferred stock minus cash, to estimated earnings before
interest, taxes, depreciation, amortization and exploration costs, which
is referred to as EBITDAX, ranged from 5.2x to 6.0x for 2000, with a mean
of 5.5x and a median of 5.4x, and ranged from 5.0x to 6.1x for 2001, with
a mean and median of 5.5x; and
- the ratio of the equity value, meaning the market value of equity, to
projected cash flow ranged from 3.8x to 5.6x for 2000, with a mean of 4.7x
and a median of 4.6x, and ranged from 3.7x to 6.1x for 2001, with a mean
of 4.7x and a median of 4.6x.
Chase Securities also compared certain financial and operating information
and ratios for Devon with corresponding financial and operating information and
ratios for the following five companies in lines of business believed to be
generally comparable to those of Devon, as follows:
- Anadarko Petroleum Corporation/Union Pacific Resources Group Inc.
- Apache Corporation
- Burlington Resources Inc.
- EOG Resources, Inc.
- Unocal Corporation
This analysis indicated that:
- the ratio of the firm value to estimated EBITDAX ranged from 5.2x to 8.3x
for 2000, with a mean of 6.7x and a median of 6.9x, and ranged from 5.2x
to 7.4x for 2001, with a mean and median of 6.7x; and
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<PAGE>
- the ratio of the equity value to projected cash flow ranged from 5.5x to
7.5x for 2000, with a mean of 6.3x and a median of 6.2x, and ranged from
5.5x to 6.6x for 2001, with a mean and median of 6.2x.
Based upon the range of multiples derived from the analysis conducted for
the two sets of companies listed above and assuming the same commodity pricing
for each set of estimates for Santa Fe Snyder and Devon according to prices
listed on NYMEX during the first week of May 2000 for the balance of year 2000
and for calendar year 2001, Chase Securities estimated a reference range and
calculated the implied exchange ratios by comparing the implied per share equity
values of the Santa Fe Snyder common stock and the Devon common stock. The
analysis yielded the following implied exchange ratios (rounded to the nearest
thousandth), in each case compared to the proposed exchange ratio of 0.22:
<TABLE>
<CAPTION>
COMPARISON IMPLIED EXCHANGE RATIO
---------- ----------------------
<S> <C>
Lowest estimated valuation of the Santa Fe Snyder common
stock to highest estimated valuation of Devon common
stock................................................. 0.169x
Highest estimated valuation of the Santa Fe Snyder
common stock to lowest estimated valuation of the
Devon common stock.................................... 0.254x
</TABLE>
COMPARABLE TRANSACTIONS ANALYSIS. Chase Securities reviewed certain
publicly available information regarding selected business combinations in the
oil and gas exploration and production industry. The comparable transaction and
the month in which each transaction was announced were as follows:
- Union Pacific Resources Group Inc./Anadarko Petroleum Corporation
(April 2000)
- PennzEnergy Company/Devon Energy Corporation (May 1999)
- Snyder Oil Corporation/Santa Fe Energy Resources, Inc. (January 1999)
- Ocean Energy Inc./Seagull Energy Corporation (November 1998)
- Oryx Energy Company/Kerr-McGee Corporation (October 1998)
- Domain Energy Corporation/Lomak Petroleum Inc. (May 1998)
- Union Texas Petroleum Holdings, Inc./Atlantic Richfield Company
(May 1998)
- United Meridian Corporation/Ocean Energy Inc. (December 1997)
- Hugoton Energy Corporation/Chesapeake Energy Corporation (November 1997)
- Monterey Resources, Inc./Texaco Inc. (August 1997)
- The Louisiana Land and Exploration Company/Burlington Resources Inc.
(July 1997)
- Cairn Energy USA, Inc./The Meridian Resource Corporation (July 1997)
- American Exploration Company/Louis Dreyfus Natural Gas Corp. (June 1997)
- Convest Energy Corporation/Forcenergy Inc. (June 1997)
- McFarland Energy, Inc./Monterey Resources Inc. (June 1997)
- Parker & Parsley Petroleum Company/MESA Inc. (April 1997)
Chase Securities estimated a reference range for Santa Fe Snyder which
indicated that:
- the ratio of firm value to EBITDAX for the twelve months ending March 31,
2000 ranged from 6.1x to 7.1x;
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- the ratio of firm value to proven barrel of oil equivalents ranged from
$6.50 to $7.50; and
- the ratio of firm value to estimated after tax present value of proven
reserves ranged from 1.75x to 2.25x.
Chase Securities estimated a reference range for Devon which indicated that:
- the ratio of firm value to EBITDAX for the twelve months ending March 31,
2000 ranged from 8.5x to 9.5x;
- the ratio of firm value to proven barrel of oil equivalents ranged from
$9.00 to $10.00; and
- the ratio of firm value to estimated after tax present value of proven
reserves ranged from 1.75x to 2.25x.
Based upon the range of multiples derived from the analysis conducted for
the transactions listed above, Chase Securities also calculated the implied
exchange ratios by comparing the implied per share equity values of the Santa Fe
Snyder common stock and the Devon common stock. The analysis yielded the
following implied exchange ratios (rounded to the nearest thousandth), in each
case compared to the proposed exchange ratio of 0.22:
<TABLE>
<CAPTION>
COMPARISON IMPLIED EXCHANGE RATIO
---------- ----------------------
<S> <C>
Lowest estimated valuation of the Santa Fe Snyder common
stock to highest estimated valuation of Devon common
stock................................................. 0.154x
Highest estimated valuation of the Santa Fe Snyder
common stock to lowest estimated valuation of the
Devon common stock.................................... 0.236x
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. Chase Securities performed a discounted cash
flow analysis for each of Santa Fe Snyder and Devon using financial forecasts
for Santa Fe Snyder provided by Santa Fe Snyder and financial forecasts for
Devon provided by Devon. Chase Securities calculated a discounted cash flow
analysis for Santa Fe Snyder assuming discount rates ranging from 10% to 11%,
and terminal multiples of earnings before interest, taxes, depreciation and
amortization, which is referred to as EBITDA, in the year 2004 ranging from 5.0x
to 6.0x, and for Devon assuming discount rates ranging from 9% to 10%, and
terminal multiples of EBITDA in the year 2004 ranging from 6.0x to 7.0x. Based
upon the estimated valuation ranges of Santa Fe Snyder and Devon set forth
above, Chase Securities calculated an implied exchange ratio of a share of Devon
common stock to a share of Santa Fe Snyder common stock. The analysis yielded
the following implied exchange ratios (rounded to the nearest thousandth), in
each case compared to the proposed exchange ratio of 0.22:
<TABLE>
<CAPTION>
COMPARISON IMPLIED EXCHANGE RATIO
---------- ----------------------
<S> <C>
Lowest estimated valuation of Santa Fe Snyder common
stock to highest estimated valuation of Devon common
stock................................................. .208x
Highest estimated valuation of Santa Fe Snyder common
stock to Lowest estimated valuation of Devon common
stock................................................. .318x
</TABLE>
CONTRIBUTION ANALYSIS. Chase Securities estimated the contribution of each
of Santa Fe Snyder and Devon to the pro forma combined company with respect to
projected EBITDA and earnings for fiscal years 2000 and 2001, reserves,
projected production, book equity and discretionary cash flow. The relative
contributions of Santa Fe Snyder to the pro forma combined company resulted in
implied exchange ratios ranging from 0.182x to 0.300x.
LIQUIDATION NAV ANALYSIS. Chase Securities performed a liquidation net
asset value analysis for each of Santa Fe Snyder and Devon using financial
forecasts for Santa Fe Snyder provided by Santa Fe
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<PAGE>
Snyder and for Devon provided by Devon. Chase Securities estimated the
liquidation net asset value by:
1. calculating the estimated value of domestic and international
reserves based upon an average dollars per barrel of oil equivalent
derived from various available precedent transactions;
2. adding the amount of working capital;
3. in the case of Devon, adding the estimated value of Devon's
gathering, processing and marketing operations, field equipment and
buildings; and
4. subtracting total long-term debt, the present value of other
liabilities and corporate overhead.
Based upon the estimated valuation ranges of Santa Fe Snyder and Devon set
forth above, Chase Securities calculated an implied exchange ratio of a share of
Devon common stock to a share of Santa Fe Snyder common stock. The analysis
yielded the following implied exchange ratios (rounded to the nearest
thousandth), in each case compared to the proposed exchange ratio of 0.22:
<TABLE>
<CAPTION>
COMPARISON IMPLIED EXCHANGE RATIO
---------- ----------------------
<S> <C>
Lowest estimated valuation of the Santa Fe Snyder common
stock to highest estimated valuation of Devon common
stock................................................. 0.177x
Highest estimated valuation of the Santa Fe Snyder
common stock to lowest estimated valuation of the
Devon common stock.................................... 0.296x
</TABLE>
The following is a summary of implied exchange ratio ranges derived from
Chase Securities' historical exchange ratio analysis, comparable public
companies analysis, precedent transactions analysis, going concern discounted
cash flow analysis, contribution analysis and liquidation net asset value
analysis, all as described above:
<TABLE>
<CAPTION>
METHOD OF ANALYSIS IMPLIED EXCHANGE RATIO RANGE
------------------ ----------------------------
<S> <C>
Historical Exchange Ratio Analysis................. 0.187 to 0.219
Comparable Public Companies Analysis............... 0.169 to 0.254
Precedent Transactions Analysis.................... 0.154 to 0.236
Going Concern Discounted Cash Flow Analysis........ 0.208 to 0.318
Contribution Analysis.............................. 0.182 to 0.300
Liquidation Net Asset Value Analysis............... 0.177 to 0.296
</TABLE>
The summary set forth above does not purport to be a complete description of
the analyses performed by Chase Securities in arriving at its opinion. Arriving
at a fairness opinion is a complex process not necessarily susceptible to
partial analysis or summary description. Chase Securities believes that its
analyses must be considered as a whole and that selecting portions of analyses
and of the factors considered by it, without considering all such factors and
analyses, could create a misleading view of the processes underlying its
opinion. Chase Securities did not assign relative weights to any of its analyses
in preparing its opinion. The matters considered by Chase Securities in its
analyses were based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond Santa Fe Snyder's and
Devon's control and involve the application of complex methodologies and
educated judgment. Any estimates incorporated in the analyses performed by Chase
Securities are not necessarily indicative of actual past or future results or
values, which may be significantly more or less favorable than such estimates.
Estimated values do not purport to be appraisals and do not necessarily
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<PAGE>
reflect the prices at which businesses or companies may be sold in the future,
and such estimates are inherently subject to uncertainty. None of the comparable
companies used in the comparable public companies analysis described above is
identical to Santa Fe Snyder or Devon, and none of the comparable transactions
used in the comparable transactions analysis described above is identical to the
merger. Accordingly, an analysis of publicly traded comparable companies and
transactions is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
Santa Fe Snyder's board of directors selected Chase Securities to act as its
financial advisor on the basis of the reputation of Chase Securities as an
internationally recognized investment banking firm with substantial expertise in
transactions similar to the merger and because it is familiar with Santa Fe
Snyder and its business. As part of its financial advisory business, Chase
Securities is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes. Chase Securities has acted as financial
advisor to the board of directors in connection with the merger and will receive
a fee for its services, payment of a significant portion of which is contingent
upon the consummation of the merger. In the ordinary course of business, Chase
Securities or its affiliates may trade in the debt and equity securities of
Santa Fe Snyder and Devon for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
The terms of the engagement of Chase Securities by the board of directors
are set forth in a letter dated May 1, 2000. Pursuant to the terms of the letter
agreement, Santa Fe Snyder will pay to Chase Securities a fee of $3,500,000 upon
the closing of the merger if at any time prior to May 1, 2002 the merger or
similar transaction is consummated or an agreement is entered into which
subsequently results in a consummated transaction. In addition to this
compensation, Santa Fe Snyder has also agreed to reimburse Chase Securities for
its reasonable out-of-pocket expenses (including the fees of its legal counsel)
and to indemnify Chase Securities and certain related persons from and against
certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws, arising out of its engagement.
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<PAGE>
THE MERGER AGREEMENT
THIS SECTION DESCRIBES VARIOUS MATERIAL PROVISIONS OF THE MERGER AGREEMENT.
BECAUSE THE DESCRIPTION OF THE MERGER AGREEMENT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION THAT
MAY BE IMPORTANT TO YOU. YOU SHOULD READ CAREFULLY THE ENTIRE AGREEMENT AND PLAN
OF MERGER ATTACHED AS ANNEX A TO THIS JOINT PROXY STATEMENT/PROSPECTUS BEFORE
YOU DECIDE HOW TO VOTE.
GENERAL
As of the effective time of the merger, two things will happen:
- First, Devon Merger Co., a newly formed Delaware corporation, wholly owned
by Devon, will be merged into Santa Fe Snyder. Santa Fe Snyder will
continue as the surviving corporation and will become a wholly owned
subsidiary of Devon.
- Second, the outstanding shares of Santa Fe Snyder common stock will be
converted into shares of Devon common stock, based on the exchange ratio.
CLOSING OF THE MERGER; EFFECTIVE TIME OF THE MERGER
CLOSING OF THE MERGER. Unless Devon and Santa Fe Snyder agree otherwise,
the merger will close on the first business day after the date on which all
closing conditions have been satisfied or waived. We expect the closing to take
place after the stockholders of both companies approve the merger at the special
meetings.
EFFECTIVE TIME OF THE MERGER. At the closing of the merger, Devon will file
a certificate of merger with the Delaware Secretary of State. Unless Devon and
Santa Fe Snyder agree otherwise, the merger will become effective at the time
the certificate is filed.
CONSIDERATION TO BE RECEIVED IN THE MERGER
In the merger, without any action on the part of the Santa Fe Snyder
stockholders, the issued and outstanding shares of Santa Fe Snyder capital stock
will be treated as follows:
- each outstanding share of Santa Fe Snyder common stock will be converted
into 0.22 shares of Devon common stock;
- each share of Santa Fe Snyder common stock owned or held by Devon or Santa
Fe Snyder or their wholly owned subsidiaries, including treasury stock,
will be canceled and retired;
- each outstanding and unexercised option to purchase a share of Santa Fe
Snyder common stock issued under Santa Fe Snyder's employee benefit plans
will be converted into an option to purchase 0.22 shares of Devon common
stock at an exercise price equal to the quotient obtained by dividing the
exercise price immediately prior to the merger by 0.22 (rounded to the
nearest cent), and will have the same terms and conditions that were
applicable to the Santa Fe Snyder stock options.
EXCHANGE OF SHARES; FRACTIONAL SHARES
EXCHANGE AGENT. Prior to the merger, Devon will appoint Fleet National Bank
or another exchange agent reasonably acceptable to Santa Fe Snyder to exchange
the certificates representing shares of Santa Fe Snyder common stock for
certificates representing shares of Devon common stock and the cash to be paid
in lieu of fractional shares of Devon common stock. From time to time as needed,
Devon will deposit, for the benefit of holders of Santa Fe Snyder common stock,
certificates representing Devon common stock with the exchange agent for
conversion of shares as described below.
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<PAGE>
EXCHANGE OF SHARES. Promptly after the merger, the exchange agent will mail
to each holder of certificates representing Santa Fe Snyder common stock a
transmittal letter and instructions explaining how to surrender their
certificates to the exchange agent.
Santa Fe Snyder stockholders who surrender their stock certificates to the
exchange agent, together with a properly completed and signed transmittal letter
and any other documents required by the instructions to the transmittal letter,
will receive Devon common stock certificates representing the number of shares
that each holder is entitled in accordance with the exchange ratio, with a check
representing the amount of cash being paid in lieu of fractional shares of Devon
common stock. Holders of unexchanged Santa Fe Snyder stock certificates will not
receive any dividends or other distributions made by Devon after the merger
until their stock certificates are surrendered. Upon surrender, subject to
applicable laws, those holders will receive all dividends and distributions made
subsequent to the merger (with a record date also subsequent to the merger) and
prior to surrender on the related shares of Devon common stock, less the amount
of any withholding taxes, together with a check representing the amount of cash
in lieu of fractional shares of Devon common stock, in each case without
interest. Any shares of Devon common stock to be issued in the merger or funds
set aside by Devon to pay cash in lieu of fractional shares in connection with
the merger or to pay dividends or other distributions on shares of Devon common
stock to be issued in the merger that are not claimed one year after the merger
will be delivered to Devon. Thereafter, Devon will act as the exchange agent and
former stockholders of Santa Fe Snyder may look only to Devon for payment of
their shares of Devon common stock, cash in lieu of fractional shares and unpaid
dividends and distributions. None of Devon, the exchange agent or any other
person will be liable to any former holder of Santa Fe Snyder common stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
SANTA FE SNYDER STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED
PROXY CARD. A TRANSMITTAL LETTER AND ACCOMPANYING INSTRUCTIONS WILL BE PROVIDED
TO SANTA FE SNYDER STOCKHOLDERS FOLLOWING THE MERGER.
FRACTIONAL SHARES. No fractional shares of Devon common stock will be
issued to holders of Santa Fe Snyder common stock. In lieu of fractional shares,
each holder of shares of Santa Fe Snyder common stock otherwise entitled to a
fractional amount will receive by cash, check or other form of payment an amount
representing the fractional amount multiplied by the average of the closing
sales prices (or, if the securities are not traded on any trading day, the
average of the bid and ask prices on that day) of Devon common stock as reported
on the American Stock Exchange during the five trading days before the effective
date of the merger.
Devon will deposit the necessary cash with the exchange agent to forward to
holders in lieu of fractional shares of Devon common stock.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH COMPANY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of Devon and Santa Fe Snyder to complete the merger are subject to a
number of conditions, including the following, unless waived by both companies:
- approval of the merger by the Devon stockholders and Santa Fe Snyder
stockholders;
- the expiration or early termination of the waiting period under (a) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and (b) any material
applicable foreign competition or antitrust law or regulation;
- no statute, rule or regulation prohibiting the consummation of the merger
and no decree, order or injunction prohibiting the consummation of the
merger, provided the parties have agreed to use reasonable commercial
efforts to have any applicable decree, order or injunction lifted;
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<PAGE>
- the effectiveness of the registration statement of which this joint proxy
statement/prospectus is a part and the SEC not issuing a stop order
suspending the effectiveness; and
- the approval of the shares of Devon common stock to be issued in the
merger for listing on the American Stock Exchange, subject to official
notice of issuance.
ADDITIONAL CONDITIONS TO EACH COMPANY'S OBLIGATIONS. The obligations of
Devon and Santa Fe Snyder to complete the merger are subject to the following
additional conditions, unless waived by the other:
- material compliance with the agreements and covenants under the merger
agreement;
- the representations and warranties set forth in the merger agreement and
the documents delivered in connection with the merger agreement being true
and correct in all material respects;
- receipt of a written opinion of Andrews & Kurth L.L.P., in the case of
Santa Fe Snyder, and McAfee & Taft A Professional Corporation, in the case
of Devon, that:
(1) the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
(2) in the case of the Andrews & Kurth L.L.P. opinion, no gain or loss
will be recognized by Santa Fe Snyder or its stockholders who
exchange all of their common stock for Devon common stock, except for
cash in lieu of fractional shares and, in the case of the McAfee &
Taft A Professional Corporation opinion, no gain or loss will be
recognized by Devon; and
- the absence of any material event or occurrence with respect to the other
party since the date of the merger agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties by Devon and
Santa Fe Snyder as to themselves and their subsidiaries concerning, among other
things:
- organization, standing and authority;
- corporate authorization to enter into the merger and related transactions;
- capital structure;
- significant subsidiaries;
- the absence of defaults caused by execution of the merger agreement;
- compliance with agreements, court orders and laws;
- accuracy of financial statements and reports filed with the SEC;
- the absence of material litigation;
- the absence of certain changes or events;
- tax matters;
- employee benefits and labor matters;
- the absence of violations or liabilities under environmental laws;
- the ownership and rights to use intellectual property;
- good title to properties;
- insurance matters;
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<PAGE>
- broker's and finder's fees;
- receipt of financial advisors' opinions;
- the absence of ownership of the other company's capital stock;
- qualification of the merger for pooling-of-interests accounting treatment
and as a reorganization for federal income tax purposes;
- required board and stockholder approvals;
- in the case of Devon, amendment of its rights agreement to permit the
merger and related transactions;
- the inapplicability of Section 203 of Delaware General Corporation Law;
and
- the absence of noncompetition and material asset sale or purchase
contracts.
CERTAIN COVENANTS
OPERATING COVENANTS. Prior to the merger, each of Devon and Santa Fe Snyder
agreed to conduct its operations in the ordinary course in substantially the
same manner as previously conducted, and will use commercially reasonable best
efforts to preserve intact its business organization and goodwill and keep
available the services of its respective officers and maintain satisfactory
relationships with those persons with whom it is having business relationships.
With certain exceptions, the merger agreement places specific restrictions on
the ability of each of Devon and Santa Fe Snyder to, among other things:
- amend its certificate of incorporation or by-laws;
- fail to promptly notify the other of any material change in its financial
condition or business or any material litigation or material governmental
complaints, investigations or hearings (including those contemplated and
delivered in writing) or the material breach of any representation or
warranty contained in the merger agreement;
- fail to promptly deliver to the other any SEC filings made subsequent to
the date of the merger agreement;
- issue its capital stock, effect any change in its capitalization, grant
any right to acquire capital stock (other than to new employees consistent
with past practice or pursuant to existing contractual commitments),
increase any compensation or benefits or adopt any employee benefit plan;
- declare, set aside or pay dividends or redeem, purchase or otherwise
acquire any shares of its capital stock, except that Devon may continue to
pay dividends on (1) the shares of Devon common stock and exchangeable
shares at a quarterly rate not greater than $0.05 per share and (2) the
shares of Devon preferred stock at a quarterly rate not greater than
$1.6225 per share;
- dispose of material assets outside the ordinary course of business;
- acquire businesses or entities for an aggregate consideration in excess of
$3 million or for which a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 is required without the consent of the other
party;
- except as may be required by a change in law or in generally accepted
accounting practices, change any of its accounting principles or
practices;
- fail to use reasonable efforts to maintain its insurance;
- make or rescind any material tax election, settle or compromise any
material tax liability, or materially change its methods of reporting
income or deductions for federal income tax purposes, except as may be
required by applicable law;
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<PAGE>
- (1) incur any indebtedness for borrowed money (except under existing
credit lines, refinancing of existing debt and other immaterial borrowings
that in each case permit prepayment without material penalty),
(2) guarantee any indebtedness or issue any debt securities (or warrants
or rights to acquire any debt securities), or guarantee any debt
securities of others, (3) except in the ordinary course of business, enter
into any material leases or create any material mortgages, liens, security
interests or other encumbrances on its property in connection with any
indebtedness or (4) make or commit to make any capital expenditures in
excess of $3 million over the fiscal 2000 capital expenditures budget;
- purchase any shares of Devon common stock or Santa Fe Snyder common stock;
- agree to do any of the above actions;
- take any action that is likely to materially delay or adversely affect the
ability of Devon or Santa Fe Snyder to obtain any consent or approval of
any governmental commission, board or other regulatory body or the
expiration of any applicable waiting period required to complete the
merger;
- terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it is a party or fail to enforce to the
fullest extent permitted under applicable law the provisions of those
agreements;
- enter into or amend any agreement with any holder of shares of Devon
common stock or Santa Fe Snyder common stock with respect to the holding,
voting or disposing of shares;
- cause by resolution of its board of directors the acceleration of rights,
benefits or payments under its employment benefits plans;
- fail to use best commercial efforts to cause the merger to qualify as a
368(a) reorganization and to be accounted for as a pooling-of-interests
and take any action to prevent the merger from qualifying for
pooling-of-interests accounting treatment; and
- enter into forward sales contracts, fixed price contracts, fixed price
swaps, collars, options or other hedging arrangements.
The merger agreement contains additional agreements relating to, among other
things:
- the preparation, filing and distribution of this document and Devon's
filing of the registration statement on Form S-4 of which this document is
a part;
- the recommendation of the merger by each company's board of directors to
their respective stockholders;
- convening and holding the Devon stockholders meeting and the Santa Fe
Snyder stockholders meeting;
- access to information and cooperation regarding filings with governmental
and other agencies and organizations;
- public announcements;
- mutual notification of specified matters;
- the delivery of the comfort letters from each company's independent
accountants;
- agreements as to certain employee benefits matters;
- absence of actions or omissions that would result in the merger not
qualifying as a reorganization under Section 368(a) of the Internal
Revenue Code; and
- actions preventing the merger or the transactions contemplated by the
merger agreement from causing the rights issued pursuant to the Devon
rights agreements to be exercised.
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<PAGE>
AFFILIATE AGREEMENTS. Santa Fe Snyder has agreed to use reasonable
commercial efforts to cause its affiliates (as defined by Rule 145 under the
Securities Act) to enter into written agreements prior to the merger not to
sell, pledge, transfer or otherwise dispose of any shares of Devon common stock
issued to them in connection with the merger, except in compliance with
Rule 145 under the Securities Act or unless the shares have been registered
under the Securities Act or there is an available exemption from the
registration requirements. An affiliate would include any person that controls,
is controlled by, or is under common control with Santa Fe Snyder and may
include some of their officers and directors.
Each of Devon and Santa Fe Snyder has agreed to use reasonable commercial
efforts to cause its affiliates (as that term is used in Section E of Topic 2 of
the Securities and Exchange Commission's staff accounting bulletin series) to
enter into agreements prior to the merger not to intentionally take any action
that would cause the merger to fail to be accounted for as a
pooling-of-interests.
INDEMNIFICATION AND INSURANCE
For a period of six years after the merger, the combined company will
indemnify and hold harmless to the fullest extent permitted under applicable law
each past or present officer or director of Santa Fe Snyder and each person who
served at the request of Santa Fe Snyder as a director, officer, trustee or
fiduciary of another entity or enterprise. Those persons will be indemnified for
actions taken by them, or failures to act, while serving in those capacities,
whether claimed before or after the merger.
The combined company will cause directors' and officers' liability insurance
to be maintained for six years after the merger. The insurance will cover
persons who are or were covered by Santa Fe Snyder's existing directors' and
officers' liability insurance policies. The terms of the insurance will be
substantially no less advantageous to such persons than the existing insurance
with respect to acts or omissions prior to the merger. However, the combined
company will not be required to pay annual premiums in excess of 250% of the
last annual premium paid by Devon, but will purchase as much coverage as
reasonably practicable for such amount.
OTHER ACQUISITION PROPOSALS
In the merger agreement, each of Devon and Santa Fe Snyder has agreed that
it and its subsidiaries will:
- not knowingly permit any of its officers, directors, employees, agents or
representatives to solicit, initiate or knowingly encourage any inquiry,
proposal or offer for a third-party tender offer, merger, consolidation,
business combination or similar transaction involving 30% or more of the
assets or 15% or more of its capital stock, or participate in any
discussions or negotiations concerning such an acquisition proposal; and
- immediately cease any existing negotiations with any third parties with
respect to any of the above; except that Santa Fe Snyder or Devon, or
their boards of directors, may respond publicly to a third-party tender
offer as required by the federal securities laws or provide information on
a confidential basis to any person, or have discussions with any person,
who makes an unsolicited bona fide acquisition proposal with respect to
all of the outstanding common stock or substantially all of the company
assets, as long as:
(1) the company involved, whether Devon or Santa Fe Snyder, provides
prompt notice to the other that it has received the unsolicited
request for information or an acquisition proposal, and continues to
provide timely updates as to material developments;
(2) in the good faith judgment of its board of directors, after
consultation with its financial and outside legal advisors and taking
into account the likelihood of consummation, the acquisition proposal
is superior to the merger and the failure to respond to the
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information request or to engage in discussions would be inconsistent
with its fiduciary obligations; and
(3) it does not enter into any agreement with respect to an acquisition
proposal prior to the termination of the merger agreement.
The Devon board or the Santa Fe Snyder board may withdraw or change its
original recommendation to stockholders to vote for the merger agreement, or
recommend that stockholders vote instead for a superior acquisition proposal,
but only if the board determines, after consultation with its counsel, that the
failure to do so would be inconsistent with its fiduciary obligations. As
described further in the next two sections, each of Devon and Santa Fe Snyder
has the right to terminate the merger agreement in order to accept a superior
acquisition proposal, subject to the payment of a termination fee and expenses.
See "--Termination Fees and Expenses" on page 71.
TERMINATION
Prior to the merger, the merger agreement may be terminated:
- by mutual written consent of Devon and Santa Fe Snyder;
- by either Devon or Santa Fe Snyder if:
(1) the merger is not consummated by December 31, 2000, so long as the
party seeking to terminate did not prevent consummation by failing to
fulfill any of its obligations under the merger agreement;
(2) the stockholders of either company fail to approve the merger; or
(3) there is a legal prohibition to closing the merger, so long as the
party seeking termination has used reasonable commercial efforts to
remove such prohibition.
- by Devon if:
(1) the Devon board determines that proceeding with the merger would be
inconsistent with its fiduciary obligations due to a superior
proposal, but only if Devon provides Santa Fe Snyder with three
business days' written notice of its intent to terminate and during
those three days, Devon considers any adjustments in the terms and
conditions of the merger agreement that Santa Fe Snyder may propose,
and Devon pays to Santa Fe Snyder a termination fee of up to
$103 million;
(2) Santa Fe Snyder breaches any of its agreements in the merger
agreement or if any representation or warranty of Santa Fe Snyder
becomes untrue, where the conditions to the merger agreement would
not be satisfied, and the breach is not cured within 30 days and
Devon is not in material breach of the merger agreement; or
(3) the Santa Fe Snyder board withdraws, or materially modifies, its
approval or recommendation of the merger, or recommends an
acquisition proposal.
- Santa Fe Snyder if:
(1) the Santa Fe Snyder board determines that proceeding with the merger
would be inconsistent with its fiduciary obligations due to a
superior proposal, but only if Santa Fe Snyder provides Devon with
three business days' written notice of its intent to terminate and
during those three days, Santa Fe Snyder considers any adjustments in
the terms and conditions of the merger agreement that Devon may
propose, and Santa Fe Snyder pays to Devon a termination fee of up to
$103 million;
(2) Devon breaches any of its agreements in the merger agreement or if
any representation or warranty of Devon becomes untrue, where the
conditions to the merger agreement
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would not be satisfied, and the breach is not cured within 30 days
and Santa Fe Snyder is not in material breach of the merger
agreement; or
(3) the Devon board withdraws, or materially modifies, its approval or
recommendation of the merger, or recommends an acquisition proposal.
TERMINATION FEES AND EXPENSES
TERMINATION FEES PAYABLE BY DEVON. Devon has agreed to pay Santa Fe Snyder
a cash termination fee of up to $103 million at the time of termination of the
merger agreement if any one of the following circumstances occurs:
- Devon terminates the merger agreement because of a superior acquisition
proposal;
- after the public announcement that Devon has received an acquisition
proposal, Devon or Santa Fe Snyder terminates the merger agreement because
the Devon stockholders vote against the merger; or
- after the public announcement or receipt by Devon of an acquisition
proposal, Santa Fe Snyder terminates the merger agreement because the
Devon board has withdrawn or materially modified its approval or
recommendation of the merger, or the Devon board has recommended to Devon
stockholders the acquisition proposal.
If the circumstances specified in the first or third preceding clause occur, the
termination fee will be $103 million. If the circumstances specified in the
second preceding clause occur, the termination fee will be $46.35 million, plus
an additional $56.65 million if, within twelve months after terminating the
merger agreement, a third party acquires at least 50% of Devon's voting stock or
assets or any transaction occurs in which Devon is not the surviving
corporation, or in which Devon is the surviving corporation, but the Devon
shares are exchanged for other shares or property, or the Devon shares
outstanding after the transaction represent less than 50% of the Devon shares
outstanding before the transaction.
TERMINATION FEES PAYABLE BY SANTA FE SNYDER. Santa Fe Snyder has agreed to
pay Devon a cash termination fee of up to $103 million at the time of
termination of the merger agreement if any one of the following circumstances
occurs:
- Santa Fe Snyder terminates the merger agreement because of a superior
acquisition proposal;
- after the public announcement that Santa Fe Snyder has received an
acquisition proposal, Santa Fe Snyder or Devon terminates the merger
agreement because the Santa Fe Snyder stockholders vote against the
merger; or
- after the public announcement or receipt by Santa Fe Snyder of an
acquisition proposal, Devon terminates the merger agreement because the
Santa Fe Snyder board has withdrawn or materially modified its approval or
recommendation of the merger, or the Santa Fe Snyder board has recommended
to Santa Fe Snyder stockholders the acquisition proposal.
If the circumstances specified in the first or third preceding clause occur, the
termination fee will be $103 million. If the circumstances specified in the
second preceding clause occur, the termination fee will be $46.35 million, plus
an additional $56.65 million if, within twelve months after terminating the
merger agreement, a third party acquires at least 50% of Santa Fe Snyder voting
stock or assets or any transaction occurs in which Santa Fe Snyder is not the
surviving corporation, or in which Santa Fe Snyder is the surviving corporation,
but the Santa Fe Snyder shares are exchanged for other shares or property, or
the Santa Fe Snyder shares outstanding after the transaction represent less than
50% of the Santa Fe Snyder shares outstanding before the transaction.
TERMINATION FEES--GENERAL. If the board of directors of Santa Fe Snyder or
Devon recommends that its stockholders accept a third party tender or exchange
offer for its common stock, it will be
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treated for purposes of determining the termination fees as though an
acquisition agreement for Santa Fe Snyder or Devon has been executed and
delivered.
If either company fails to promptly pay any termination amount due, and, in
order to obtain such payment, the other party commences a suit which results in
a judgment against the party owing the termination amount, the party owing the
termination amount will pay to the other party its costs and expenses in
connection with such suit, together with interest on the termination amount from
each date for payment until the date of such payment at the published prime rate
of The Chase Manhattan Bank in effect on the date such payment was required to
be made plus two percent.
MERGER COSTS. Devon and Santa Fe Snyder expect to incur approximately
$57 million of nonrecurring business combination costs, primarily related to
investment banking expenses, severance, legal and accounting fees, financial
printing expenses and other related charges.
OTHER EXPENSES. All costs and expenses incurred in connection with the
merger agreement and related transactions will be paid by the party incurring
them, except that termination fees and expenses will be paid as provided above
in "--Termination Fees and Expenses" on page 71.
AMENDMENT; EXTENSION AND WAIVER
AMENDMENT. Subject to the next sentence, the merger agreement may be
amended at any time with the consent of the Devon board and the Santa Fe Snyder
board. If the merger agreement has been approved by the Devon stockholders and
the Santa Fe Snyder stockholders, then it cannot be amended subsequently without
obtaining any further stockholder approval required by law.
EXTENSION AND WAIVER. At any time prior to the completion of the merger,
each of Devon and Santa Fe Snyder may, to the extent permitted by law, grant the
other party additional time to perform its obligations under the merger
agreement, may waive any inaccuracies in the representations and warranties of
the other party and may waive compliance with any agreements or conditions for
the benefit of that party.
STOCK EXCHANGE LISTING
The American Stock Exchange is expected to approve, subject to stockholder
approval, the listing, on a "when issued" basis, of the shares of Devon common
stock to be issued in the merger and upon future exercise of Santa Fe Snyder
stock options.
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THE STOCK OPTION AGREEMENTS
BECAUSE THE DESCRIPTION OF THE STOCK OPTION AGREEMENTS CONTAINED HEREIN IS A
SUMMARY, IT MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU.
YOU SHOULD READ CAREFULLY THE ENTIRE COPIES OF THE STOCK OPTION AGREEMENTS
ATTACHED AS ANNEXES D AND E TO THIS JOINT PROXY STATEMENT/PROSPECTUS BEFORE YOU
DECIDE HOW TO VOTE.
GENERAL
As an inducement and condition to entering into the merger agreement, Devon
and Santa Fe Snyder granted to each other options to purchase shares of their
common stock equal to approximately 19.9% of their currently outstanding shares
in substantially identical stock option agreements.
TERMS OF THE OPTIONS
NUMBER OF SHARES AND EXERCISE PRICE. Under the Devon stock option agreement,
Devon has granted to Santa Fe Snyder an option to purchase up to 16,501,054
shares of Devon common stock at a price per share of $56.4875, the average of
the closing prices of the Devon common stock as reported on the American Stock
Exchange from May 11 to May 24, the ten consecutive trading days before the
execution of the stock option agreement. Under the Santa Fe Snyder stock option
agreement, Santa Fe Snyder has granted to Devon an option to purchase up to
36,424,413 shares of Santa Fe Snyder common stock at a price per share of
$10.6625, the average of the closing prices of the Santa Fe Snyder common stock
as reported on the New York Stock Exchange during the same ten-day period.
