EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DEVX ENERGY, INC.
AT
$7.32 NET PER SHARE
BY
COMSTOCK ACQUISITION INC.,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
COMSTOCK RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, DECEMBER 13, 2001,
UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger dated as of November 12, 2001 among Comstock Resources, Inc., Comstock
Holdings, Inc., Comstock Acquisition Inc. and DevX Energy, Inc. The Offer is
conditioned upon a number of matters contained in this Offer to Purchase, which
include there having been validly tendered and not withdrawn prior to the
expiration of the Offer at least 50% of the number of then outstanding DevX
shares (including all DevX shares issuable upon the exercise of then outstanding
options or warrants) plus one DevX share. See "Section 1. Terms of the Offer;
Expiration Date" and "Section 14. Certain Conditions of the Offer," which set
forth in full the conditions to the Offer.
The Board of Directors of DevX has determined that the Agreement and Plan
of Merger and the transactions contemplated thereby, including the Offer and the
merger, are fair to, and in the best interest of, the holders of common stock of
DevX, has approved, adopted and declared advisable the Agreement and Plan of
Merger and the transactions contemplated thereby, including the Offer and the
merger, and has resolved to recommend that the holders of those shares accept
the Offer and tender their shares pursuant to the Offer.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
DevX shares should do any of the following:
- complete and sign the accompanying Letter of Transmittal in accordance
with the instructions in the Letter of Transmittal and mail or deliver
it, together with the certificate(s) evidencing tendered shares, and any
other required documents, to American Stock Transfer & Trust Company, the
Depositary for the Offer;
- tender your shares pursuant to the procedure for book-entry transfer
described in "Section 3. Procedures for Accepting the Offer and Tendering
Shares"; or
- request such stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such stockholder. Any
stockholder whose DevX shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such shares.
A stockholder who desires to tender shares of DevX common stock and whose
certificates evidencing such shares are not immediately available, or who cannot
comply with the procedure for book-entry transfer on a timely basis, may tender
such shares by following the procedure for guaranteed delivery set forth in
"Section 3. Procedures for Accepting the Offer and Tendering Shares."
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
November 15, 2001
TABLE OF CONTENTS
<Table>
SUMMARY TERM SHEET................................................. ii
INTRODUCTION....................................................... 1
1. Terms of the Offer; Expiration Date......................... 3
2. Acceptance for Payment and Payment for Shares............... 5
3. Procedures for Accepting the Offer and Tendering Shares..... 6
4. Withdrawal Rights........................................... 8
5. Certain Federal Income Tax Consequences..................... 9
6. Price Range of Shares; Dividends............................ 10
7. Certain Information Concerning DevX......................... 11
8. Certain Information Concerning Comstock, Holdings and
Purchaser................................................... 11
9. Financing of the Offer and the Merger....................... 12
10. Background of the Offer; the Merger Agreement and Related
Agreements.................................................. 14
11. Purpose of the Offer; Plans for DevX After the Offer and the
Merger; Effect on Senior Notes.............................. 24
12. Dividends and Distributions................................. 27
13. Possible Effects of the Offer on the Market for Shares,
Nasdaq Listing, Margin Regulations and Exchange Act
Registration................................................ 27
14. Certain Conditions of the Offer............................. 28
15. Certain Legal Matters and Regulatory Approvals.............. 29
16. Fees and Expenses........................................... 31
17. Miscellaneous............................................... 31
Schedule I Directors and Executive Officers of Comstock, Holdings
and Purchaser
</Table>
i
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this Offer to
Purchase, and may not contain all of the information that is important to you.
To better understand our Offer to you and for a complete description of the
legal terms of the Offer, you should read this entire Offer to Purchase and the
accompanying Letter of Transmittal carefully. Questions or requests for
assistance may be directed to the Information Agent at its address and telephone
number on the last page of this Offer to Purchase.
WHO IS OFFERING TO BUY MY SECURITIES?
- We are Comstock Acquisition Inc., a newly formed Delaware corporation and
a wholly owned subsidiary of Comstock Holdings, Inc., a Delaware
corporation, which, in turn, is a wholly owned subsidiary of Comstock
Resources, Inc., a Nevada corporation. We were organized in connection
with this Offer and have not carried on any activities other than in
connection with this Offer. See "Section 8. Certain Information
Concerning Comstock, Holdings and Purchaser."
- Comstock Resources, Inc. is an independent energy company engaged in the
acquisition, development, production and exploration of oil and natural
gas properties. See "Section 8. Certain Information Concerning Comstock,
Holdings and Purchaser."
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
- We are seeking to purchase all of the issued and outstanding shares of
common stock, par value $0.234 per share, of DevX Energy, Inc. See
"Introduction" and "Section 1. Terms of the Offer; Expiration Date."
- The Offer is not being made for (nor will tenders be accepted of) any of
DevX's 12 1/2% senior notes due 2008. See "Introduction" and "Section 11.
Purpose of the Offer, Plans for DevX After the Offer and the Merger;
Effect on Senior Notes."
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
- We are offering to pay $7.32 per share of common stock of DevX, net to
the seller in cash (subject to applicable withholding taxes) and without
interest thereon. See "Introduction," "Section 1. Terms of the Offer;
Expiration Date" and "Section 5. Certain Federal Income Tax
Consequences."
- If you tender your DevX shares in the Offer, you will not be obligated to
pay brokerage fees or commissions or, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, stock transfer taxes with
respect to the sale of your shares pursuant to the Offer. See
"Introduction."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF THE OFFER?
- We are not obligated to purchase any DevX shares unless there have been
validly tendered and not withdrawn prior to the expiration of the Offer
at least 50% of the number of then outstanding DevX shares (including all
DevX shares issuable upon the exercise of options or warrants outstanding
on December 12, 2001) plus one DevX share. See "Section 1. Terms of the
Offer; Expiration Date" and "Section 14. Certain Conditions of the
Offer."
- This and other conditions to our obligation to purchase DevX shares
tendered in the Offer are described in greater detail in "Section 1.
Terms of the Offer; Expiration Date" and "Section 14. Certain Conditions
of the Offer."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE THE OFFERED PAYMENT?
