Exhibit 7.2
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of May 19, 1999 is by and between
PennzEnergy Company, a Delaware corporation (the "Company"), and Devon Energy
Corporation, an Oklahoma corporation (the "Grantee").
RECITALS
The Grantee, the Company and Devon Delaware Corporation, a Delaware
corporation and a wholly owned subsidiary of the Grantee ("Newco"), propose to
enter into the Merger Agreement providing, among other things, for the Merger
pursuant to the Merger Agreement of the Company and the Grantee with and into
Newco, 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 the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of DVN Common Stock (as defined in the Merger
Agreement).
The Board of Directors of the Company has approved the Merger
Agreement, the Merger and this Agreement and has recommended approval of the
Merger Agreement by the holders of PZE 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 PZE Common Stock,
7,145,912 shares of PZE Common Stock (as adjusted as set forth herein) (the
"Option Shares"), at the Exercise Price.
(b) Exercise Price. The exercise price (the "Exercise Price") of the
Option shall be $14.488 per Option Share.
(c) Term. The Option shall be exercisable at any time and from time to
time following the occurrence of an Exercise Event and shall remain in full
force and effect until the earliest to occur of (i) the Effective Time,
(ii) the first anniversary of the receipt by Grantee of written notice from
the Company of the occurrence of an Exercise Event and (iii) termination of
the Merger Agreement in accordance with its terms prior to the occurrence
of the later of (x) an Exercise Event and (y) the event giving rise to the
payment of the $12 million fee under Section 9.5 of the Merger Agreement
(the "Option Term"). If the Option is not theretofore exercised, the rights
and obligations set forth in this Agreement shall terminate at the
expiration of the Option Term.
(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. 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
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Company an amount equal to the Exercise Price multiplied by the number
of Option Shares to be purchased on such Closing Date.
(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.
A new certificate or certificates evidencing the same number of shares of the
PZE 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 PZE Common Stock pursuant
to any exercise of the Option, the Company shall have issued any share
purchase rights or similar securities to holders of PZE 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 PZE Common Stock.
3. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in the outstanding shares of PZE
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,
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as applicable. In no event shall the number of shares of PZE Common Stock
subject to the Option exceed 19.9% of the number of shares of PZE 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, in the event that the Company enters into an
agreement (i) to consolidate with or merge into any person, other than the
Grantee or one of its subsidiaries, and the Company will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit any
person, other than the Grantee or one of its subsidiaries, to merge into the
Company and the Company will be the continuing or surviving corporation, but in
connection with such merger, the shares of Common Stock outstanding immediately
prior to the consummation of such merger will 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 the PZE Common Stock outstanding immediately
prior to the consummation of such merger will, after such merger, represent less
than 50% of the outstanding voting securities of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than the Grantee or one of its subsidiaries, 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 shares of PZE Common Stock purchased by the
Grantee pursuant hereto and with respect to which the Grantee then has
ownership. The date on which the Grantee exercises its rights under this
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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 the Applicable Price over 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
shares; and
(iii) the excess, if any, of (x) the Applicable Price per share
of PZE 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 shares of PZE 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 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.
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 PZE 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,
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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 PZE 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 PZE 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, 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.
(d) In connection with any offering, sale and delivery of PZE 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.
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(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 9.5 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 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 PZE 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, 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 PZE 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
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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.
(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:
PennzEnergy Company
Pennzoil Place
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxx
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with a copy to:
Xxxxx & Xxxxx, L.L.P.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx, Jr.
If to Grantee to:
Devon Energy Corporation
00 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: J. Xxxxx Xxxxxxx
with a copy to:
McAfee & Xxxx
00xx Xxxxx
Xxx Xxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxx
(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
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. In the event of any exercise of the
Option by the Grantee, 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.
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(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.
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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.
PENNZENERGY COMPANY
By: /s/ H. Xxxxx Xxxxxx
-----------------------------------
Name:
Title:
DEVON ENERGY CORPORATION
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Name:
Title:
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 DVN 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 DVN
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 DVN 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 DVN 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.
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"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 DVN 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 DVN Common Stock are not quoted thereon, on The Nasdaq
Stock Market or, if the shares of DVN 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 $22 million fee under Section 9.5 of the
Merger Agreement or (ii) the event giving rise to the obligation to pay the $12
million fee under Section 9.5 of the Merger Agreement after an event giving rise
to the obligation to pay the $10 million fee under Section 9.5 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, Newco and Grantee.
"Notice Date" shall have the meaning ascribed to such term in Section
2 herein.
A-2
"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 DVN 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 $23 million.
"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.
"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.
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"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 and (iii) all amounts received
by the Grantee from the Company or concurrently being paid to the Grantee
pursuant to Section 9.5 of the Merger Agreement less (iv) any payments made
pursuant to Section 6(a)(ii).
"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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