Each option has customary adjustment provisions to change the number of
shares issuable under that option and the exercise price in the event of a stock
dividend, a stock split, a merger, an exchange of shares, an extraordinary or
liquidating dividend, or similar kinds of events in order to fully preserve the
economic benefits provided under the option. The number of shares issuable under
each option will also be adjusted in the event the party granting the option
issues additional shares of common stock in order to ensure that the option
remains exercisable for an aggregate of 19.9% of that party's outstanding common
stock.
EXERCISE RIGHTS. Either Devon or Santa Fe Snyder may exercise its option if
the merger agreement is terminated under circumstances which entitle it to
receive a termination fee, as described above in "The Merger
Agreement--Termination" on page 70 and "--Termination Fees and Expenses" on page
71. These circumstances generally involve:
- an adverse change in, or failure to reconfirm, the recommendation of a
party's board of directors to that party's stockholders to approve the
merger after an acquisition proposal has been received or publicly
announced;
- the approval or recommendation by a party's board of directors of a
superior proposal; or
- the failure of a party's stockholders to approve the merger after an
acquisition proposal has been publicly announced.
EXPIRATION. To the extent an option has not been exercised, it will expire
upon the earliest of:
- completion of the merger;
- the grantee's written notice to the company granting the option of
termination of the option agreement;
- twelve months after the occurrence of the first event which causes the
option to be exercisable; and
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- the termination of the merger agreement under certain circumstances where
the option would not and could not be exercisable.
REPURCHASE AT THE OPTION OF THE GRANTEE
Each of Devon and Santa Fe Snyder has the right to require the other to
repurchase the unexercised portion of the option and any shares of its common
stock purchased and held by the optionholder under the option after the
occurrence of an event which results in the option being exercisable, and prior
to 120 days after the expiration of the option term.
REPURCHASE PRICE. The price per share the issuer of the option will pay
upon that event is equal to the sum of:
- the aggregate exercise price paid for the exercised option shares being
repurchased;
- the excess of the applicable price over the exercise price, multiplied by
the number of exercised option shares being repurchased; and
- the excess of the applicable price over the exercise price, multiplied by
the number of unexercised option shares being repurchased.
The applicable price for a share of common stock issued under either the
Devon stock option or the Santa Fe Snyder stock option is equal to the higher
of:
- the then current market price, based on the average closing price during
the ten preceding trading days,
- the highest purchase price per share to be paid by a third party in
connection with a tender or exchange offer and
- the price per share to be paid by a third party in connection with a
business combination involving the common stock.
REGISTRATION RIGHTS
Devon and Santa Fe Snyder have granted each other customary rights to
register the shares of common stock issuable upon exercise of their options.
Each has the right to require the other to file up to two registration
statements under the Securities Act to register the shares for resale. In
addition, each has agreed that if it files its own registration statement to
register shares of its common stock unrelated to the options, it will allow the
other to participate in that registration statement in order to register shares
issuable under its option, subject to certain volume limitations. In connection
with any registration described above, the issuer and optionholder will provide
to each other and any underwriter of the offering customary representations,
warranties and covenants, including covenants of indemnification and
contribution.
LIMITATION OF PROFIT
Each of Devon's and Santa Fe Snyder's total profit under its stock option
agreement may not exceed $103 million. The total profit under each stock option
agreement is the sum of:
- the amounts received by the grantee in the repurchase of all or part of
the unexercised portion of the option;
- the amounts received by the grantee in the sale of option shares, less the
grantee's purchase price for the option shares; and
- all termination fees and expenses received or payable under the merger
agreement; less, any payments made to the grantor to reduce grantee's
total profit.
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Any excess amount received by Devon or Santa Fe Snyder above $103 million
must be returned to the other party, either by delivering for cancellation
shares of common stock previously issued to it, by making a cash payment, by
reducing the amount of the termination fee otherwise payable to it under the
merger agreement, or by any combination of these methods.
EFFECT OF STOCK OPTION AGREEMENTS
The stock option agreements are intended to increase the likelihood that the
merger will be completed in accordance with the terms of the merger agreement.
The stock option agreements have the effect of making an acquisition or other
combination of either company by or with a third party more costly because of
the need to acquire or otherwise provide for the shares issuable under the
option. Moreover, after consulting with their independent accountants, Devon and
Santa Fe Snyder believe that, if either option becomes exercisable, a third
party acquiror of the company that issued the option would likely be prohibited
for two years from accounting for the acquisition by using the
pooling-of-interests accounting method. Accordingly, the stock option agreements
may discourage a third party from proposing a competing transaction, including
one that might be more favorable to stockholders than the merger.
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PROPERTIES OF THE COMBINED COMPANY
The following table shows the total proved reserves of the combined company
as of December 31, 1999, on a pro forma basis assuming completion of the merger:
<TABLE>
<CAPTION>
PROVED RESERVES AS OF DECEMBER 31, 1999
---------------------------------------------------------------------
10% PRESENT 10%
SANTA FE COMBINED VALUE (IN PRESENT
PRIMARY OPERATING AREAS DEVON SNYDER COMPANY MBOE% THOUSANDS) VALUE %
----------------------- --------- --------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NORTH AMERICA--MBOE
Northern Division
Rocky Mountains................ 113,771 105,229 219,000 21% $ 972,002 17%
Permian Basin.................. 120,312 95,038 215,350 20% 1,443,141 25%
Mid-Contintent and Other....... 102,945 -- 102,945 10% 535,211 9%
--------- --------- --------- --- ---------- ---
Total Northern Division.......... 337,028 200,267 537,295 51% 2,950,354 51%
--------- --------- --------- --- ---------- ---
Southern Division
Offshore....................... 56,380 54,061 110,441 11% 765,956 13%
Onshore........................ 28,601 2,927 31,528 3% 211,097 3%
--------- --------- --------- --- ---------- ---
Total Southern Division.......... 84,981 56,988 141,969 14% 977,053 16%
--------- --------- --------- --- ---------- ---
Canadian Division................ 120,515 -- 120,515 11% 689,777 12%
--------- --------- --------- --- ---------- ---
TOTAL--NORTH AMERICA............. 542,524 257,255 799,779 76% 4,617,184 79%
--------- --------- --------- --- ---------- ---
INTERNATIONAL--MBOE
Azerbaijan....................... 107,735 -- 107,735 10% 409,306 7%
Southeast Asia................... -- 71,547 71,547 7% 325,112 6%
South America.................... 17,240 47,046 64,286 6% 317,212 5%
Other International.............. 2,323 10,410 12,733 1% 143,901 3%
--------- --------- --------- --- ---------- ---
TOTAL INTERNATIONAL.............. 127,298 129,003 256,301 24% 1,195,531 21%
--------- --------- --------- --- ---------- ---
TOTAL COMPANY.................... 669,822 386,258 1,056,080 100% $5,812,715 100%
========= ========= ========= === ========== ===
OIL--MBBLS
United States.................... 145,524 103,845 249,369 24%
Canada........................... 32,132 -- 32,132 3%
International.................... 126,261 88,877 215,138 20%
--------- --------- --------- ---
Total Company--Oil............... 303,917 192,722 496,639 47%
========= ========= ========= ---
GAS--MMCF
United States.................... 1,384,086 890,326 2,274,412 36%
Canada........................... 506,218 -- 506,218 8%
International.................... 6,223 162,765 168,988 3%
--------- --------- --------- ---
Total Company--Gas............... 1,896,527 1,053,091 2,949,618 47%
========= ========= ========= ---
NGLS--MBBLS
United States.................... 45,804 5,023 50,827 5%
Canada........................... 4,013 -- 4,013 --%
International.................... -- 12,998 12,998 1%
--------- --------- --------- ---
Total Company--NGLs.............. 49,817 18,021 67,838 6%
--------- --------- --------- ---
TOTAL COMPANY--MBOE.............. 669,822 386,258 1,056,080 100%
========= ========= ========= ===
</TABLE>
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PRIMARY OPERATING AREAS--NORTH AMERICA
The combined company's operations within North America will be organized
geographically into three divisions: Northern, Southern and Canada. The Northern
Division consists of the Rocky Mountains, the Permian Basin and the
Mid-Continent areas. The Southern Division consists of the offshore Gulf of
Mexico and the onshore Gulf Coast areas of Texas and Louisiana.
UNITED STATES--NORTHERN DIVISION PROPERTIES
ROCKY MOUNTAINS. Many oil and gas producing basins are located in the Rocky
Mountains area stretching from the Canadian border south into northern New
Mexico. This area will represent the combined company's largest concentration of
proved reserves with 219.0 million barrels of oil equivalent, or 21% of the
total company on a pro forma basis at December 31, 1999.
In addition to substantial oil production, the Rocky Mountains area will
include the combined company's operations in three coalbed methane areas: the
San Juan Basin in northwest New Mexico and southern Colorado, the Powder River
Basin in Wyoming and the Raton Basin of northeastern New Mexico. Technology
pioneered by Devon and other companies in the 1980's and 1990's resulted in
significant production from coalbeds in the San Juan Basin. The combined company
will continue development of coalbed reservoirs in the Powder River and Raton
basins. During the next five years, we plan to drill several thousand coalbed
methane wells in these basins which could, in aggregate, add significant proved
natural gas reserves. Additionally, Devon controls a majority interest in a
126-mile gas gathering system servicing the Powder River Basin that commenced
operations in the third quarter of 1999. The system has access to multiple
interstate pipelines and, when fully developed in 2001, will have an estimated
capacity of 450 million cubic feet of gas per day.
Other producing basins in the Rocky Mountains area include the gas-prone
Washakie, Wind River, Big Horn and Green River basins in Wyoming. The combined
company will operate 229 wells in the Washakie Basin with an average 77% working
interest. It will operate 110 wells in the Wind River Basin, holding a 91%
average working interest. In the Green River Basin, the combined company will
own an interest in properties in the Jonah field and the deep Moxa Arch.
PERMIAN BASIN. The Permian Basin area encompasses approximately 66,000
square miles in southeastern New Mexico and west Texas and contains more than
500 major oil and gas fields. Since 1987, several significant acquisitions of
properties by Devon in the Permian Basin have established prospective acreage in
areas in which leasehold positions could not otherwise be obtained. The Permian
Basin area will represent the combined company's second largest proved reserve
position with 215.4 million barrels of oil equivalent, or 20% of the total
company on a pro forma basis at December 31, 1999. The area is characterized by
prolific, long-lived oil and gas production from numerous formations found at a
wide variety of depths. Devon has been among the most active companies in the
basin and plans to continue its aggressive development, exploitation and
exploration programs. Of particular emphasis will be Morrow formation drilling
in the Catclaw Draw and Indian Basin areas. Many formations respond to enhanced
recovery techniques, such as waterfloods and CO2 recovery programs. The region
is crossed by a number of pipelines with easy access to many oil and gas
markets.
MID-CONTINENT AND OTHER. The Mid-Continent area includes all or portions of
the states of Kansas, Oklahoma, Texas, Arkansas, Louisiana, Mississippi and
Alabama. On a pro forma basis at December 31, 1999, this area, including
properties in the Appalachian states that have been selected for divestiture,
included 102.9 million barrels of oil equivalent proved reserves, or 10% of the
combined company. The area covers a wide spectrum of geologic formations
producing both oil and natural gas. The Mid-Continent area continues to offer
exploitation and exploration potential. Advanced technologies such as 3-D
seismic should enable the combined company to study complex geologic
environments and identify new exploratory prospects on its extensive undeveloped
acreage base.
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Application of nuclear magnetic resonance logging and advanced fracture
stimulation technology should enhance exploitation of previously bypassed gas
reserves in the Carthage-Bethany and Sligo fields of east Texas and north
Louisiana.
UNITED STATES--SOUTHERN DIVISION PROPERTIES
SOUTHERN DIVISION OFFSHORE. On a pro forma basis at December 31, 1999, the
offshore Gulf of Mexico area accounted for 110.4 million barrels of oil
equivalent proved reserves, or 11% of the combined company. The combined company
will be one of the ten largest independent producers on the shelf (less than 600
feet of water) in the Gulf of Mexico. The offshore shelf is a prolific, yet
mature, producing province. Devon will leverage its extensive infrastructure and
asset base on the shelf with the objective of maintaining current production
levels. Devon will operate 52 fields and 101 platforms on the shelf.
In addition to the shelf effort, the combined company will look to deeper
water, beyond the shelf, to explore for new oil and gas reserves. The combined
company will hold interests in 172 exploratory blocks in the Gulf of Mexico. Of
these, 90 blocks are in deep water. The deep water is believed to hold some of
North America's largest undiscovered oil and gas deposits. Technology and
infrastructure now exist to drill and produce oil in water depths greater than
3,000 feet. In July 1999 and January 2000, Santa Fe Snyder increased its deep
water asset base by acquiring working interests in the Angus, Manatee, El Toro,
and Macaroni fields in the Garden Banks and Green Canyon deep water areas. The
Angus field is on production and the Macaroni field commenced production in the
third quarter of 1999. Production from the El Toro and Manatee fields is
expected to commence in 2001 and 2002, respectively. In addition, the combined
company will participate in the development of three other fields that will
contribute to the production profile in the deep water in 2001 and 2002.
SOUTHERN DIVISION ONSHORE. The combined company's onshore Gulf Coast area
includes lands in south Texas and south Louisiana. This area included
31.5 million barrels of oil equivalent proved reserves, or 3% of the combined
company on a pro forma basis as of December 31, 1999. In south Texas, where
exploration for oil and gas is accelerating, 3-D seismic data covers our major
acreage positions. This acreage is prospective for production in the Charco
Lobo, Middle Wilcox and Frio-Vicksburg formations. The combined company's
exploration efforts in south Louisiana are focused on natural gas prospects in
the lower, mid and upper Miocene age formations. The onshore Gulf Coast area
provides ready access to pipelines and production facilities.
CANADIAN DIVISION PROPERTIES
Western Canada accounted for 120.5 million barrels of oil equivalent proved
reserves, or 11% of the combined company on a pro forma basis as of
December 31, 1999. The combined company will operate in Canada through its
wholly owned subsidiary, Northstar Energy Corporation. The Western Canadian
Sedimentary Basin encompasses portions of British Columbia, Alberta,
Saskatchewan and Manitoba and offers a wide variety of oil and natural gas
exploration and development opportunities. The combined company's properties
within the Western Canadian Sedimentary Basin will range from shallow oil and
natural gas production in northern Alberta to deep, long-lived gas reservoirs in
the Foothills area near the Alberta/British Columbia border. The Foothills area
is perhaps the most underdeveloped exploration region in western Canada and
contains some of the area's most promising deep gas prospects. Drilling plans in
the year 2000 include participation in an offset to a significant 1998 Foothills
gas discovery.
The combined company will hold 2.2 million net acres of undeveloped
leasehold in the Western Canadian Sedimentary Basin. This extensive acreage
position will provide the company with numerous opportunities to increase
reserves and production.
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PRIMARY OPERATING AREAS--INTERNATIONAL
Approximately one-quarter of the combined company's proved oil and gas
reserves will be in countries outside North America. As one of the five largest
U.S.-based independents, the combined company will have the technical
capabilities and financial strength necessary to support an international
exploration and production effort. The combined company's International Division
will focus on selected oil and gas provinces outside North America that can
provide reserve growth opportunities, access to markets and favorable fiscal
regimes.
AZERBAIJAN
The largest concentration of proved reserves to be held by the combined
company outside North America are located under the Caspian Sea, offshore
Azerbaijan, part of the former Soviet Union. The Caspian Basin is considered to
hold some of the world's last known major undeveloped hydrocarbon reserves.
Devon holds a 4.8% carried interest in the Azeri-Chirag-Gunashli joint
development area. This area is estimated to contain in excess of five billion
barrels of crude oil. We expect significant production from our interest in
Azerbaijan to begin sometime between 2005 and 2010. Azerbaijan will include
107.7 million barrels of oil equivalent proved reserves, or 10% of the combined
company on a pro forma basis at December 31, 1999.
SOUTHEAST ASIA
Southeast Asia will account for 71.5 million barrels of oil equivalent
proved reserves, or 7% of the combined company on a pro forma basis at
December 31, 1999, including oil and gas reserves in Indonesia and China. In
Indonesia, the combined company will hold a 30% interest and operate the Jabung
Block on the island of Sumatra. Oil production commenced from the Jabung Block
in 1997. Additional development wells are planned in 2000. Development of
significant natural gas reserves on the Jabung Block depends upon Devon entering
into long-term gas sales contracts. Final negotiations of these contracts are in
progress. Assuming successful conclusion of the negotiations in 2000 and
assuming the construction of a pipeline, gas sales to Singapore could commence
in 2002 to 2003. Oil production from the Tuban Block on the island of Java
commenced in 1998.
The combined company will hold a 3.2 million net acre lease position in the
Pearl River Mouth Basin in the South China Sea. The Ursa discovery in 1998 and
the Bootes discovery in 1999 have led to planned first production from China by
2003. We expect to conduct further exploration drilling on untested blocks in
2000. In addition to its assets in Indonesia and China, the combined company
will hold exploration concessions in Malaysia and Thailand.
SOUTH AMERICA
On a pro forma basis at December 31, 1999, South America accounted for
64.3 million barrels of oil equivalent proved reserves, or 6% of the combined
company. In Argentina, the company will focus primarily on natural gas from the
Neuquen Basin. This area supplies gas to Buenos Aires and Chile. Drilling plans
for 2000 include the 100% working interest El Mangrullo block and the 20%
working interest CNQ-10 block.
The combined company will operate the Carauna Block in the Potiguar Basin
offshore Brazil and hold a 51% working interest. In 2000, the company will
re-enter three wells, drill four new wells and install a system which will
produce to a floating storage and offloading vessel. If the field performs as
expected, the company expects to set permanent production facilities and drill
additional development wells in 2001. The combined company will also operate
Block BM-C-8 in the shallow water portion of the Campos Basin of Brazil. Santa
Fe Snyder won the exploration and production rights to this oil block in a
recent lease sale.
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The combined company expects to exit Venezuela. Minor oil volumes are
currently produced from Devon's wells in eastern Lake Maracaibo.
OTHER INTERNATIONAL PROPERTIES
In the West African nation of Gabon, offshore oil production commenced in
January 1998. Additional production is expected to commence in 2000. In Egypt,
the combined company expects to begin producing oil by early 2001 from a 1999
discovery in the Gulf of Suez. These countries will account for 12.7 million
barrels of oil equivalent proved reserves, or 1% of the total company on a pro
forma basis at December 31, 1999. The combined company will also hold
exploratory concessions in the Congo, Cote d'Ivoire, Ghana, and Qatar. We will
evaluate our positions in these exploratory areas and may seek to reduce our
working interests in some of these concessions.
DEVELOPED AND UNDEVELOPED ACREAGE
The following table sets forth the combined company's developed and
undeveloped oil and gas lease and mineral acreage on a pro forma basis as of
December 31, 1999. Gross acres are the total number of acres in which the
combined company will own a working interest. Net refers to gross acres
multiplied by the combined company's fractional working interests therein.
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
------------------- -------------------
GROSS NET GROSS NET
-------- -------- -------- --------
(IN THOUSANDS OF ACRES)
<S> <C> <C> <C> <C>
United States--Onshore...................................... 3,177 1,910 4,714 2,769
United States--Offshore..................................... 584 314 1,009 661
Canada...................................................... 873 469 3,074 2,206
Argentina................................................... 201 46 1,186 330
Australia................................................... -- -- 730 289
Azerbaijan.................................................. 10 -- 97 5
Brazil...................................................... 47 24 895 273
China....................................................... -- -- 3,861 3,202
Congo....................................................... -- -- 207 155
Cote d'Ivoire............................................... -- -- 315 312
Egypt....................................................... -- -- 9,642 9,467
Gabon....................................................... 13 3 1,052 1,025
Ghana....................................................... -- -- 2,222 2,222
Indonesia................................................... 18 4 5,989 2,192
Malaysia.................................................... -- -- 3,494 2,795
Qatar....................................................... -- -- 522 391
Thailand.................................................... -- -- 2,294 2,294
Venezuela................................................... 21 11 1,399 1,385
----- ----- ------ ------
Total..................................................... 4,944 2,781 42,702 31,973
===== ===== ====== ======
</TABLE>
80
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMBINED COMPANY
DIRECTORS
The Devon certificate of incorporation classifies the combined company board
into three classes having staggered terms of three years each. The number of
directors will be fixed from time to time by resolution of the combined company
board. The Devon board is currently set at 14 members. Upon completion of the
merger, we expect the combined company board will be set at 13 members,
initially consisting of the following:
<TABLE>
<CAPTION>
CURRENT BOARD EXPIRATION OF
NAME AGE MEMBERSHIP FIRST TERM
---- -------- --------------- -------------
<S> <C> <C> <C>
Thomas F. Ferguson(1)..................................... 64 Devon 2001
David M. Gavrin(2)........................................ 65 Devon 2001
Michael E. Gellert(3)..................................... 69 Devon 2002
William E. Greehey(4)..................................... 64 Santa Fe Snyder 2003
John A. Hill(4)........................................... 58 Santa Fe Snyder 2002
William J. Johnson........................................ 65 Devon 2002
Michael M. Kanovsky....................................... 51 Devon 2002
Melvyn N. Klein(4)........................................ 58 Santa Fe Snyder 2001
Robert A. Mosbacher, Jr................................... 49 Devon 2002
J. Larry Nichols.......................................... 57 Devon 2003
James L. Pate(5).......................................... 64 Devon 2002
James L. Payne............................................ 63 Santa Fe Snyder 2003
Robert B. Weaver.......................................... 61 Devon 2003
</TABLE>
------------------------
(1) Chairman of the Audit Committee.
(2) Chairman of the Compensation and Stock Option Committee.
(3) Chairman of the Nominating Committee.
(4) Designated by Santa Fe Snyder and mutually approved by Santa Fe Snyder's
chief executive officer and Devon's president and chief executive officer.
(5) Chairman of the Board and Chairman of the Executive Committee. The Executive
Committee will consist of Mr. Pate, Mr. Payne and Mr. Nichols.
EXECUTIVE OFFICERS
The following executive officers of Devon will continue to serve in their
respective capacities until their successors are duly elected and qualified or
until their earlier resignation or removal:
<TABLE>
<CAPTION>
CURRENT
COMPANY
NAME AGE POSITION IN THE COMBINED COMPANY AFFILIATION
---- -------- --------------------------------------------------------- -----------
<S> <C> <C> <C>
J. Larry Nichols... 58 President and Chief Executive Officer Devon
Donald A. Garner... 43 President and Chief Operating Officer of Northstar Energy Devon
Corporation
J. Michael Lacey... 54 Senior Vice President--Exploration and Production Devon
Duke R. Ligon...... 59 Senior Vice President--General Counsel Devon
Marian J. Moon..... 50 Senior Vice President--Administration and Secretary Devon
John Richels....... 49 Chief Executive Officer of Northstar Energy Corporation Devon
Darryl G. Smette... 53 Senior Vice President--Marketing Devon
H. Allen Turner.... 47 Senior Vice President--Corporate Development Devon
William T. Vaughn.. 53 Senior Vice President--Finance Devon
</TABLE>
Additional executive officers from Santa Fe Snyder may be added to the
management team of the combined company.
81
<PAGE>
INTERESTS OF CERTAIN EXECUTIVE OFFICERS
AND DIRECTORS IN THE MERGER
DEVON
One of the members of Devon's board of directors owns 12,710 shares of Santa
Fe Snyder common stock. Prior to 1999, the same director also received options
to purchase an additional 15,375 shares of Santa Fe Snyder common stock during
the course of an affiliation with a Santa Fe Snyder predecessor. Accordingly,
this director may have interests in the merger that are different from Devon's
stockholders.
SANTA FE SNYDER
Some of Santa Fe Snyder's directors and executive officers have interests in
the merger that are different from Santa Fe Snyder stockholders' interests:
- All unvested outstanding options of Santa Fe Snyder directors become
exercisable upon a change in control. The merger will constitute a change
in control under Santa Fe Snyder's stock plans.
- Santa Fe Snyder's executive officers are covered by change-in-control
agreements with benefits and other provisions similar to those pertaining
to Devon executive officers. The merger will constitute a change in
control under the Santa Fe Snyder agreements.
- Under Santa Fe Snyder's stock plans, upon a change in control, unvested
options and phantom shares held by Santa Fe Snyder's executive officers
become exercisable and/or vest and restrictions on directors' and
executives' restricted shares lapse.
Additionally, Mr. Payne, the current chief executive officer of Santa Fe
Snyder, will receive an annual salary of $610,000, plus an annual bonus and
normal business expenses, for his responsibilities for all international
operations of Devon and for serving as Vice Chairman of the board of the
combined company. Further, Devon will enter into a written agreement with
Mr. Payne providing that if his employment is terminated prior to age 65, due to
his death or disability or by Devon other than for cause, he will be entitled to
receive an immediate lump sum payment equal to the sum of his annual base salary
and his maximum annual bonus. Effective upon completion of the merger,
Mr. Payne will also receive 75,751 shares of Devon common stock in exchange for
his 345,324 restricted shares of Santa Fe Snyder common stock.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary describes the material U.S. federal income tax
consequences of the merger to Devon, Santa Fe Snyder and U.S. holders of Santa
Fe Snyder capital stock. The summary is based upon the Internal Revenue Code,
Treasury Regulations, administrative rulings and pronouncements, and judicial
precedent in effect on the date of this joint proxy statement/prospectus. These
authorities may be repealed, revoked or modified, possibly with retroactive
effect, so as to result in U.S. federal income tax consequences different from
those discussed below.
We do not address all aspects of the U.S. federal income tax consequences
that may be relevant to particular U.S. stockholders of Santa Fe Snyder in light
of their particular circumstances. The summary deals only with Santa Fe Snyder
capital stock held by U.S. stockholders as capital assets within the meaning of
Section 1221 of the Internal Revenue Code and does not deal with special classes
of investors, such as:
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<PAGE>
- dealers in securities or currencies;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- persons holding Santa Fe Snyder capital stock as part of a hedging,
conversion or straddle transaction;
- U.S. stockholders whose "functional currency" is not the U.S. dollar; or
- persons who acquire Santa Fe Snyder capital stock through the exercise or
cancellation of employee stock options or otherwise as compensation.
The summary also does not address any tax consequences arising out of the tax
laws of any state, local or foreign jurisdiction.
For purposes of this summary, "U.S. stockholder" means a beneficial owner of
Santa Fe Snyder capital stock, as applicable, that is a citizen or resident (as
that term is defined in the Internal Revenue Code) of the United States, a
corporation created or organized in or under the laws of the United States or
any state thereof, or the District of Columbia, or a partnership, trust or
estate treated for U.S. federal income tax purposes as a domestic partnership,
trust or estate.
EACH U.S. STOCKHOLDER IS STRONGLY ADVISED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, INCLUDING
THE PARTICULAR FACTS AND CIRCUMSTANCES THAT MAY BE UNIQUE TO THE U.S.
STOCKHOLDER, AND AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE MERGER.
OPINIONS OF COUNSEL
The obligation of Devon and Santa Fe Snyder to effect the merger is
conditioned upon, among other things, the receipt by Devon of an opinion of
McAfee & Taft A Professional Corporation, and the receipt by Santa Fe Snyder of
an opinion of Andrews & Kurth L.L.P., each dated as of the date of the merger
and based on the facts, representations and assumptions set forth in the
opinions, that the merger will be treated for U.S. federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code and, in the case of the McAfee & Taft A Professional Corporation opinion,
no gain or loss will be recognized by Devon, and in the case of the Andrews &
Kurth L.L.P. opinion, no gain or loss will be recognized by Santa Fe Snyder, as
a result of the merger.
Completion of the merger is also conditioned upon the receipt by Santa Fe
Snyder of an opinion by Andrews & Kurth L.L.P. that the U.S. stockholders of
Santa Fe Snyder will recognize no gain or loss upon the exchange of all of their
common stock solely for Devon capital stock in the merger, except with respect
to cash received in lieu of fractional shares of Devon capital stock.
Both Devon and Santa Fe Snyder may waive the receipt of these opinions of
counsel. If either Devon or Santa Fe Snyder waives this condition, we will
circulate a new proxy statement advising the stockholders that the condition to
receive the required tax opinion prior to the merger has been waived and we will
give the stockholders of the company that waived the condition an opportunity to
reconsider their vote.
McAfee & Taft A Professional Corporation and Andrews & Kurth L.L.P. cannot
provide assurance that the Internal Revenue Service will not take a contrary
view, and neither Devon nor Santa Fe Snyder will seek a ruling from the IRS
concerning the U.S. federal income tax consequences of the merger. The opinions
are not guarantees that the merger will be tax free and are not binding on the
IRS or the courts. In rendering these opinions, McAfee & Taft A Professional
Corporation and
83
<PAGE>
Andrews & Kurth L.L.P. have assumed that the merger will be consummated as
contemplated by this document. Each firm will receive customary representations
from Devon, Devon Merger Co. and Santa Fe Snyder upon which they will rely.
TAX CONSEQUENCES OF THE MERGER
TAX CONSEQUENCES TO DEVON. In the opinion of McAfee & Taft, subject to the
assumptions and qualifications set forth above, for U.S. federal income tax
purposes, Devon and Devon Merger Co. will not recognize gain or loss as a result
of the merger.
TAX CONSEQUENCES TO SANTA FE SNYDER AND ITS U.S. STOCKHOLDERS. In the
opinion of Andrews & Kurth, subject to the assumptions and qualifications set
forth above, for U.S. federal income tax purposes:
- Santa Fe Snyder will not recognize gain or loss with respect to the
exchange of Devon and Santa Fe Snyder capital stock as a result of the
merger;
- U.S. stockholders of Santa Fe Snyder will not recognize gain or loss as a
result of the exchange of their shares of Santa Fe Snyder capital stock
for Devon capital stock in the merger, except with respect to cash
received instead of a fractional share of Devon capital stock;
- the tax basis of the shares of Devon capital stock received by a U.S.
stockholder of Santa Fe Snyder in the merger will equal the U.S.
stockholder's tax basis in the Santa Fe Snyder capital stock exchanged in
the merger reduced by any tax basis allocable to a fractional share
interest in Devon capital stock for which cash was received;
- the holding period of shares of Devon capital stock received by a U.S.
stockholder in the merger will include the holding period of the Santa Fe
Snyder capital stock surrendered in the merger.
Devon will not issue any fractional shares of its capital stock in the
merger. A U.S. stockholder of Santa Fe Snyder will generally recognize gain or
loss upon the receipt of cash instead of a fractional share of Devon capital
stock in the merger measured by the difference between the amount of cash
received by the U.S. stockholder and the U.S. stockholder's tax basis allocable
to the fractional share of Devon capital stock. This gain or loss will be a
long-term capital gain or loss if the share of Santa Fe Snyder capital stock
exchanged for the fractional share of Devon capital stock was held for more than
one year at the effective time of the merger. In the case of a noncorporate U.S.
stockholder (including an individual), any long-term capital gain will be
taxable at a maximum 20% capital gains rate. The deductibility of capital losses
is subject to limitations. U.S. stockholders should consult their own tax
advisors regarding the taxation of capital gains and capital losses recognized
upon the receipt of cash in lieu of fractional shares.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting requirements will generally apply to payments of cash
in lieu of fractional shares made pursuant to the merger to U.S. stockholders
other than exempt recipients (such as corporations). Unless an exemption applies
under the applicable laws and regulations, the exchange agent may be required to
withhold and, if required, will withhold, 31% of any cash payments to a Santa Fe
Snyder stockholder in the merger unless the stockholder provides the appropriate
form. Unless an applicable exemption exists and is proved in a satisfactory
manner to the exchange agent, a stockholder should complete and sign the
substitute Form W-9 included in the transmittal letter to be delivered to Santa
Fe Snyder stockholders following consummation of the merger. This completed form
provides the necessary information, including the holder's taxpayer
identification number, and certification necessary to avoid backup withholding.
84
<PAGE>
COMPARISON OF THE RIGHTS
OF DEVON AND SANTA FE SNYDER STOCKHOLDERS
The following is a comparison of the material differences between the rights
of holders of Devon common stock and the rights of holders of Santa Fe Snyder
common stock, governed by Delaware law and by their respective certificates of
incorporation and bylaws. Both Devon and Santa Fe Snyder are incorporated in
Delaware and, accordingly, descriptions of Delaware law apply to both companies.
Upon consummation of the merger, the rights of Santa Fe Snyder stockholders who
become Devon stockholders in the merger will be governed by Delaware law and by
the Devon certificate and bylaws.
The following comparison may not contain all the information that is
important to you. For a more detailed description of stockholder rights, please
read the Devon certificate and bylaws and the Santa Fe Snyder certificate and
bylaws. For information on how to obtain copies of the certificates of
incorporation and bylaws of the companies, see "Where You Can Find More
Information" on page 95.
<TABLE>
<CAPTION>
<S> <C>
DEVON SANTA FE SNYDER
<CAPTION>
<S> <C>
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Devon The authorized capital stock of Santa Fe Snyder
consists of: consists of:
- 400,000,000 shares of Devon common - 300,000,000 shares of Santa Fe Snyder common
stock, par value $0.10 per share; stock, par value $0.01 per share; and
- 4,500,000 shares of Devon preferred - 50,000,000 shares of Santa Fe Snyder
stock, par value $1.00 per share; and preferred stock, par value $0.01 per share.
- one share of special voting stock, par
value $0.10 per share.
AMENDMENT TO GOVERNING DOCUMENTS
CHARTER. Under Delaware law, a CHARTER. An amendment to the certificate of
corporation's certificate of incorporation may incorporation relating to:
be amended by the affirmative vote of a - the composition and classification of the
majority of the outstanding stock entitled to Santa Fe Snyder board,
vote at a stockholders' meeting and a majority - amendment of the Santa Fe Snyder bylaws,
of the outstanding stock of each class entitled - issuance of rights to purchase Santa Fe
to vote as a class. Also, Delaware law provides Snyder capital stock, and
that a corporation's certificate may require - limitations on the liability of directors
the vote of a greater number or proportion than requires the vote of at least 80% of all
is required by Delaware law. stockholders entitled to vote in the election
The Devon certificate requires approval of of directors, voting as a single class. Any
at least two-thirds of the outstanding shares other amendment requires the approval of a
entitled to vote to amend some of the majority of Santa Fe Snyder's board of
provisions of the Devon certificate. directors and the approval of the holders of a
BYLAWS. Devon's Certificate of majority of the voting power of the then
Incorporation grants the Devon board the power outstanding capital stock of Santa Fe Snyder.
to adopt, alter, and repeal the Devon bylaws. BYLAWS. The Santa Fe Snyder stockholders may
In addition, the stockholders of Devon may amend the Santa Fe Snyder bylaws with a vote of
amend the bylaws with an affirmative vote of at least 80% of all stockholders entitled to
the holders of at least two-thirds of the vote in the election of directors, voting as a
outstanding shares entitled to vote, voting single class. A majority of the entire Santa Fe
together as a single class. Snyder board may make, repeal, alter, amend or
rescind any of the Santa Fe Snyder bylaws.
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DEVON SANTA FE SNYDER
<CAPTION>
<S> <C>
NUMBER OF DIRECTORS
The Devon certificate of incorporation The Santa Fe Snyder certificate of
provides that the number of directors shall not incorporation provides that the number of
be less than three nor more than twenty, and directors shall not be less than three or more
generally shall be fixed from time to time by a than 15 and shall be fixed as specified in the
resolution adopted by a majority of the entire bylaws. The Santa Fe Snyder bylaws provide that
Devon board. The number of directors has been the number of directors may be fixed from time
fixed by the Devon board at fourteen. to time by resolution of the board of directors
adopted by the affirmative vote of a majority
of the members of the entire board of
directors.
Santa Fe Snyder currently has nine directors.