- Yes. Comstock Holdings, Inc. will finance approximately $57.0 million of
the Offer with borrowings under an acquisition loan. The remaining
portion of the Offer will be financed through an investment by Comstock
Resources, Inc. in Comstock Holdings, Inc. with borrowings under a new
bank credit facility. See "Section 9. Financing of the Offer and the
Merger."
ii
- Friedman, Billings, Ramsey & Co., Inc. is an advisor and arranger for the
acquisition loan and is also DevX's financial advisor for the Offer and
the Merger. Friedman, Billings, Ramsey & Co., Inc. is also providing
services to Comstock Resources, Inc. in connection with a potential
acquisition from third parties of oil and gas properties in which DevX
also owns an interest. The fees payable by Comstock and DevX to Friedman,
Billings, Ramsey & Co., Inc. and its affiliate in connection with these
matters are described below in "Section 9. Financing of the Offer and the
Merger."
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
- We do not think that our financial condition is relevant to your decision
to tender in the Offer because the form of payment consists solely of
cash and the Offer is not subject to a financing condition. In addition,
no relevant historical information concerning Comstock Acquisition Inc.
is available because we have not carried on any activities other than in
connection with the Offer.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
- You will have at least until 12:00 midnight, New York City time, on
Thursday, December 13, 2001, to decide whether to tender your DevX shares
in the Offer. If you cannot deliver everything that is required in order
to make a valid tender by that time, you may be able to use a guaranteed
delivery procedure, which is described in "Section 3. Procedures for
Accepting the Offer and Tendering Shares."
CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
- We may, without the consent of DevX, but subject to the terms of the
Merger Agreement and applicable law, extend the period of time during
which the Offer remains open. We have agreed in the Agreement and Plan of
Merger that we may extend the Offer until not later than January 11, 2002
if less than 50% of the number of then outstanding DevX shares (including
all DevX shares issuable upon the exercise of options or warrants
outstanding on December 12, 2001) plus one DevX share have been validly
tendered and not withdrawn prior to December 13, 2001. See "Section 1.
Terms of Offer; Expiration Date."
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
- If we decide to extend the Offer, we will inform American Stock Transfer
& Trust Company, the Depositary, of that fact, and will issue a press
release giving the new expiration date no later than 9:00 a.m., New York
City time, on the day after the day on which the Offer was previously
scheduled to expire. See "Section 1. Terms of Offer; Expiration Date."
HOW DO I TENDER MY SHARES?
- To tender your DevX shares in the Offer, you must:
- complete and sign the accompanying Letter of Transmittal in accordance
with the instructions in the Letter of Transmittal and mail or deliver
it, together with your share certificate(s), and any other required
documents, to the Depositary;
- tender your shares pursuant to the procedure for book-entry transfer
described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares"; or
- request your broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for you. If your shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee, you must contact such broker, dealer, commercial bank, trust
company or other nominee if you desire to tender your shares.
- If your share certificates are not immediately available or if you cannot
deliver your share certificates and any other required documents to
American Stock Transfer & Trust Company prior to the
iii
expiration of the Offer, or you cannot complete the procedure for
delivery by book-entry transfer on a timely basis, you may still tender
your shares if you comply with the guaranteed delivery procedures
described in "Section 3. Procedures for Accepting the Offer and Tendering
Shares."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
- You may withdraw previously tendered shares any time prior to the
expiration of the Offer. See "Section 4. Withdrawal Rights."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
- To withdraw previously tendered shares, you must deliver a written or
facsimile notice of withdrawal with the required information to American
Stock Transfer & Trust Company while you still have the right to
withdraw. If you tendered shares by giving instructions to a broker or
bank, you must instruct the broker or bank to arrange for the withdrawal
of your shares. See "Section 4. Withdrawal Rights."
WHAT DOES THE BOARD OF DIRECTORS OF DEVX THINK OF THE OFFER?
- The Board of Directors of DevX has determined that the merger agreement
and the transactions contemplated thereby, including the Offer and the
merger, are fair to, and in the best interest of, the holders of common
stock of DevX, has approved, adopted and declared advisable the merger
agreement and the transactions contemplated thereby, including the Offer
and the merger, and has resolved to recommend that the holders of those
shares accept the Offer and tender their shares pursuant to the Offer.
See "Introduction."
WILL DEVX CONTINUE AS A PUBLIC COMPANY?
- If the merger occurs, DevX will no longer be publicly owned. Even if the
merger does not occur, if we purchase all of the tendered shares, there
may be so few remaining stockholders and publicly held shares that the
shares will no longer be eligible to be traded through the Nasdaq
National Market or other securities market, there may not be a public
trading market for the shares and DevX may cease making filings with the
Securities and Exchange Commission or otherwise cease being required to
comply with Securities and Exchange Commission rules relating to publicly
held companies. See "Section 13. Possible Effects of the Offer on the
Market for Shares, Nasdaq Listing, Margin Regulations and Exchange Act
Registration."
WILL THE OFFER BE FOLLOWED BY A MERGER IF ALL THE SHARES ARE NOT TENDERED?
- If Comstock Acquisition Inc. accepts for payment and pays for at least
50% of the number of then outstanding DevX shares (including all DevX
shares issuable upon the exercise of options or warrants outstanding on
December 12, 2001) plus one DevX share, Comstock Acquisition Inc. will
merge into DevX. If the merger occurs, DevX will become an indirect
wholly owned subsidiary of Comstock Resources, Inc., and each issued and
outstanding DevX share (other than any shares held in the treasury of
DevX, owned by DevX, us or Comstock Resources, Inc., or owned by
stockholders seeking appraisal for their shares) will be canceled and
converted automatically into the right to receive $7.32 per share, in
cash (or any greater amount per share paid pursuant to the Offer),
without interest. See "Introduction" and "Section 10. Background of the
Offer; the Merger Agreement and Related Agreements."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
- If you decide not to tender your shares in the Offer and the merger
occurs, you will receive the same amount of cash per share as if you
would have tendered your shares in the Offer, unless you have exercised
your appraisal rights under Delaware law. See "Section 11. Purpose of the
Offer; Plans for DevX After the Offer and the Merger; Effect on Senior
Notes."
iv
- If you decide not to tender your shares in the Offer and the merger does
not occur, and we purchase all the tendered shares, there may be so few
remaining stockholders and publicly held shares that the shares will no
longer be eligible to be traded through the Nasdaq National Market or
other securities market, there may not be a public trading market for the
shares and DevX may cease making filings with the Securities and Exchange
Commission or otherwise cease being required to comply with Securities
and Exchange Commission rules relating to publicly held companies. See
"Section 13. Possible Effects of the Offer on the Market for Shares,
Nasdaq Listing, Margin Regulations and Exchange Act Registration."
- Following the Offer, it is possible that the shares might no longer
constitute "margin securities" for purposes of the margin regulations of
the Federal Reserve Board, in which event the shares could no longer be
used as collateral for loans made by brokers. See "Section 13. Possible
Effects of the Offer on the Market of Shares, Nasdaq Listing, Margin
Regulations and Exchange Act Registration."
WHAT IS A RECENT MARKET VALUE OF MY SHARES?
- On October 19, 2001, the last full trading day before we announced the
signing of the letter of intent relating to the Offer, the closing price
per DevX share reported on the Nasdaq National Market was $5.20 per
share. On November 12, 2001, the last full trading day before we
announced the Offer, the closing price per DevX share reported on the
Nasdaq National Market was $6.60 per share. See "Section 7. Certain
Information Concerning DevX."
WITH WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE OFFER?
- You can call Innisfree M&A Incorporated, the Information Agent, at (888)
750-5834. See the back cover of this Offer to Purchase.
v
To the Holders of Common Stock of DevX Energy, Inc.:
INTRODUCTION
Comstock Acquisition Inc., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Comstock Holdings, Inc., a Delaware corporation
("Holdings"), which, in turn, is a wholly owned subsidiary of Comstock
Resources, Inc., a Nevada corporation ("Comstock"), hereby offers to purchase
all the issued and outstanding shares of common stock, par value $0.234 per
share ("Shares"), of DevX Energy, Inc., a Delaware corporation ("DevX"), for
$7.32 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer (as defined below), the "Per Share Amount"), net to the seller in
cash, without interest, upon the terms and subject to the conditions described
in this Offer to Purchase and in the related Letter of Transmittal (which,
together with this Offer to Purchase and any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). See "Section 8. Certain
Information Concerning Comstock, Holdings and Purchaser" for additional
information concerning Comstock, Holdings and Purchaser.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. However, any tendering stockholder or other
payee who fails to complete and sign the Substitute Form W-9 that is included in
the Letter of Transmittal may be subject to a required backup U.S. federal
income tax withholding of 30.5% (or, if the Expiration Date (as defined below)
occurs after December 31, 2001, 30%) of the gross proceeds payable to such
stockholder or other payee pursuant to the Offer. See "Section 5. Certain
Federal Income Tax Consequences." Purchaser, Holdings or Comstock will pay all
charges and expenses of American Stock Transfer & Trust Company (the
"Depositary") and Innisfree M&A Incorporated (the "Information Agent") incurred
in connection with the Offer. See "Section 16. Fees and Expenses."
The Board of Directors of DevX (the "Board") has determined that the Merger
Agreement (as defined below) and the transactions contemplated thereby,
including the Offer and the Merger (as defined below), are fair to, and in the
best interest of, the holders of Shares, has approved, adopted and declared
advisable the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and has resolved to recommend that the
holders of Shares accept the Offer and tender their Shares pursuant to the
Offer. Patrick J. Keeley abstained from voting with respect to these matters.
Friedman, Billings, Ramsey & Co., Inc. ("FBR") has delivered to the Board
its written opinion dated November 7, 2001 to the effect that, as of the date of
the opinion, based upon and subject to various considerations and assumptions
described in such opinion, the terms of the Offer and Merger are fair to the
stockholders of DevX from a financial point of view. A copy of the written
opinion of FBR is contained in DevX's Solicitation/ Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), which has been filed with the Securities
and Exchange Commission (the "Commission") in connection with the Offer and
which is being mailed to DevX's stockholders with this Offer to Purchase. DevX's
stockholders are urged to read such opinion carefully in its entirety for a
description of the assumptions made, matters considered and limitations of the
review undertaken by FBR. FBR is also providing services to Comstock in
connection with the financing of a portion of the consideration for the Offer
and the Merger and a potential acquisition from third parties of oil and gas
properties in which DevX also owns an interest. The fees payable by Comstock and
DevX to FBR and its affiliates in connection with these matters are described
below in "Section 9. Financing of the Offer and the Merger."
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer at least
50% of the number of then outstanding Shares (including all Shares issuable upon
the exercise of Outstanding Options or Outstanding Warrants (as each such term
is defined below), each as of the business day preceding the Initial Expiration
Date (as defined below)), plus one Share (the "Minimum Condition"). The Offer is
also subject to certain other conditions contained in this Offer to Purchase.
See "Section 1. Terms of the Offer; Expiration Date" and "Section 14. Certain
Conditions of the Offer," which set forth in full the conditions to the Offer.
1
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of November 12, 2001 (the "Merger Agreement") among Comstock, Holdings,
Purchaser and DevX. The Merger Agreement provides, among other things, that as
promptly as practicable after the purchase of Shares pursuant to the Offer and
the satisfaction or, if permissible, waiver, of the other conditions described
in the Merger Agreement, and in accordance with the relevant provisions of the
General Corporation Law of the State of Delaware ("Delaware Law"), Purchaser
will be merged into DevX (the "Merger"). As a result of the Merger, DevX, which
will continue as the surviving corporation (the "Surviving Corporation"), will
become a wholly owned subsidiary of Holdings. At the effective time of the
Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time (other than Shares held in the treasury of DevX,
owned by Purchaser, Holdings, Comstock or DevX or owned by stockholders who have
demanded and perfected appraisal rights under Delaware Law) will be canceled and
converted automatically into the right to receive the Per Share Amount in cash,
without interest (the "Merger Consideration"). Stockholders who demand and fully
perfect appraisal rights under Delaware Law will be entitled to receive, in
connection with the Merger, cash for the fair value of their Shares as
determined pursuant to the procedures prescribed by Delaware Law. See "Section
11. Purpose of the Offer; Plans for DevX After the Offer and the Merger; Effect
on Senior Notes." The Merger Agreement is more fully described in "Section 10.