REMOVAL OF DIRECTORS; FILLING VACANCIES
Under Delaware law, unless otherwise The Santa Fe Snyder certificate of
provided in the certificate of incorporation, incorporation provides that directors may be
directors serving on a classified board may removed only for cause and only upon the
only be removed by the stockholders for cause. affirmative vote of the holders of a majority
The Devon certificate generally provides of the outstanding capital stock entitled to
that newly-created directorships and any vote at an election of directors.
vacancies in the Devon board may be filled only The Santa Fe Snyder certificate of
by the affirmative vote of a majority of the incorporation provides that vacancies on the
remaining directors then in office. board of directors, whether arising through
death, resignation or removal of a director, or
through an increase in the number of directors
of any class, shall be filled by the majority
vote of the remaining directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Under Delaware law, unless otherwise The Santa Fe Snyder certificate of
provided in a corporation's certificate of incorporation specifically prohibits
incorporation, stockholders may act by written stockholder action by written consent.
consent. Stockholders can only take action at an annual
The Devon certificate specifically or special meeting.
prohibits stockholder action by written The Santa Fe Snyder bylaws provide that special
consent. meetings of stockholders can be called at any
The Devon certificate provides that special time by the board of the directors.
meetings of stockholders can be called only by Stockholders of Santa Fe Snyder may not call a
the Devon board, and, to the extent provided special meeting.
for in the bylaws, the chairman of the board or
the president. Stockholders are not permitted
to call a special meeting.
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DEVON SANTA FE SNYDER
<CAPTION>
<S> <C>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware law provides that a corporation The Santa Fe Snyder bylaws provide that the
may provide indemnification for each person who corporation shall provide indemnification to
is involved in any actual or threatened action, the fullest extent permitted by Delaware law to
suit, or proceeding by reason of the fact that Santa Fe Snyder's directors, officers,
he is or was a director, officer, employee, or employees, and agents, as well as to anyone
agent of the corporation, so long as the serving at the request of Santa Fe Snyder as a
potential indemnitee acted in good faith and in director, officer, employee, or agent of
a manner he reasonably believed to be in or not another corporation, partnership, joint
opposed to the best interests of the venture, trust, or other enterprise. The Santa
corporation. In the case of a criminal Fe Snyder certificate of incorporation and
proceeding, the potential indemnitee must have bylaws do not prohibit Santa Fe Snyder from
had no reasonable cause to believe his conduct purchasing and maintaining insurance on behalf
was unlawful. In the case of an action brought of its directors and officers.
by or in the right of the corporation, no
indemnification is available for any claim or
matter as to which the indemnitee has been
adjudged liable to the corporation, unless
ordered by a court. Delaware law further
provides that a corporation may purchase and
maintain insurance on behalf of its directors
and officers.
The Devon certificate of incorporation and
bylaws provide indemnification for each person
who is involved in any actual or threatened
action, suit, or proceeding by reason of the
fact that he is or was a director, officer,
employee, or agent of Devon. To qualify for
indemnification, a potential indemnitee must
have acted in good faith and in a manner he
reasonably believed to be in or not opposed to
the best interests of Devon. Devon is
authorized to purchase and maintain insurance
on behalf of its directors and officers.
DIRECTOR LIABILITY
Delaware law permits a corporation to The Santa Fe Snyder certificate of
include a provision in its certificate of incorporation limits the personal liability of
incorporation eliminating or limiting the a director to the corporation and its
personal liability of a director or officer to stockholders for damages for a breach of the
the corporation or its stockholders for damages director's duty, subject to certain
for a breach of the director's or the officer's limitations.
fiduciary duty, subject to some limitations.
The Devon certificate contains such a
provision.
</TABLE>
87
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DEVON SANTA FE SNYDER
<CAPTION>
<S> <C>
STOCKHOLDER RIGHTS PLAN
Under the Devon rights agreement, holders Santa Fe Snyder does not have a rights
of Devon common stock have one right with agreement.
respect to each share of Devon common stock
held. The certificates representing outstanding
shares of Devon common stock also evidence one
right for each share. Currently, the rights
trade with the shares of Devon common stock.
Upon the occurrence of events generally
associated with an unsolicited takeover attempt
of Devon or transactions involving a change of
control, the rights will be distributed, will
become exercisable, and will be tradeable
separately from the Devon common stock.
If a person or group becomes the beneficial
owner of, or commences a tender or exchange
offer for, 15% or more of the voting shares of
Devon, then each right would entitle the
holders other than the acquiring person or
group to purchase Devon common stock having a
market value equal to twice the applicable
purchase price.
The rights do not become exercisable as a
result of a stock acquisition by a tender or
exchange offer for all outstanding shares of
Devon common stock, which offer is determined
by the independent directors of Devon to be
fair, not inadequate, and otherwise in the best
interest of Devon and its stockholders.
The rights have some antitakeover effects.
They will cause substantial dilution to a
person or group that attempts to acquire Devon
in a manner that causes the rights to become
exercisable. The rights may be redeemed by the
Devon board for $0.01 per right. The terms of
the rights agreement may be amended by the
Devon board without the consent of the holders
of the Devon common stock or the rights.
VOTING OF THE SPECIAL VOTING STOCK
The Devon certificate of incorporation Santa Fe Snyder has no such special voting
provides that the share of special voting stock stock.
is entitled to the number of votes equal to the
number of exchangeable shares outstanding from
time to time that are held by persons other
than Devon or its subsidiaries.
</TABLE>
88
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DEVON SANTA FE SNYDER
<CAPTION>
<S> <C>
NOTICE OF STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A stockholder must give notice, in proper Notice of proposed stockholder nominations for
form, of director nominations or proposals for the election of directors must be in writing
each annual meeting to the secretary between 90 and received by Santa Fe Snyder:
and 120 days before the one-year anniversary of - not less than 90 days nor more than 120 days
the last previous annual meeting. If the date prior to the meeting, or
of the annual meeting is moved more than 30 - no later than the close of business on the
days before or after the anniversary date, a 10th day following the day on which notice
stockholder notice must be given to the of the date of the meeting was mailed or
secretary between 70 and 90 days prior to the made public if Santa Fe Snyder gives less
date of the meeting, or within 10 days after than 100 days' notice of the date of the
the public announcement of the date of the meeting.
meeting, if later. For a special meeting called A Santa Fe Snyder stockholder must deliver
to elect directors, a stockholder must give notice of a proposed matter to be brought
notice, in proper form, of director nominations before the annual meeting to Santa Fe Snyder
to the secretary within 10 days after the not less than 120 days from the date of the
public announcement of the date of the meeting. release of Santa Fe Snyder's proxy statement
relating to the prior year's annual meeting of
the stockholders. If no annual meeting was held
in the prior year or if the current year's
annual meeting shall be held more than 30 days
prior to or after the anniversary of the
previous year's annual meeting, a stockholder's
notice must be received by Santa Fe Snyder not
later than 10 days following the date on which
notice of the date of Santa Fe Snyder's annual
meeting was mailed or made public. The
stockholder's notice must conform to the Santa
Fe Snyder bylaws.
</TABLE>
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<PAGE>
PROPOSED STOCK OPTION PLAN AMENDMENT
GENERAL
In order to permit the combined company to have sufficient stock options
available for future grants to employees and directors, Devon is asking the
Devon stockholders to approve an amendment to the Devon 1997 Stock Option Plan
to increase the number of shares available for grant from six million to ten
million. At the time of the merger, the Santa Fe Snyder stock option plans will
be assumed by Devon and each of the outstanding options under the plans will be
converted into options to purchase Devon common stock. If the merger is not
completed, the stock option plan amendment will not be implemented.
The Devon 1997 Stock Option Plan authorizes Devon, through the compensation
and stock option committee of its board, to grant stock options to employees and
directors of Devon and its subsidiaries. The Devon board has reserved six
million shares of Devon common stock for grant. On May 25, 2000, the Devon
board, subject to stockholder approval, reserved an additional four million
shares of common stock for grant if the merger with Santa Fe Snyder is approved.
As of June 16, 2000, a total of 2.3 million options to purchase Devon common
stock have been granted under the Devon 1997 Stock Option Plan.
A DESCRIPTION OF THE DEVON 1997 STOCK OPTION PLAN APPEARS BELOW. BECAUSE
THIS DESCRIPTION MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT, YOU
SHOULD READ CAREFULLY THE ENTIRE COPY OF THE DEVON STOCK OPTION PLAN
INCORPORATED BY REFERENCE IN THIS DOCUMENT.
BACKGROUND
The purpose of Devon's stock option plan is to create incentives that will
motivate employees and directors of Devon to put forth maximum efforts toward
the success and growth of Devon and to enable Devon to attract and retain
experienced people who are able to make important contributions to Devon's
success.
ADMINISTRATION
The stock option committee administers Devon's stock option plan. Among the
powers granted to the committee are the powers to interpret the plan, establish
rules and regulations for its operation, select employees to receive awards and
determine the timing, form, amount and other terms and conditions of the awards.
The committee may also select nonemployee directors of Devon to receive awards
and determine the vesting schedule of such awards. However, such awards may only
be made at the times and up to the amounts specified in the Devon stock option
plan. See "--Stock Option Awards to Nonemployee Directors" below.
ELIGIBILITY FOR PARTICIPATION
Any employee of Devon or its subsidiaries and any nonemployee director of
Devon is eligible to participate in Devon's stock option plan. The selection of
participants from among employees and directors is within the discretion of the
committee.
TYPES OF AWARDS
Devon's stock option plan provides for the granting of both stock options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code and nonqualified stock options that do not qualify as
incentive stock options. Nonemployee directors may be granted only nonqualified
stock options.
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<PAGE>
OTHER COMPONENTS OF THE DEVON STOCK OPTION PLAN
Devon's stock option plan authorizes the committee to grant awards during
the period beginning March 26, 1997 and ending March 25, 2007. Shares of Devon
common stock reserved for option awards that terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of shares will again
be available for grant.
STOCK OPTION AWARDS TO EMPLOYEES
Under Devon's stock option plan, the committee may grant options to purchase
shares of Devon common stock, determine the terms and conditions of such option,
the number of shares subject to the option and the manner and time of the
option's exercise. The exercise price of an option may not be less than the fair
market value of the Devon common stock on the date of grant. A participant may
pay for the option in cash, shares of Devon common stock or a combination of
both.
STOCK OPTION AWARDS TO NONEMPLOYEE DIRECTORS
Devon's stock option plan provides for the grant of options to nonemployee
directors. Those directors are eligible to receive stock option grants of up to
3,000 shares immediately after each annual meeting of stockholders at an
exercise price equal to the fair market value of Devon's common stock on that
date. Any unexercised options will expire ten years after the date of grant.
The committee may elect to grant awards that are less than 3,000 shares and
may determine the vesting schedule for such grants. However, the committee will
have no other discretion regarding awards to nonemployee directors.
ADJUSTMENTS
The total number of shares of the Devon common stock that may be purchased
through options, and the number of shares subject to outstanding options and the
related option process will be adjusted in the case of changes in capital
structure resulting from any recapitalization, stock split, stock dividend or
similar transaction.
CHANGE OF CONTROL
In the case of a "corporate event," as described in the Devon stock option
plan, all options will become automatically fully vested and immediately
exercisable, with such acceleration to occur without the requirement of any
further act by Devon or the employee or director. In the case of either a
"change of control date" or an "acquisition date," as defined in the Devon stock
option plan, options may become automatically vested and fully exercisable,
provided the committee makes such provision in the grant of the award.
TERMINATION AND AMENDMENT
Devon's stock option plan terminates as of midnight, March 25, 2007. Before
that date, it may be suspended or terminated by Devon's board. In addition, the
Devon board may, from time to time, amend the plan in any manner. However, the
amendment must have stockholder approval if the amendment would increase the
number of shares available under the plan or decrease the exercise price to less
than the fair market value of Devon common stock on the date of grant. Any other
amendment to the plan would also require stockholder approval if, in the opinion
of counsel to Devon, the approval is required by any federal or state law, rule
or regulation.
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FEDERAL TAX TREATMENT
Under current U.S. federal tax law, the following are the federal tax
consequences generally arising with respect to awards under the Devon 1997 Stock
Option Plan. A participant who is granted an incentive stock option does not
realize regular taxable income at the time of the grant or at the time of
exercise, but only at the time of disposition of the shares. The participant
does, however, realize alternative minimum taxable income at the time of
exercise equal to the difference between the exercise price and the market value
of the shares on the date of exercise. Devon is not entitled to any deduction at
the time of grant or at the time of exercise. If the participant holds the
shares for two years from the date of grant and one year from the date the
option is exercised, any gain or loss realized on a subsequent disposition of
the shares will be treated as a long-term capital gain or loss. Under these
circumstances, Devon will not be entitled to any deduction for federal income
tax purposes. If the participant makes a disposition prior to these times, any
gain will be ordinary income up to the excess of the market value of the shares
on the date of exercise over the exercise price and short-term capital gain as
to the balance. Under these circumstances, Devon will be entitled to a deduction
equal to the amount of ordinary income recognized by the participant on the
disposition.
A participant who is granted a nonqualified option does not have taxable
income at the time of grant, but does have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. Devon is entitled to a
corresponding deduction for the same amount.
WITHHOLDING TAXES
Devon will have the right to require a participant to remit to Devon, in
cash, an amount sufficient to satisfy federal, state and local withholding
requirements, if any, prior to the delivery of any certificate for shares of
Devon common stock acquired pursuant to the exercise of the options.
Notwithstanding the foregoing, a participant may tender to Devon a number of
shares of Devon common stock or Devon may withhold a number of shares of Devon
common stock the fair market value of which will satisfy the federal and state
tax requirements.
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AUDITORS, TRANSFER AGENT AND REGISTRAR
The independent auditors of Devon are KPMG LLP. The independent auditors of
Santa Fe Snyder are PricewaterhouseCoopers LLP.
Fleet National Bank, c/o EquiServe, Shareholder Services, 150 Royall Canton,
MA 02021 is the transfer agent and registrar for the Devon common stock. CIBC
Mellon Trust Company, 600 The Dome Tower, 333 - 7(th) Avenue S.W., Calgary,
Alberta, Canada T2P 2Z1 is the transfer agent and registrar for the Northstar
exchangeable shares. CIBC Mellon Trust Company is also the trustee under the
voting and exchange trust agreement and Canadian co-registrar for the Devon
common stock. The transfer agent for Santa Fe Snyder common stock is First
Chicago Trust Company of New York, P.O. Box 2500, Jersey City, NJ 07303-2500.
LEGAL MATTERS
Certain legal matters in connection with the merger will be passed upon, on
behalf of Santa Fe Snyder, by Andrews Kurth L.L.P. and, on behalf of Devon, by
McAfee & Taft A Professional Corporation.
EXPERTS
The consolidated financial statements of Devon as of and for each of the
years ended December 31, 1999, 1998 and 1997 have been incorporated by reference
herein in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG LLP as of and for
the years ended December 31, 1998 and 1997 is based in part herein in reliance
upon the report of Deloitte & Touche LLP, chartered accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The audited consolidated financial statements of PennzEnergy and its
subsidiaries incorporated by reference in this joint proxy statement/prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
Certain information with respect to Devon's and PennzEnergy's oil and gas
reserves derived from the reports of LaRoche Petroleum Consultants, Ltd., Ryder
Scott Company, L.P., AMH Group Ltd., Paddock Lindstrom & Associates, Ltd. and
John P. Hunter & Associates, Ltd., independent consulting petroleum engineers,
has been included and incorporated by reference herein upon the authority of
said firms as experts with respect to matters covered by such reports and in
giving such reports.
Certain information with respect to the oil and gas reserves of Santa Fe
Snyder derived from the report of Ryder Scott Company, L.P., independent
consulting petroleum engineers, has been included and incorporated by reference
herein upon the authority of said firm as experts with respect to matters
covered by such report and in giving such report.
The consolidated financial statements of Santa Fe Snyder Corporation
incorporated in this joint proxy statement/prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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FUTURE STOCKHOLDER PROPOSALS
Whether or not the merger is completed as expected, Devon will hold an
annual stockholders' meeting in 2001. If the merger is not completed, Santa Fe
Snyder will hold an annual stockholders' meetings in 2001.
DEVON 2001 ANNUAL MEETING
Any Devon stockholder who wishes to submit a proposal for action to be
included in the proxy statement and form of proxy relating to Devon's 2001
annual meeting of stockholders is required to submit that proposal to Devon on
or before December 4, 2000. Only those proposals that comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934 will be
included in Devon's proxy statement for the 2001 annual meeting. Written notice
of stockholder proposals submitted outside the process of Rule 14a-8 for
consideration at the 2001 annual meeting of stockholders (but not included in
Devon's proxy statement) must be received by Devon's secretary between March 4,
2001 and March 24, 2001 in order to be considered timely, and comply with
provisions of Devon's by-laws. The chairman of the meeting may determine that
any proposal for which Devon did not receive timely notice will not be
considered at the meeting. If in the discretion of the chairman any such
proposal is to be considered at the meeting, the persons designated in Devon's
proxy statement will be granted discretionary authority with respect to the
untimely stockholder proposal.
SANTA FE SNYDER 2001 ANNUAL MEETING
In order to be included in Santa Fe Snyder's proxy material for its 2001
annual meeting of stockholders, eligible proposals of stockholders intended to
be presented at the Santa Fe Snyder annual meeting must be received at Santa Fe
Snyder's executive offices no later than November 23, 2000; provided, however,
that if the date of the 2001 annual meeting is scheduled to be held prior to
April 16, 2001 or later than June 16, 2001, the proposals are then required to
be received by Santa Fe Snyder within a reasonable time before its solicitation
is made if the proposals are to be included in such proxy material, and no later
than the close of business on the tenth day following the day on which the proxy
materials for the 2001 annual meeting are first mailed or public disclosure is
made if he proposals are to be brought before the 2001 annual meeting.
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WHERE YOU CAN FIND MORE INFORMATION
Devon and Santa Fe Snyder file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
materials we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."
Devon filed a registration statement on Form S-4 to register with the SEC
the Devon common stock to be issued to Santa Fe Snyder stockholders in the
merger. This joint proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of Devon in addition to being a proxy
statement of Devon and Santa Fe Snyder for the meetings. As allowed by SEC
rules, this joint proxy statement/prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/ prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by
information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/ prospectus incorporates by
reference the documents listed below that we have previously filed with the SEC.
These documents contain important information about our companies and their
finances.
<TABLE>
<S> <C>
DEVON SEC FILINGS
(FILE NO. 000-30176) PERIOD
------------------------------------------ ------------------------------------------
Description of Common Stock contained in
Current Report on Form 8-K Filed on August 18, 1999
Annual Report on Form 10-K Year ended December 31, 1999
Current Report on Form 8-K Filed on January 27, 2000
Quarterly Report on Form 10-Q Quarter ended March 31, 2000
Proxy Statement on Schedule 14A Filed April 14, 2000
Current Report on Form 8-K Filed on May 26, 2000
Current Report on Form 8-K Filed on June 5, 2000
Current Report on Form 8-K Filed on June 21, 2000
Current Report on Form 8-K Filed on June 22, 2000
Current Report on Form 8-K Filed on July 12, 2000
PENNZENERGY SEC FILINGS
(FILE NO. 001-05591)
------------------------------------------ ------------------------------------------
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on 10-Q Quarter ended March 31, 1999
Quarterly Report on 10-Q Quarter ended June 30, 1999
SANTA FE SNYDER SEC FILINGS
(FILE NO. 001-07667) PERIOD
------------------------------------------ ------------------------------------------
Annual Report on Form 10-K Year ended December 31, 1999
Proxy Statement on Schedule 14A Filed on March 22, 2000
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Report on Form 8-K Filed on May 30, 2000
SNYDER OIL CORPORATION
(FILE NO. 001-10509) PERIOD
------------------------------------------ ------------------------------------------
Annual Report on Form 10-K, as amended on Year ended December 31, 1998
March 31, 1999 and April 30, 1999
</TABLE>
95
<PAGE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
date of the meetings.
Devon has supplied all information contained or incorporated by reference in
this joint proxy statement/prospectus relating to Devon and PennzEnergy, and
Santa Fe Snyder has supplied all such information relating to Santa Fe Snyder.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them by contacting Devon or
Santa Fe Snyder directly, or the SEC. Documents incorporated by reference are
available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this joint proxy
statement/prospectus.
You can also get more information by visiting Devon's web site at
"http://www.devonenergy.com" and Santa Fe Snyder's web site at
"http://www.santafe-snyder.com." Web site materials are not part of this joint
proxy statement/prospectus.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus. We have not authorized
anyone to provide you with information that is different from what is contained
in this joint proxy statement/prospectus. This joint proxy statement/prospectus
is dated July 21, 2000. You should not assume that the information contained in
the joint proxy statement/prospectus is accurate as of any date other than such
date, and neither the mailing of this joint proxy statement/prospectus to
stockholders nor the issuance of the Devon common stock in the merger shall
create any implication to the contrary.
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Devon and Santa Fe Snyder have made forward-looking statements in this
document and in the documents referred to in this document, which are subject to
risks and uncertainties. These statements are based on the beliefs and
assumptions of our managements and on the information currently available to
them.
Statements and calculations concerning oil and gas reserves and their
present value also may be deemed to be forward-looking statements in that they
reflect the determination, based on estimates and assumptions, that oil and gas
reserves may be profitably exploited in the future. When used or referred to in
this document, these forward-looking statements may be preceded by, followed by,
or otherwise include the words "believes," "expects," "anticipates," "intends,"
"plans," "estimates," "projects" or similar expressions, or statements that
certain events or conditions "will" or "may" occur.
Except for their ongoing obligations to disclose material information as
required by the federal securities laws, Devon and Santa Fe Snyder do not have
any intention or obligation to update forward-looking statements after they
distribute this document.
<TABLE>
<S> <C>
By Order of the Board of Directors of Devon
Energy Corporation
MARIAN J. MOON
CORPORATE SECRETARY
July 21, 2000
Oklahoma City, Oklahoma
By Order of the Board of Directors of Santa
Fe Snyder Corporation
Mark A. Older
CORPORATE SECRETARY
July 21, 2000
Houston, Texas
</TABLE>
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COMMONLY USED OIL AND GAS TERMS
"BBL" means barrel.
"BBL/D" means Bbls per day.
"BCF" means billion cubic feet.
"BOE" means equivalent barrels of oil, calculated by converting gas to
equivalent Bbls. The U.S. convention for this conversion is six Mcf equals one
Boe.
"BOE/D" means Boe per day.
"MBBLS" means thousand barrels.
"MBOE" means thousand Boe.
"MCF" means thousand cubic feet.
"MCFE" means thousand equivalent cubic feet of gas, calculated by converting
oil and NGLs to equivalent Mcf. The U.S. convention for this conversion is
one-sixth Bbl equals one Mcfe.
"MMBBLS" means million barrels.
"MMBOE" means million Boe.
"MMBTU" means million British thermal units, a measure of heating value.
"MMCF" means million cubic feet.
"MMCF/D" means MMcf per day.
"NGL" means natural gas liquids.
"OIL" includes crude oil and condensate.
"SEC 10% PRESENT VALUE" is the pre-tax present value of future net cash
flows from proved reserves, discounted at 10% per year. Oil, gas and NGL prices
used to calculate future revenues are based on year-end prices held constant,
except where fixed and determinable price changes are provided by contractual
arrangements. Future development and production costs are also based on year-end
costs and assume the continuation of existing economic conditions.
"STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS" is the SEC 10%
present value defined above, less applicable income taxes.
"TCF" means trillion cubic feet.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DEVON ENERGY CORPORATION,
DEVON MERGER CO.
AND
SANTA FE SNYDER CORPORATION
DATED AS OF MAY 25, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE 1 THE MERGER............................................................. A-1
Section 1.1 THE MERGER.................................................. A-1
Section 1.2 THE CLOSING................................................. A-1
Section 1.3 EFFECTIVE TIME.............................................. A-2
Section 1.4 CORPORATE HEADQUARTERS...................................... A-2
Section 1.5 CERTIFICATE OF INCORPORATION................................ A-2
Section 1.6 BYLAWS...................................................... A-2
Section 1.7 RESIGNATION OF SANTA FE SNYDER DIRECTORS.................... A-2
ARTICLE 2 DIRECTORS OF DEVON..................................................... A-2
Section 2.1 DIRECTORS OF DEVON.......................................... A-2
ARTICLE 3 CONVERSION OF SANTA FE SNYDER STOCK.................................... A-3
Section 3.1 CERTAIN DEFINITIONS......................................... A-3
Section 3.2 CONVERSION OF SANTA FE SNYDER STOCK......................... A-3
Section 3.3 EXCHANGE OF CERTIFICATES REPRESENTING SANTA FE SNYDER A-4
STOCK.....................................................
Section 3.4 ADJUSTMENT OF EXCHANGE RATIO................................ A-6
Section 3.5 RULE 16B-3 APPROVAL......................................... A-6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SANTA FE SNYDER...................... A-6
Section 4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY............... A-6
Section 4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS............ A-6
Section 4.3 CAPITALIZATION.............................................. A-7
Section 4.4 SIGNIFICANT SUBSIDIARIES.................................... A-7
Section 4.5 NO VIOLATION................................................ A-7
Section 4.6 NO CONFLICT................................................. A-8
Section 4.7 SEC DOCUMENTS............................................... A-9
Section 4.8 LITIGATION.................................................. A-9
Section 4.9 ABSENCE OF CERTAIN CHANGES.................................. A-9
Section 4.10 TAXES....................................................... A-10
Section 4.11 EMPLOYEE BENEFIT PLANS...................................... A-11
Section 4.12 LABOR MATTERS............................................... A-11
Section 4.13 ENVIRONMENTAL MATTERS....................................... A-12
Section 4.14 INTELLECTUAL PROPERTY....................................... A-12
Section 4.15 TITLE TO PROPERTIES......................................... A-13
Section 4.16 INSURANCE................................................... A-13
Section 4.17 NO BROKERS.................................................. A-13
Section 4.18 OPINION OF FINANCIAL ADVISOR................................ A-13
Section 4.19 DEVON STOCK OWNERSHIP....................................... A-13
Section 4.20 ACCOUNTING AND REORGANIZATION MATTERS....................... A-13
Section 4.21 VOTE REQUIRED............................................... A-14
Section 4.22 CERTAIN APPROVALS........................................... A-14
Section 4.23 CERTAIN CONTRACTS........................................... A-14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF DEVON AND MERGER CO.................. A-14
Section 5.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY............... A-14
Section 5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS............ A-14
Section 5.3 CAPITALIZATION.............................................. A-15
Section 5.4 SIGNIFICANT SUBSIDIARIES.................................... A-15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.5 NO VIOLATION................................................ A-16
Section 5.6 NO CONFLICT................................................. A-16
Section 5.7 SEC DOCUMENTS............................................... A-17
Section 5.8 LITIGATION.................................................. A-17
Section 5.9 ABSENCE OF CERTAIN CHANGES.................................. A-18
Section 5.10 TAXES....................................................... A-18
Section 5.11 EMPLOYEE BENEFIT PLANS...................................... A-19
Section 5.12 LABOR MATTERS............................................... A-19
Section 5.13 ENVIRONMENTAL MATTERS....................................... A-20
Section 5.14 INTELLECTUAL PROPERTY....................................... A-20
Section 5.15 TITLE TO PROPERTIES......................................... A-20
Section 5.16 INSURANCE................................................... A-21
Section 5.17 NO BROKERS.................................................. A-21
Section 5.18 OPINION OF FINANCIAL ADVISOR................................ A-21
Section 5.19 SANTA FE SNYDERSTOCK OWNERSHIP.............................. A-21
Section 5.20 ACCOUNTING AND REORGANIZATION MATTERS....................... A-21
Section 5.21 VOTE REQUIRED............................................... A-21
Section 5.22 DEVON RIGHTS AGREEMENT...................................... A-22
Section 5.23 CERTAIN APPROVALS........................................... A-22
Section 5.24 CERTAIN CONTRACTS........................................... A-22
ARTICLE 6 COVENANTS.............................................................. A-22
Section 6.1 CONDUCT OF BUSINESSES....................................... A-22
Section 6.2 NO SOLICITATION BY SANTA FE SNYDER.......................... A-25
Section 6.3 NO SOLICITATION BY DEVON.................................... A-26
Section 6.4 MEETINGS OF STOCKHOLDERS.................................... A-26
Section 6.5 FILINGS; REASONABLE BEST EFFORTS............................ A-27
Section 6.6 INSPECTION.................................................. A-28
Section 6.7 PUBLICITY................................................... A-28
Section 6.8 REGISTRATION STATEMENT...................................... A-28
Section 6.9 LISTING APPLICATION......................................... A-29
Section 6.10 LETTERS OF ACCOUNTANTS...................................... A-29
Section 6.11 AGREEMENTS OF AFFILIATES.................................... A-29
Section 6.12 EXPENSES.................................................... A-30
Section 6.13 INDEMNIFICATION AND INSURANCE............................... A-30
Section 6.14 CERTAIN BENEFITS............................................ A-31
Section 6.15 REORGANIZATION.............................................. A-31
Section 6.16 RIGHTS AGREEMENT............................................ A-31
ARTICLE 7 CONDITIONS............................................................. A-32
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE A-32
MERGER....................................................
Section 7.2 CONDITIONS TO OBLIGATION OF SANTA FE SNYDER TO EFFECT THE A-32
MERGER....................................................
Section 7.3 CONDITIONS TO OBLIGATION OF DEVON TO EFFECT THE MERGER...... A-33
ARTICLE 8 TERMINATION............................................................ A-33
Section 8.1 TERMINATION BY MUTUAL CONSENT............................... A-33
Section 8.2 TERMINATION BY DEVON OR SANTA FE SNYDER..................... A-34
Section 8.3 TERMINATION BY SANTA FE SNYDER.............................. A-34
Section 8.4 TERMINATION BY DEVON........................................ A-35
Section 8.5 EFFECT OF TERMINATION....................................... A-35
Section 8.6 EXTENSION; WAIVER........................................... A-37
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 9 GENERAL PROVISIONS..................................................... A-37
Section 9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS... A-37
Section 9.2 NOTICES..................................................... A-37
Section 9.3 ASSIGNMENT; BINDING EFFECT; BENEFIT......................... A-38
Section 9.4 ENTIRE AGREEMENT............................................ A-38
Section 9.5 AMENDMENTS.................................................. A-38
Section 9.6 GOVERNING LAW............................................... A-38
Section 9.7 COUNTERPARTS................................................ A-39
Section 9.8 HEADINGS.................................................... A-39
Section 9.9 INTERPRETATION.............................................. A-39
Section 9.10 WAIVERS..................................................... A-39
Section 9.11 INCORPORATION OF EXHIBITS................................... A-39
Section 9.12 SEVERABILITY................................................ A-39
Section 9.13 ENFORCEMENT OF AGREEMENT.................................... A-39
Section 9.14 OBLIGATION OF MERGER CO..................................... A-39
Section 9.15 SUBSIDIARIES................................................ A-40
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 25,
2000, is among Devon Energy Corporation, a Delaware corporation ("Devon"), Devon
Merger Co., a Delaware corporation and a direct and wholly-owned subsidiary of
Devon ("Merger Co."), and Santa Fe Snyder Corporation, a Delaware corporation
("Santa Fe Snyder").
RECITALS
WHEREAS, Devon and Santa Fe Snyder have each determined to engage in a
strategic business combination with the other;
WHEREAS, in furtherance thereof, the parties hereto desire that Merger Co.
merge with and into Santa Fe Snyder (the "Merger"), pursuant to which each
outstanding share of Santa Fe Snyder Common Stock (as defined in Section 3.1)
will be converted into shares of Devon Common Stock (as defined in Section 3.1);
WHEREAS, the respective Boards of Directors of each of Devon, Merger Co. and
Santa Fe Snyder have determined the Merger, in the manner contemplated herein,
to be desirable and in the best interests of their respective corporations and
stockholders and to be consistent with, and in furtherance of, their respective
business strategies and goals, and, by resolutions duly adopted, have approved
and adopted this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code");
WHEREAS, it is intended that the Merger be accounted for as a pooling of
interests in accordance with APB Opinion 16 as amended by Statements of
Financial Accounting Standards and related interpretations of the American
Institute of Certified Public Accountants, the Financial Accounting Standards
Board, and the rules and regulations of the Securities and Exchange Commission
("Pooling of Interests");
WHEREAS, as an inducement to the willingness of Santa Fe Snyder to enter
into this Agreement, Devon has granted Santa Fe Snyder an option to purchase
shares of Devon Common Stock pursuant to a Stock Option Agreement (as defined in
Section 3.1); and
WHEREAS, as an inducement to the willingness of Devon to enter into this
Agreement, Santa Fe Snyder has granted Devon an option to purchase shares of
Santa Fe Snyder Common Stock pursuant to a Stock Option Agreement (as defined in
Section 3.1).
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Merger Co. shall
be merged with and into Santa Fe Snyder in accordance with this Agreement, and
the separate corporate existence of Merger Co. shall thereupon cease. Santa Fe
Snyder shall be the surviving corporation in the Merger and shall be a
wholly-owned subsidiary of Devon (sometimes hereinafter referred to as the
"Surviving Corporation"). The Merger shall have the effects specified in the
Delaware General Corporation Law ("DGCL").
Section 1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of McAfee & Taft A Professional
A-1
<PAGE>
Corporation, 10th Floor, Two Leadership Square, 211 North Robinson Avenue,
Oklahoma City, Oklahoma, at 9:00 a.m., local time, on the first business day
immediately following the day on which the last to be fulfilled or waived of the
conditions set forth in Article 7 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as Devon and Santa Fe Snyder
may agree. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date."
Section 1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth
in Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 8, on the
Closing Date, a certificate of merger (the "Certificate of Merger") meeting the
requirements of Section 251 of the DGCL shall be properly executed and filed
with the Secretary of State of the State of Delaware (the "Secretary of State").
The Merger shall become effective at the time of filing of the Certificate of
Merger with the Secretary of State in accordance with the DGCL, or at such later
time that the parties hereto shall have agreed upon and designated in such
filing as the effective time of the Merger (the "Effective Time").
Section 1.4 CORPORATE HEADQUARTERS. After the Closing Date, the corporate
headquarters of Devon and the Surviving Corporation shall be located in Oklahoma
City, Oklahoma.
Section 1.5 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of Santa Fe Snyder in effect immediately prior to the Effective Time shall be
amended and restated to duplicate the certificate of incorporation of Merger
Co., until duly amended in accordance with applicable law, except that
Article 1 of such certificate of incorporation shall state as follows: "FIRST:
The name of the corporation is Santa Fe Snyder Corporation."
Section 1.6 BYLAWS. The bylaws of Merger Co. in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation, until
duly amended in accordance with applicable law.
Section 1.7 RESIGNATION OF SANTA FE SNYDER DIRECTORS. The Board of
Directors of the Surviving Corporation shall consist of the Board of Directors
of Merger Co., as it existed immediately prior to the Effective Time, and each
of the members of the Board of Directors of Santa Fe Snyder shall tender his
resignation, to be effective immediately upon the Effective Time.
ARTICLE 2
DIRECTORS OF DEVON
Section 2.1 DIRECTORS OF DEVON. At the Effective Time, the Board of
Directors of Devon shall consist of a number of persons as determined by Devon.
One-third ( 1/3) of the total number of directors, rounded to the nearest whole
number, shall be persons designated by Santa Fe Snyder who are acceptable to
Devon (the "Santa Fe Snyder Designees"). The Santa Fe Snyder Designees shall be
appointed to fill any vacancies on the Board of Directors existing immediately
prior to the Effective Time and then shall be allocated as evenly as possible
among the different classes of Devon directors. Devon shall give written notice
to Santa Fe Snyder by June 15, 2000 of the number of directors which shall
constitute the entire Board at the Effective Time. Santa Fe Snyder shall have
until June 30, 2000 to give Devon written notice of Santa Fe Snyder's designees
to serve as directors at the Effective Time. The notice of designees shall
include the information concerning each designee as would be required to be
included in a proxy statement under Regulation 14A of the Exchange Act. If Devon
reasonably determines that any Santa Fe Snyder designee is unacceptable, Santa
Fe Snyder and Devon will agree upon a substitute designee not later than July
15, 2000. If, prior to the Effective Time, any Santa Fe Snyder designee becomes
unavailable or unwilling to serve, Santa Fe Snyder shall designate a substitute
designee acceptable to Devon. If necessary to comply with this Section 2.1,
Devon shall cause to be presented to the meeting of its stockholders
contemplated by Section 6.4 of this Agreement a proposal to amend Devon's
Certificate of Incorporation to increase the number of directors that
constitutes the entire Board of Directors.