Background of the Offer; the Merger Agreement and Related Agreements." Certain
federal income tax consequences of the sale of Shares pursuant to the Offer and
the Merger are described in "Section 5. Certain Federal Income Tax
Consequences."
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of 50% of the outstanding Shares plus one Share (including Shares purchased
pursuant to the Offer), Purchaser will be entitled to designate up to such
number of directors, rounded up to the next whole number, on the Board as will
give Purchaser representation on the Board equal to the product of the total
number of directors on the Board (giving effect to the directors elected
pursuant to the provision described in this paragraph) multiplied by the
percentage that the aggregate number of Shares then beneficially owned by
Purchaser or any affiliate of Purchaser following such purchase bears to the
total number of Shares then outstanding. In the Merger Agreement, DevX has
agreed, at such time, to promptly take all actions necessary to cause
Purchaser's designees to be elected as directors of DevX, including increasing
the size of the Board or securing the resignations of incumbent directors, or
both.
The obligation of each party to effect the Merger is subject to the
satisfaction or waiver of certain conditions, including the consummation of the
Offer, and, if necessary, the approval and adoption of the Merger Agreement and
the Merger by the requisite vote of the stockholders of DevX. For a more
detailed description of the conditions to the Merger, see "Section 10.
Background of the Offer; the Merger Agreement and Related Agreements." Under
Delaware Law, the affirmative vote of the holders of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and the
Merger. Consequently, if Purchaser acquires (pursuant to the Offer or otherwise)
at least a majority of the outstanding Shares, then Purchaser will have
sufficient voting power to approve and adopt the Merger Agreement and the Merger
without the vote of any other stockholder. See "Section 10. Background of the
Offer; the Merger Agreement and Related Agreements" and "Section 11. Purpose of
the Offer; Plans for DevX After the Offer and the Merger; Effect on Senior
Notes."
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, Purchaser will be able
to approve and adopt the Merger Agreement and the Merger without a vote of the
stockholders of DevX. In such event, Comstock, Holdings, Purchaser and DevX have
agreed to take, at the request of Purchaser, all necessary and appropriate
action to cause the Merger to become effective in accordance with Delaware Law
as promptly as reasonably practicable after such acquisition, without a meeting
of the stockholders of DevX. If, however, Purchaser does not acquire at least
90% of the then outstanding Shares pursuant to the Offer or otherwise and a vote
of the stockholders of DevX is required under Delaware Law, a significantly
longer period of time will be required to effect the Merger. See "Section 11.
Purpose of the Offer; Plans for DevX After the Offer and the Merger; Effect on
Senior Notes."
DevX has advised Purchaser that, as of November 12, 2001, 12,649,522 Shares
were issued and outstanding, 522,500 Shares were reserved for issuance pursuant
to outstanding stock options or stock
2
incentive rights, 265,000 Shares were reserved for issuance pursuant to
outstanding warrants, 100,000 Shares were held in the treasury of DevX and no
Shares were held by any subsidiary of DevX. Assuming that 12,649,522 Shares are
outstanding on the scheduled Expiration Date and there are no Outstanding
Options or Outstanding Warrants on such date, Purchaser could cause the Merger
to become effective in accordance with Delaware Law, pursuant to a vote but
without a meeting of DevX's stockholders, if Purchaser owns 6,324,762 Shares on
such date.
The Offer is not being made for (nor will tenders be accepted of) any of
the holders of the DevX 12 1/2% senior notes due 2008 (the "Senior Notes"). See
"Section 11. Purpose of the Offer; Plans for DevX After the Offer and the
Merger; Effect on Senior Notes."
Subject to the terms and conditions of the Indenture dated as of July 1,
1998, as amended (the "Indenture"), among DevX (formerly known as Queen Sand
Resources, Inc.), DevX's subsidiaries and Harris Trust and Savings Bank, as
Trustee, upon the consummation of the Offer, the holders of the Senior Notes
will have the right to require DevX to repurchase all or any portion of their
Senior Notes at a purchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase. See "Section 11.
Purpose of the Offer; Plans for DevX After the Offer and the Merger; Effect on
Senior Notes."
Purchaser may offer a subsequent offering period in connection with the
Offer. If Purchaser elects to provide a subsequent offering period, it will make
a public announcement thereof on the next business day after the previously
scheduled Expiration Date.
No appraisal rights are available in connection with the Offer. However,
stockholders of DevX may have appraisal rights in connection with the Merger
regardless of whether the Merger is consummated with or without a vote of DevX's
stockholders. See "Section 11. Purpose of the Offer; Plans for DevX After the
Offer and the Merger; Effect on Senior Notes."
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered (and not withdrawn in accordance with the procedures described in
"Section 4. Withdrawal Rights") on or prior to the Expiration Date. "Expiration
Date" means 12:00 midnight, New York City time, on Thursday, December 13, 2001,
unless and until Purchaser (subject to the terms and conditions of the Merger
Agreement) will have extended the period during which the Offer is open, in
which case Expiration Date will mean the latest time and date at which the
Offer, as may be extended by Purchaser, will expire.
The Offer is subject to the conditions described under "Section 14. Certain
Conditions of the Offer," including the satisfaction of the Minimum Condition.
Subject to the applicable rules and regulations of the Commission and subject to
the terms and conditions of the Merger Agreement, Purchaser expressly reserves
the right to waive any such condition, in whole or in part, in its sole
discretion. Subject to the applicable rules and regulations of the Commission
and subject to the terms and conditions of the Merger Agreement, Purchaser also
expressly reserves the right to increase the Per Share Amount and to make any
other changes in the terms and conditions of the Offer. Purchaser may not,
however, without the prior consent of DevX, decrease the Per Share Amount,
change the form of consideration payable, reduce the number of Shares to be
purchased in the Offer or impose or modify (other than to waive) conditions to
the Offer in addition to those set forth in "Section 14. Certain Conditions of
the Offer." Subject to the terms of the Offer and the Merger Agreement and the
satisfaction or waiver of the Minimum Condition as of the scheduled Expiration
Date, which will initially be 20 business days following the commencement of the
Offer (the "Initial Expiration Date"), and the other conditions set forth in
"Section 14. Certain Conditions of the Offer," Purchaser will
3
accept for payment and pay for all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the Expiration Date.
The Merger Agreement provides that Purchaser is entitled to extend the
Offer from time to time without the consent of DevX until no later than January
11, 2002 if, at the Initial Expiration Date, the Minimum Condition is not
satisfied or until no later than December 31, 2001 if, at the Initial Expiration
Date, the Minimum Condition is satisfied but any other condition to the Offer is
not satisfied or waived. Purchaser agreed in the Merger Agreement to extend the
Offer from time to time until not later than December 31, 2001 if, at the then
scheduled Expiration Date, the Minimum Condition has not been satisfied or
waived as permitted by the Merger Agreement. The Merger Agreement also provides
that any extension of the Offer pursuant to the Merger Agreement will not,
without the written consent of DevX, exceed the number of days that Purchaser
reasonably believes will be necessary so that the Minimum Condition will be
satisfied. Purchaser may also, without the consent of DevX, extend any then
scheduled Expiration Date for any period required by applicable rules,
regulations, interpretations or positions of the Commission or the staff thereof
applicable to the Offer or required by applicable law. The Merger Agreement
further provides that, if the Initial Expiration Date occurred, but fewer than
90% of the Shares have been validly tendered and not withdrawn as of the Initial
Expiration Date, Purchaser may provide for a subsequent offering period (as
contemplated by Rule 14d-11 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as long as providing for the subsequent offering
period does not require the extension of the initial offer period under
applicable rules and regulation of the Commission, which subsequent offering
period will not exceed 20 business days. In addition, the Per Share Amount may
be increased and the Offer may be extended to the extent required by law in
connection with such increase, in each case without the consent of DevX. Upon
any extension of the Offer, all Shares previously tendered and not withdrawn
will remain subject to the Offer and subject to the right of a tendering
stockholder to withdraw such stockholder's Shares. See "Section 4. Withdrawal
Rights." Under no circumstances will interest be paid on the purchase price for
tendered Shares, whether or not the Offer is extended.
On or prior to the dates that Purchaser becomes obligated to accept for
payment and pay for Shares pursuant to the Offer, Comstock will provide or cause
to be provided to Purchaser the funds necessary to pay for all Shares that
Purchaser becomes so obligated to accept for payment and pay for pursuant to the
Offer. Notwithstanding the foregoing and subject to the applicable rules of the
Commission and the terms and conditions of the Offer, Purchaser also expressly
reserves the right (i) to delay payment for Shares in order to comply in whole
or in part with applicable laws (any such delay will be effected in compliance
with Rule 14e-1(c) under the Exchange Act, which requires Purchaser to pay the
consideration offered or to return Shares deposited by or on behalf of
stockholders promptly after the termination or withdrawal of the Offer), (ii) to
extend or terminate the Offer and not to accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the occurrence of
any of the conditions to the Offer specified in "Section 14. Certain Conditions
of the Offer," and (iii) to amend the Offer or to waive any conditions to the
Offer in any respect consistent with the provisions of the Merger Agreement
described above, in each case by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making public
announcement thereof.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof. In the case
of an extension, the announcement will be made no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Subject to applicable law (including Rules 14d-4(d)(i), 14d-6(c) and 14e-1
under the Exchange Act, which require that material changes be promptly
disseminated to stockholders in a manner reasonably designed to inform them of
such changes) and without limiting the manner in which Purchaser may choose to
make any public announcement, Purchaser will have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service or the Public Relations
Newswire.
If Purchaser makes a material change to the terms of the Offer or the
information concerning the Offer, or if Purchaser waives a material condition of
the Offer, Purchaser will extend the Offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act.
Subject to the
4
terms of the Merger Agreement, if, prior to the Expiration Date, Purchaser
should decide to increase the consideration being offered in the Offer, such
increase in the consideration being offered will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer and, if
at the time notice of any such increase in the consideration being offered is
first published, sent or given to holders of such Shares, the Offer is scheduled
to expire at any time earlier than the period ending on the tenth business day
from and including the date that such notice is first so published, sent or
given, the Offer will be extended at least until the expiration of such
10-business day period. For purposes of the Offer, a "business day" means any
day on which the principal offices of the Commission in Washington, D.C. are
open to accept filings, or, in the case of determining a date when any payment
is due, any day on which banks are not required or authorized to close in The
City of New York, and consists of the period from 12:01 a.m. through 12:00
midnight, New York City time.
Purchaser may offer a subsequent offering period in connection with the
Offer. If Purchaser does provide for such subsequent offering period, subject to
the applicable rules and regulations of the Commission, Purchaser may elect to
extend its offer to purchase Shares beyond the Expiration Date for a subsequent
offering period of three business days to 20 business days (the "Subsequent
Offering Period"), if, among other things, upon the Expiration Date (i) all of
the conditions to Purchaser's obligations to accept for payment, and to pay for,
the Shares are satisfied or waived and (ii) Purchaser immediately accepts for
payment, and promptly pays for, all Shares validly tendered (and not withdrawn
in accordance with the procedures set forth in "Section 4. Withdrawal Rights")
prior to the Expiration Date. Shares tendered during the Subsequent Offering
Period may not be withdrawn. See "Section 4. Withdrawal Rights." Purchaser will
immediately accept for payment, and promptly pay for, all validly tendered
Shares as they are received during the Subsequent Offering Period. Any election
by the Purchaser to include a Subsequent Offering Period may be effected by
Purchaser giving oral or written notice of the Subsequent Offering Period to the
Depositary. If Purchaser decides to include a Subsequent Offering Period, it
will make an announcement to that effect by issuing a press release to the Dow
Jones New Services or the Public Relations Newswire on the next business day
after the previously scheduled Expiration Date.