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ARTICLE 3
CONVERSION OF SANTA FE SNYDER STOCK
Section 3.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Devon Common Stock" shall mean the common stock, par value $.10 per
share, of Devon, and the rights under the Devon Rights Agreement.
(b) "Santa Fe Snyder Common Stock" shall mean the common stock, par value
$0.01 per share, of Santa Fe Snyder.
(c) "Santa Fe Snyder Exchange Ratio" shall equal 0.22.
(d) "Stock Option Agreements" shall mean (i) the Stock Option Agreement
dated the date hereof between Devon and Santa Fe Snyder pursuant to which Devon
has granted to Santa Fe Snyder an option to purchase a certain number of shares
of Devon Common Stock and (ii) the Stock Option Agreement dated the date hereof
between Santa Fe Snyder and Devon pursuant to which Santa Fe Snyder has granted
to Devon an option to purchase a certain number of shares of Santa Fe Snyder
Common Stock.
Section 3.2 CONVERSION OF SANTA FE SNYDER STOCK AND MERGER CO. STOCK.
(a) At the Effective Time, each share of Santa Fe Snyder Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Santa Fe Snyder Common Stock (x) held in Santa Fe Snyder's treasury or (y) owned
by Devon or any wholly-owned Subsidiary (as defined in Section 9.15) of Devon or
Santa Fe Snyder) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the number of shares of Devon
Common Stock equal to the Santa Fe Snyder Exchange Ratio, subject to adjustment
as provided in Section 3.4. At the Effective Time, each share of Merger Co.
common stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of Santa Fe Snyder Common Stock.
(b) As a result of the Merger and without any action on the part of the
holders thereof, each share of Santa Fe Snyder Common Stock shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any shares of Santa Fe Snyder Common Stock
(a "Certificate") shall thereafter cease to have any rights with respect to such
shares of Santa Fe Snyder Common Stock, except that such Certificates shall
thereafter evidence (x) the number of whole shares of Devon Common Stock into
which such shares are converted pursuant to Section 3.2(a) and the right to
receive any dividends or distributions with respect thereto and (y) the right to
receive cash for fractional shares of Devon Common Stock in accordance with
Sections 3.3(b) and 3.3(e) upon the surrender of such Certificate.
(c) (i) At the Effective Time, all options (individually, a "Santa Fe Snyder
Option" and collectively, the "Santa Fe Snyder Options") then outstanding under
the stock option plans of Santa Fe Snyder described in the Santa Fe Snyder
Disclosure Letter (collectively, the "Santa Fe Snyder Stock Option Plans") shall
remain outstanding following the Effective Time and cease to represent a right
to acquire shares of Santa Fe Snyder Common Stock and shall be converted
automatically into options to purchase shares of Devon Common Stock as provided
in this Section 3.2(c). At the Effective Time, the Santa Fe Snyder Options
shall, by virtue of the Merger and without any further action on the part of
Devon or the holder of any Santa Fe Snyder Option, be assumed by Devon in such
manner that Devon (A) is a corporation "assuming a stock option in a transaction
to which Section 424(a) applied" within the meaning of Section 424 of the Code
or (B) to the extent that Section 424 of the Code does not apply to any Santa Fe
Snyder Option, would be such a corporation were Section 424 of the Code
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applicable to such option. Each Santa Fe Snyder Option assumed by Devon shall be
exercisable upon the same terms and conditions as under the applicable Santa Fe
Snyder Stock Option Plan and the applicable option agreement issued thereunder,
except that (X) each Santa Fe Snyder Option shall be exercisable for that whole
number of shares of Devon Common Stock (rounded upward to the nearest whole
share) into which the number of shares of the Santa Fe Snyder Common Stock
subject to such Santa Fe Snyder Option immediately prior to the Effective Time
would be converted under Section 3.2(a) if such number of shares of Santa Fe
Snyder Common Stock was then outstanding and (Y), the option price per share of
Devon Common Stock shall be an amount equal to the option price per share of
Santa Fe Snyder Common Stock subject to such Santa Fe Snyder Option in effect
immediately prior to the Effective Time, divided by the Santa Fe Snyder Exchange
Ratio, subject to adjustment as provided in Section 3.4 (the price per share, as
so determined, being rounded upward to the nearest full cent).
(ii) Devon shall take all corporate action necessary to reserve for
issuance a number of shares of Devon Common Stock equal to the number of
shares of Devon Common Stock issuable upon the exercise of the Santa Fe
Snyder Options assumed by Devon pursuant to this Section 3.2(c). From and
after the date of this Agreement, except as provided in Section 6.1(f), no
additional options shall be granted by Santa Fe Snyder or its Subsidiaries
under the Santa Fe Snyder Stock Option Plans or otherwise. At the Effective
Time or as soon as practicable, but in no event more than three business
days thereafter, Devon shall file with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form S-8 covering all
shares of Devon Common Stock to be issued upon exercise of the Santa Fe
Snyder Options and shall cause such registration statement to remain
effective for as long as there are outstanding any Santa Fe Snyder Options.
Section 3.3 EXCHANGE OF CERTIFICATES REPRESENTING SANTA FE SNYDER STOCK.
(a) As of the Effective Time, Devon shall deposit, or shall cause to be
deposited, with BankBoston, N.A. or such other party reasonably satisfactory to
Devon and Santa Fe Snyder (the "Exchange Agent"), for the benefit of the holders
of shares of Santa Fe Snyder Common Stock, for exchange in accordance with this
Article 3, certificates representing (i) the shares of Devon Common Stock to be
issued pursuant to Section 3.2 in exchange for outstanding shares of Santa Fe
Snyder Common Stock and (ii) cash sufficient to pay cash in lieu of fractional
shares and any dividends and other distributions pursuant to Section 3.3(b) and
3.3(e) (the "Exchange Fund").
(b) Promptly after the Effective Time, Devon shall cause the Exchange Agent
to mail to each holder of record of one or more Certificates: (i) a letter of
transmittal (the "Letter of Transmittal") which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Devon and Santa Fe Snyder may
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Devon
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in exchange
therefor (A) a certificate representing that number of whole shares of Devon
Common Stock and (B) a check representing the amount of cash in lieu of
fractional shares, if any, in respect of the Certificate surrendered pursuant to
the provisions of this Article 3, after giving effect to any required
withholding tax, and the Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
In the event of a transfer of ownership of Santa Fe Snyder Common Stock which is
not registered in the transfer records of Santa Fe Snyder, a certificate
representing the proper number of shares of Devon Common Stock, together with a
check for the cash to be paid in lieu of fractional shares, shall be issued to
such a transferee if the Certificate representing such Santa Fe Snyder Common
Stock is presented to the Exchange Agent, accompanied by all documents required
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to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time with respect to
Devon Common Stock with a record date after the Effective Time shall be paid
with respect to the shares represented by any Certificate until such Certificate
is surrendered for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Devon Common
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to the number of whole
shares of Devon Common Stock into which the shares represented by the
Certificates are exchanged and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Devon Common Stock, less the amount
of any withholding taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of Santa Fe Snyder of the shares of Santa Fe Snyder Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Devon, the presented Certificates
shall be canceled and exchanged for certificates for shares of Devon Common
Stock and cash in lieu of fractional shares, if any, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Article 3.
(e) No fraction of a share of Devon Common Stock will be issued, but in lieu
thereof each holder of Santa Fe Snyder Common Stock otherwise entitled to
receive a fraction of a share of Devon Common Stock will be entitled to receive
in accordance with the provisions of this Section 3.3(e) from the Exchange Agent
a cash payment in lieu of the fraction of a share of Devon Common Stock equal to
the fraction multiplied by the average of the closing sales price (or, if the
securities should not trade on any trading day, the average of the bid and ask
prices therefor on that day) of Devon Common Stock as reported on the American
Stock Exchange (the "AMEX") during the five consecutive trading days immediately
preceding the Effective Date. As promptly as practicable after the determination
of the amount of cash, if any, to be paid to holders of fractional interests,
the Exchange Agent will notify Devon, and Devon will deposit the necessary cash
with the Exchange Agent and will cause the Exchange Agent to forward payment to
the holders of fractional interests in accordance with the terms of this
Agreement. The Exchange Agent shall, subject to any applicable abandoned
property or similar law, until one year after the Effective Date, pay to such
holders the cash value of such fraction so determined, without interest. Any
balance of such cash, as to which certificates representing Santa Fe Snyder
Common Stock outstanding immediately prior to the Effective Time shall not have
been surrendered by the expiration of such one-year period, shall thereafter be
returned to and held by Devon subject to any applicable statute of limitations
or any abandoned property, escheat or similar law.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Devon Common Stock) that remains unclaimed
by the former stockholders of Santa Fe Snyder one year after the Effective Time
shall be delivered to Devon. Any former stockholders of Santa Fe Snyder who have
not theretofore complied with this Article 3 shall thereafter look only to Devon
for payment of their shares of Devon Common Stock, cash in lieu of fractional
shares and unpaid dividends and distributions on the Devon Common Stock
deliverable in respect of each Certificate such former stockholder holds as
determined pursuant to this Agreement.
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(g) None of Devon, the Exchange Agent or any other person shall be liable to
any former holder of shares of Santa Fe Snyder Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Devon, the posting by such
person of a bond in such reasonable amount as Devon may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Devon Common Stock and cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Devon Common Stock
deliverable in respect thereof pursuant to this Agreement.
Section 3.4 ADJUSTMENT OF EXCHANGE RATIO. If, subsequent to the date of
this Agreement but prior to the Effective Time, Santa Fe Snyder changes the
number of shares of Santa Fe Snyder Common Stock, or Devon changes the number of
shares of Devon Common Stock, issued and outstanding as a result of a stock
split, reverse stock split, stock dividend, recapitalization or other similar
transaction, the Santa Fe Snyder Exchange Ratio and other items dependent
thereon shall be appropriately adjusted.
Section 3.5 RULE 16b-3 APPROVAL. Devon agrees that the Devon Board of
Directors or the Compensation Committee of the Devon Board of Directors shall,
at or prior to the Effective Time, adopt resolutions specifically approving, for
purposes of Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the receipt, pursuant to Section 3.2, of Devon
Common Stock and Devon stock options by officers and directors of Santa Fe
Snyder who will become officers or directors of the Devon subject to Section 16
of the Exchange Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SANTA FE SNYDER
Except as set forth in the disclosure letter delivered to Devon concurrently
with the execution hereof (the "Santa Fe Snyder Disclosure Letter") or as
disclosed with reasonable specificity in the Santa Fe Snyder Reports (as defined
in Section 4.7), Santa Fe Snyder represents and warrants to Devon that:
Section 4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Santa Fe Snyder
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. Santa Fe Snyder is duly qualified to do
business as a foreign corporation and is in good standing under the laws of any
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect (as
defined in Section 9.9). Santa Fe Snyder has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted. The copies of Santa Fe Snyder's certificate of incorporation
and bylaws previously made available to Devon are true and correct and contain
all amendments as of the date hereof.
Section 4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Santa Fe
Snyder has the requisite corporate power and authority to execute and deliver
this Agreement, the Stock Option Agreements and all other agreements and
documents contemplated hereby, to which it is a party. The consummation by Santa
Fe Snyder of the transactions contemplated hereby and by the Stock Option
Agreements has been duly authorized by all requisite corporate action, other
than, with respect to the Merger, the approval and adoption of this Agreement by
Santa Fe Snyder's stockholders. This Agreement and the Stock Option Agreements
constitute the valid and legally binding obligations of Santa Fe Snyder to the
extent it is a party, enforceable in accordance with their respective terms,
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subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
Section 4.3 CAPITALIZATION. The authorized capital stock of Santa Fe
Snyder consists of 300,000,000 shares of Santa Fe Snyder Common Stock, and
50,000,000 shares of Santa Fe Snyder preferred stock, par value $0.01 per share
("Santa Fe Snyder Preferred Stock"). As of May 24, 2000, there were (a)
183,035,836 shares of Santa Fe Snyder Common Stock issued and outstanding
(including 40,000 shares of restricted stock to be granted to non-employee
directors, 20,000 shares of bonus stock to be granted to the non-employee
directors and 345,324 shares of restricted stock to be granted to James L.
Payne, all such shares to be issued as of May 16, 2000) and (b) no shares of
Santa Fe Snyder Preferred Stock issued and outstanding. All issued and
outstanding shares of Santa Fe Snyder Common Stock (i) are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights,
(ii) were not issued in violation of the terms of any agreement or other
understanding binding upon Santa Fe Snyder and (iii) were issued in compliance
with all applicable charter documents of Santa Fe Snyder and all applicable
federal and state securities laws, rules and regulations. As of the date of this
Agreement, except as set forth in this Section 4.3 or in the Stock Option
Agreements and except for any shares of Santa Fe Snyder Common Stock issued
pursuant to the plans described in the Santa Fe Snyder Disclosure Letter, there
are no outstanding shares of capital stock and there are no options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Santa Fe Snyder or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock or other voting securities of Santa
Fe Snyder or any of its Subsidiaries. Santa Fe Snyder has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of Santa Fe Snyder on any matter.
Section 4.4 SIGNIFICANT SUBSIDIARIES. For purposes of this Agreement,
"Significant Subsidiary" shall mean significant subsidiary as defined in Rule
1-02 of Regulation S-X of the Exchange Act. Each of Santa Fe Snyder's
Significant Subsidiaries is a corporation or partnership duly organized, validly
existing and in good standing (where applicable) under the laws of its
jurisdiction of incorporation or organization, has the corporate or partnership
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing (where applicable) in each jurisdiction in which the
ownership, operation or lease of its property or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing would not have, individually or in the
aggregate, a Santa Fe Snyder Material Adverse Effect. All of the outstanding
shares of capital stock of, or other ownership interests in, each of Santa Fe
Snyder's Significant Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by Santa Fe Snyder free
and clear of all liens, pledges, security interests, claims, preferential
purchase rights or other rights, interests or encumbrances ("Liens"). Schedule
4.4 to the Santa Fe Snyder Disclosure Letter sets forth for each Significant
Subsidiary of Santa Fe Snyder, its name and jurisdiction of incorporation or
organization.
Section 4.5 NO VIOLATION. Neither Santa Fe Snyder nor any of its
Subsidiaries is, or has received notice that it would be with the passage of
time, in violation of any term, condition or provision of (a) its charter
documents or bylaws, (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license or other instrument or (c) any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which Santa Fe Snyder or
any of its Subsidiaries or any of their respective properties or assets is
subject, or is delinquent with respect to any report required to be filed with
any governmental entity, except, in the case of matters described in clause (b)
or (c), as would not have, individually or in the aggregate, a Santa Fe Snyder
Material Adverse Effect. Santa Fe Snyder and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders, franchises and approvals of all
governmental authorities
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necessary for the lawful conduct of their respective businesses (the "Santa Fe
Snyder Permits"), except where the failure so to hold would not have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect.
Santa Fe Snyder and its Subsidiaries are in compliance with the terms of the
Santa Fe Snyder Permits, except where the failure so to comply would not have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect. No
investigation by any governmental authority with respect to Santa Fe Snyder or
any of its Subsidiaries is pending or, to the knowledge of Santa Fe Snyder,
threatened, other than those the outcome of which would not have, individually
or in the aggregate, a Santa Fe Snyder Material Adverse Effect.
Section 4.6 NO CONFLICT.
(a) Neither the execution and delivery by Santa Fe Snyder of this Agreement
or the Stock Option Agreements nor the consummation by Santa Fe Snyder of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof will: (i) conflict with or result in a breach of any provisions of
the charter documents or bylaws of Santa Fe Snyder; (ii) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or give rise to a right of purchase under, or accelerate the performance
required by, or result in the creation of any Lien upon any of the properties of
Santa Fe Snyder or its Subsidiaries under, or result in being declared void,
voidable, or without further binding effect, or otherwise result in a detriment
to Santa Fe Snyder or any of its Subsidiaries under any of the terms, conditions
or provisions of, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement, joint venture or other instrument
or obligation to which Santa Fe Snyder or any of its Subsidiaries is a party, or
by which Santa Fe Snyder or any of its Subsidiaries or any of their properties
is bound or affected; or (iii) contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation, judgment, order or
decree binding upon or applicable to Santa Fe Snyder or any of its Subsidiaries,
except, in the case of matters described in clause (ii) or (iii), as would not
have, individually or in the aggregate, a Santa Fe Snyder Material Adverse
Effect.
(b) Neither the execution and delivery by Santa Fe Snyder of this Agreement
or the Stock Option Agreements nor the consummation by Santa Fe Snyder of the
transactions contemplated hereby or thereby in accordance with the terms hereof
or thereof will require any consent, approval or authorization of, or filing or
registration with, any governmental or regulatory authority, other than (i) the
filings provided for in Article l and (ii) filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Exchange Act, the Securities Act or applicable state securities and
"Blue Sky" laws and applicable foreign competition or antitrust laws ((i) and
(ii) collectively, the "Regulatory Filings"), and listing on the New York Stock
Exchange ("NYSE") of Santa Fe Snyder Common Stock to be issued upon exercise of
the option granted to Devon pursuant to the applicable Stock Option Agreement
under the rules of NYSE, except for any consent, approval or authorization the
failure of which to obtain and for any filing or registration the failure of
which to make would not prevent or materially delay the consummation of the
Merger or otherwise prevent Santa Fe Snyder from performing its obligations
under this Agreement and would not have, individually or in the aggregate, a
Santa Fe Snyder Material Adverse Effect.
(c) Other than as contemplated by Section 4.6(b), no consents, assignments,
waivers, authorizations or other certificates are necessary in connection with
the transactions contemplated hereby to provide for the continuation in full
force and effect of all of Santa Fe Snyder's material contracts or leases or for
Santa Fe Snyder to consummate the transactions contemplated hereby, except when
the failure to receive such consents or other certificates would not have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) result in any
payment from Santa Fe Snyder or its
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Subsidiaries (including severance, unemployment compensation, parachute payment,
bonus or otherwise) becoming due to any director, employee or independent
contractor of Santa Fe Snyder or any of its Subsidiaries under any Santa Fe
Snyder Plan (as defined in Section 4.11) or otherwise; (ii) materially increase
any benefits otherwise payable under any Santa Fe Snyder Plan or otherwise; or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
Section 4.7 SEC DOCUMENTS. Santa Fe Snyder has made available to Devon
each registration statement, report, proxy statement or information statement
(other than preliminary materials) filed by Santa Fe Snyder with the SEC since
January 1, 1999, each in the form (including exhibits and any amendments
thereto) filed with the SEC prior to the date hereof (collectively, the "Santa
Fe Snyder Reports"), and Santa Fe Snyder has filed all forms, reports and
documents required to be filed by it with the SEC pursuant to relevant
securities statutes, regulations, policies and rules since such time. As of
their respective dates, the Santa Fe Snyder Reports (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder and
complied in all material respects with the then applicable accounting
requirements and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading except for such statements, if any, as have been
modified by subsequent filings with the SEC prior to the date hereof. Each of
the consolidated balance sheets included in or incorporated by reference into
the Santa Fe Snyder Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of Santa
Fe Snyder and its Subsidiaries as of its date and each of the consolidated
statements of operations, comprehensive income, cash flows and stockholders'
equity included in or incorporated by reference into the Santa Fe Snyder Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations, cash flows or changes in stockholders'
equity, as the case may be, of Santa Fe Snyder and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to such
exceptions as may be permitted by Form 10-Q of the SEC), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Since December 31,
1999, neither Santa Fe Snyder nor any of its Subsidiaries had any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
other than liabilities or obligations disclosed in the Santa Fe Snyder Reports
or which would not have, individually or in the aggregate, a Santa Fe Snyder
Material Adverse Effect.
Section 4.8 LITIGATION. There are no actions, suits or proceedings pending
against Santa Fe Snyder or any of its Subsidiaries or, to Santa Fe Snyder's
knowledge, threatened against Santa Fe Snyder or any of its Subsidiaries, at law
or in equity, or before or by any federal, state or foreign commission, board,
bureau, agency or instrumentality, that are likely to have, individually or in
the aggregate, a Santa Fe Snyder Material Adverse Effect. There are no
outstanding judgments, decrees, injunctions, awards or orders against Santa Fe
Snyder or any of its Subsidiaries that are likely to have, individually or in
the aggregate, a Santa Fe Snyder Material Adverse Effect.
Section 4.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, there has
not been (i) an event that would have a Santa Fe Snyder Material Adverse Effect;
(ii) any material change by Santa Fe Snyder or any of its Subsidiaries, when
taken as a whole, in any of its accounting methods, principles or practices or
any of its tax methods, practices or elections; (iii) any material damage,
destruction, or loss to the business or properties of Santa Fe Snyder and its
Subsidiaries, taken as a whole, not covered by insurance; (iv) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
capital stock of Santa Fe Snyder, or any direct or indirect redemption, purchase
or any other acquisition by Santa Fe Snyder of any such stock; (v) except for
the repurchase by Santa Fe Snyder of a total of 1,213,000 shares pursuant to
Santa Fe Snyder's open market purchase program, any change in the capital stock
or in the number of shares or classes of Santa Fe Snyder's authorized or
outstanding
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capital stock (other than as a result of issuances of restricted stock under the
Santa Fe Snyder Plans or exercises of options to purchase Santa Fe Snyder Common
Stock outstanding or issued as permitted hereunder); (vi) any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (other than the 2000 Incentive
Stock Option Plan), stock purchase or other employee benefit plan, except in the
ordinary course of business; or (vii) any other event or condition known to
Santa Fe Snyder particularly pertaining to and adversely affecting the
operations, assets or business of Santa Fe Snyder or any of its Subsidiaries
(other than events or conditions which are of a general or industry-wide nature
and of general public knowledge) which would constitute, individually or in the
aggregate, a Santa Fe Snyder Material Adverse Effect.
Section 4.10 TAXES.
(a) Each of Santa Fe Snyder, its Subsidiaries and each affiliated,
consolidated, combined, unitary or similar group of which any such corporation
is or, since January 1, 1991, was a member has (i) duly filed (or there has been
filed on its behalf) on a timely basis (taking into account any extensions of
time to file before the date hereof) with appropriate governmental authorities
all tax returns, statements, reports, declarations, estimates and forms
("Returns") required to be filed by or with respect to it, except to the extent
that any failure to file would not have, individually or in the aggregate, a
Santa Fe Snyder Material Adverse Effect, and (ii) duly paid or deposited in full
on a timely basis or made adequate provisions in accordance with generally
accepted accounting principles (or there has been paid or deposited or adequate
provision has been made on its behalf) for the payment of all taxes required to
be paid by it other than those being contested in good faith by Santa Fe Snyder
or a Subsidiary of Santa Fe Snyder and except to the extent that any failure to
pay or deposit or make adequate provision for the payment of such taxes would
not have, individually or in the aggregate, a Santa Fe Snyder Material Adverse
Effect.
(b) (i) The federal income tax returns of Santa Fe Snyder and each of its
Subsidiaries have been examined by the Internal Revenue Service (the "IRS") (or
the applicable statutes of limitation for the assessment of federal income taxes
for such periods have expired) for all periods; (ii) except to the extent being
contested in good faith, all material deficiencies asserted as a result of such
examinations and any other examinations of Santa Fe Snyder and its Subsidiaries
by any taxing authority have been paid fully, settled or adequately provided for
in the financial statements contained in the Santa Fe Snyder Reports; (iii) as
of the date hereof, neither Santa Fe Snyder nor any of its Subsidiaries has
granted any requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any taxes with respect to
any Returns of Santa Fe Snyder or any of its Significant Subsidiaries that will
be outstanding as of the Effective Time; (iv) neither Santa Fe Snyder nor any of
its Subsidiaries is a party to, is bound by or has any obligation under any tax
sharing, allocation or indemnity agreement or any similar agreement or
arrangement that would have, individually or in the aggregate, a Santa Fe Snyder
Material Adverse Effect; (v) there are no tax liens on any assets of Santa Fe
Snyder or its Subsidiaries except for taxes not yet currently due, with respect
to matters being contested by Santa Fe Snyder in good faith for which adequate
reserves are reflected in the financial statements and those which could not
reasonably be expected, individually or in the aggregate, to result in a Santa
Fe Snyder Material Adverse Effect; and (vi) neither Santa Fe Snyder nor any of
its Subsidiaries is a party to an agreement that provides for the payment of any
amount that would constitute a "parachute payment" within the meaning of Section
280G of the Code.
For purposes of this Agreement, "tax" or "taxes" means all federal, state,
county, local, foreign or other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, accumulated earnings, personal holding, excess
profits, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, disability, capital stock, or
windfall profits taxes, customs duties or other taxes, fees, assessments or
governmental charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).
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Section 4.11 EMPLOYEE BENEFIT PLANS. For purposes of this Section 4.11,
Santa Fe Snyder Subsidiaries shall include any enterprise which, with Santa Fe
Snyder, forms or formed a controlled group of corporations, a group of trades or
business under common control or an affiliated service group, within the meaning
of Section 414(b), (c) or (m) of the Code. All employee benefit plans, programs,
arrangements and agreements covering active, former or retired employees of
Santa Fe Snyder and Santa Fe Snyder Subsidiaries which provide material benefits
to such employees are listed in the Santa Fe Snyder Disclosure Letter (the
"Santa Fe Snyder Plans"). Santa Fe Snyder has made available to Devon true,
complete and correct copies of each Santa Fe Snyder Plan, any related trust
agreement, annuity or insurance contract or other funding vehicle, and:
(a) each Santa Fe Snyder Plan has been maintained and administered in material
compliance with its terms and is, to the extent required by applicable law or
contract, fully funded without having any deficit or unfunded actuarial
liability or adequate provision has been made therefor; (b) all required
employer contributions under any such plans have been made and the applicable
funds have been funded in accordance with the terms thereof, (c) each Santa Fe
Snyder Plan that is required or intended to be qualified under applicable law or
registered or approved by a governmental agency or authority has been so
qualified, registered or approved by the appropriate governmental agency or
authority, and nothing has occurred since the date of the last qualification,
registration or approval to adversely affect, or cause, the appropriate
governmental agency or authority to revoke such qualification, registration or
approval; (d) to the extent applicable, the Santa Fe Snyder Plans comply, in all
material respects, with the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and any other applicable
tax act and other laws, and any Santa Fe Snyder Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and nothing has occurred to cause the loss of such
qualified status; (e) no Santa Fe Snyder Plan is covered by Title IV of ERISA or
Section 412 of the Code; (f) there are no pending or anticipated material claims
against or otherwise involving any of the Santa Fe Snyder Plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of the Santa Fe Snyder Plan activities) has been brought against
or with respect to any Santa Fe Snyder Plan; (g) all material contributions,
reserves or premium payments required to be made as of the date hereof to the
Santa Fe Snyder Plans have been made or provided for; (h) neither Santa Fe
Snyder nor any Santa Fe Snyder Subsidiary has incurred or reasonably expects to
incur any liability under subtitle C or D of Title IV of ERISA with respect to
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by Santa Fe Snyder, any Santa Fe Snyder
Subsidiary or any entity which is considered one employer with Santa Fe Snyder
under Section 4001 of ERISA; (i) neither Santa Fe Snyder nor any Santa Fe Snyder
Subsidiary has incurred or reasonably expects to incur any withdrawal liability
under Subtitle E of Title IV of ERISA with respect to any "multi-employer plan,"
within the meaning of Section 4001(a)(3) of ERISA; and (j) neither Santa Fe
Snyder nor any Santa Fe Snyder Subsidiary has any material obligations for
retiree health and life benefits under any Santa Fe Snyder Plan.
Section 4.12 LABOR MATTERS.
(a) Neither Santa Fe Snyder nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization.
(b) Neither Santa Fe Snyder nor any of its Subsidiaries is subject to a
dispute, strike or work stoppage with respect to any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization to which it is a party or by which it is bound which would
have, individually or in the aggregate, a Santa Fe Snyder Material Adverse
Effect.
(c) To Santa Fe Snyder's knowledge, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of
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Santa Fe Snyder or any of its Subsidiaries except for those the formation of
which would not have, individually or in the aggregate, a Santa Fe Snyder
Material Adverse Effect.
Section 4.13 ENVIRONMENTAL MATTERS. Except as would not have, individually
or in the aggregate, a Santa Fe Snyder Material Adverse Effect:
(a) there are not any present or, to the knowledge of Santa Fe Snyder, past
conditions or circumstances that interfere with the conduct of the business of
Santa Fe Snyder and each of its Subsidiaries in the manner now conducted or
which interfere with compliance with any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation related to human health or the environment ("Environmental
Law");
(b) there are not any present or, to the knowledge of Santa Fe Snyder, past
conditions or circumstances at, or arising out of, any current or, to the
knowledge of Santa Fe Snyder, former businesses, assets or properties of Santa
Fe Snyder or any Subsidiary of Santa Fe Snyder, including but not limited to,
on-site or off-site disposal or release of any chemical substance, product or
waste, which constitute a violation under any Environmental Law or could
reasonably be expected to give rise to: (i) liabilities or obligations for any
cleanup, remediation, disposal or corrective action under any Environmental Law
or (ii) claims arising for personal injury, property damage, or damage to
natural resources;
(c) neither Santa Fe Snyder nor any of its Subsidiaries has (i) received any
written notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law, (ii) received any written notice
regarding any existing, pending or threatened investigation or inquiry related
to alleged violations under any Environmental Laws or regarding any claims for
remedial obligations or contribution under any Environmental Laws or
(iii) entered into any consent decree or order or is subject to any order of any
court or governmental authority or tribunal under any Environmental Law or
relating to the cleanup of any hazardous materials contamination;
(d) Santa Fe Snyder and its Subsidiaries have in full force and effect all
material environmental permits, licenses, approvals and other authorizations
required to conduct their operations and are operating in material compliance
thereunder; and
(e) Santa Fe Snyder does not know of any reason that would preclude it from
renewing or obtaining a reissuance of the material permits, licenses or other
authorizations required pursuant to any applicable Environmental Laws to operate
and use any of Santa Fe Snyder's or its Subsidiaries' assets for their current
purposes and uses.
Section 4.14 INTELLECTUAL PROPERTY. Santa Fe Snyder and its Subsidiaries
own or possess adequate licenses or other valid rights to use all patents,
patent rights, trademarks, trademark rights and proprietary information used or
held for use in connection with their respective businesses as currently being
conducted, free and clear of material Liens, except where the failure to own or
possess such licenses and other rights would not have, individually or in the
aggregate, a Santa Fe Snyder Material Adverse Effect, and there are no
assertions or claims challenging the validity of any of the foregoing which are
likely to have, individually or in the aggregate, a Santa Fe Snyder Material
Adverse Effect. Except in the ordinary course of business, neither Santa Fe
Snyder nor any of its Subsidiaries has granted to any other person any license
to use any of the foregoing. The conduct of Santa Fe Snyder's and its
Subsidiaries' respective businesses as currently conducted does not conflict
with any patents, patent rights, licenses, trademarks, trademark rights, trade
names, trade name rights or copyrights of others in any way likely to have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect.
There is no material infringement of any proprietary right owned by or licensed
by or to Santa Fe Snyder or any of its Subsidiaries which is likely to have,
individually or in the aggregate, a Santa Fe Snyder Material Adverse Effect.
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Section 4.15 TITLE TO PROPERTIES. Except for goods and other property
sold, used or otherwise disposed of since December 31, 1999 in the ordinary
course of business for fair value, Santa Fe Snyder has defensible title for oil
and gas purposes to all its properties, interests in properties and assets, real
and personal, reflected in its December 31, 1999 financial statements, free and
clear of any Lien, except: (a) Liens reflected in the balance sheet of Santa Fe
Snyder as of December 31, 1999; (b) Liens for current taxes not yet due and
payable and (c) such imperfections of title, easements and Liens as would not
have, individually or in the aggregate, a Santa Fe Snyder Material Adverse
Effect. All leases and other agreements pursuant to which Santa Fe Snyder or any
of its Subsidiaries leases or otherwise acquires or obtains operating rights
affecting any real or personal property are in good standing, valid, and
effective; and there is not, under any such leases, any existing or prospective
default or event of default or event which with notice or lapse of time, or
both, would constitute a default by Santa Fe Snyder or any of its Subsidiaries
which, individually or in the aggregate, would have a Santa Fe Snyder Material
Adverse Effect and in respect to which Santa Fe Snyder or any of its
Subsidiaries has not taken adequate steps to prevent a default from occurring.
All major items of operating equipment of Santa Fe Snyder and its Subsidiaries
are in good operating condition and in a state of reasonable maintenance and
repair, ordinary wear and tear excepted. Without limiting the generality of the
foregoing, Santa Fe Snyder's interest in production of hydrocarbons from each
well, unit or property described in the report of Ryder Scott Company dated
February 7, 2000 and delivered to Devon (after deducting all applicable
royalties, overriding royalties and other payments out of production) is not
materially less than the interest shown under the heading "Net Revenue Interest"
for such well, unit or property, and Santa Fe Snyder's share of exploration,
development and operation costs for each such well, unit or property is not
materially greater than the percentage shown under the heading "Working
Interest" for such well, unit or property. Santa Fe Snyder has not received any
material advance, take-or-pay or other similar payments that entitle purchasers
of production to receive deliveries of hydrocarbons without paying therefor,
and, on a net, company-wide basis, Santa Fe Snyder is neither underproduced nor
overproduced under gas balancing or similar arrangements.
Section 4.16 INSURANCE. Santa Fe Snyder and its Subsidiaries maintain
insurance coverage reasonably adequate for the operation of their respective
businesses (taking into account the cost and availability of such insurance).
Section 4.17 NO BROKERS. Santa Fe Snyder has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Devon, Merger Co. or Santa Fe Snyder pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Santa Fe Snyder has retained Chase Securities
Inc. to render the opinion referred to in Section 4.18, the arrangements with
which have been disclosed in writing to Devon prior to the date hereof.
Section 4.18 OPINION OF FINANCIAL ADVISOR. The Board of Directors of Santa
Fe Snyder has received the opinion of Chase Securities Inc. to the effect that,
as of the date of this Agreement, the Santa Fe Snyder Exchange Ratio is fair,
from a financial point of view, to the holders of Santa Fe Snyder Common Stock;
it being understood and acknowledged by Devon that such opinion has been
rendered for the benefit of the Board of Directors of Santa Fe Snyder, and is
not intended to, and may not, be relied upon by Devon, its affiliates or their
respective Subsidiaries.
Section 4.19 DEVON STOCK OWNERSHIP. Neither Santa Fe Snyder nor any of its
Subsidiaries owns any shares of capital stock of Devon or any other securities
convertible into or otherwise exercisable to acquire capital stock of Devon.
Section 4.20 ACCOUNTING AND REORGANIZATION MATTERS. Santa Fe Snyder
intends that the Merger be accounted for as a Pooling of Interests. To the best
of its knowledge, neither Santa Fe Snyder nor any of its affiliates has taken or
agreed to take any action that would prevent the Merger from qualifying
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(i) for Pooling of Interests accounting treatment or (ii) as a reorganization
within the meaning of Section 368(a) of the Code (a "368(a) Reorganization").
Section 4.21 VOTE REQUIRED. The affirmative vote of holders of a majority
of the outstanding shares of Santa Fe Snyder Common Stock required by the DGCL
is the only vote necessary to approve this Agreement and the transactions
contemplated hereby.
Section 4.22 CERTAIN APPROVALS. Santa Fe Snyder's Board of Directors has
taken any and all necessary and appropriate action to render inapplicable to the
Merger and the transactions contemplated by this Agreement and the Stock Option
Agreements the provisions of Section 203 of the DGCL.
Section 4.23 CERTAIN CONTRACTS. Neither Santa Fe Snyder nor any of its
Subsidiaries is a party to or bound by (i) any non-competition agreement or any
other agreement or obligation which purports to limit the manner in which, or
the localities in which, the current business of Santa Fe Snyder and its
Subsidiaries, taken as a whole, or Devon and its Subsidiaries, taken as a whole,
is conducted or (ii) any executory agreement or obligation which pertains to the
acquisition or disposition of any asset, or which provides any third party any
lien, claim or preferential right with regard thereto, except in each case for
any such agreements or obligations which would not have, individually or in the
aggregate, a Santa Fe Snyder Material Adverse Effect.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
DEVON AND MERGER CO.
Except as set forth in the disclosure letter delivered to Santa Fe Snyder
concurrently with the execution hereof (the "Devon Disclosure Letter") or as
disclosed with reasonable specificity in the Devon Reports (as defined in
Section 5.7), Devon and Merger Co., jointly and severally, represent and warrant
to Santa Fe Snyder that:
Section 5.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Devon
and Merger Co. is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of Devon and Merger Co.