DevX has provided Purchaser with DevX's stockholder list and security
position listings for the purpose of disseminating the Offer to the holders of
Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed by Purchaser to record holders of Shares whose names appear on DevX's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listings.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), Purchaser will accept for payment promptly after the
Expiration Date all Shares validly tendered (and not properly withdrawn in
accordance with "Section 4. Withdrawal Rights") prior to the Expiration Date.
Purchaser will pay for all Shares validly tendered and not withdrawn promptly
following the acceptance of Shares for payment pursuant to the Offer. Subject to
applicable rules and regulations of the Commission and the terms of the Merger
Agreement, Purchaser reserves the right to delay acceptance of or payment for
Shares in order to comply in whole or in part with applicable laws. See "Section
1. Terms of the Offer; Expiration Date" and "Section 15. Certain Legal Matters
and Regulatory Approvals."
In all cases (including during any Subsequent Offering Period), Purchaser
will pay for Shares tendered and accepted for payment pursuant to the Offer only
after timely receipt by the Depositary of (i) the certificates evidencing such
Shares (the "Share Certificates") or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures described in "Section 3. Procedures for Accepting the
Offer and Tendering Shares," (ii) the Letter of Transmittal, properly completed
and duly executed, with any required signature guarantees, in the case of a
book-entry transfer, or an Agent's
5
Message (as defined below), and (iii) any other documents required under the
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by the Book-Entry Transfer Facility to, and received by, the Depositary and
forming a part of the Book-Entry Confirmation that states that the Book-Entry
Transfer Facility has received an express acknowledgment from the participant in
the Book-Entry Transfer Facility tendering the Shares that are the subject of
such Book-Entry Confirmation, that the participant has received and agrees to be
bound by the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
For purposes of the Offer (including during any Subsequent Offering
Period), Purchaser will be deemed to have accepted for payment (and thereby
purchased) Shares validly tendered and not properly withdrawn as, if and when
Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares purchased pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders whose Shares have
been accepted for payment for the purpose of receiving payments from Purchaser
and transmitting such payments to validly tendering stockholders. Under no
circumstances will Purchaser pay interest on the purchase price for Shares,
regardless of any delay in making such payment.
If Purchaser does not purchase any Shares pursuant to the Offer, or if
Share Certificates are submitted evidencing more Shares than are tendered, Share
Certificates evidencing unpurchased Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedure described in "Section 3. Procedures for Accepting the
Offer and Tendering Shares," such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered in the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender of Securities. In order for a holder of Shares to validly
tender Shares pursuant to the Offer, the Depositary must receive the Letter of
Transmittal, properly completed and duly executed, together with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of Transmittal, at its
address set forth on the back cover of this Offer to Purchase. In addition,
either (i) the Share Certificates evidencing tendered Shares must be received by
the Depositary at such address or such Shares must be tendered pursuant to the
procedure for book-entry transfer described below and the Depositary must
receive a Book-Entry Confirmation (including an Agent's Message), in each case
prior to the Expiration Date or the expiration of the Subsequent Offering
Period, if any, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
The method of delivery of Share Certificates and all other required
documents, including delivery through the Book-Entry Transfer Facility, is at
the option and risk of the tendering stockholder, and the delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Book-Entry Transfer. The Depositary will establish accounts with respect
to Shares at the Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-
6
entry transfer at the Book-Entry Transfer Facility, an Agent's Message, and any
other required documents, must, in any case, be received by the Depositary at
its address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date or the expiration of the Subsequent Offering Period, if any, or
the tendering stockholder must comply with the guaranteed delivery procedure
described below. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Depositary.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Security Transfer Agent Medallion
Signature Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing
being referred to as an "Eligible Institution"), except in cases where Shares
are tendered (i) by a registered holder of Shares who has not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile), properly completed and
duly executed, with any required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market ("Nasdaq") trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or by
facsimile transmission to the Depositary and must include a guarantee by an
Eligible Institution in the form set forth in the form of Notice of Guaranteed
Delivery made available by Purchaser.
In all cases (including any Subsequent Offering Period), payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of the Share Certificates evidencing such
Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message, and any other documents required by the Letter of
Transmittal.
Determination of Validity. All questions as to the form of documents and
the validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Shares will be determined by Purchaser, in its sole
discretion, which determination will be final and binding on all parties.
Purchaser reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance for payment of which may, in
the opinion of its counsel, be unlawful. Purchaser also reserves the absolute
right to waive any condition of the Offer to the extent permitted by applicable
law and the Merger Agreement or any defect or irregularity in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be
7
deemed to have been validly made until all defects and irregularities have been
cured or waived. None of Purchaser, Holdings, Comstock or any of their
respective affiliates or assigns, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering stockholder's acceptance of the terms and conditions of
the Offer, as well as the tendering stockholder's representation and warranty to
Purchaser that (i) such stockholder has the full power and authority to tender,
sell, assign and transfer the tendered Shares (and any and all other Shares or
other securities issued or issuable in respect of such Shares), and (ii) when
the same are accepted for payment by Purchaser, Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
Appointment as Proxy. By executing the Letter of Transmittal, or through
delivery of an Agent's Message, as described above, a tendering stockholder
irrevocably appoints designees of Purchaser as such stockholder's agents,
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by Purchaser (and with respect to any and all other Shares
or other securities issued or issuable in respect of such Shares on or after
November 12, 2001). All such powers of attorney and proxies will be considered
irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, Purchaser
accepts such Shares for payment. Upon such acceptance for payment, all prior
powers of attorney and proxies given by such stockholder with respect to such
Shares (and such other Shares and securities) will be revoked, without further
action, and no subsequent powers of attorney or proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. Purchaser
designees will, with respect to the Shares for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the holders of Shares or any adjournment or postponement, by
written consent in lieu of any such meeting or otherwise. Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon Purchaser's payment for such Shares, Purchaser must be able to
exercise full voting rights with respect to such Shares (and such other Shares
and securities).
Under the "backup withholding" provisions of U.S. federal income tax law,
the Depositary may be required to withhold 30.5% (or, if the Expiration Date
occurs after December 31, 2001, 30%) of any payments of cash pursuant to the
Offer. To prevent backup federal income tax withholding with respect to payment
to certain stockholders of the purchase price of Shares purchased pursuant to
the Offer, each such stockholder must provide the Depositary with such
stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to backup federal income tax withholding by
completing the Substitute Form W-9 in the Letter of Transmittal. See Instruction
9 of the Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
such Shares may be withdrawn at any time prior to the Expiration Date. If
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to accept Shares for payment pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may, nevertheless, on Purchaser's behalf, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this "Section 4. Withdrawal
Rights," subject to Rule 14e-1(c) under the Exchange Act. Any such delay will be
by an extension of the Offer to the extent
8
required by law. If Purchaser decides to include a Subsequent Offering Period,
Shares tendered during the Subsequent Offering Period may not be withdrawn. See
"Section 1. Terms of the Offer; Expiration Date."
For a withdrawal of Shares to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover page of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as described in "Section 3. Procedures for Accepting the
Offer and Tendering Shares," any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, which determination will be final and binding. None of Purchaser,
Holdings, Comstock or any of their respective affiliates or assigns, the
Depositary, the Information Agent or any other person will be under any duty to
give any notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date (or during the Subsequent Offering Period, if any) by following
one of the procedures described in "Section 3. Procedures for Accepting the
Offer and Tendering Shares."
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive cash in the
Merger (whether upon receipt of the Merger Consideration or pursuant to the
proper exercise of dissenter's rights). The discussion applies only to holders
of Shares in whose hands Shares are capital assets, and may not apply to Shares
received pursuant to the exercise of employee stock options or otherwise as
compensation, or to holders of Shares who are not citizens or residents of the
United States of America.
The tax discussion set forth below is included for general information
purposes only and is based upon present law (which may be subject to change,
possibly on a retroactive basis). Because individual circumstances may differ,
each holder of Shares should consult such holder's own tax advisor to determine
the applicability of the rules discussed to such holder and the particular tax
effects of the Offer and the Merger, including the application and effect of
state, local and other tax laws.
The receipt of cash pursuant to the Offer and the receipt of cash pursuant
to the Merger (whether as Merger Consideration or pursuant to the proper
exercise of dissenter's rights) will be a taxable transaction for federal income
tax purposes (and also may be a taxable transaction under applicable state,
local and other income tax laws). In general, for federal income tax purposes, a
holder of Shares will recognize gain or loss equal to the difference between
such holder's adjusted tax basis in the Shares sold pursuant to the Offer or
converted to cash in the Merger and the amount of cash received. Gain or loss
must be determined separately for each block of Shares (i.e., Shares acquired at
the same cost in a single transaction) sold pursuant to the Offer or converted
to cash in the Merger. Such gain or loss will be capital gain or loss.
Individual holders will be subject to tax on the net amount of such gain at a
maximum rate of 20% if the Shares were held for more than 12 months. Special
rules (and generally lower maximum rates) apply to individuals in lower tax
brackets. The deduction of capital losses is subject to certain limitations.
Stockholders should consult their own tax advisors in this regard.
9
Payments in connection with the Offer or the Merger may be subject to
backup withholding at a 30.5% (or, if the Expiration Date occurs after December
31, 2001, 30%) rate. Backup withholding generally applies if a stockholder (i)
fails to furnish such stockholder's social security number or taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails
properly to report interest or dividends or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is such stockholder's correct number and that such stockholder
is not subject to backup withholding. Backup withholding is not an additional
tax but merely an advance payment, which may be refunded to the extent it
results in an overpayment of tax. Certain persons, including corporations and
financial institutions generally, are exempt from backup withholding. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
such stockholder's own tax advisor as to such stockholder's qualifications for
exemption from withholding and the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares have been listed and principally traded on Nasdaq under the
symbol "DVXE" since October 26, 2000. From November 11, 1999 to October 25,
2000, the Shares were quoted on the Nasdaq OTC Bulletin Board under the symbol
"QSRI." From May 1997 to November 10, 1999, the Shares were quoted on the Nasdaq
Small Cap Market under the symbol "QSRI." The following table sets forth, for
the quarters indicated, the high and low sales prices per Share as listed on
Nasdaq, as quoted on the Nasdaq OTC Bulletin Board or as reported on Nasdaq
Small Cap Market. The prices for periods prior to October 26, 2000 have been
adjusted to give effect to the 156-to-1 reverse stock split of the Shares. No
dividends have been declared or paid on the Shares during the quarters
indicated.
<Table>
<Caption>
HIGH LOW
------- -------
Fiscal 1999
First Quarter............................................. $643.50 $175.50
Second Quarter............................................ $229.16 $146.17
Third Quarter............................................. $146.33 $ 43.84
Fourth Quarter............................................ $ 92.66 $ 43.84
Fiscal 2000
First Quarter............................................. $ 82.68 $ 43.84
Second Quarter............................................ $ 63.38 $ 14.63
Third Quarter............................................. $ 46.32 $ 7.32
Fourth Quarter............................................ $ 8.38 $ 7.32
Fiscal 2001
First Quarter............................................. $ 8.64 $ 7.00
Second Quarter............................................ $ 9.02 $ 6.55
Third Quarter............................................. $ 7.05 $ 4.50
Fourth Quarter (through November 14, 2001)................ $ 7.27 4.91
</Table>
On October 19, 2001, the last full trading day prior to the announcement of
signing of the letter of intent relating to the Offer, the closing price per
Share as reported on Nasdaq was $5.20. On November 12, 2001, the last full
trading day prior to the announcement of the execution of the Merger Agreement
and of Purchaser's intention to commence the Offer, the closing price per Share
as reported on Nasdaq was $6.60. On November 14, 2001, the last full trading day
prior to the commencement of the Offer, the closing price per Share as reported
on Nasdaq was $7.24. As of November 12, 2001, the approximate number of holders
of record of Shares was 932.
Stockholders are urged to obtain a current market quotation for the Shares.