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of any jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have, individually or in the aggregate, a Devon Material
Adverse Effect (as defined in Section 9.9). Each of Devon and Merger Co. has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now conducted. The copies of each of Devon's and
Merger Co.'s certificate of incorporation and bylaws previously made available
to Santa Fe Snyder are true and correct and contain all amendments as of the
date hereof.
Section 5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of
Devon and Merger Co. has the requisite corporate power and authority to execute
and deliver this Agreement, the Stock Option Agreements and all other agreements
and documents contemplated hereby, to which it is a party. The consummation by
each of Devon and Merger Co. of the transactions contemplated hereby, including
the issuance and delivery by Devon of shares of Devon Common Stock pursuant to
the Merger, and the consummation by Devon of the transactions contemplated by
the Stock Option Agreements, has been duly authorized by all requisite corporate
action, other than, with respect to the Merger, the approval and adoption of
this Agreement by Devon's stockholders. This Agreement and the Stock Option
Agreements constitutes the valid and legally binding obligations of each of
Devon and Merger Co. to the extent it is a party, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
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Section 5.3 CAPITALIZATION. The authorized capital stock of Devon consists
of 400,000,000 shares of Devon Common Stock, one share of Devon Special Voting
Stock, par value $0.10 per share, and 4,500,000 shares of Devon's preferred
stock, par value $1.00 per share ("Devon Preferred Stock"). As of May 24, 2000,
there were (a) 82,919,871 shares of Devon Common Stock issued and outstanding,
(b) one share of Devon Special Voting Stock issued and outstanding,
(c) 8,462,318 shares of Devon Common Stock reserved for issuance under the stock
options plans of Devon described in the Devon Disclosure Letter, (d) 33,300
shares of Devon Common Stock reserved for issuance under the Devon Restricted
Stock Award Plan, (e) 53,147 shares of Devon Common Stock reserved for issuance
under certain conditional stock awards granted to former employees of
PennzEnergy Company, (f) 3,877,317 shares reserved for issuance upon exchange of
outstanding exchangeable shares ("Northstar Exchangeable Shares") issued by
Northstar Energy Corporation, an Alberta corporation ("Northstar"), (g)
1,500,000 shares of Devon Preferred Stock designated as 6.49% Cumulative
Preferred Stock, Series A, issued and outstanding and (h) 1,000,000 unissued
shares of Devon Preferred Stock designated as Series A Junior Participating
Preferred Stock. All issued and outstanding shares of Devon Common Stock
(i) are duly authorized, validly issued, fully paid, nonassessable and, except
as set forth in the Devon Disclosure Letter, free of preemptive rights,
(ii) were not issued in violation of the terms of any agreement or other
understanding binding upon Devon and (iii) were issued in compliance with all
applicable charter documents of Devon and all applicable federal and state
securities laws, rules and regulations. One right to purchase Series A Junior
Participating Preferred Stock of Devon (each, a "Devon Right") issued pursuant
to a Rights Agreement, dated as of August 17, 1999 (the "Devon Rights
Agreement"), between Devon and BankBoston, N.A., is associated with and attached
to each outstanding share of Devon Common Stock. The shares of Devon Common
Stock to be issued in connection with the Merger, when issued in accordance with
this Agreement, will be validly issued, fully paid and nonassessable. As of the
date of this Agreement, except as set forth in this Section 5.3 or in the Stock
Option Agreements and except for any shares of Devon Common Stock issued
pursuant to the plans described in the Devon Disclosure Letter, there are no
outstanding shares of capital stock and there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Devon or any of its Subsidiaries to issue, transfer
or sell any shares of capital stock or other voting securities of Devon or any
of its Subsidiaries. Devon has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Devon on any matter.
Section 5.4 SIGNIFICANT SUBSIDIARIES.
(a) Each of Devon's Significant Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing (where applicable) under the laws of its jurisdiction of incorporation
or organization, has the corporate, limited liability company or partnership
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing (where applicable) in each jurisdiction in which the
ownership, operation or lease of its property or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing would not have, individually or in the
aggregate, a Devon Material Adverse Effect. All of the outstanding shares of
capital stock of, or other ownership interests in, each of Devon's Significant
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by Devon free and clear of all Liens.
Schedule 5.4 to the Devon Disclosure Letter sets forth for each Significant
Subsidiary of Devon its name and jurisdiction of incorporation or organization.
(b) Devon Energy Production Company, L.P. ("Devon Production"), a
Significant Subsidiary, is a limited partnership (except for tax purposes) duly
organized and validly existing under Oklahoma law, the general partner of which
is Devon Energy Management Company, L.L.C., an Oklahoma limited
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liability company which is wholly owned by Devon Energy Corporation (Oklahoma),
an Oklahoma corporation, and has elected to be treated as a sole proprietorship
for federal income tax purposes. Devon Production has one limited partner. All
of the outstanding partnership interests of Devon Production are owned directly
or indirectly by Devon.
(c) All of the outstanding shares of capital stock of Merger Co. are owned
directly by Devon. Merger Co. was formed solely for the purpose of engaging in
the transactions contemplated hereby and has not engaged in any activities other
than in connection with the transactions contemplated by this Agreement.
Section 5.5 NO VIOLATION. Neither Devon nor any of its Subsidiaries is, or
has received notice that it would be with the passage of time, in violation of
any term, condition or provision of (a) its charter documents or bylaws, (b) any
loan or credit agreement, note, bond, mortgage, indenture, contract, agreement,
lease, license or other instrument or (c) any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which Devon or any of its Subsidiaries or any of their
respective properties or assets is subject, or is delinquent with respect to any
report required to be filed with any governmental entity, except, in the case of
matters described in clause (b) or (c), as would not have, individually or in
the aggregate, a Devon Material Adverse Effect. Devon and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and approvals
of all governmental authorities necessary for the lawful conduct of their
respective businesses (the "Devon Permits"), except where the failure so to hold
would not have, individually or in the aggregate, a Devon Material Adverse
Effect. Devon and its Subsidiaries are in compliance with the terms of the Devon
Permits, except where the failure so to comply would not have, individually or
in the aggregate, a Devon Material Adverse Effect. No investigation by any
governmental authority with respect to Devon or any of its Subsidiaries is
pending or, to the knowledge of Devon, threatened, other than those the outcome
of which would not have, individually or in the aggregate, a Devon Material
Adverse Effect.
Section 5.6 NO CONFLICT.
(a) Neither the execution and delivery by Devon and Merger Co. of this
Agreement, the execution and delivery by Devon of the Stock Option Agreements
nor the consummation by Devon and Merger Co. of the transactions contemplated
hereby or thereby in accordance with the terms hereof or thereof will: (i)
conflict with or result in a breach of any provisions of the charter documents
or bylaws of Devon or Merger Co.; (ii) violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or give rise to
a right of purchase under, or accelerate the performance required by, or result
in the creation of any Lien upon any of the properties of Devon or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to Devon or any of
its Subsidiaries under any of the terms, conditions or provisions of, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement, joint venture or other instrument or obligation to which
Devon or any of its Subsidiaries is a party, or by which Devon or any of its
Subsidiaries or any of their properties is bound or affected; or (iii)
contravene or conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, order or decree binding upon or applicable to
Devon or any of its Subsidiaries, except, in the case of matters described in
clause (ii) or (iii), as would not have, individually or in the aggregate, a
Devon Material Adverse Effect.
(b) Neither the execution and delivery by Devon or Merger Co. of this
Agreement, the execution and delivery by Devon of the Stock Option Agreements
nor the consummation by Devon or Merger Co. of the transactions contemplated
hereby or thereby in accordance with the terms hereof or thereof will require
any consent, approval or authorization of, or filing or registration with, any
governmental
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or regulatory authority, other than Regulatory Filings, and listing of the Devon
Common Stock to be issued in the Merger on the AMEX and the listing of the Devon
Common Stock upon exercise of the option granted to Santa Fe Snyder pursuant to
the applicable Stock Option Agreement under the rules of the AMEX, except for
any consent, approval or authorization the failure of which to obtain and for
any filing or registration the failure of which to make would not prevent or
materially delay the consummation of the Merger or otherwise prevent Devon from
performing its obligations under this Agreement and would not have, individually
or in the aggregate, a Devon Material Adverse Effect.
(c) Other than as contemplated by Section 5.6(b), no consents, assignments,
waivers, authorizations or other certificates are necessary in connection with
the transactions contemplated hereby to provide for the continuation in full
force and effect of all of Devon's material contracts or leases or for Devon to
consummate the transactions contemplated hereby, except when the failure to
receive such consents or other certificates would not have, individually or in
the aggregate, a Devon Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) result in any
payment from Devon or its Subsidiaries (including severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee or independent contractor of Devon or any of its Subsidiaries
under any Devon Plan (as defined in Section 5.11) or otherwise; (ii) materially
increase any benefits otherwise payable under any Devon Plan or otherwise; or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
Section 5.7 SEC DOCUMENTS. Devon has made available to Santa Fe Snyder
each registration statement, report, proxy statement or information statement
(other than preliminary materials) filed by Devon with the SEC since January 1,
1999, each in the form (including exhibits and any amendments thereto) filed
with the SEC prior to the date hereof (collectively, the "Devon Reports"), and
Devon has filed all forms, reports and documents required to be filed by it with
the SEC pursuant to relevant securities statutes, regulations, policies and
rules since such time. As of their respective dates, the Devon Reports (i) were
prepared in all material respects in accordance with the applicable requirements
of the Securities Act, the Exchange Act, and the rules and regulations
thereunder and complied in all material respects with the then applicable
accounting requirements and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading except for such statements, if any,
as have been modified by subsequent filings with the SEC prior to the date
hereof. Each of the consolidated balance sheets included in or incorporated by
reference into the Devon Reports (including the related notes and schedules)
fairly presents in all material respects the consolidated financial position of
Devon and its Subsidiaries as of its date and each of the consolidated
statements of operations, cash flows and stockholders' equity included in or
incorporated by reference into the Devon Reports (including any related notes
and schedules) fairly presents in all material respects the results of
operations, cash flows or changes in stockholders' equity, as the case may be,
of Devon and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to such exceptions as may be permitted by Form
10-Q of the SEC), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Since December 31, 1999, neither Devon nor any of its
Subsidiaries had any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), other than liabilities or obligations
disclosed in the Devon Reports or which would not have, individually or in the
aggregate, a Devon Material Adverse Effect.
Section 5.8 LITIGATION. There are no actions, suits or proceedings pending
against Devon or any of its Subsidiaries or, to Devon's knowledge, threatened
against Devon or any of its Subsidiaries, at law or in equity, or before or by
any federal, state or foreign commission, board, bureau, agency or
instrumentality, that are likely to have, individually or in the aggregate, a
Devon Material Adverse
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Effect. There are no outstanding judgments, decrees, injunctions, awards or
orders against Devon or any of its Subsidiaries that are likely to have,
individually or in the aggregate, a Devon Material Adverse Effect.
Section 5.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, there has
not been (i) an event that would have a Devon Material Adverse Effect; (ii) any
material change by Devon or any of its Subsidiaries, when taken as a whole, in
any of its accounting methods, principles or practices or any of its tax
methods, practices or elections; (iii) any material damage, destruction, or loss
to the business or properties of Devon and its Subsidiaries, taken as a whole,
not covered by insurance; (iv) any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of Devon, or any
direct or indirect redemption, purchase or any other acquisition by Devon of any
such stock (except for, and provided that, Devon may continue to pay or cause to
be paid, dividends upon the shares of Devon Common Stock and the Northstar
Exchangeable Shares at a rate not greater than $.05 per share in any quarter);
(v) any change in the capital stock or in the number of shares or classes of
Devon's authorized or outstanding capital stock (other than as a result of
exercises of options to purchase Devon Common Stock outstanding or issued as
permitted hereunder); (vi) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, except in
the ordinary course of business; or (vii) any other event or condition known to
Devon particularly pertaining to and adversely affecting the operations, assets
or business of Devon or any of its Subsidiaries (other than events or conditions
which are of a general or industry-wide nature and of general public knowledge)
which would constitute, individually or in the aggregate, a Devon Material
Adverse Effect.
Section 5.10 TAXES.
(a) Each of Devon, its Subsidiaries and each affiliated, consolidated,
combined, unitary or similar group of which any such corporation is or was a
member has (i) duly filed (or there has been filed on its behalf) on a timely
basis (taking into account any extensions of time to file before the date
hereof) with appropriate governmental authorities all Returns required to be
filed by or with respect to it, except to the extent that any failure to file
would not have, individually or in the aggregate, a Devon Material Adverse
Effect, and (ii) duly paid or deposited in full on a timely basis or made
adequate provisions in accordance with generally accepted accounting principles
(or there has been paid or deposited or adequate provision has been made on its
behalf) for the payment of all taxes required to be paid by it other than those
being contested in good faith by Devon or a Subsidiary of Devon and except to
the extent that any failure to pay or deposit or make adequate provision for the
payment of such taxes would not have, individually or in the aggregate, a Devon
Material Adverse Effect.
(b) (i) The federal income tax returns of Devon and each of its Subsidiaries
have been examined by the IRS (or the applicable statutes of limitation for the
assessment of federal income taxes for such periods have expired) for all
periods; (ii) except to the extent being contested in good faith, all material
deficiencies asserted as a result of such examinations and any other
examinations of Devon and its Subsidiaries by any taxing authority have been
paid fully, settled or adequately provided for in the financial statements
contained in the Devon Reports; (iii) as of the date hereof, neither Devon nor
any of its Subsidiaries has granted any requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any taxes with respect to any Returns of Devon or any of its
Significant Subsidiaries that will be outstanding as of the Effective Time; (iv)
neither Devon nor any of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing, allocation or indemnity agreement or any
similar agreement or arrangement that would have, individually or in the
aggregate, a Devon Material Adverse Effect; (v) there are no tax liens on any
assets of Devon or its Subsidiaries except for taxes not yet currently due, with
respect to matters being contested by Devon in good faith for which adequate
reserves are reflected in the financial statements and those which could not
reasonably be expected, individually or in the aggregate, to result in a
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Devon Material Adverse Effect; and (vi) neither Devon nor any of its
Subsidiaries is a party to an agreement that provides for the payment of any
amount that would constitute a "parachute payment" within the meaning of Section
280G of the Code.
Section 5.11 EMPLOYEE BENEFIT PLANS. For purposes of this Section 5.11,
Devon Subsidiaries shall include any enterprise which, with Devon, forms or
formed a controlled group of corporations, a group of trades or business under
common control or an affiliated service group, within the meaning of Section
414(b), (c) or (m) of the Code. All employee benefit plans, programs,
arrangements and agreements covering active, former or retired employees of
Devon and Devon Subsidiaries which provide material benefits to such employees
are listed in the Devon Disclosure Letter (the "Devon Plans"). Devon has made
available to Santa Fe Snyder true, complete and correct copies of each Devon
Plan, any related trust agreement, annuity or insurance contract or other
funding vehicle, and: (a) each Devon Plan has been maintained and administered
in material compliance with its terms and is, to the extent required by
applicable law or contract, fully funded without having any deficit or unfunded
actuarial liability or adequate provision has been made therefor; (b) all
required employer contributions under any such plans have been made and the
applicable funds have been funded in accordance with the terms thereof,
(c) each Devon Plan that is required or intended to be qualified under
applicable law or registered or approved by a governmental agency or authority
has been so qualified, registered or approved by the appropriate governmental
agency or authority, and nothing has occurred since the date of the last
qualification, registration or approval to adversely affect or cause the
appropriate governmental agency or authority to revoke such qualification,
registration or approval; (d) to the extent applicable, the Devon Plans comply,
in all material respects, with the requirements of ERISA, the Code and any other
applicable tax act and other laws, and any Devon Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and nothing has occurred to cause the loss of such
qualified status; (e) no Devon Plan is covered by Title IV of ERISA or Section
412 of the Code; (f) there are no pending or anticipated material claims against
or otherwise involving any of the Devon Plans and no suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
Devon Plan activities) has been brought against or with respect to any Devon
Plan; (g) all material contributions, reserves or premium payments required to
be made as of the date hereof to the Devon Plans have been made or provided for;
(h) neither Devon nor any Devon Subsidiary has incurred or reasonably expects to
incur any liability under subtitle C or D of Title IV of ERISA with respect to
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by Devon, any Devon Subsidiary or any entity
which is considered one employer with Devon under Section 4001 of ERISA;
(i) neither Devon nor any Devon Subsidiary has incurred or reasonably expects to
incur any withdrawal liability under Subtitle E of Title IV of ERISA with
respect to any "multi-employer plan," within the meaning of Section
4001(a)(3) of ERISA; and (j) neither Devon nor any Devon Subsidiary has any
material obligations for retiree health and life benefits under any Devon Plan.
Section 5.12 LABOR MATTERS.
(a) Neither Devon nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization.
(b) Neither Devon nor any of its Subsidiaries is subject to a dispute,
strike or work stoppage with respect to any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization to which it is a party or by which it is bound which would have,
individually or in the aggregate, a Devon Material Adverse Effect.
(c) To Devon's knowledge, there are no organizational efforts with respect
to the formation of a collective bargaining unit presently being made or
threatened involving employees of Devon or any of its Subsidiaries, except for
those the formation of which would not have, individually or in the aggregate, a
Devon Material Adverse Effect.
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Section 5.13 ENVIRONMENTAL MATTERS. Except as would not have, individually
or in the aggregate, a Devon Material Adverse Effect:
(a) there are not any present or, to the knowledge of Devon, past conditions
or circumstances that interfere with the conduct of the business of Devon and
each of its Subsidiaries in the manner now conducted or which interfere with
compliance with any order of any court, governmental authority or arbitration
board or tribunal, or any Environmental Law;
(b) there are not any present or, to the knowledge of Devon, past conditions
or circumstances at, or arising out of, any current or, to the knowledge of
Devon, former businesses, assets or properties of Devon or any Subsidiary of
Devon, including but not limited to, on-site or off-site disposal or release of
any chemical substance, product or waste, which constitute a violation under any
Environmental Law or could reasonably be expected to give rise to:
(i) liabilities or obligations for any cleanup, remediation, disposal or
corrective action under any Environmental Law or (ii) claims arising for
personal injury, property damage, or damage to natural resources;
(c) neither Devon nor any of its Subsidiaries has (i) received any written
notice of noncompliance with, violation of, or liability or potential liability
under any Environmental Law, (ii) received any written notice regarding any
existing, pending or threatened investigation or inquiry related to alleged
violations under any Environmental Laws or regarding any claims for remedial
obligations or contribution under any Environmental Laws or (iii) entered into
any consent decree or order or is subject to any order of any court or
governmental authority or tribunal under any Environmental Law or relating to
the cleanup of any hazardous materials contamination;
(d) Devon and its Subsidiaries have in full force and effect all material
environmental permits, licenses, approvals and other authorizations required to
conduct their operations and are operating in material compliance thereunder;
and
(e) Devon does not know of any reason that would preclude it from renewing
or obtaining a reissuance of the material permits, licenses or other
authorizations required pursuant to any applicable Environmental Laws to operate
and use any of Devon's or its Subsidiaries' assets for their current purposes
and uses.
Section 5.14 INTELLECTUAL PROPERTY. Devon and its Subsidiaries own or
possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, free and clear of material Liens, except where the failure to own or
possess such licenses and other rights would not have, individually or in the
aggregate, a Devon Material Adverse Effect, and there are no assertions or
claims challenging the validity of any of the foregoing which are likely to
have, individually or in the aggregate, a Devon Material Adverse Effect. Except
in the ordinary course of business, neither Devon nor any of its Subsidiaries
has granted to any other person any license to use any of the foregoing. The
conduct of Devon's and its Subsidiaries' respective businesses as currently
conducted does not conflict with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of
others in any way likely to have, individually or in the aggregate, a Devon
Material Adverse Effect. There is no material infringement of any proprietary
right owned by or licensed by or to Devon or any of its Subsidiaries which is
likely to have, individually or in the aggregate, a Devon Material Adverse
Effect.
Section 5.15 TITLE TO PROPERTIES. Except for goods and other property
sold, used or otherwise disposed of since December 31, 1999 in the ordinary
course of business for fair value, Devon has defensible title for oil and gas
purposes to all its properties, interests in properties and assets, real and
personal, reflected in its December 31, 1999 financial statements, free and
clear of any Lien, except: (a) Liens reflected in the balance sheet of Devon as
of December 31, 1999; (b) Liens for current taxes not yet due and payable and
(c) such imperfections of title, easements and Liens as would not have,
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individually or in the aggregate, a Devon Material Adverse Effect. All leases
and other agreements pursuant to which Devon or any of its Subsidiaries leases
or otherwise acquires or obtains operating rights affecting any real or personal
property are in good standing, valid, and effective; and there is not, under any
such leases, any existing or prospective default or event of default or event
which, with notice or lapse of time, or both, would constitute a default by
Devon or any of its Subsidiaries which, individually or in the aggregate, would
have a Devon Material Adverse Effect and in respect to which Devon or any of its
Subsidiaries has not taken adequate steps to prevent a default from occurring.
All major items of operating equipment of Devon and its Subsidiaries are in good
operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted. Without limiting the generality of the
foregoing, Devon's interest in production of hydrocarbons from each well, unit
or property described in the reports of (i) LaRoche Petroleum Consultants, Ltd.
dated January 25, 2000, (ii) Paddock Lindstrom & Associates, Ltd. dated January
19, 2000, (iii) Ryder Scott Company dated February 18, 2000 and (iv) Devon dated
January 4, 2000 and delivered to Santa Fe Snyder (after deducting all applicable
royalties, overriding royalties and other payments out of production) is not
materially less than the interest shown under the heading "Net Revenue Interest"
for such well, unit or property, and Devon's share of exploration, development
and operation costs for each such well, unit or property is not materially
greater than the percentage shown under the heading "Working Interest" for such
well, unit or property. Devon has not received any material advance, take-or-pay
or other similar payments that entitle purchasers of production to receive
deliveries of hydrocarbons without paying therefor, and, on a net, company-wide
basis, Devon is neither underproduced nor overproduced under gas balancing or
similar arrangements.
Section 5.16 INSURANCE. Devon and its Subsidiaries maintain insurance
coverage reasonably adequate for the operation of their respective businesses
(taking into account the cost and availability of such insurance).
Section 5.17 NO BROKERS. Devon has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Devon, Merger Co. or Santa Fe Snyder to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Devon has retained Morgan Stanley Dean Witter
to prepare the opinion as set forth in Section 5.18, the arrangements with which
have been disclosed in writing to Santa Fe Snyder prior to the date hereof.
Section 5.18 OPINION OF FINANCIAL ADVISOR. The Board of Directors of Devon
has received the opinion of Morgan Stanley & Co. Incorporated to the effect
that, as of the date of this Agreement, the Santa Fe Snyder Exchange Ratio is
fair, from a financial point of view, to Devon; it being understood and
acknowledged by Santa Fe Snyder that such opinion has been rendered for the
benefit of the Board of Directors of Devon, and is not intended to, and may not,
be relied upon by Santa Fe Snyder, its affiliates or their respective
Subsidiaries.
Section 5.19 SANTA FE SNYDER STOCK OWNERSHIP. Neither Devon nor any of its
Subsidiaries owns any shares of capital stock of Santa Fe Snyder or any other
securities convertible into or otherwise exercisable to acquire capital stock of
Santa Fe Snyder.
Section 5.20 ACCOUNTING AND REORGANIZATION MATTERS. Each of Devon and
Merger Co. intends that the Merger be accounted for as a Pooling of Interests.
To the best of its knowledge, neither Devon nor any of its affiliates has taken
or agreed to take any action that would prevent the Merger from qualifying (i)
for Pooling of Interests accounting treatment or (ii) as a 368(a)
Reorganization.
Section 5.21 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Devon Common Stock and the outstanding
Northstar Exchangeable Shares, voting as a single class with the Devon Special
Voting Share voting for the Northstar Exchangeable Shares as provided in Devon's
charter, represented in person or by proxy at a meeting at which quorum is
present is the only
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vote of the holders of any class or series of Devon capital stock necessary to
approve this Agreement and the transactions contemplated hereby; PROVIDED,
HOWEVER, if a proposal to amend Devon's Certificate of Incorporation is
presented at the meeting for approval pursuant to Section 2.1 hereof, the
affirmative vote of the holders of a majority of the outstanding shares of Devon
Common Stock and the outstanding Northstar Exchangeable Shares, voting as a
single class with the Devon Special Voting Share voting for the Northstar
Exchangeable Shares as provided in Devon's charter, will be required for
approval.
Section 5.22 DEVON RIGHTS AGREEMENT. Devon has taken all required action
under the Devon Rights Agreement so that none of the execution and delivery of
this Agreement or the Stock Option Agreements, the issuance of shares of Devon
Common Stock upon exercise of the option granted to Santa Fe Snyder pursuant to
the applicable Stock Option Agreement, and the consummation of the Merger or any
other transaction contemplated hereby or by the Stock Option Agreement, will
cause (i) the Devon Rights to become exercisable under the Devon Rights
Agreement, (ii) Santa Fe Snyder or any of its Subsidiaries to be deemed an
"Acquiring Person" (as defined in the Devon Rights Agreement), (iii) any such
event to be an event described in Section 7(e) or 13 of the Devon Rights
Agreement or (iv) the "Stock Acquisition Date" or the "Distribution Date" (each
as defined in the Devon Rights Agreement) to occur upon any such event. Devon
has delivered to Santa Fe Snyder a true and complete copy of the Devon Rights
Agreement, as amended to date.
Section 5.23 CERTAIN APPROVALS. Devon's Board of Directors has taken any
and all necessary and appropriate action to render inapplicable to the Merger
and the transactions contemplated by this Agreement and the Stock Option
Agreements the provisions of Section 203 of the DGCL.
Section 5.24 CERTAIN CONTRACTS. Neither Devon nor any of its Subsidiaries
is a party to or bound by (i) any non-competition agreement or any other
agreement or obligation which purports to limit the manner in which, or the
localities in which, the current business of Devon and its Subsidiaries, taken
as a whole, or Santa Fe Snyder and its Subsidiaries, taken as a whole, is
conducted or (ii) any executory agreement or obligation which pertains to the
acquisition or disposition of any asset, or which provides any third party any
lien, claim or preferential right with regard thereto, except in each case for
any such agreements or obligations which would not have, individually or in the
aggregate, a Devon Material Adverse Effect.
ARTICLE 6
COVENANTS
Section 6.1 CONDUCT OF BUSINESSES. Prior to the Effective Time, except as
set forth in the Devon Disclosure Letter or Santa Fe Snyder Disclosure Letter or
as expressly contemplated by any other provision of this Agreement including
Schedule 6.14, or the Stock Option Agreements, unless Devon or Santa Fe Snyder,
respectively, has consented in writing thereto, each of Santa Fe Snyder and
Devon:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted; provided, however, such
Subsidiaries may be reorganized or combined in any manner so long as the
reorganization or combination would not have a Material Adverse Effect;
(b) shall use its commercially reasonable best efforts, and shall cause each
of its Subsidiaries to use its commercially reasonable best efforts, to preserve
intact their business organizations and goodwill, keep available the services of
their respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(c) shall not amend its certificate of incorporation or bylaws;
(d) shall promptly notify the other of any material change in its financial
condition or business or any material litigation or material governmental
complaints, investigations or hearings (or
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communications in writing indicating that such litigation, complaints,
investigations or hearings may be contemplated), or the breach in any material
respect of any representation or warranty contained herein;
(e) shall promptly deliver or otherwise make available to the other true and
correct copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;
(f) shall not (i) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof, or
referred to in clause (ii) below and disclosed pursuant to this Agreement or in
connection with transactions permitted by Section 6.1(i), issue any shares of
its capital stock, effect any stock split or otherwise change its capitalization
as it existed on the date hereof; (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof to
acquire any shares of its capital stock except (x) the grant of options to new
employees consistent with past practice in an amount not to exceed 100,000
shares of Santa Fe Snyder Common Stock, in the case of Santa Fe Snyder, and
100,000 shares of Devon Common Stock, in the case of Devon, or pursuant to
contractual commitments existing on the date of this Agreement; (iii) increase
any compensation or benefits, except in the ordinary course of business
consistent with past practice, or enter into or amend any employment agreement
with any of its present or future officers or directors, except with new
employees consistent with past practice, or (iv) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or amend
(except as required by law) any existing employee benefit plan in any material
respect, except for changes which are less favorable to participants in such
plans;
(g) shall not (i) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
(ii) redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of any of its Subsidiaries, or make any commitment for any such
action, except that Devon may continue to pay or cause to be paid, dividends
upon (A) the shares of Devon Common Stock and the Northstar Exchangeable Shares
at a rate not greater than $.05 per share in any quarter and (B) the shares of
Devon Preferred Stock at a rate not greater than $1.6225 per share in any
quarter;
(h) shall not, and shall not permit any of its Subsidiaries to, sell, lease
or otherwise dispose of any of its assets (including capital stock of
Subsidiaries) which are material to Santa Fe Snyder or Devon, as the case may
be, individually or in the aggregate, except in the ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to, except
pursuant to contractual commitments in effect on the date hereof and disclosed
in the Devon Disclosure Letter or Santa Fe Snyder Disclosure Letter, as the case
may be, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets or securities in each case (i) for an
aggregate consideration for all such acquisitions in excess of $3 million
(excluding acquisitions approved in writing by Devon and Santa Fe Snyder) and
(ii) where a filing under the HSR Act is required, except where Devon and Santa
Fe Snyder have agreed in writing that such action is not likely to (x) have a
material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement or (y) delay materially the
Effective Time;
(j) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(k) shall, and shall cause any of its Subsidiaries to, use reasonable
efforts to maintain with financially responsible insurance companies insurance
in such amounts and against such risks and losses as are customary for such
party;
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(l) shall not, and shall not permit any of its Subsidiaries to, (i) make or
rescind any material express or deemed election relating to taxes unless it is
reasonably expected that such action will not, individually or in the aggregate,
materially and adversely affect Devon or Santa Fe Snyder, including elections
for any and all joint ventures, partnerships, limited liability companies,
working interests or other investments where it has the capacity to make such
binding election, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, except where such settlement or compromise will not,
individually or in the aggregate, materially and adversely affect Devon or Santa
Fe Snyder or (iii) change in any material respect any of its methods of
reporting any item for federal income tax purposes from those employed in the
preparation of its federal income tax return for the most recent taxable year
for which a return has been filed, except as may be required by applicable law
or except for such changes that are reasonably expected not to, individually or
in the aggregate, materially and adversely affect Devon or Santa Fe Snyder;
(m) shall not, nor shall it permit any of its Subsidiaries to, (i) incur any
indebtedness for borrowed money (except (x) under existing credit lines, (y)
refinancings of existing debt and (z) other immaterial borrowings that, in the
case of (x), (y) or (z), permit prepayment of such debt without penalty (other
than LIBOR breakage costs)) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt securities of such
party or any of its Subsidiaries or guarantee any debt securities of others,
(ii) except in the ordinary course of business, enter into any material lease
(whether such lease is an operating or capital lease) or create any material
mortgages, liens, security interests or other encumbrances on the property of
Devon or Santa Fe Snyder or any of their Subsidiaries in connection with any
indebtedness thereof, or (iii) make or commit to make aggregate capital
expenditures in excess of $3 million over the fiscal 2000 capital expenditures
budget disclosed in reasonable detail on the Devon Disclosure Letter or Santa Fe
Snyder Disclosure Letter, as the case may be;
(n) shall not purchase any shares of Devon Common Stock or Santa Fe Snyder
Common Stock;
(o) shall not, nor shall it permit any of its Subsidiaries to, agree in
writing or otherwise to take any of the foregoing actions;
(p) subject to Section 6.5, shall not take any action that is likely to
delay materially or adversely affect the ability of any of the parties hereto to
obtain any consent, authorization, order or approval of any governmental
commission, board or other regulatory body or the expiration of any applicable
waiting period required to consummate the Merger;
(q) shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
Subsidiaries is a party; and during such period shall enforce, to the fullest
extent permitted under applicable law, the provisions of such agreement,
including by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court of the
United States of America or any state having jurisdiction;
(r) shall not enter into or amend any agreement with any holder of shares of
Devon Common Stock or Santa Fe Snyder Common Stock with respect to holding,
voting or disposing of shares;
(s) shall not by resolution of its Board of Directors cause the acceleration
of rights, benefits or payments under any Santa Fe Snyder Plans or Devon Plans;
(t) undertakes and agrees to use its best commercial efforts to cause the
Merger to qualify as a 368(a) Reorganization, and to be accounted for as a
Pooling of Interests, and that it will not intentionally take any action that
would cause the Merger to fail to so qualify or fail to be accounted for as a
Pooling of Interests; and
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(u) shall not enter into forward sales contracts, fixed price contracts,
fixed price swaps, collars, options or other hedging arrangements with respect
to its oil production and more than 10% of its budgeted gas production for the
year 2000, and, in any event, for a term longer than 12 months.
Section 6.2 NO SOLICITATION BY SANTA FE SNYDER.
(a) Santa Fe Snyder agrees that it and its Subsidiaries will not knowingly
(and it will not permit their officers, directors, employees, agents or
representatives, including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) to, solicit, initiate
or knowingly encourage (including by way of furnishing material non-public
information) any inquiry, proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a third party tender
offer, merger, consolidation, business combination or similar transaction
involving any assets or class of capital stock of Santa Fe Snyder, or any
acquisition of 15% or more of the capital stock (other than upon exercise of
Santa Fe Snyder Options that are outstanding as of the date hereof) or 30% or
more of the assets of Santa Fe Snyder and its subsidiaries, taken as a whole, in
a single transaction or a series of related transactions, or any combination of
the foregoing (any such proposal, offer or transaction being hereinafter
referred to as a "Santa Fe Snyder Acquisition Proposal") or participate or
engage in any discussions or negotiations concerning a Santa Fe Snyder
Acquisition Proposal; and (ii) it will immediately cease and cause to be
terminated any existing negotiations with any third parties conducted heretofore
with respect to any of the foregoing; PROVIDED THAT, subject to Section 6.4(b),
nothing contained in this Agreement shall prevent Santa Fe Snyder or its Board
of Directors from (A) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to a Santa Fe Snyder Acquisition Proposal or (B) prior to the
Cutoff Date, providing information (pursuant to a confidentiality agreement
containing terms identical in all material respects to the terms of the
confidentiality agreement entered into between Santa Fe Snyder and Devon) to or
engaging in any negotiations or discussions with any person or entity who has
made an unsolicited bona fide Santa Fe Snyder Acquisition Proposal with respect
to the outstanding Santa Fe Snyder Common Stock or the assets of Santa Fe Snyder
that, in the good faith judgment of Santa Fe Snyder's Board of Directors, taking
into account the likelihood of consummation, after consultation with its
financial advisors, is superior to the Merger (a "Santa Fe Snyder Superior
Proposal"), if the Board of Directors of Santa Fe Snyder, after consultation
with its outside legal counsel, determines that the failure to do so would be
inconsistent with its fiduciary obligations.
(b) Santa Fe Snyder will promptly notify Devon of any requests referred to
in Section 6.2(a) for information or the receipt of any Santa Fe Snyder
Acquisition Proposal, including the identity of the person or group engaging in
such discussions or negotiations, requesting such information or making such
Santa Fe Snyder Acquisition Proposal, and the material terms and conditions of
any Santa Fe Snyder Acquisition Proposal, and shall keep Devon informed on a
timely basis of any material changes with respect thereto. Prior to taking any
action referred to in the PROVISO of Section 6.2(a), if Santa Fe Snyder intends
to participate in any such discussions or negotiations or provide any such
information to any such third party, Santa Fe Snyder shall give prompt prior
notice to Devon of each such action.
(c) Nothing in this Section 6.2 shall permit Santa Fe Snyder to enter into
any agreement with respect to a Santa Fe Snyder Acquisition Proposal during the
term of this Agreement, it being agreed that during the term of this Agreement,
Santa Fe Snyder shall not enter into any agreement with any person that provides
for, or in any way facilitates, a Santa Fe Snyder Acquisition Proposal, other
than a confidentiality agreement in reasonably customary form.
(d) For purposes hereof, the "Cutoff Date" means the date the conditions set
forth in Section 7.1(a) are satisfied.
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Section 6.3 NO SOLICITATION BY DEVON.
(a) Devon agrees that it and its Subsidiaries will not knowingly (and it
will not permit their officers, directors, employees, agents or representatives,
including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) to, solicit, initiate or knowingly
encourage (including by way of furnishing material non-public information) any
inquiry, proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a third party tender offer, merger,
consolidation, business combination or similar transaction involving any assets
or class of capital stock of Devon, or any acquisition of 15% or more of the
capital stock (other than upon exercise of Devon Options that are outstanding as
of the date hereof) or 30% or more of the assets of Devon and its subsidiaries,
taken as a whole, in a single transaction or a series of related transactions,
or any combination of the foregoing (any such proposal, offer or transaction
being hereinafter referred to as a "Devon Acquisition Proposal") or participate
or engage in any discussions or negotiations concerning a Devon Acquisition
Proposal; and (ii) it will immediately cease and cause to be terminated any
existing negotiations with any third parties conducted heretofore with respect
to any of the foregoing; PROVIDED that, subject to Section 6.4(b), nothing
contained in this Agreement shall prevent Devon or its Board of Directors from
(A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a Devon Acquisition Proposal or (B) prior to the Cutoff Date, providing
information (pursuant to a confidentiality agreement containing terms identical
in all material respects to the terms of the confidentiality agreement entered
into between Santa Fe Snyder and Devon) to or engaging in any negotiations or
discussions with any person or entity who has made an unsolicited bona fide
Devon Acquisition Proposal with respect to the outstanding Devon Common Stock or
the assets of Devon that, in the good faith judgment of Devon's Board of
Directors, taking into account the likelihood of consummation, after
consultation with its financial advisors, is superior to the Merger (a "Devon
Superior Proposal"), if the Board of Directors of Devon, after consultation with
its outside legal counsel, determines that the failure to do so would be
inconsistent with its fiduciary obligations.
(b) Devon will promptly notify Santa Fe Snyder of any requests referred to
in Section 6.3(a) for information or the receipt of any Devon Acquisition
Proposal, including the identity of the person or group engaging in such
discussions or negotiations, requesting such information or making such Devon
Acquisition Proposal, and the material terms and conditions of any Devon
Acquisition Proposal, and shall keep Santa Fe Snyder informed on a timely basis
of any material changes with respect thereto. Prior to taking any action
referred to in the PROVISO of Section 6.3(a), if Devon intends to participate in
any such discussions or negotiations or provide any such information to any such
third party, Devon shall give prompt prior notice to Santa Fe Snyder of each
such action.
(c) Nothing in this Section 6.3 shall permit Devon to enter into any
agreement with respect to a Devon Acquisition Proposal during the term of this
Agreement, it being agreed that during the term of this Agreement, Devon shall
not enter into any agreement with any person that provides for, or in any way
facilitates, a Devon Acquisition Proposal, other than a confidentiality
agreement in reasonably customary form.
Section 6.4 MEETINGS OF STOCKHOLDERS.
(a) Each of Devon and Santa Fe Snyder will take all action necessary in
accordance with applicable law and its certificate of incorporation and bylaws
to convene a meeting of its stockholders as promptly as practicable to consider
and vote upon the approval of this Agreement and the Merger, and in the case of
Devon, if necessary pursuant to Section 2.1 hereof, an amendment to Devon's
Certificate of Incorporation. Santa Fe Snyder and Devon shall coordinate and
cooperate with respect to the timing of such meetings and shall use their
reasonable commercial efforts to hold such meetings on the same day.
(b) Santa Fe Snyder and Devon, through their respective Boards of Directors,
shall recommend approval of such matters; provided that the Board of Directors
of Santa Fe Snyder or the Board of
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Directors of Devon may at any time prior to the Effective Time withdraw, modify,
or change any recommendation and declaration regarding this Agreement or the
Merger, or recommend and declare advisable any other offer or proposal, if and
only if, after receipt of a Santa Fe Snyder Superior Proposal or a Devon
Superior Proposal, as the case may be, in the opinion of such Board of Directors
after consultation with its counsel the failure to so withdraw, modify, or
change its recommendation and declaration would be inconsistent with its
fiduciary obligations.
Section 6.5 FILINGS; REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions herein provided, Santa Fe Snyder and
Devon shall:
(i) promptly (but in not more than 20 business days from the date
hereof) make their respective filings under the HSR Act with respect to the
Merger and thereafter shall promptly make any other required submissions
under the HSR Act;
(ii) use their reasonable commercial efforts to cooperate with one
another in (a) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from
governmental or regulatory authorities of the United States, the several
states, and foreign jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the Merger and the
transactions contemplated hereby; and (b) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations;
(iii) promptly notify each other of any communication concerning this
Agreement or the Merger to that party from any governmental authority and
permit the other party to review in advance any proposed communication
concerning this Agreement or the Merger to any governmental entity;
(iv) not agree to participate in any meeting or discussion with any
governmental authority in respect of any filings, investigation or other
inquiry concerning this Agreement or the Merger unless it consults with the
other party in advance and, to the extent permitted by such governmental
authority, gives the other party the opportunity to attend and participate
thereat;
(v) furnish the other party with copies of all correspondence, filings
and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on
the one hand, and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this Agreement and the
Merger; and
(vi) furnish the other party with such necessary information and
reasonable assistance as such other parties and their respective affiliates
may reasonably request in connection with their preparation of necessary
filings, registrations or submissions of information to any governmental or
regulatory authorities, including without limitation, any filings necessary
or appropriate under the provisions of the HSR Act.
(b) Without limiting Section 6.5(a), Devon and Santa Fe Snyder shall:
(i) each use its reasonable commercial efforts to avoid the entry of, or
to have vacated or terminated, any decree, order or judgment that would
restrain, prevent or delay the Closing, including without limitation
defending through litigation on the merits any claim asserted in any court
by any party; and
(ii) each use reasonable commercial efforts to avoid or eliminate each
and every impediment under any antitrust, competition or trade regulation
law that may be asserted by any governmental entity with respect to the
Merger so as to enable the Closing to occur as soon as reasonably possible
(and in any event no later than 60 days following the termination of all
applicable waiting
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periods under the HSR Act, unless the parties are in litigation with the
government, in which case at the conclusion of such litigation).
Section 6.6 INSPECTION. From the date hereof to the Effective Time, each
of Santa Fe Snyder and Devon shall allow all designated officers, attorneys,
accountants and other representatives of Devon or Santa Fe Snyder, as the case
may be, access at all reasonable times upon reasonable notice to the records and
files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs of Devon and Santa Fe Snyder and their
respective Subsidiaries, including inspection of such properties; provided that
no investigation pursuant to this Section 6.6 shall affect any representation or
warranty given by any party hereunder, and provided further that notwithstanding
the provision of information or investigation by any party, no party shall be
deemed to make any representation or warranty except as expressly set forth in
this Agreement. Notwithstanding the foregoing, no party shall be required to
provide any information which it reasonably believes it may not provide to the
other party by reason of applicable law, rules or regulations, which such party
reasonably believes constitutes information protected by attorney/client
privilege, or which it is required to keep confidential by reason of contract or
agreement with third parties. The parties hereto will make reasonable and
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. Each of Devon and Santa Fe Snyder
agrees that it will not, and will cause its respective representatives not to,
use any information obtained pursuant to this Section 6.6 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement.
Section 6.7 PUBLICITY. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to
this Agreement or the transactions contemplated hereby and shall not issue any
such press releases or make any such public announcements prior to such
consultation and agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange, in which case the party proposing to issue such press release or make
such public announcement shall use its reasonable commercial best efforts to
consult in good faith with the other party before issuing any such press
releases or making any such public announcements.
Section 6.8 REGISTRATION STATEMENT.
(a) Each of Devon and Santa Fe Snyder shall cooperate and promptly prepare
and Devon shall file with the SEC as soon as practicable a Registration
Statement on Form S-4 under the Securities Act (the "Registration Statement"),
with respect to the Devon Common Stock issuable in the Merger. A portion of the
Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the stockholders of Devon and of Santa Fe Snyder in
connection with the Merger (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Registration Statement
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations thereunder.
Devon shall use its reasonable commercial efforts, and Santa Fe Snyder will
cooperate with Devon, to have the Registration Statement declared effective by
the SEC as promptly as practicable. Devon shall use its reasonable commercial
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "Blue Sky" permits or approvals required
to carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. Devon will advise Santa Fe Snyder, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Devon Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Proxy Statement/ Prospectus or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
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(b) Each of Devon and Santa Fe Snyder will use its reasonable commercial
efforts to cause the Proxy Statement/Prospectus to be mailed to its stockholders
as promptly as practicable after the date hereof.
(c) Each of Devon and Santa Fe Snyder agrees that the information provided
by it for inclusion in the Proxy Statement/Prospectus and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of stockholders of Devon and of Santa Fe Snyder, or, in the
case of information provided by it for inclusion in the Registration Statement
or any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 6.9 LISTING APPLICATION. Devon shall use its reasonable commercial
efforts to cause the Devon Common Stock to be issued in the Merger to be
approved for listing on the AMEX prior to the Effective Time, subject to
official notice of issuance. Devon shall promptly prepare and submit to the AMEX
a supplemental listing application covering the shares of Devon Common Stock
issuable in the Merger.
Section 6.10 LETTERS OF ACCOUNTANTS.
(a) If requested to do so by Devon, Santa Fe Snyder shall use its reasonable
commercial efforts to cause to be delivered to Devon "comfort" letters of
PricewaterhouseCoopers LLP, Santa Fe Snyder's independent public accountants,
dated the effective date of the Registration Statement and the Closing Date,
respectively, and addressed to Devon with regard to certain financial
information regarding Santa Fe Snyder included in the Registration Statement, in
form reasonably satisfactory to Devon and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(b) If requested to do so by Santa Fe Snyder, Devon shall use its reasonable
commercial efforts to cause to be delivered to Santa Fe Snyder "comfort" letters
of KPMG LLP, Devon's independent public accountants, dated the effective date of
the Registration Statement and the Closing Date, respectively, and addressed to
Santa Fe Snyder, with regard to certain financial information regarding Devon
included in the Registration Statement, in form reasonably satisfactory to Santa
Fe Snyder and customary in scope and substance for "comfort" letters delivered
by independent public accountants in connection with registration statements
similar to the Registration Statement.
(c) Santa Fe Snyder shall use its reasonable commercial efforts to cause to
be delivered to it, immediately prior to the Effective Time, from
PricewaterhouseCoopers LLP, Santa Fe Snyder's independent public accountants, an
opinion in form and substance acceptable to Santa Fe Snyder that the Merger
should be accounted for as a Pooling of Interests (the "PricewaterhouseCoopers
Opinion").
(d) Devon shall use its reasonable commercial efforts to cause to be
delivered to it, immediately prior to the Effective Time, from KPMG LLP, Devon's
independent public accountants, an opinion in form and substance acceptable to
Devon that the Merger should be accounted for as a Pooling of Interests (the
"KPMG Opinion").
Section 6.11 AGREEMENTS OF AFFILIATES.
(a) Prior to the Effective Time, Santa Fe Snyder shall cause to be prepared
and delivered to Devon a list identifying all persons who, at the time of the
meeting or the meeting of Santa Fe Snyder's stockholders pursuant to Section
6.4, Santa Fe Snyder believes may be deemed to be "affiliates" of Santa Fe
Snyder, as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Rule 145 Affiliates"). Devon shall be entitled to place
restrictive legends on any shares of Devon Common Stock received by such Rule
145 Affiliates. Santa Fe Snyder shall use its
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reasonable commercial efforts to cause each person who is identified as a
Rule 145 Affiliate in such list to deliver to Devon, at or prior to the
Effective Time, a written agreement, in the form to be approved by the parties
hereto, that such Rule 145 Affiliate will not sell, pledge, transfer or
otherwise dispose of any shares of Devon Common Stock issued to such Rule 145
Affiliate pursuant to the Merger, except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act.
(b) At or prior to a date 45 days prior to the Effective Time, Santa Fe
Snyder and Devon shall each cause to be prepared and delivered to the other a
list identifying all persons Santa Fe Snyder and Devon believe may be deemed to
be their "affiliates" as that term is used in Section E of Topic 2 of the staff
accounting bulletin series (the "Pooling Affiliates"). Santa Fe Snyder and Devon
shall use their reasonable commercial efforts to cause each person who is
identified as their Pooling Affiliates to deliver to the other party, at or
prior to the Effective Time, a written agreement, in the form to be approved by
the parties hereto, that such Pooling Affiliates will not intentionally take any
action that would cause the Merger to fail to be accounted for as a Pooling of
Interests.
Section 6.12 EXPENSES. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
as expressly provided in Section 8.5.
Section 6.13 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, Devon shall indemnify, defend and
hold harmless to the fullest extent permitted under applicable law each person
who is, or has been at any time prior to the Effective Time, an officer or
director of Santa Fe Snyder (or any Subsidiary or division thereof) and each
person who served at the request of Santa Fe Snyder as a director, officer,
trustee or fiduciary of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan or enterprise (individually, an
"Indemnified Party" and, collectively, the "Indemnified Parties") against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in their
capacities as such, whether commenced, asserted or claimed before or after the
Effective Time. In the event of any such claim, action, suit, proceeding or
investigation (an "Action"), (i) Devon shall pay, as incurred, the fees and
expenses of counsel selected by the Indemnified Party, which counsel shall be
reasonably acceptable to Devon, in advance of the final disposition of any such
Action to the fullest extent permitted by applicable law, and, if required, upon
receipt of any undertaking required by applicable law, and (ii) Devon will
cooperate in the defense of any such matter; PROVIDED, HOWEVER, Devon shall not
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed), and provided FURTHER, that Devon
shall not be obligated pursuant to this Section 6.13(a) to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any single
Action, unless, in the good faith judgment of any of the Indemnified Parties,
there is or may be a conflict of interests between two or more of such
Indemnified Parties, in which case there may be separate counsel for each
similarly situated group.
(b) The parties agree that the rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any action or
suit, in the certificate of incorporation, bylaws and any indemnification
agreement of Santa Fe Snyder and its Subsidiaries with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time; PROVIDED, HOWEVER, that all rights to indemnification in respect of any
Action pending or asserted or claim made within such period shall continue until
the disposition of such Action or resolution of such claim.
(c) For a period of six years after the Effective Time, Devon shall cause to
be maintained officers' and directors' liability insurance covering the
Indemnified Parties who are or at any time prior to the
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Effective Time were covered by Santa Fe Snyder's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance with
respect to acts or omissions, or alleged acts or omissions, prior to the
Effective Time (whether claims, actions or other proceedings relating thereto
are commenced, asserted or claimed before or after the Effective Time);
PROVIDED, that after the Effective Time, Devon shall not be required to pay
annual premiums in excess of 250% of the last annual premium paid by Devon prior
to the date hereof (the amount of which premiums are set forth in the Devon
Disclosure Letter), but in such case shall purchase as much coverage as
reasonably practicable for such amount.
(d) The rights of each Indemnified Party hereunder shall be in addition to
any other rights such Indemnified Party may have under the certificate of
incorporation or bylaws of Santa Fe Snyder or any of its Subsidiaries, under the
DGCL, or otherwise. The provisions of this Section 6.13 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
(e) In the event Devon or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of Devon, as the case may be, shall assume the
obligations set forth in this Section 6.13.
Section 6.14 CERTAIN BENEFITS. Schedule 6.14 sets forth certain agreements
of Devon and Santa Fe Snyder with respect to employee benefit matters.
Section 6.15 REORGANIZATION. From and after the date hereof and until the
Effective Time, none of Devon, Santa Fe Snyder or any of their respective
Subsidiaries shall knowingly (i) take any action, or fail to take any reasonable
action, as a result of which the Merger would fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code or (ii) enter
into any contract, agreement, commitment or arrangement to take or fail to take
any such action. Each of the parties shall use its reasonable best efforts to
obtain the opinions of counsel referred to in Sections 7.2(b) and 7.3(b).
Following the Effective Time, Devon shall not knowingly take any action or
knowingly cause any action to be taken which would cause the Merger to fail to
qualify as a reorganization within the meaning of section 368(a) of the Code
(and any comparable provisions of applicable state or local law).
Section 6.16 RIGHTS AGREEMENT. Prior to the Effective Time, the Board of
Directors of Devon shall take any action (including, if necessary, amending or
terminating (but with respect to termination, only as of immediately prior to
the Effective Time) the Devon Rights Agreement) necessary so that none of the
execution and delivery of this Agreement, the Stock Option Agreements, the
issuance of Devon Common Stock upon exercise of the option granted to Santa Fe
Snyder pursuant to the applicable Stock Option Agreement, the consummation of
the Merger, or any other transaction contemplated hereby or by the Stock Option
Agreements will cause (i) the Devon Rights to become exercisable under the Devon
Rights Agreement, (ii) Santa Fe Snyder or any of its Subsidiaries to be deemed
an "Acquiring Person" (as defined in the Devon Rights Agreement), (iii) any such
event to be an event described in Section 13 of the Devon Rights Agreement or
(iv) the "Stock Acquisition Date" or the "Distribution Date" (each as defined in
the Devon Rights Agreement) to occur upon any such event. Neither the Board of
Directors of Devon nor Devon shall take any other action to terminate the Devon
Rights Agreement, redeem the Devon Rights, cause any person not to be or become
an "Acquiring Person" or otherwise amend the Devon Rights Agreement in a manner
adverse to Santa Fe Snyder, unless otherwise ordered by a court of competent
jurisdiction.
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ARTICLE 7
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger shall have been adopted and approved by
the affirmative vote of holders of (i) a majority of the outstanding shares of
Santa Fe Snyder Common Stock; and (ii) a majority of the outstanding shares of
Devon Common Stock and the Northstar Exchangeable Shares voting as a single
class with the Devon Special Voting Stock voting for the Northstar Exchangeable
Shares as provided in Devon's charter.
(b) The waiting period applicable to the consummation of the Merger shall
have expired or been terminated under (i) the HSR Act and (ii) any mandatory
waiting period under any applicable foreign competition or antitrust law or
regulation where the failure to observe such waiting period referred to in this
clause (ii) would have, individually or in the aggregate, a Devon Material
Adverse Effect or a Santa Fe Snyder Material Adverse Effect.
(c) None of the parties hereto shall be subject to any decree, order or
injunction of a court of competent jurisdiction, U.S. or foreign, which
prohibits the consummation of the Merger; PROVIDED, HOWEVER, that prior to
invoking this condition, each party agrees to comply with Section 6.5, and with
respect to other matters not covered by Section 6.5, to use its reasonable
commercial efforts to have any such decree, order or injunction lifted or
vacated; and no statute, rule or regulation shall have been enacted by any
governmental authority which prohibits or makes unlawful the consummation of the
Merger.
(d) The Registration Statement shall have become effective and no stop order
with respect thereto shall be in effect.
(e) The shares of Devon Common Stock to be issued pursuant to the Merger
shall have been authorized for listing on the AMEX, subject to official notice
of issuance.
Section 7.2 CONDITIONS TO OBLIGATION OF SANTA FE SNYDER TO EFFECT THE
MERGER. The obligation of Santa Fe Snyder to effect the Merger shall be subject
to the fulfillment or prior to the Closing Date of the following conditions:
(a) Devon shall have performed in all material respects its covenants and
agreements contained in this Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of Devon and Merger Co.
contained in this Agreement and in any document delivered in connection herewith
(i) to the extent qualified by Devon Material Adverse Effect or any other
materiality qualification shall be true and correct and (ii) to the extent not
qualified by Devon Material Adverse Effect or any other materiality
qualification shall be true and correct so long as any failures of such
representations and warranties to be true and correct, individually or in the
aggregate, do not have a Devon Material Adverse Effect, as of the date of this
Agreement and as of the Closing Date (except for representations and warranties
made as of a specified date, which need be true and correct only as of the
specified date), and Santa Fe Snyder shall have received a certificate of Devon,
executed on its behalf by its President or a Senior Vice President of Devon,
dated the Closing Date, certifying to such effect.
(b) Santa Fe Snyder shall have received the opinion of Andrews & Kurth,
L.L.P., counsel to Santa Fe Snyder, in form and substance reasonably
satisfactory to Santa Fe Snyder, on the basis of certain facts, representations
and assumptions set forth in such opinion, dated the Closing Date, a copy of
which shall be furnished to Devon, to the effect that (i) the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and (ii) no gain or
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loss will be recognized by Santa Fe Snyder or the stockholders of Santa Fe
Snyder who exchange all of their Santa Fe Snyder Common Stock solely for Devon
Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in Devon Common Stock). In rendering such
opinion, such counsel shall be entitled to receive and rely upon representations
of officers of Santa Fe Snyder, Merger Co. and Devon as to such matters as such
counsel may reasonably request. The opinion referred to in this Section
7.2(b) shall not be waivable after receipt of the affirmative vote of
stockholders referred to in Section 7.1(a), unless further stockholder approval
is obtained with appropriate disclosure.
(c) At any time after the date of this Agreement, there shall not have been
any event or occurrence, individually or in the aggregate with all such events
or occurrences, that have had or is likely to have a Devon Material Adverse
Effect.
Section 7.3 CONDITIONS TO OBLIGATION OF DEVON TO EFFECT THE MERGER. The
obligations of Devon and Devon Production to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Santa Fe Snyder shall have performed in all material respects its
covenants and agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties of Santa Fe
Snyder contained in this Agreement and in any document delivered in connection
herewith (i) to the extent qualified by Santa Fe Snyder Material Adverse Effect
or any other materiality qualification shall be true and correct and (ii) to the
extent not qualified by Santa Fe Snyder Material Adverse Effect or any other
materiality qualification shall be true and correct so long as any failures of
such representations and warranties to be true and correct, individually or in
the aggregate, do not have a Santa Fe Snyder Material Adverse Effect, as of the
date of this Agreement and as of the Closing Date (except for representations
and warranties made as of a specified date, which need be true and correct only
as of the specified date), and Devon shall have received a certificate of Santa
Fe Snyder, executed on its behalf by its President or a Vice President of Santa
Fe Snyder, dated the Closing Date, certifying to such effect.
(b) Devon shall have received the opinion of McAfee & Taft A Professional
Corporation, counsel to Devon, in form and substance reasonably satisfactory to
Devon, on the basis of certain facts, representations and assumptions set forth
in such opinion, dated the Closing Date, a copy of which will be furnished to
Santa Fe Snyder, to the effect that (i) the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and (ii) no gain or loss will be recognized by Devon. In rendering such
opinion, such counsel shall be entitled to receive and rely upon representations
of officers of Santa Fe Snyder, Merger Co. and Devon as to such matters as such
counsel may reasonably request. The opinion referred to in this Section
7.3(b) shall not be waivable after receipt of the affirmative vote of
stockholders referred to in Section 7.1(a), unless further stockholder approval
is obtained with appropriate disclosure.
(c) At any time after the date of this Agreement, there shall not have been
any event or occurrence, individually or the in aggregate, with all such events
or occurrences that have had or is likely to have a Santa Fe Snyder Material
Adverse Effect.
ARTICLE 8
TERMINATION
Section 8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Effective Time by the mutual written consent
of Santa Fe Snyder and Devon.
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Section 8.2 TERMINATION BY DEVON OR SANTA FE SNYDER. This Agreement may be
terminated by action of the Board of Directors of Devon or of Santa Fe Snyder
if:
(a) the Merger shall not have been consummated by December 31, 2000;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this
clause (a) shall not be available to any party whose failure to perform or
observe in any material respect any of its obligations under this Agreement in
any manner shall have been the cause of, or resulted in, the failure of the
Merger to occur on or before such date; or
(b) a meeting (including adjournments and postponements) of Santa Fe
Snyder's stockholders for the purpose of obtaining the approval required by
Section 7.1(a)(i) shall have been held and such stockholder approval shall not
have been obtained; or
(c) a meeting (including adjournments and postponements) of Devon's
stockholders for the purpose of obtaining the approval required by Section
7.1(a)(ii) shall have been held and such stockholder approval shall not have
been obtained; or
(d) a United States federal or state court of competent jurisdiction or
United States federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final and
non-appealable; PROVIDED, HOWEVER, that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have complied with Section 6.5 and
with respect to other matters not covered by Section 6.5 shall have used its
reasonable commercial efforts to remove such injunction, order or decree.
Section 8.3 TERMINATION BY SANTA FE SNYDER. This Agreement may be
terminated prior to the Effective Time, by action of the Board of Directors of
Santa Fe Snyder after consultation with its legal advisors, if:
(a) the Board of Directors of Santa Fe Snyder determines that proceeding
with the Merger would be inconsistent with its fiduciary obligations by reason
of a Santa Fe Snyder Superior Proposal and elects to terminate this Agreement
effective prior to the Cutoff Date; PROVIDED that Santa Fe Snyder may not effect
such termination pursuant to this Section 8.3(a) unless and until (i) Devon
receives at least three business days' prior written notice from Santa Fe Snyder
of its intention to effect such termination pursuant to this Section 8.3(a);
(ii) during such week, Santa Fe Snyder shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that Devon may propose; and PROVIDED, FURTHER, that
any termination of this Agreement pursuant to this Section 8.3(a) shall not be
effective until Santa Fe Snyder has made the $103,000,000 payment required by
Section 8.5(a)(i); or
(b) (i) there has been a breach by Devon or Merger Co. of any
representation, warranty, covenant or agreement set forth in this Agreement or
if any representation or warranty of Devon or Merger Co. shall have become
untrue, in either case such that the conditions set forth in Section 7.2(a)
would not be satisfied and (ii) such breach is not curable, or, if curable, is
not cured within 30 days after written notice of such breach is given to Devon
by Santa Fe Snyder; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 8.3(b) shall not be available to Santa Fe
Snyder if it, at such time, is in material breach of any representation,
warranty, covenant or agreement set forth in this Agreement such that the
conditions set forth in Section 7.3(a) shall not be satisfied; or
(c) the Board of Directors of Devon shall have withdrawn or materially
modified, in a manner adverse to Santa Fe Snyder, its approval or recommendation
of the Merger or recommended a Devon Acquisition Proposal, or resolved to do so.
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<PAGE>
Section 8.4 TERMINATION BY DEVON. This Agreement may be terminated at any
time prior to the Effective Time, by action of the Board of Directors of Devon
after consultation with its legal advisors, if:
(a) the Board of Directors of Devon determines that proceeding with the
Merger would be inconsistent with its fiduciary obligations by reason of a Devon
Superior Proposal and elects to terminate this Agreement effective prior to the
Cutoff Date; PROVIDED that Devon may not effect such termination pursuant to
this Section 8.4(a) unless and until (i) Santa Fe Snyder receives at least three
business days' prior written notice from Devon of its intention to effect such
termination pursuant to this Section 8.4(a); (ii) during such week, Devon shall,
and shall cause its respective financial and legal advisors to, consider any
adjustment in the terms and conditions of this Agreement that Santa Fe Snyder
may propose; and PROVIDED, FURTHER, that any termination of this Agreement
pursuant to this Section 8.4(a) shall not be effective until Devon has made the
$103,000,000 payment required by Section 8.5(b)(i); or
(b) (i) there has been a breach by Santa Fe Snyder of any representation,
warranty covenant or agreement set forth in this Agreement or if any
representation or warranty of Santa Fe Snyder shall have become untrue, in
either case such that the conditions set forth in Section 7.3(a) would not be
satisfied and (ii) such breach is not curable, or, if curable, is not cured
within 30 days after written notice of such breach is given by Devon to Santa Fe
Snyder; PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this Section 8.4(b) shall not be available to Devon if it, at such time, is
in material breach of any representation, warranty, covenant or agreement set
forth in this Agreement such that the conditions set forth in Section 7.2(a)
shall not be satisfied; or
(c) the Board of Directors of Santa Fe Snyder shall have withdrawn or
materially modified, in a manner adverse to Devon, its approval or
recommendation of the Merger or recommended approval of a Santa Fe Snyder
Acquisition Proposal, or resolved to do so.
Section 8.5 EFFECT OF TERMINATION.
(a) If this Agreement is terminated
(i) by Santa Fe Snyder pursuant to Section 8.3(a); or
(ii) after the public announcement of a Santa Fe Snyder Acquisition
Proposal, by Santa Fe Snyder or Devon pursuant to Section 8.2(b); or
(iii) after the public announcement, or receipt by Santa Fe Snyder's
Board of Directors of a Santa Fe Snyder Acquisition Proposal, by Devon
pursuant to Section 8.4(c);
then Santa Fe Snyder shall pay Devon the Santa Fe Snyder Termination Amount
(subject to reduction pursuant to Section 6 of the applicable Stock Option
Agreement) at the time of such termination in cash by wire transfer to an
account designated by Devon. The term "Santa Fe Snyder Termination Amount" shall
mean, in the case of termination pursuant to clause (i) or clause (iii) of the
preceding sentence, $103,000,000 or, in the case of termination pursuant to
clause (ii) of the preceding sentence, "Santa Fe Snyder Termination Amount"
shall mean $46,350,000 plus, if (x) Santa Fe Snyder executes and delivers an
agreement with respect to any Santa Fe Snyder Acquisition or (y) a Santa Fe
Snyder Acquisition is consummated, in any such case, within 12 months from the
date of termination pursuant to clause (ii), an additional $56,650,000 (which
additional amount shall be paid promptly by wire transfer to an account
designated by Devon). If the Board of Directors of Santa Fe Snyder recommends
the acceptance by the stockholders of Santa Fe Snyder of a third-party tender or
exchange offer for Santa Fe Snyder Common Stock, such recommendation shall be
treated for purposes of this paragraph as though an agreement with respect to a
Santa Fe Snyder Acquisition had been executed and delivered. For purposes
hereof, "Santa Fe Snyder Acquisition" means (i) a consolidation, exchange of
shares or merger of Santa Fe Snyder with any person, other than Devon or one of
its Subsidiaries or
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<PAGE>
any of Santa Fe Snyder's Subsidiaries, and, in the case of a merger, in which
Santa Fe Snyder shall not be the continuing or surviving corporation, (ii) a
merger of Santa Fe Snyder with a person, other than Devon or one of its
Subsidiaries or any of Santa Fe Snyder's Subsidiaries, in which Santa Fe Snyder
shall be the continuing or surviving corporation but the then outstanding shares
of Santa Fe Snyder Common Stock shall be changed into or exchanged for stock or
other securities of Santa Fe Snyder or any other person or cash or any other
property or the shares of Santa Fe Snyder Common Stock outstanding immediately
before such merger shall after such merger represent less than 50% of the voting
stock of Santa Fe Snyder outstanding immediately after the merger, (iii) the
acquisition of beneficial ownership of 50% or more of the voting stock of Santa
Fe Snyder by any person (as such term is used under Section 13(d) of the
Exchange Act), or (iv) a sale, lease or other transfer of 50% or more of the
assets of Santa Fe Snyder to any person, other than Devon or one of its
Subsidiaries or any of Santa Fe Snyder's Subsidiaries. Santa Fe Snyder
acknowledges that the agreements contained in this Section 8.5(a) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Devon would not enter into this Agreement;
accordingly, if Santa Fe Snyder fails promptly to pay any amount due pursuant to
this Section 8.5(a), and, in order to obtain such payment, Devon commences a
suit which results in a judgment against Santa Fe Snyder for the payment set
forth in this Section 8.5(a), Santa Fe Snyder shall pay to Devon its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the Santa Fe Snyder Termination Amount from each date for payment
until the date of such payment at the prime rate of The Chase Manhattan Bank in
effect on the date such payment was required to be made plus two percent (2%).
(b) If this Agreement is terminated
(i) by Devon pursuant to Section 8.4(a); or
(ii) after the public announcement of a Devon Acquisition Proposal, by
Santa Fe Snyder or Devon pursuant to Section 8.2(c); or
(iii) after the public announcement or receipt by Devon's Board of
Directors of a Devon Acquisition Proposal, by Santa Fe Snyder pursuant to
Section 8.3(c);
then Devon shall pay Santa Fe Snyder the Devon Termination Amount (subject to
reduction pursuant to Section 6 of the applicable Stock Option Agreement) at the
time of such termination in cash by wire transfer to an account designated by
Santa Fe Snyder. The term "Devon Termination Amount" shall mean, in the case of
termination pursuant to clause (i) or clause (iii) of the preceding sentence,
$103,000,000 or, in the case of termination pursuant to clause (ii) of the
preceding sentence, "Devon Termination Amount" shall mean $46,350,000 plus, if
(x) Devon executes and delivers an agreement with respect to any Devon
Acquisition or (y) a Devon Acquisition is consummated, in any such case, within
12 months from the date of termination pursuant to clause (ii), an additional
$56,650,000 (which additional amount shall be paid promptly by wire transfer to
an account designated by Santa Fe Snyder). If the Board of Directors of Devon
recommends the acceptance by the stockholders of Devon of a third party tender
or exchange offer for the Devon Common Stock, such recommendation shall be
treated for purposes of this paragraph as though an agreement with respect to a
Devon Acquisition had been executed and delivered. For purposes hereof, "Devon
Acquisition" means (i) a consolidation, exchange of shares or merger of Devon
with any person, other than Santa Fe Snyder or one of its Subsidiaries or any of
Devon's Subsidiaries, and, in the case of a merger, in which Devon shall not be
the continuing or surviving corporation, (ii) a merger of Devon with a person,
other than Santa Fe Snyder or one of its Subsidiaries or any of Devon's
Subsidiaries, in which Devon shall be the continuing or surviving corporation
but the then outstanding shares of Devon Common Stock shall be changed into or
exchanged for stock or other securities of Devon or any other person or cash or
any other property or the shares of Devon Common Stock outstanding immediately
before such merger shall after such merger represent less than 50% of the voting
stock of Devon outstanding immediately
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<PAGE>
after the merger, (iii) the acquisition of beneficial ownership of 50% or more
of the voting stock of Devon by any person (as such term is used. under Section
13(d) of the Exchange Act), or (iv) a sale, lease or other transfer of 50% or
more of the assets of Devon to any person, other than Santa Fe Snyder or one of
its Subsidiaries or any of Devon's Subsidiaries. Devon acknowledges that the
agreements contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Santa Fe Snyder would not enter into this Agreement; accordingly, if Devon fails
promptly to pay any amount due pursuant to this Section 8.5(b), and, in order to
obtain such payment, Santa Fe Snyder commences a suit which results in a
judgment against Devon for the payment set forth in this Section 8.5(b), Devon
shall pay to Santa Fe Snyder its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the Devon Termination
Amount from each date for payment until the date of such payment at the prime
rate of The Chase Manhattan Bank in effect on the date such payment was required
to be made plus two percent (2%).
(c) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 8, all obligations of the parties hereto shall
terminate, except the obligations of the parties pursuant to this Section 8.5
and Section 6.12 and except for the provisions of Sections 9.3, 9.4, 9.6, 9.8,
9.9, 9.12, 9.13 and 9.14, PROVIDED that nothing herein shall relieve any party
from any liability for any willful and material breach by such party of any of
its covenants or agreements set forth in this Agreement and all rights and
remedies of such nonbreaching party under this Agreement in the case of such a
willful and material breach, at law or in equity, shall be preserved.
Section 8.6 EXTENSION; WAIVER. At any time prior to the Effective Time,
each party may by action taken by its Board of Directors, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Merger; PROVIDED, HOWEVER, that the agreements contained in
Article 2, Article 3 and in Sections 6.11, 6.12, 6.13, 6.14, 6.15 and this
Article 9 and the agreements delivered pursuant to this Agreement shall survive
the Merger.
Section 9.2 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission or by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
(a) if to Devon or Merger Co.:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Telephone: (405)
Facsimile: (405) 552-4550
Attn: J. Larry Nichols
with a copy to:
McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7103
Facsimile: (405) 235-0439
Attn: Gary F. Fuller
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<PAGE>
(b) if to Santa Fe Snyder:
Santa Fe Snyder Corporation
840 Gessner, Suite 1400
Houston, Texas 77024
Facsimile: (713) 507-5341
Attn: James L. Payne
with a copy to:
Andrews & Kurth L.L.P.
4200 Chase Tower
600 Travis
Houston, Texas 77002
Facsimile: (713) 220-4285
Attn: G. Michael O'Leary
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
Section 9.3 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article 3 and Section 6.13, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
Section 9.4 ENTIRE AGREEMENT. This Agreement, the Stock Option Agreements,
the exhibits to this Agreement, the Santa Fe Snyder Disclosure Letter, the Devon
Disclosure Letter and any documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
Section 9.5 AMENDMENTS. This Agreement may be amended by the parties
hereto, by action taken or authorized by their Boards of Directors, at any time
before or after approval of matters presented in connection with the Merger by
the stockholders of Santa Fe Snyder or Devon, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 9.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its rules of conflict of laws. Each of Santa Fe Snyder and Devon hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "Delaware Courts") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the Delaware Courts and agrees not to plead or claim in any Delaware Court
that such litigation brought therein has been brought in an inconvenient forum.
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<PAGE>
Section 9.7 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
Section 9.8 HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 9.9 INTERPRETATION. In this Agreement:
(a) Unless the context otherwise requires, words describing the singular
number shall include the plural and vice versa, and words denoting any gender
shall include all genders and words denoting natural persons shall include
corporations and partnerships and vice versa.
(b) The phrase "to the knowledge of" and similar phrases relating to
knowledge of Santa Fe Snyder or Devon, as the case may be, shall mean the actual
knowledge of its executive officers.
(c) "Material Adverse Effect" with respect to Santa Fe Snyder or Devon shall
mean a material adverse effect on or change in (a) the business or financial
condition of a party and its Subsidiaries on a consolidated basis, except for
such changes or effects in general economic, capital market, regulatory or
political conditions or changes that affect generally the oil and gas industry
or (b) the ability of the party to consummate the transactions contemplated by
this Agreement or fulfill the conditions to closing. "Santa Fe Snyder Material
Adverse Effect" and "Devon Material Adverse Effect" mean a Material Adverse
Effect with respect to Santa Fe Snyder and Devon, respectively.
Section 9.10 WAIVERS. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
Section 9.11 INCORPORATION OF EXHIBITS. The Santa Fe Snyder Disclosure
Letter, the Devon Disclosure Letter and all exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
Section 9.12 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 9.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 9.14 OBLIGATION OF MERGER CO. Whenever this Agreement requires
Merger Co. (or its successors) to take any action prior to the Effective Time,
such requirement shall be deemed to include an undertaking on the part of Devon
to cause Merger Co. to take such action and a guarantee of the performance
thereof.
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<PAGE>
Section 9.15 SUBSIDIARIES. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
<TABLE>
<S> <C> <C>
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS
-----------------------------------------
Name: J. Larry Nichols
Title: President and Chief Executive
Officer
DEVON MERGER CO.
By: /s/ DUKE R. LIGON
-----------------------------------------
Name: Duke R. Ligon
Title: Vice President
SANTA FE SNYDER CORPORATION
By: /s/ JAMES L. PAYNE
-----------------------------------------
Name: James L. Payne
Title: Chief Executive Officer
</TABLE>
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
A-41
<PAGE>
SCHEDULE 6.14
EMPLOYEE MATTERS AGREEMENT
THIS EMPLOYEE MATTERS AGREEMENT ("Agreement"), dated as of May 25, 2000, is
among Devon Energy Corporation, a Delaware corporation ("Devon"), Devon Merger
Co., a Delaware corporation ("Sub"), and Santa Fe Snyder Corporation, a Delaware
corporation ("SFS").
RECITALS:
WHEREAS, pursuant to the Agreement and Plan of Merger by and among Devon,
Sub and SFS dated as of May 25, 2000 ("Merger Agreement") SFS will become a
wholly owned subsidiary of Devon;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. SEVERANCE PLANS.
The Santa Fe Snyder Corporation Severance Program and the Santa Fe Snyder
Corporation 2000 Severance Program (the "Severance Programs") will be assumed by
Devon and continued for 24 months following the Effective Time (as defined in
the Merger Agreement), provided, however, Devon reserves the right to amend or
modify the Severance Programs in accordance with their terms.
Section 2. QUALIFIED PENSION PLAN.
For a 24-month period following the Effective Time, any employee or former
employee who prior to the Effective Time has elected or during the 24-month
period following the Effective Time elects an extended payment period under a
Severance Program, such extended severance period will be recognized for
(1) Years of Service, (2) Benefit Service purposes, (3) eligibility for early
retirement, and (4) qualifying for the early retirement supplemental benefit (in
an amount not less than as provided in the Santa Fe Snyder Corporation
Retirement Income Plan ("RIP") immediately prior to the Effective Time) either
under the terms of the RIP or under a separate or successor plan. Such person
who has elected the extended severance payment period will, if otherwise
eligible, earn benefits under the SFS Supplemental Executive Retirement Plan
("SERP"). Provided, no other benefits shall be accrued for any employee under
the SFS SERP following the Effective Time. Notwithstanding anything to the
contrary above the maximum extended payment period that will be recognized under
the RIP and the SERP is 24 months from the Effective Time.
Section 3. RETIREE MEDICAL.
(a) For a 24-month period following the Effective Time, Devon will provide
coverage under a Devon retiree health plan.
(b) Devon will or will cause the extended severance payment period (but not
to exceed 24 months from the Effective Time) for any person who prior to the
Effective Time or during the 24-month period following the Effective Time has
elected or elects an extended severance payment period under the Severance
Programs to be credited as service for eligibility to participate in the Devon
retiree health program (or its successor). At the end of an elected extended
severance period, the person shall be eligible to receive retiree health
coverage if (i) Devon then maintains such a program and, (ii) at that time, the
person meets the eligibility service and age requirements as in effect under the
SFS retiree program immediately prior to the Effective Time.
(c) No retiree medical benefits shall be provided past age 65 unless a
former SFS employee was eligible or otherwise receiving such benefits under the
SFS retiree medical program at the Effective Time.
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<PAGE>
Section 4. EQUITY-BASED AWARDS.
As of the Effective Time SFS optionees shall have their SFS stock option
agreements replaced with a grant agreement substantially in the form attached
hereto as Attachment A.
Section 5. ADDITIONAL MATTERS.
(a) Devon shall credit the SFS employees with their service with SFS as of
the Effective Time for vesting purposes under Devon's retirement plan and 401(k)
plan.
(b) Corporate officers of SFS (as defined as currently Executive Vice
Presidents and above) who continue with Devon shall participate in the
Supplemental Retirement Income Plan of Devon Energy Corporation after the
Effective Time, shall receive credit thereunder for all purposes, including
benefit accrual and vesting, for their service with SFS or Snyder Oil
Corporation as of the Effective Time, and shall have their benefit accrued under
the Devon SERP "offset" by their accrued benefit under the SFS SERP and RIP (but
only if the SFS SERP and RIP have not been merged into the Devon SERP and Devon
defined benefit Plan, respectively), Severance Programs and Employment
Agreements. In no event shall a former SFS employee's aggregate benefits under
the Devon SERP and SFS SERP be less than his accrued benefit under the SFS SERP
at the Effective Time. It is the intent of the parties that no duplication of
benefits will occur under the Devon SERP and the SFS SERP.
(c) Devon hereby agrees to assume the Employment Agreements between SFS and
those employees listed on Schedule One and to perform all obligations of SFS
thereunder as required by the terms of such Employment Agreements.
(d) On the Effective Time James L. Payne shall become Vice Chairman of
Devon. In addition, he shall be responsible for all international operations of
Devon and its subsidiaries as an officer of Devon, reporting to the Chief
Executive Officer of Devon. Further, Devon shall enter into a written agreement
with Mr. Payne providing that if his employment is terminated prior to age 65,
due to his death or disability or by Devon other than for cause, he shall be
entitled to receive an immediate lump sum payment equal to the sum of his annual
base salary and his maximum annual bonus.
Section 6. MISCELLANEOUS.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be considered one and the same agreement, and shall become effective
when both counterparts have been signed by each of the parties and delivered to
the other parties.
(b) Except as preempted by federal law, this Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
reference to the choice of law principles thereof.
(c) Except as set forth in this Agreement, whether the transactions
contemplated hereby are or are not consummated, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
(d) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(e) The section headings contained in this Agreement are inserted for
convenience of reference only and will not affect the meaning or interpretation
of this Agreement. All references to Sections contained herein mean Sections of
this Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
(f) This Agreement may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom enforcement of any such
modification or amendment is
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<PAGE>
sought. Any party hereto may, only by an instrument in writing, waive compliance
by the other parties hereto with any term or provision of this Agreement on the
part of such other party hereto to be performed or complied with. The waiver by
any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
(g) This Agreement, together with the Merger Agreement, reflects the entire
agreement between the parties concerning employee matters and supersedes all
prior or contemporaneous oral or written understandings, statements,
representations, or promises between the parties. This Agreement is signed by
the parties without reliance upon any representations, commitments or
understandings other than those set forth herein. The terms of this Agreement
are contractual and not mere recitals. Actions to be taken by or with respect to
an employee benefit plan in accordance with this Agreement shall constitute
covenants by the employer-sponsor of the plan to cause such actions to be taken.
(h) The parties hereto agree that each person who is a participant or
beneficiary under one of the employee benefit plans covered by this Agreement is
a third party beneficiary of the provisions of this Agreement as applicable to
such person and his or her benefits under such plan.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties, effective for all purposes as of the date of the Merger
Agreement.
<TABLE>
<S> <C> <C>
DEVON ENERGY CORPORATION
By:
-----------------------------------------
Name:
Title:
DEVON MERGER CO.
By:
-----------------------------------------
Name:
Title:
SANTA FE SNYDER CORPORATION
By:
-----------------------------------------
Name:
Title:
</TABLE>
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<PAGE>
ATTACHMENT A TO
SCHEDULE 6.14
NONQUALIFIED STOCK OPTION AGREEMENT
WHEREAS, pursuant to the Agreement and Plan of Merger by and among Devon
Energy Corporation (the "Company"), Devon Merger Co. and Santa Fe Snyder
Corporation ("SFS") dated as of , 2000, (the "Merger Agreement"), each
stock option exercisable for shares of SFS common stock ("SFS Option") will
automatically convert into an option (a "Company Option") with respect to the
common stock, par value $.01 per share, of the Company ("Company Stock") on the
Effective Time (as defined in the Merger Agreement) of the merger of [Sub] into
SFS without any action on the part of ("Optionee"); and
WHEREAS, (i) the exercise price of the Company Option shall be determined by
dividing the exercise price of the applicable SFS Option by and (ii) the
number of shares of Company Stock issuable upon exercise of the Company Option
shall be determined by multiplying the number of shares issuable upon exercise
of the SFS Option by ; and
WHEREAS, the parties hereto wish to enter into this Agreement to evidence
the automatic conversion of Optionee's SFS Option into a Company Option upon the
Merger;
NOW, THEREFORE, effective upon the Effective Time the parties hereby agree
as follows:
1. COMPANY OPTION. Optionee's SFS Option dated is hereby assumed by
the Company and converted into a right and option to purchase all or any part of
an aggregate of shares of Company Stock on the terms and conditions set
forth herein. This Company Option is not intended to constitute an incentive
stock option within the meaning of section 422(b) of the Internal Revenue Code
of 1986, as amended.
2. EXERCISE PRICE. The exercise price per share of Company stock to be
purchased pursuant to this Company Option shall be $ .
3. VESTING OF COMPANY OPTION. This Company Option is 100% vested
(exercisable) on and after the Effective Time.
4. TERMS OF THE COMPANY OPTION. This Agreement is not intended to either
enlarge or diminish any of Optionee's rights under the SFS Option as the same
existed immediately prior to the Merger. Accordingly, all terms of the SFS
Option and all rights of Optionee with respect to such option, which include the
right to exercise the SFS Option during the 36-month period [FOR GRANTS MADE
UNDER THE 2000 INCENTIVE STOCK COMPENSATION PLAN AND GRANTS MADE UNDER THE 1995
NONEXECUTIVE EMPLOYEE INCENTIVE STOCK PLAN AFTER JANUARY 1, 2000 -- "12-MONTH
PERIOD" SHALL BE SUBSTITUTED FOR "36-MONTH PERIOD"] following Optionee's
termination of employment or through the 10th anniversary of the date of grant
of the SFS Option, whichever periods ends first, are hereby incorporated by
reference in this Agreement and shall apply equally to this Company Option.
5. NO RIGHT TO EMPLOYMENT. This assumption/conversion of the SFS Option
into a Company Option shall not be construed as giving Optionee the right to be
retained in the employ of, or in any consulting relationship to, the Company or
any subsidiary of the Company. Further, the Company or any such subsidiary may
at any time dismiss Optionee from its employment or discontinue any consulting
relationship, free from any liability or any claim under this Agreement.
6. NO RIGHTS AS SHAREHOLDER. Neither Optionee nor any holder or
beneficiary of this Company Option shall have any rights as a shareholder with
respect to any Company Stock to be distributed hereunder until he or she has
become the holder of such Company Stock.
A-45
<PAGE>
7. NO FRACTIONAL SHARES. No fractional shares of Company Stock shall be
issued or delivered pursuant to this Agreement ( shares shall be rounded to the
nearest whole shares).
8. WITHHOLDING OF TAX. To the extent the Company or its subsidiary is
required to withhold any tax upon the exercise of this Company Option, Optionee
shall deliver to the Company or the subsidiary at the time of such exercise such
amount of money or, with the consent of the Company, shares of Company Stock as
the Company may require to meet its withholding obligations under applicable tax
laws or regulations.
9. LAWS APPLICABLE TO CONSTRUCTION. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of Delaware
without regard to its conflict of laws.
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
<TABLE>
<S> <C> <C>
DEVON ENERGY CORPORATION
By:
-----------------------------------------
Name:
Title:
OPTIONEE
</TABLE>
A-46
<PAGE>
AMENDMENT NO. ONE
TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DEVON ENERGY CORPORATION, DEVON MERGER CO.
AND SANTA FE SNYDER CORPORATION
DATED AS OF MAY 25, 2000
DATED AS OF JULY 11, 2000
A-47
<PAGE>
AMENDMENT NO. ONE
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. ONE TO AGREEMENT AND PLAN OF MERGER, dated as of
July 11, 2000 ("Amendment No. One"), amends the Agreement and Plan of Merger
(the "Agreement") dated as of May 25, 2000 among Devon Energy Corporation, a
Delaware corporation ("Devon"), Devon Merger Co., a Delaware corporation and
direct and wholly-owned subsidiary of Devon ("Merger Co.") and Santa Fe Snyder
Corporation, a Delaware corporation ("Santa Fe Snyder").
1. Section 7.1(a)(ii) is hereby amended to read in its entirety as follows:
"(ii) a majority of the outstanding shares of Devon Common Stock and the
Northstar Exchangeable Shares, voting as a single class with the Devon
Special Voting Stock voting for the Northstar Exchangeable Shares as
provided in Devon's charter, represented in person or by proxy at a
meeting at which a quorum is present."
2. No further changes are made to the Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment No. One and
caused the same to be duly delivered on their behalf on the day and year first
written above.
<TABLE>
<S> <C> <C>
DEVON ENERGY CORPORATION
By: /s/ DUKE R. LIGON
----------------------------------------------
Name: Duke R. Ligon
Title: Senior Vice President and General
Counsel
DEVON MERGER CO.
By: /s/ DUKE R. LIGON
----------------------------------------------
Name: Duke R. Ligon
Title: Vice President
SANTA FE SNYDER CORPORATION
By: /s/ DAVE HICKS
----------------------------------------------
Name: Dave Hicks
Title: Vice President--Law and General Counsel
</TABLE>
A-48
<PAGE>
ANNEX B
MORGAN STANLEY DEAN WITTER
CHASE TOWER
600 TRAVIS, SUITE 3700
HOUSTON, TEXAS 77002
(713) 512-4400
May 25, 2000
Board of Directors
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73103-8260
Members of the Board:
We understand that Santa Fe Snyder Corporation ("Santa Fe" or the
"Company"), Devon Energy Corporation ("Devon") and Devon Merger Co. propose to
enter into an Agreement and Plan of Merger substantially in the form of the
draft dated May 24, 2000 (the "Merger Agreement"), which provides for, among
other things, Santa Fe becoming a wholly owned subsidiary of Devon (the
"Merger"). Pursuant to the Merger, each share of common stock, par value $0.01
per share, of Santa Fe (the "Santa Fe Common Stock") issued and outstanding
immediately prior to the Effective Time (as defined in the Merger Agreement) of
the Merger, other than shares of Santa Fe Common Stock held in Santa Fe's
treasury or owned by Devon or any wholly owned subsidiary of Devon or Santa Fe,
will be converted into 0.220 shares (the "Exchange Ratio") of common stock, par
value $0.10 per share, of Devon (the "Devon Common Stock"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to Devon.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Devon, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data, including internal oil and gas reserve estimates,
concerning the Company and Devon prepared by the managements of the
Company and Devon, respectively;
(iii) reviewed certain financial forecasts prepared by the managements of the
Company and Devon, respectively;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of the Company;
(v) discussed the past and current operations and financial condition and
the prospects of Devon, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of Devon;
(vi) reviewed the pro forma impact of the Merger on Devon's earnings per
share, cash flow, oil and gas reserves and production, consolidated
capitalization and financial ratios;
B-1
<PAGE>
(vii) reviewed the reported prices and trading activity for the Santa Fe
Common Stock and the Devon Common Stock;
(viii) compared the financial performance of the Company and Devon and the
prices and trading activity of the Santa Fe Common Stock and Devon
Common Stock with that of certain other publicly-traded companies,
comparable with the Company and Devon, respectively, and their
securities;
(ix) reviewed certain reserve reports prepared by Devon and Devon's
independent reserve engineers;
(x) reviewed certain reserve reports prepared by the Company and the
Company's independent reserve engineers;
(xi) reviewed the financial terms, to the extent publicly available, of
certain comparable business combination transactions deemed relevant;
(xii) participated in discussions and negotiations among representatives of
the Company and Devon and their financial and legal advisors;
(xiii) reviewed the draft of the Merger Agreement and certain related
documents; and
(xiv) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and Devon, respectively. We have not
made any independent valuation or appraisal of the assets or liabilities of the
Company or Devon; nor have we been furnished with any such appraisals. With
respect to the reserve estimates and reports referred to in (ii), (vi),
(ix) and (x) above, we are not experts in the engineering evaluation of oil and
gas properties and, with your consent, we have relied, without independent
verification, solely upon the internal reserve estimates of the Company and
Devon, respectively. In addition, we have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement. We
have also assumed that the Merger will be accounted for as a
"pooling-of-interests" business combination in accordance with U.S. Generally
Accepted Accounting Principles and that the Merger will be treated as a tax-free
reorganization pursuant to the Internal Revenue Code of 1986.Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Devon in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Devon and have received fees for
the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of Devon only and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing of a proxy or a registration statement with the Securities and
Exchange Commission in connection with the Merger.
We are expressing no opinion herein as to the prices at which the Santa Fe
Common Stock or Devon Common Stock will trade at any time. In addition, Morgan
Stanley expresses no opinion or recommendation as to how the holders of Devon
Common Stock should vote at the shareholders' meeting held in connection with
the Merger.
B-2
<PAGE>
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Devon.
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
[SIG]
Stephen M. Trauber
MANAGING DIRECTOR
</TABLE>
B-3
<PAGE>
ANNEX C
[LOGO]
CHASE SECURITIES INC.
270 Park Avenue
New York, NY 10017-2070
May 25, 2000
Board of Directors
Santa Fe Snyder Corporation
840 Gessner, Suite 1400
Houston, Texas 77024
Members of the Board:
You have informed us that Santa Fe Snyder Corporation (the "Company"), Devon
Energy Corporation (the "Merger Partner"), and Devon Merger Co., a wholly-owned
subsidiary of the Merger Partner ("Merger Sub"), propose to enter into an
Agreement and Plan of Merger dated as of May 25, 2000 (the "Agreement") which
provides, among other things, that Merger Sub will be merged with and into the
Company (the "Merger") in a transaction in which each outstanding share of
common stock, par value $0.01 per share, of the Company (the "Company Common
Stock"), other than shares of the Company Common Stock held in treasury or owned
by the Merger Partner or any wholly-owned subsidiary of the Company or the
Merger Partner, all of which shall be canceled, will be converted into 0.22
shares (the "Exchange Ratio") of common stock, par value $0.10 per share, of the
Merger Partner (the "Merger Partner Common Stock").
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view, to the holders of the Company Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed the Agreement;
(b) reviewed certain publicly available business and financial information
we deemed relevant relating to the Company and the Merger Partner and the
industries in which they operate;
(c) reviewed certain internal non-public financial and operating data and
forecasts provided to us by the managements of the Company and the Merger
Partner relating to their respective businesses, as well as the amount
and timing of the cost savings and related expenses and synergies
expected to result from the Merger (the "Synergies") furnished to us by
the Company and the Merger Partner;
(d) discussed, with members of the senior managements of the Company and the
Merger Partner, the Company's and the Merger Partner's operations,
historical financial statements and future prospects, before and after
giving effect to the Merger and the Synergies;
(e) compared the financial and operating performance of the Company and the
Merger Partner with publicly available information concerning certain
other companies we deemed comparable and reviewed the relevant historical
stock prices of the Company Common Stock and the Merger Partner Common
Stock and certain publicly traded securities of such other companies;
(f) compared the proposed financial terms of the Merger with the financial
terms of certain recent acquisition transactions we deemed reasonably
comparable to the Merger and otherwise relevant to our inquiry; and
(g) made such other analyses and examinations as we have deemed necessary or
appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with or reviewed by or for us, or publicly
available, for purposes of this opinion and have further relied upon the
assurance of the managements of the Company and the Merger Partner that they are
not aware of any facts that would make such information inaccurate or
misleading. We have neither made nor obtained any independent evaluations or
appraisals of the assets or liabilities of the Company or the Merger Partner,
nor have we conducted a physical inspection of the properties or facilities of
the Company or the Merger Partner. We have assumed that the financial forecasts
and the Synergies provided to or discussed with us by the Company and the
C-1
<PAGE>
Merger Partner have been reasonably determined on bases reflecting the best
currently available estimates and judgments of the management of the Company and
the Merger Partner as to the future financial performance of their respective
companies and the Synergies. We express no view as to such forecast or
projection information or the assumptions on which they were based.
For purposes of rendering our opinion, we have assumed that, in all respects
material to our analysis, the representations and warranties of each party
contained in the Agreement are true and correct, that each party will perform
all of the covenants and agreements required to be performed by it under the
Agreement and that all conditions to the consummation of the Merger will be
satisfied without waiver thereof. We have further assumed that all material
governmental, regulatory or other consents and approvals will be obtained and
that in the course of obtaining any necessary governmental, regulatory or other
consents and approvals, or any amendments, modifications or waivers to any
documents to which either of the Company or the Merger Partner are a party, as
contemplated by the Agreement, no restrictions will be imposed or amendments,
modifications or waivers made that would have any material adverse effect on the
contemplated benefits of the Merger. In addition, we have assumed that the
Merger will qualify as a tax-free reorganization for U.S. federal income tax
purposes. We have further assumed with your consent that the Merger will be
accounted for as a pooling of interests under United States generally accepted
accounting principles.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
Our opinion herein is necessarily based on market, commodity price, economic
and other conditions as they exist and can be evaluated on the date of this
letter. Our opinion is limited to the fairness, from a financial point of view,
to the holders of the Company Common Stock of the Exchange Ratio and we express
no opinion as to the merits of the underlying decision by the Company to engage
in the Merger. This opinion does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should vote with respect
to the Merger or any other matters relating thereto. In addition, we express no
opinion as to the prices at which the Company Common Stock or the Merger Partner
Common Stock will trade following the announcement or the consummation of the
Merger, as the case may be.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to the Company in
connection with the Merger and will receive a fee for our services, payment of a
significant portion of which is contingent upon the consummation of the Merger.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. The Chase Manhattan Corporation and its
affiliates, including Chase Securities Inc., in the ordinary course of business,
have from time to time, provided commercial and investment banking services to
the Company and commercial banking services to the Merger Partner, for which we
received usual and customary compensation and in the future may continue to
provide such commercial and investment banking services. In the ordinary course
of business, we or our affiliates may trade in the debt and equity securities of
the Company and the Merger Partner for our own accounts and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of the Company Common Stock.
This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Merger and shall not be used for any other
purpose without the prior written consent of Chase Securities Inc. This opinion
shall not be reproduced, disseminated, quoted, summarized or referred to at any
time, in any manner or for any purpose, nor shall any public references to Chase
Securities Inc. be made by the Company, without the prior written consent of
Chase Securities Inc.
Very truly yours,
CHASE SECURITIES INC.
C-2
<PAGE>
ANNEX D
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of May 25, 2000 is by and between Santa
Fe Snyder Corporation, a Delaware corporation (the "Company"), and Devon Energy
Corporation, a Delaware corporation (the "Grantee").
RECITALS
The Grantee, the Company and Merger Co., a Delaware corporation wholly owned
by the Grantee ("Merger Co."), propose to enter into the Merger Agreement
providing, among other things, for the Merger pursuant to the Merger Agreement
of Merger Co. with and into the Company, which shall be the surviving
corporation.
As a condition and inducement to the Grantee's willingness to enter into the
Merger Agreement, the Grantee has requested that the Company agree, and the
Company has agreed, to grant the Grantee the Option.
The Board of Directors of the Grantee has approved and adopted the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of Devon Common Stock (as defined in the Merger
Agreement).
The Board of Directors of the Company has approved and adopted the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of Santa Fe Snyder Common Stock (as defined in
the Merger Agreement).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and the Grantee agree as follows:
1. CAPITALIZED TERMS. Those capitalized terms used but not defined herein
that are defined in the Merger Agreement are used herein with the same meanings
as ascribed to them therein; PROVIDED, HOWEVER, that, as used in this Agreement,
"Person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act. Those capitalized terms used in this Agreement that are not
defined in the Merger Agreement are defined in Annex A hereto and are used
herein with the meanings ascribed to them therein.
2. THE OPTION.
(a) GRANT OF OPTION. Subject to the terms and conditions set forth herein,
the Company hereby grants to the Grantee an irrevocable option to purchase, out
of the authorized but unissued Santa Fe Snyder Common Stock, 36,424,413 shares
of Santa Fe Snyder Common Stock (as adjusted as set forth herein) (the "Option
Shares"), at the Exercise Price.
(b) EXERCISE PRICE. The exercise price (the "Exercise Price") per Option
Share shall be the Current Market Price per share of Santa Fe Snyder Common
Stock on the date of this Agreement.
(c) TERM. The Option shall either (i) be exercisable at any time and from
time to time following the occurrence of an Exercise Event described in
subsection (i) of the definition of an Exercise Event and remain in full force
and effect for one year thereafter, or (ii) be exercisable at any time and from
time to time following the occurrence of an Exercise Event described in
subsection (ii) of the definition of an Exercise Event and remain in full force
and effect for one year thereafter (the "Option Term"). This Option shall
terminate on the earliest to occur of (i) the failure of Grantee to exercise the
Option prior to the termination of the Option Term, (ii) the Effective Time,
(iii) Grantee's written notice of termination of this Agreement to the Company,
and (iv) termination of the Merger Agreement in
D-1
<PAGE>
accordance with its terms under circumstances in which the Option does not and
could not, through the passage of time or in conjunction with subsequent events,
become exercisable in accordance with the preceding sentence.
(d) EXERCISE OF OPTION.
(i) The Grantee may exercise the Option, in whole or in part, at any
time and from time to time during the Option Term. Notwithstanding the
expiration of the Option Term, the Grantee shall be entitled to purchase
those Option Shares with respect to which it has exercised the Option in
accordance with the terms hereof prior to the expiration of the Option Term.
(ii) If the Grantee wishes to exercise the Option, it shall send a
written notice (an "Exercise Notice") (the date of which being herein
referred to as the "Notice Date") to the Company specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and a date (the "Closing Date") not earlier than three Business
Days nor later than 15 Business Days from the Notice Date for the closing of
the purchase and sale pursuant to the Option (the "Closing").
(iii) If the Closing cannot be effected by reason of the application of
any Law, Regulation or Order, the Closing Date shall be extended to the
tenth Business Day following the expiration or termination of the
restriction imposed by such Law, Regulation or Order; PROVIDED HOWEVER, that
during this extended period, notwithstanding any prior Exercise Notice,
Grantee shall be entitled to rescind such Exercise Notice and shall not be
obligated to purchase any Option Shares in connection with such exercise
upon written notice to such effect to the Company. Without limiting the
foregoing, if prior notification to, or Authorization of, any Governmental
Authority is required in connection with the purchase of such Option Shares
by virtue of the application of such Law, Regulation or Order, the Grantee
and, if applicable, the Company shall promptly file the required notice or
application for Authorization and the Grantee, with the cooperation of the
Company, shall expeditiously process the same.
(e) PAYMENT AND DELIVERY OF CERTIFICATES.
(i) At each Closing, the Grantee shall pay to the Company in immediately
available funds by wire transfer to a bank account designated by the Company
an amount equal to the Exercise Price multiplied by the number of Option
Shares to be purchased on such Closing Date. Alternatively, the Grantee may
elect to purchase Option Shares issuable, and pay some or all of the
aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option
Shares as is determined by dividing (i) the aggregate Exercise Price payable
in respect of the number of Option Shares being purchased in such manner by
(ii) the excess of the Current Market Price per share of Santa Fe Snyder
Common Stock as of the last trading day preceding the date Grantee delivers
its Exercise Notice over the per share Exercise Price.
(ii) At each Closing, simultaneously with the delivery of immediately
available funds as provided above, the Company shall deliver to the Grantee
a certificate or certificates representing the Option Shares to be purchased
at such Closing, which Option Shares shall be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all Liens, and
the Grantee shall deliver to the Company its written agreement that the
Grantee will not offer to sell or otherwise dispose of such Option Shares in
violation of applicable Law or the provisions of this Agreement.
(f) CERTIFICATES. Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
D-2
<PAGE>
A new certificate or certificates evidencing the same number of shares of
the Santa Fe Snyder Common Stock will be issued to the Grantee in lieu of the
certificate bearing the above legend, and such new certificate shall not bear
such legend if the Grantee shall have delivered to the Company a copy of a
letter from the staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to the Company and its counsel, to the effect
that such legend is not required for purposes of the Securities Act.
(g) If at the time of issuance of any Santa Fe Snyder Common Stock pursuant
to any exercise of the Option, the Company shall have issued any share purchase
rights or similar securities to holders of Santa Fe Snyder Common Stock, then
each Option Share purchased pursuant to the Option shall also include rights
with terms substantially the same as and at least as favorable to the Grantee as
those issued to other holders of Santa Fe Snyder Common Stock.
3. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in the outstanding shares of Santa Fe Snyder
Common Stock by reason of a stock dividend, stock split, split-up, merger,
consolidation, recapitalization, combination, conversion, exchange of shares,
extraordinary or liquidating dividend or similar transaction which would have
the effect of diluting the Grantee's rights hereunder, the type and number of
shares or securities purchasable upon the exercise of the Option and the
Exercise Price shall be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that the Grantee will
receive upon exercise of the Option the number and class of shares or other
securities or property that Grantee would have received in respect of the Option
Shares had the Option been exercised immediately prior to such event or the
record date therefor, as applicable. In no event shall the number of shares of
Santa Fe Snyder Common Stock subject to the Option exceed 19.9% of the number of
shares of Santa Fe Snyder Common Stock issued and outstanding at the time of
exercise.
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Option is adjusted as provided in this Section
3, the Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction, the numerator of which is equal to the number of Option Shares
purchasable prior to the adjustment and the denominator of which is equal to the
number of Option Shares purchasable after the adjustment.
(c) Without limiting the parties' relative rights and obligations under the
Merger Agreement, if the Company enters into an agreement to consummate a
Business Combination Transaction, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Option
Shares had the Option been exercised immediately prior to such consolidation,
merger, sale or transfer or the record date therefor, as applicable, and will
make any other necessary adjustments and the Company shall take such steps in
connection with such consolidation, merger, liquidation or other such
transaction as may be reasonably necessary to assure that the provisions hereof
shall thereafter apply as nearly as possible to any securities or property
thereafter deliverable upon exercise of the Option.
4. REPURCHASE AT THE OPTION OF GRANTEE.
(a) At the request of the Grantee made at any time and from time to time
after the occurrence of an Exercise Event and prior to 120 days after the
expiration of the Option Term (the "Put Period"), the Company (or any successor
thereto) shall, at the election of the Grantee (the "Put Right"), repurchase
from the Grantee (i) that portion of the Option relating to all or any part of
the Unexercised Option Shares (or as to which the Option has been exercised but
the Closing has not occurred) and (ii) all or any portion of the Option Shares
of Santa Fe Snyder Common Stock
D-3
<PAGE>
purchased by the Grantee upon exercise of the Option (or any portion thereof)
and with respect to which the Grantee then has ownership. The date on which the
Grantee exercises its rights under this Section 4 is referred to as the "Put
Date." Such repurchase shall be at an aggregate price (the "Put Consideration")
equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any Option
Shares which the Grantee owns and as to which the Grantee is exercising the
Put Right;
(ii) the excess, if any, of (x) the Applicable Price per share of Santa
Fe Snyder Common Stock over (y) the Exercise Price paid by the Grantee for
each Option Share as to which the Grantee is exercising the Put Right,
multiplied by the number of such Option Shares; and
(iii) the excess, if any, of (x) the Applicable Price per share of Santa
Fe Snyder Common Stock over (y) the Exercise Price, multiplied by the number
of Unexercised Option Shares as to which the Grantee is exercising the Put
Right.
(b) If the Grantee exercises its rights under this Section 4, the Company
shall, within five Business Days after the Put Date, pay the Put Consideration
to the Grantee in immediately available funds, and the Grantee shall surrender
to the Company the Option or portion of the Option and the certificates
evidencing the Option Shares of Santa Fe Snyder Common Stock purchased
thereunder. The Grantee shall warrant to the Company that, immediately prior to
the repurchase thereof pursuant to this Section 4, the Grantee had sole record
and Beneficial Ownership of the Option or such Option Shares, or both, as the
case may be, and that the Option or such shares, or both, as the case may be,
were then held free and clear of all Liens.
(c) If the Option has been exercised, in whole or in part, as to any Option
Shares subject to the Put Right but the Closing thereunder has not occurred, the
payment of the Put Consideration shall, to that extent, render such exercise
null and void.
(d) Notwithstanding any provision to the contrary in this Agreement, the
Grantee may not exercise its rights pursuant to this Section 4 in a manner that
would result in Total Profit of more than the Profit Cap; PROVIDED, HOWEVER,
that nothing in this sentence shall limit the Grantee's ability to exercise the
Option in accordance with its terms.
(e) To the extent that the Company is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares pursuant to this
Section 4, the Company shall immediately so notify Grantee and thereafter
deliver, from time to time, to Grantee the portion of the Put Consideration that
it is no longer prohibited from delivering, within five Business Days after the
date on which the Company is no longer so prohibited; PROVIDED, HOWEVER, that if
the Company at any time after the Put Date is prohibited under applicable Law
from delivering to Grantee the full amount of the Put Consideration, Grantee may
rescind the exercise of the Put Right, whether in whole, in part or to the
extent of the prohibition, and, to the extent rescinded, no part of the amounts,
terms or the rights with respect to the Option or Put Right shall be changed or
affected as if such Put Right was not exercised. The Company shall use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices to permit Grantee to exercise its Put Right and
shall use its reasonable best efforts to avoid or cause to be rescinded or
rendered inapplicable any prohibition on the Company's repurchase of the Option
or the Option Shares.
5. REGISTRATION RIGHTS.
(a) The Company shall, if requested by the Grantee at any time and from time
to time during the Registration Period, as expeditiously as practicable,
prepare, file and cause to be made effective up to two registration statements
under the Securities Act if such registration is required in order to permit the
offering, sale and delivery of any or all shares of Santa Fe Snyder Common Stock
or other securities that have been acquired by or are issuable to the Grantee
upon exercise of the Option in
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accordance with the intended method of sale or other disposition stated by the
Grantee, including, at the sole discretion of the Company, a "shelf"
registration statement under Rule 415 under the Securities Act or any successor
provision, and the Company shall use all reasonable efforts to qualify such
shares or other securities under any applicable state securities laws. The
Company shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties that are required therefor and to keep such registration statement
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of the Company hereunder
to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 days in the aggregate
if the Board of Directors of the Company shall have determined in good faith
that the filing of such registration or the maintenance of its effectiveness
would require disclosure of nonpublic information that would materially and
adversely affect the Company. For purposes of determining whether two requests
have been made under this Section 5, only requests relating to a registration
statement that has become effective under the Securities Act and pursuant to
which the Grantee has disposed of all shares covered thereby in the manner
contemplated therein shallbe counted.
(b) The Registration Expenses shall be for the account of the Company;
PROVIDED, HOWEVER, that the Company shall not be required to pay any
Registration Expenses with respect to such registration if the registration
request is subsequently withdrawn at the request of the Grantee unless the
Grantee agrees to forfeit its right to request one registration.
(c) The Grantee shall provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. If
during the Registration Period the Company shall propose to register under the
Securities Act the offering, sale and delivery of Santa Fe Snyder Common Stock
for cash for its own account or for any other stockholder of the Company
pursuant to a firm underwriting, it shall, in addition to the Company's other
obligations under this Section 5, allow the Grantee the right to participate in
such registration provided that the Grantee participates in the underwriting;
PROVIDED, HOWEVER, that, if the managing underwriter of such offering advises
the Company in writing that in its opinion the number of shares of Santa Fe
Snyder Common Stock requested to be included in such registration exceeds the
number that can be sold in such offering, the Company shall, after fully
including therein all securities to be sold by the Company or, if such
registration relates to Santa Fe Snyder Common Stock of any other stockholder of
the Company being registered pursuant to a demand registration, all securities
to be sold by such other stockholder, include the shares requested to be
included therein by Grantee pro rata (based on the number of shares intended to
be included therein) with the shares intended to be included therein by Persons
other than the Company or, in the case of a demand registration of a Company
stockholder, with the shares intended to be included therein by the Company or
other Company stockholders.
(d) In connection with any offering, sale and delivery of Santa Fe Snyder
Common Stock pursuant to a registration statement effected pursuant to this
Section 5, the Company and the Grantee shall provide each other and each
underwriter of the offering with customary representations, warranties and
covenants, including covenants of indemnification and contribution.
6. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Grantee's Total Profit exceed the Profit Cap and, if it otherwise would
exceed such amount, the Grantee, at its sole election, shall either (i) deliver
to the Company for cancellation Option Shares previously purchased by Grantee,
(ii) pay cash or other consideration to the Company, (iii) reduce the amount of
the fee payable to Grantee under Section 8.5 of the Merger Agreement or
(iv) undertake any combination thereof, so that the Grantee's Total Profit shall
not exceed the Profit Cap after taking into account the foregoing actions.
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(b) Notwithstanding any other provision of this Agreement, this Stock Option
may not be exercised for a number of Option Shares that would, as of the Notice
Date, result in a Notional Total Profit of more than the Profit Cap, and, if the
Notional Total Profit associated with exercise of the Option otherwise would
exceed the Profit Cap, the Grantee, at its sole option, may increase the
Exercise Price for that number of Option Shares set forth in the Exercise Notice
so that the Notional Total Profit shall not exceed the Profit Cap; PROVIDED,
HOWEVER, that nothing in this sentence shall restrict any exercise of the Option
otherwise permitted by this Section 6(b) on any subsequent date at the Exercise
Price set forth in Section 2(b) if such exercise would not then be restricted
under this Section 6(b).
7. LISTING. If the Santa Fe Snyder Common Stock or any other securities
then subject to the Option are then listed on the New York Stock Exchange
("NYSE") or any other national securities exchange, or on the Nasdaq National
Market, the Company, upon the occurrence of an Exercise Event, will promptly
file an application to list on the NYSE or such other securities exchange the
shares of the Santa Fe Snyder Common Stock or other securities then subject to
the Option and will use all reasonable efforts to cause such listing application
to be approved as promptly as practicable.
8. REPLACEMENT OF AGREEMENT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Company will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement shall constitute an additional
contractual obligation of the Company, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
9. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in the Merger Agreement or as
otherwise expressly provided herein, each of the parties hereto shall bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARY; SEVERABILITY. Except as
otherwise set forth in the Merger Agreement, this Agreement (including the
Merger Agreement and the other documents and instruments referred to herein and
therein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
(d) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
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<PAGE>
(e) GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law.
(f) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience or reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses or sent by electronic
transmission to the telecopier number specified below:
If to the Company to:
Santa Fe Snyder Corporation
840 Gessner, Suite 1400
Houston, Texas 77024
Facsimile: (713) 507-5335
Attn: James L. Payne
with a copy to:
Andrews & Kurth L.L.P.
4200 Chase Tower
600 Travis
Houston, Texas 77002
Facsimile: (713) 238-7130
Attn: G. Micheal O'Leary
If to Grantee to:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Facsimile: (405) 552-8171
Attn: J. Larry Nichols
with a copy to:
McAfee & Taft
10th Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
Facsimile: (405) 235-0439
Attn: Gary F. Fuller
(h) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in counterparts, each of which shall be deemed an original and all of which
taken together shall constitute but a single document.
(i) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be sold, assigned or otherwise
disposed of or transferred by either of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party,
except that the Grantee may assign this Agreement to a wholly owned Subsidiary
of the Grantee; PROVIDED, HOWEVER, that no such assignment shall have the effect
of releasing the Grantee from
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its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(j) FURTHER ASSURANCES. If the Grantee exercises the Option or any portion
thereof, the Company and the Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(k) SPECIFIC PERFORMANCE. The parties hereto hereby acknowledge and agree
that the failure of any party to this Agreement to perform its agreements and
covenants hereunder will cause irreparable injury to the other party to this
Agreement for which damages, even if available, will not be an adequate remedy.
Accordingly, each of the parties hereto hereby consents to the granting of
equitable relief (including specific performance and injunctive relief) by any
court of competent jurisdiction to enforce any party's obligations hereunder.
The parties further agree to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such equitable relief and
that this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, the Company and the Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
<TABLE>
<S> <C> <C>
SANTA FE SNYDER CORPORATION
By: /s/ JAMES L. PAYNE
-----------------------------------------
Name: James L. Payne
Title: Chief Executive Officer
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS
-----------------------------------------
Name: J. Larry Nichols
Title: President and Chief Executive
Officer
</TABLE>
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<PAGE>
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Applicable Price" means the highest of (i) the highest purchase price per
share paid pursuant to a third party's tender or exchange offer made for shares
of Santa Fe Snyder Common Stock after the date hereof and on or prior to the Put
Date, (ii) the price per share to be paid by any third Person for shares of
Santa Fe Snyder Common Stock pursuant to an agreement for a Business Combination
Transaction entered into on or prior to the Put Date, and (iii) the Current
Market Price. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm jointly selected by the Grantee
and the Company, which determination shall be conclusive for all purposes of
this Agreement.
"Authorization" shall mean any and all permits, licenses, authorizations,
orders certificates, registrations or other approvals granted by any
Governmental Authority.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own" shall have
the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
"Business Combination Transaction" shall mean (i) a consolidation, exchange
of shares or merger of the Company with any Person, other than the Grantee or
one of its Subsidiaries, and, in the case of a merger, in which the Company
shall not be the continuing or surviving corporation, (ii) a merger of the
Company with a Person, other than the Grantee or one of its Subsidiaries, in
which the Company shall be the continuing or surviving corporation but the then
outstanding shares of Santa Fe Snyder Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other Person or
cash or any other property or the shares of Santa Fe Snyder Common Stock
outstanding immediately before such merger shall after such merger represent
less than 50% of the common shares and common share equivalents of the Company
outstanding immediately after the merger or (iii) a sale, lease or other
transfer of all or substantially all the assets of the Company to any Person,
other than the Grantee or one of its Subsidiaries.
"Business Day" shall mean a day other than Saturday, Sunday or a federal
holiday.
"Closing" shall have the meaning ascribed to such term in Section 2 herein.
"Closing Date" shall have the meaning ascribed to such term in Section 2
herein.
"Court" shall mean any court or arbitration tribunal of the United States,
any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Current Market Price" shall mean, as of any date, the average of the
closing prices (or, if such securities should not trade on any trading day, the
average of the bid and asked prices therefor on such day) of the Santa Fe Snyder
Common Stock as reported on the New York Stock Exchange Composite Tape during
the ten consecutive trading days ending on (and including) the trading day
immediately prior to such date or, if the shares of Santa Fe Snyder Common Stock
are not quoted thereon, on The Nasdaq National Market or, if the shares of Santa
Fe Snyder Common Stock are not quoted thereon, on the principal trading market
(as defined in Regulation M under the Exchange Act) on which such shares are
traded as reported by a recognized source during such ten Business Day period.
"Exercise Event" shall mean (i) any of the events giving rise to the
obligation of the Company to pay the $103,000,000 fee under Section 8.5(a) of
the Merger Agreement or (ii) the event giving rise to the obligation to pay the
$56,650,000 fee under Section 8.5(a) of the Merger Agreement after an event
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giving rise to the obligation to pay the $46,350,000 fee under Section
8.5(a) of the Merger Agreement has already occurred.
"Exercise Notice" shall have the meaning ascribed to such term in Section
2(d) herein.
"Exercise Price" shall have the meaning ascribed to such term in Section 2
herein.
"Governmental Authority" shall mean any governmental agency or authority
(other than a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision thereof, and shall include any
multinational authority having governmental or quasi-governmental powers.
"Law" shall mean all laws, statutes and ordinances of the United States, any
state of the United States, any foreign country, any foreign state and any
political subdivision thereof, including all decisions of Courts having the
effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing), any conditional sale or other title retention agreement, any
lease in the nature thereof or the filing of or agreement to give any financing
statement under the Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of the date hereof by and among the Company, Merger Co. and Grantee.
"Notice Date" shall have the meaning ascribed to such term in Section 2
herein.
"Notional Total Profit" shall mean, with respect to any number of Option
Shares as to which the Grantee may propose to exercise the Option, the Total
Profit determined as of the date of the Exercise Notice assuming that the Option
were exercised on such date for such number of Option Shares and assuming such
Option Shares, together with all other Option Shares held by the Grantee and its
Affiliates as of such date, were sold for cash at the closing market price for
the Santa Fe Snyder Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions) and including all amounts
theretofore received or concurrently being paid to the Grantee pursuant to
clauses (i), (ii) and (iii) of the definition of Total Profit.
"Option" shall mean the option granted by the Company to Grantee pursuant to
Section 2 herein.
"Option Shares" shall have the meaning ascribed to such term in Section 2
herein.
"Option Term" shall have the meaning ascribed to such term in Section 2
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local, of competent
jurisdiction.
"Profit Cap" shall mean $103,000,000.
"Put Consideration" shall have the meaning ascribed to such term in
Section 4 herein.
"Put Date" shall have the meaning ascribed to such term in Section 4 herein.
"Put Period" shall have the meaning ascribed to such term in Section 4
herein.
"Put Right" shall have the meaning ascribed to such term in Section 4
herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 5
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities Dealers, Inc.), but excluding underwriting discounts or commissions
or brokers' fees in respect to shares to be sold by the Grantee and the fees and
disbursements of the Grantee's counsel.
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"Registration Period" shall mean the period of two years following the first
exercise of the Option by the Grantee.
"Regulation" shall mean any rule or regulation of any Governmental Authority
having the effect of Law or of any rule or regulation of any self-regulatory
organization, such as the NYSE.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts received by the Grantee or concurrently being paid to
the Grantee pursuant to Section 4 for the repurchase of all or part of the
unexercised portion of the Option, (ii) (A) the amounts received by the Grantee
or concurrently being paid to the Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged), including sales made to the Company or pursuant to a registration
statement under the Securities Act or any exemption therefrom, less (B) the
Grantee's purchase price for such Option Shares (or, in the case of a cashless
exercise, the aggregate Exercise Price of the Option Shares purchased by
cashless exercise) and (iii) all amounts received by the Grantee from the
Company or concurrently being paid to the Grantee pursuant to Section 8.5 of the
Merger Agreement less (iv) any payments made pursuant to Section
6(a)(ii) herein.
"Unexercised Option Shares" shall mean, from and after the Exercise Date
until the expiration of the Option Term, those Option Shares as to which the
Option remains unexercised from time to time.
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ANNEX E
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of May 25, 2000 is by and between Devon
Energy Corporation, a Delaware corporation (the "Company"), and Santa Fe Snyder
Corporation, a Delaware corporation (the "Grantee").
RECITALS
The Grantee, the Company and Merger Co., a Delaware corporation wholly owned
by the Company ("Merger Co."), propose to enter into the Merger Agreement
providing, among other things, for the Merger pursuant to the Merger Agreement
of Merger Co. with and into the Grantee, which shall be the surviving entity.
As a condition and inducement to the Grantee's willingness to enter into the
Merger Agreement, the Grantee has requested that the Company agree, and the
Company has agreed, to grant the Grantee the Option.
The Board of Directors of the Company has approved and adopted the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of Devon Common Stock (as defined in the Merger
Agreement).
The Board of Directors of the Grantee has approved and adopted the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of Santa Fe Snyder Common Stock (as defined in
the Merger Agreement).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and the Grantee agree as follows:
1. CAPITALIZED TERMS. Those capitalized terms used but not defined herein
that are defined in the Merger Agreement are used herein with the same meanings
as ascribed to them therein; PROVIDED, HOWEVER, that, as used in this Agreement,
"Person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act. Those capitalized terms used in this Agreement that are not
defined in the Merger Agreement are defined in Annex A hereto and are used
herein with the meanings ascribed to them therein.
2. THE OPTION.
(a) GRANT OF OPTION. Subject to the terms and conditions set forth herein,
the Company hereby grants to the Grantee an irrevocable option to purchase, out
of the authorized but unissued Devon Common Stock, 16,501,054 shares of Devon
Common Stock (as adjusted as set forth herein) (the "Option Shares"), at the
Exercise Price.
(b) EXERCISE PRICE. The exercise price (the "Exercise Price") per Option
Share shall be the Current Market Price per share of Devon Common Stock on the
date of this Agreement.
(c) TERM. The Option shall either (i) be exercisable at any time and from
time to time following the occurrence of an Exercise Event described in
subsection (i) of the definition of an Exercise Event and remain in full force
and effect for one year thereafter, or (ii) be exercisable at any time and from
time to time following the occurrence of an Exercise Event described in
subsection (ii) of the definition of an Exercise Event and remain in full force
and effect for one year thereafter (the "Option Term"). This Option shall
terminate on the earliest to occur of (i) the failure of Grantee to exercise the
Option prior to the termination of the Option Term, (ii) the Effective Time,
(iii) Grantee's written notice of termination of this Agreement to the Company,
and (iv) termination of the Merger Agreement in
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accordance with its terms under circumstances in which the Option does not and
could not, through the passage of time or in conjunction with subsequent events,
become exercisable in accordance with the preceding sentence.
(d) EXERCISE OF OPTION.
(i) The Grantee may exercise the Option, in whole or in part, at any
time and from time to time during the Option Term. Notwithstanding the
expiration of the Option Term, the Grantee shall be entitled to purchase
those Option Shares with respect to which it has exercised the Option in
accordance with the terms hereof prior to the expiration of the Option Term.
(ii) If the Grantee wishes to exercise the Option, it shall send a
written notice (an "Exercise Notice") (the date of which being herein
referred to as the "Notice Date") to the Company specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and a date (the "Closing Date") not earlier than three Business
Days nor later than 15 Business Days from the Notice Date for the closing of
the purchase and sale pursuant to the Option (the "Closing").
(iii) If the Closing cannot be effected by reason of the application of
any Law, Regulation or Order, the Closing Date shall be extended to the
tenth Business Day following the expiration or termination of the
restriction imposed by such Law, Regulation or Order; PROVIDED HOWEVER, that
during this extended period, notwithstanding any prior Exercise Notice,
Grantee shall be entitled to rescind such Exercise Notice and shall not be
obligated to purchase any Option Shares in connection with such exercise
upon written notice to such effect to the Company. Without limiting the
foregoing, if prior notification to, or Authorization of, any Governmental
Authority is required in connection with the purchase of such Option Shares
by virtue of the application of such Law, Regulation or Order, the Grantee
and, if applicable, the Company shall promptly file the required notice or
application for Authorization and the Grantee, with the cooperation of the
Company, shall expeditiously process the same.
(e) PAYMENT AND DELIVERY OF CERTIFICATES.
(i) At each Closing, the Grantee shall pay to the Company in immediately
available funds by wire transfer to a bank account designated by the Company
an amount equal to the Exercise Price multiplied by the number of Option
Shares to be purchased on such Closing Date. Alternatively, the Grantee may
elect to purchase Option Shares issuable, and pay some or all of the
aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option
Shares as is determined by dividing (i) the aggregate Exercise Price payable
in respect of the number of Option Shares being purchased in such manner by
(ii) the excess of the Current Market Price per share of Devon Common Stock
as of the last trading day preceding the date Grantee delivers its Exercise
Notice over the per share Exercise Price.
(ii) At each Closing, simultaneously with the delivery of immediately
available funds as provided above, the Company shall deliver to the Grantee
a certificate or certificates representing the Option Shares to be purchased
at such Closing, which Option Shares shall be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all Liens, and
the Grantee shall deliver to the Company its written agreement that the
Grantee will not offer to sell or otherwise dispose of such Option Shares in
violation of applicable Law or the provisions of this Agreement.
(f) CERTIFICATES. Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
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THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
A new certificate or certificates evidencing the same number of shares of
the Devon Common Stock will be issued to the Grantee in lieu of the certificate
bearing the above legend, and such new certificate shall not bear such legend if
the Grantee shall have delivered to the Company a copy of a letter from the
staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to the Company and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(g) If at the time of issuance of any Devon Common Stock pursuant to any
exercise of the Option, the Company shall have issued any share purchase rights
or similar securities to holders of Devon Common Stock, then each Option Share
purchased pursuant to the Option shall also include rights with terms
substantially the same as and at least as favorable to the Grantee as those
issued to other holders of Devon Common Stock.
3. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in the outstanding shares of Devon Common
Stock by reason of a stock dividend, stock split, split-up, merger,
consolidation, recapitalization, combination, conversion, exchange of shares,
extraordinary or liquidating dividend or similar transaction which would have
the effect of diluting the Grantee's rights hereunder, the type and number of
shares or securities purchasable upon the exercise of the Option and the
Exercise Price shall be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that the Grantee will
receive upon exercise of the Option the number and class of shares or other
securities or property that Grantee would have received in respect of the Option
Shares had the Option been exercised immediately prior to such event or the
record date therefor, as applicable. In no event shall the number of shares of
Devon Common Stock subject to the Option exceed 19.9% of the number of shares of
Devon Common Stock issued and outstanding at the time of exercise.
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Option is adjusted as provided in this Section
3, the Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction, the numerator of which is equal to the number of Option Shares
purchasable prior to the adjustment and the denominator of which is equal to the
number of Option Shares purchasable after the adjustment.
(c) Without limiting the parties' relative rights and obligations under the
Merger Agreement, if the Company enters into an agreement to consummate a
Business Combination Transaction, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Option
Shares had the Option been exercised immediately prior to such consolidation,
merger, sale or transfer or the record date therefor, as applicable, and will
make any other necessary adjustments and the Company shall take such steps in
connection with such consolidation, merger, liquidation or other such
transaction as may be reasonably necessary to assure that the provisions hereof
shall thereafter apply as nearly as possible to any securities or property
thereafter deliverable upon exercise of the Option.
4. REPURCHASE AT THE OPTION OF GRANTEE.
(a) At the request of the Grantee made at any time and from time to time
after the occurrence of an Exercise Event and prior to 120 days after the
expiration of the Option Term (the "Put Period"), the Company (or any successor
thereto) shall, at the election of the Grantee (the "Put Right"),
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repurchase from the Grantee (i) that portion of the Option relating to all or
any part of the Unexercised Option Shares (or as to which the Option has been
exercised but the Closing has not occurred) and (ii) all or any portion of the
Option Shares of Devon Common Stock purchased by the Grantee upon exercise of
the Option (or any portion thereof) and with respect to which the Grantee then
has ownership. The date on which the Grantee exercises its rights under this
Section 4 is referred to as the "Put Date." Such repurchase shall be at an
aggregate price (the "Put Consideration") equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any Option
Shares which the Grantee owns and as to which the Grantee is exercising the
Put Right;
(ii) the excess, if any, of (x) the Applicable Price per share of Devon
Common Stock over (y) the Exercise Price paid by the Grantee for each Option
Share as to which the Grantee is exercising the Put Right, multiplied by the
number of such Option Shares; and
(iii) the excess, if any, of (x) the Applicable Price per share of Devon
Common Stock over (y) the Exercise Price, multiplied by the number of
Unexercised Option Shares as to which the Grantee is exercising the Put
Right.
(b) If the Grantee exercises its rights under this Section 4, the Company
shall, within five Business Days after the Put Date, pay the Put Consideration
to the Grantee in immediately available funds, and the Grantee shall surrender
to the Company the Option or portion of the Option and the certificates
evidencing the Option Shares of Devon Common Stock purchased thereunder. The
Grantee shall warrant to the Company that, immediately prior to the repurchase
thereof pursuant to this Section 4, the Grantee had sole record and Beneficial
Ownership of the Option or such Option Shares, or both, as the case may be, and
that the Option or such shares, or both, as the case may be, were then held free
and clear of all Liens.
(c) If the Option has been exercised, in whole or in part, as to any Option
Shares subject to the Put Right but the Closing thereunder has not occurred, the
payment of the Put Consideration shall, to that extent, render such exercise
null and void.
(d) Notwithstanding any provision to the contrary in this Agreement, the
Grantee may not exercise its rights pursuant to this Section 4 in a manner that
would result in Total Profit of more than the Profit Cap; PROVIDED, HOWEVER,
that nothing in this sentence shall limit the Grantee's ability to exercise the
Option in accordance with its terms.
(e) To the extent that the Company is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares pursuant to this
Section 4, the Company shall immediately so notify Grantee and thereafter
deliver, from time to time, to Grantee the portion of the Put Consideration that
it is no longer prohibited from delivering, within five Business Days after the
date on which the Company is no longer so prohibited; PROVIDED, HOWEVER, that if
the Company at any time after the Put Date is prohibited under applicable Law
from delivering to Grantee the full amount of the Put Consideration, Grantee may
rescind the exercise of the Put Right, whether in whole, in part or to the
extent of the prohibition, and, to the extent rescinded, no part of the amounts,
terms or the rights with respect to the Option or Put Right shall be changed or
affected as if such Put Right was not exercised. The Company shall use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices to permit Grantee to exercise its Put Right and
shall use its reasonable best efforts to avoid or cause to be rescinded or
rendered inapplicable any prohibition on the Company's repurchase of the Option
or the Option Shares.
5. REGISTRATION RIGHTS.
(a) The Company shall, if requested by the Grantee at any time and from time
to time during the Registration Period, as expeditiously as practicable,
prepare, file and cause to be made effective up to
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two registration statements under the Securities Act if such registration is
required in order to permit the offering, sale and delivery of any or all shares
of Devon Common Stock or other securities that have been acquired by or are
issuable to the Grantee upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by the Grantee, including,
at the sole discretion of the Company, a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and the Company
shall use all reasonable efforts to qualify such shares or other securities
under any applicable state securities laws. The Company shall use all reasonable
efforts to cause each such registration statement to become effective, to obtain
all consents or waivers of other parties that are required therefor and to keep
such registration statement effective for such period not in excess of 180 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The obligations
of the Company hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding 60
days in the aggregate if the Board of Directors of the Company shall have
determined in good faith that the filing of such registration or the maintenance
of its effectiveness would require disclosure of nonpublic information that
would materially and adversely affect the Company. For purposes of determining
whether two requests have been made under this Section 5, only requests relating
to a registration statement that has become effective under the Securities Act
and pursuant to which the Grantee has disposed of all shares covered thereby in
the manner contemplated therein shall be counted.
(b) The Registration Expenses shall be for the account of the Company;
PROVIDED, HOWEVER, that the Company shall not be required to pay any
Registration Expenses with respect to such registration if the registration
request is subsequently withdrawn at the request of the Grantee unless the
Grantee agrees to forfeit its right to request one registration.
(c) The Grantee shall provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. If
during the Registration Period the Company shall propose to register under the
Securities Act the offering, sale and delivery of Devon Common Stock for cash
for its own account or for any other stockholder of the Company pursuant to a
firm underwriting, it shall, in addition to the Company's other obligations
under this Section 5, allow the Grantee the right to participate in such
registration provided that the Grantee participates in the underwriting;
PROVIDED, HOWEVER, that, if the managing underwriter of such offering advises
the Company in writing that in its opinion the number of shares of Devon Common
Stock requested to be included in such registration exceeds the number that can
be sold in such offering, the Company shall, after fully including therein all
securities to be sold by the Company or, if such registration relates to Devon
Common Stock of any other stockholder of the Company being registered pursuant
to a demand registration, all securities to be sold by such other stockholder,
include the shares requested to be included therein by Grantee pro rata (based
on the number of shares intended to be included therein) with the shares
intended to be included therein by Persons other than the Company or, in the
case of a demand registration of a Company stockholder, with the shares intended
to be included therein by the Company or other Company stockholders.
(d) In connection with any offering, sale and delivery of Devon Common Stock
pursuant to a registration statement effected pursuant to this Section 5, the
Company and the Grantee shall provide each other and each underwriter of the
offering with customary representations, warranties and covenants, including
covenants of indemnification and contribution.
6. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Grantee's Total Profit exceed the Profit Cap and, if it otherwise would
exceed such amount, the Grantee, at its sole election, shall either (i) deliver
to the Company for cancellation Option Shares previously purchased by Grantee,
(ii) pay cash or other consideration to the Company, (iii) reduce the amount of
the fee
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payable to Grantee under Section 8.5 of the Merger Agreement or (iv) undertake
any combination thereof, so that the Grantee's Total Profit shall not exceed the
Profit Cap after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Stock Option
may not be exercised for a number of Option Shares that would, as of the Notice
Date, result in a Notional Total Profit of more than the Profit Cap, and, if the
Notional Total Profit associated with exercise of the Option otherwise would
exceed the Profit Cap, the Grantee, at its sole option, may increase the
Exercise Price for that number of Option Shares set forth in the Exercise Notice
so that the Notional Total Profit shall not exceed the Profit Cap; PROVIDED,
HOWEVER, that nothing in this sentence shall restrict any exercise of the Option
otherwise permitted by this Section 6(b) on any subsequent date at the Exercise
Price set forth in Section 2(b) if such exercise would not then be restricted
under this Section 6(b).
7. LISTING. If the Devon Common Stock or any other securities then subject
to the Option are then listed on the American Stock Exchange ("AMEX") or any
other national securities exchange, or on the Nasdaq National Market, the
Company, upon the occurrence of an Exercise Event, will promptly file an
application to list on the AMEX or such other securities exchange the shares of
the Devon Common Stock or other securities then subject to the Option and will
use all reasonable efforts to cause such listing application to be approved as
promptly as practicable.
8. REPLACEMENT OF AGREEMENT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Company will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement shall constitute an additional
contractual obligation of the Company, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
9. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in the Merger Agreement or as
otherwise expressly provided herein, each of the parties hereto shall bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARY; SEVERABILITY. Except as
otherwise set forth in the Merger Agreement, this Agreement (including the
Merger Agreement and the other documents and instruments referred to herein and
therein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
(d) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the
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original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
(e) GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law.
(f) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience or reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses or sent by electronic
transmission to the telecopier number specified below:
<TABLE>
<S> <C>
If to the Company to:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Facsimile: (405) 552-8171
Attn: J. Larry Nichols
with a copy to:
McAfee & Taft
10th Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
Facsimile: (405) 235-0439
Attn: Gary F. Fuller
If to Grantee to:
Santa Fe Snyder Corporation
840 Gessner, Suite 1400
Houston, Texas 77024
Facsimile: (713) 507-5335
Attn: James L. Payne
with a copy to:
Andrews & Kurth L.L.P.
4200 Chase Tower
600 Travis
Houston, Texas 77002
Facsimile: (713) 238-7130
Attn: G. Micheal O'Leary
</TABLE>
(h) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in counterparts, each of which shall be deemed an original and all of which
taken together shall constitute but a single document.
(i) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be sold, assigned or otherwise
disposed of or transferred by either of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party,
except that the Grantee may assign this Agreement to a wholly owned Subsidiary
of the Grantee; PROVIDED, HOWEVER, that no such assignment shall have the effect
of releasing the Grantee from
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its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(j) FURTHER ASSURANCES. If the Grantee exercises the Option or any portion
thereof, the Company and the Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(k) SPECIFIC PERFORMANCE. The parties hereto hereby acknowledge and agree
that the failure of any party to this Agreement to perform its agreements and
covenants hereunder will cause irreparable injury to the other party to this
Agreement for which damages, even if available, will not be an adequate remedy.
Accordingly, each of the parties hereto hereby consents to the granting of
equitable relief (including specific performance and injunctive relief) by any
court of competent jurisdiction to enforce any party's obligations hereunder.
The parties further agree to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such equitable relief and
that this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, the Company and the Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
<TABLE>
<S> <C> <C>
DEVON ENERGY CORPORATION
By: /s/ J. LARRY NICHOLS
-----------------------------------------
Name: J. Larry Nichols
Title: President and Chief Executive
Officer
SANTA FE SNYDER CORPORATION
By: /s/ JAMES L. PAYNE
-----------------------------------------
Name: James L. Payne
Title: Chief Executive Officer
</TABLE>
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ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Applicable Price" means the highest of (i) the highest purchase price per
share paid pursuant to a third party's tender or exchange offer made for shares
of Devon Common Stock after the date hereof and on or prior to the Put Date,
(ii) the price per share to be paid by any third Person for shares of Devon
Common Stock pursuant to an agreement for a Business Combination Transaction
entered into on or prior to the Put Date, and (iii) the Current Market Price. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm jointly selected by the Grantee and the
Company, which determination shall be conclusive for all purposes of this
Agreement.
"Authorization" shall mean any and all permits, licenses, authorizations,
orders certificates, registrations or other approvals granted by any
Governmental Authority.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own" shall have
the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
"Business Combination Transaction" shall mean (i) a consolidation, exchange
of shares or merger of the Company with any Person, other than the Grantee or
one of its Subsidiaries, and, in the case of a merger, in which the Company
shall not be the continuing or surviving corporation, (ii) a merger of the
Company with a Person, other than the Grantee or one of its Subsidiaries, in
which the Company shall be the continuing or surviving corporation but the then
outstanding shares of Devon Common Stock shall be changed into or exchanged for
stock or other securities of the Company or any other Person or cash or any
other property or the shares of Devon Common Stock outstanding immediately
before such merger shall after such merger represent less than 50% of the common
shares and common share equivalents of the Company outstanding immediately after
the merger or (iii) a sale, lease or other transfer of all or substantially all
the assets of the Company to any Person, other than the Grantee or one of its
Subsidiaries.
"Business Day" shall mean a day other than Saturday, Sunday or a federal
holiday.
"Closing" shall have the meaning ascribed to such term in Section 2 herein.
"Closing Date" shall have the meaning ascribed to such term in Section 2
herein.
"Court" shall mean any court or arbitration tribunal of the United States,
any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Current Market Price" shall mean, as of any date, the average of the
closing prices (or, if such securities should not trade on any trading day, the
average of the bid and asked prices therefor on such day) of the Devon Common
Stock as reported on the American Stock Exchange during the ten consecutive
trading days ending on (and including) the trading day immediately prior to such
date or, if the shares of Devon Common Stock are not quoted thereon, on The
Nasdaq National Market or, if the shares of Devon Common Stock are not quoted
thereon, on the principal trading market (as defined in Regulation M under the
Exchange Act) on which such shares are traded as reported by a recognized source
during such ten Business Day period.
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"Exercise Event" shall mean (i) any of the events giving rise to the
obligation of the Company to pay the $103,000,000 fee under Section 8.5(b) of
the Merger Agreement or (ii) the event giving rise to the obligation to pay the
$56,650,000 fee under Section 8.5(b) of the Merger Agreement after an event
giving rise to the obligation to pay the $46,350,000 fee under Section
8.5(b) of the Merger Agreement has already occurred.
"Exercise Notice" shall have the meaning ascribed to such term in Section
2(d) herein.
"Exercise Price" shall have the meaning ascribed to such term in Section 2
herein.
"Governmental Authority" shall mean any governmental agency or authority
(other than a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision thereof, and shall include any
multinational authority having governmental or quasi-governmental powers.
"Law" shall mean all laws, statutes and ordinances of the United States, any
state of the United States, any foreign country, any foreign state and any
political subdivision thereof, including all decisions of Courts having the
effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing), any conditional sale or other title retention agreement, any
lease in the nature thereof or the filing of or agreement to give any financing
statement under the Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of the date hereof by and among the Company, Merger Co. and Grantee.
"Notice Date" shall have the meaning ascribed to such term in Section 2
herein.
"Notional Total Profit" shall mean, with respect to any number of Option
Shares as to which the Grantee may propose to exercise the Option, the Total
Profit determined as of the date of the Exercise Notice assuming that the Option
were exercised on such date for such number of Option Shares and assuming such
Option Shares, together with all other Option Shares held by the Grantee and its
Affiliates as of such date, were sold for cash at the closing market price for
the Devon Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions) and including all amounts theretofore
received or concurrently being paid to the Grantee pursuant to clauses (i),
(ii) and (iii) of the definition of Total Profit.
"Option" shall mean the option granted by the Company to Grantee pursuant to
Section 2 herein.
"Option Shares" shall have the meaning ascribed to such term in Section 2
herein.
"Option Term" shall have the meaning ascribed to such term in Section 2
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local, of competent
jurisdiction.
"Profit Cap" shall mean $103,000,000.
"Put Consideration" shall have the meaning ascribed to such term in Section
4 herein.
"Put Date" shall have the meaning ascribed to such term in Section 4 herein.
"Put Period" shall have the meaning ascribed to such term in Section 4
herein.
"Put Right" shall have the meaning ascribed to such term in Section 4
herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 5
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities
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Dealers, Inc.), but excluding underwriting discounts or commissions or brokers'
fees in respect to shares to be sold by the Grantee and the fees and
disbursements of the Grantee's counsel.
"Registration Period" shall mean the period of two years following the first
exercise of the Option by the Grantee.
"Regulation" shall mean any rule or regulation of any Governmental Authority
having the effect of Law or of any rule or regulation of any self-regulatory
organization, such as the American Stock Exchange.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts received by the Grantee or concurrently being paid to
the Grantee pursuant to Section 4 for the repurchase of all or part of the
unexercised portion of the Option, (ii) (A) the amounts received by the Grantee
or concurrently being paid to the Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged), including sales made to the Company or pursuant to a registration
statement under the Securities Act or any exemption therefrom, less (B) the
Grantee's purchase price for such Option Shares (or, in the case of a cashless
exercise, the aggregate Exercise Price of the Option Shares purchased by
cashless exercise) and (iii) all amounts received by the Grantee from the
Company or concurrently being paid to the Grantee pursuant to Section 8.5 of the
Merger Agreement less (iv) any payments made pursuant to Section
6(a)(ii) herein.
"Unexercised Option Shares" shall mean, from and after the Exercise Date
until the expiration of the Option Term, those Option Shares as to which the
Option remains unexercised from time to time.
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[LOGO]
Santa Fe Snyder
Corporation
3090-PS1-2000
<PAGE>
PROXY
SANTA FE SNYDER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE SPECIAL MEETING ON AUGUST 29, 2000
The undersigned hereby constitutes and appoints James L. Payne and David L.
Hicks, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Special
Meeting of Stockholders of Santa Fe Snyder Corporation to be held at the Omni
Hotel, Four Riverway, Houston, Texas, on Tuesday, August 29, 2000 at
10:00 a.m., and at any adjournments thereof, on all matters coming before said
meeting.
Proposal -- Approve the merger agreement and the merger between Devon Energy
Corporation and Santa Fe Snyder Corporation and the transactions
contemplated by it.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS CARD PROVIDES VOTING INSTRUCTIONS FOR SHARES HELD FOR THE BENEFIT OF
COMPANY EMPLOYEES IN THE SANTA FE SNYDER SAVINGS INVESTMENT PLAN.
<TABLE>
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<S> <C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS 9349
EXAMPLE.
FOR AGAINST ABSTAIN
Approve the merger agreement and the merger
between Devon Energy Corporation and Santa / / / / / /
Fe Snyder Corporation and the transactions
contemplated by it.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please complete, sign and promptly mail this proxy in the enclosed envelope.
Notes: Please sign exactly as name appears on this card. Joint owners
should each sign personally. Corporation proxies should be signed by
an authorized officer. Executors, administrators, trustees, etc. should
so indicate when signing.
SIGNATURE: DATE
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</TABLE>