10
7. CERTAIN INFORMATION CONCERNING DEVX.
Except as otherwise described in this Offer to Purchase, all of the
information concerning DevX contained in this Offer to Purchase, including
financial information, has been furnished by DevX or has been taken from or
based upon publicly available information. None of Comstock, Holdings or
Purchaser assumes any responsibility for the accuracy or completeness of this
information or for any failure by DevX to disclose events that may have occurred
or may affect the significance or accuracy of any such information but that are
unknown to Comstock, Holdings or Purchaser.
General. DevX is a Delaware corporation with its principal executive
offices located at 13760 Noel Road, Suite 1030, Dallas, Texas 75240-7336. DevX's
telephone number is (972) 233-9906.
DevX is an independent energy company engaged in the exploration,
exploitation, development and acquisition of oil and natural gas properties in
conventional producing areas of North America.
Available Information. DevX is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning DevX's directors and officers,
their remuneration, stock options granted to them, the principal holders of
DevX's securities and any material interest of such persons in transactions with
DevX is required to be disclosed in proxy statements distributed to DevX's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection at the
Commission's public reference rooms in Chicago, Illinois and New York, New York.
Please call the SEC at 1-800-SEC-0330 for further information concerning the
public reference rooms. Copies of such materials may also be obtained by mail,
upon payment of the Commission's customary fees, by writing to its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a World Wide Website on the Internet at
http://www.sec.gov that contains reports and other information regarding issuers
that file electronically with the Commission.
8. CERTAIN INFORMATION CONCERNING COMSTOCK, HOLDINGS AND PURCHASER.
General. Each of Holdings and Purchaser is a newly formed Delaware
corporation organized for the purpose of effecting the Offer and the Merger and
neither has carried on any activities other than in connection with the Offer
and the Merger. The principal offices of Holdings and Purchaser are located at
5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034 and their telephone
number is (972) 668-8800. Purchaser is a wholly owned subsidiary of Holdings and
Holdings is a wholly owned subsidiary of Comstock.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that either Holdings or Purchaser
will have any significant assets or liabilities or engage in activities other
than those incident to its formation and capitalization and the transactions
contemplated by the Offer and the Merger. Because each of Holdings and Purchaser
is newly formed and has minimal assets and capitalization, no meaningful
financial information regarding Holdings or Purchaser is available.
Comstock is a Nevada corporation, with its principal offices located at
5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034. Comstock's
telephone number is (972) 668-8800. Comstock's principal business is the
acquisition, development, production and exploration of oil and natural gas
properties. The common stock of Comstock is listed for trading on The New York
Stock Exchange under the symbol "CRK."
The name, citizenship, business address, business telephone number,
principal occupation or employment, and five-year employment history for each of
the directors and executive officers of Comstock, Holdings and Purchaser and
certain other information are described in Schedule I hereto. Except as
described in this Offer to Purchase and in Schedule I hereto, none of Comstock,
Holdings, Purchaser or, to their knowledge, any of the persons listed on
Schedule I hereto has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that
11
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Except as described in this Offer to Purchase, (i) none of Comstock,
Holdings or Purchaser, nor, to their knowledge, any of the persons listed in
Schedule I hereto or any associate or majority-owned subsidiary of Comstock,
Holdings or Purchaser or any of the persons so listed, beneficially owns or has
any right to acquire any Shares and (ii) none of Comstock, Holdings or
Purchaser, nor, to the their knowledge, any of the persons or entities referred
to above nor any director, executive officer or subsidiary of any of the
foregoing has effected any transaction in the Shares during the past 60 days.
Except as described in this Offer to Purchase, no material agreement,
arrangement, understanding or relationship exists or is proposed between
Comstock, Holdings, Purchaser, or, to their knowledge, any of the persons listed
in Schedule I hereto or any controlling persons or subsidiaries of Comstock,
Holdings or Purchaser and DevX or any of its executive officers, directors,
controlling persons or subsidiaries.
As of November 14, 2001, none of Comstock, Holdings or Purchaser, nor, to
their knowledge, any of the persons listed in Schedule I hereto owns any Shares.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of Comstock, Holdings or Purchaser, nor, to their
knowledge, any of the persons listed in Schedule I hereto, has any contract,
agreement, arrangement or understanding, whether or not legally enforceable,
with any other person with respect to any securities of DevX, including, but not
limited to, the transfer or voting of such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
guarantees of profits or loss or the giving or withholding of proxies, consents
or authorizations. Except as described in this Offer to Purchase, since November
15, 1999, none of Comstock, Holdings or Purchaser, nor, to their knowledge, any
of the persons listed on Schedule I hereto, has had any transaction with DevX or
any of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer. Except as described in this Offer to Purchase, since November 15, 1999,
there have been no negotiations, transactions or material contacts between any
of Comstock, Holdings or Purchaser or any of their respective subsidiaries or,
to their knowledge, any of the persons listed in Schedule I hereto, on the one
hand, and DevX or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer for or other acquisition of any class
of DevX's securities, an election of DevX's directors or a sale or other
transfer of a material amount of assets of DevX.
9. FINANCING OF THE OFFER AND THE MERGER.
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$94.0 million. Holdings will finance approximately $57.0 million of the Offer
and the Merger with borrowings under an acquisition loan (the "Acquisition
Loan") and Comstock will finance the remaining approximately $37.0 million of
the Offer and the Merger with an investment in Holdings with borrowings under a
new revolving bank credit facility (the "Comstock Credit Facility").
Alternatively, Comstock may finance the entire amount with borrowings under the
Comstock Credit Facility and not access the Acquisition Loan.
Comstock has entered into a commitment letter for the Comstock Credit
Facility. In addition, Comstock has entered into a commitment letter for a
credit facility (the "DevX Credit Facility") for the Surviving Corporation (as
defined below), to be effective upon completion of the Merger. Proceeds from the
DevX Credit Facility would be used to repay a portion of the Acquisition Loan.
The Comstock Credit Facility and the DevX Credit Facility are collectively
referred to as the "Credit Facilities." Copies of the commitment letters have
been filed as Exhibits to the Tender Offer Statement on Schedule TO (the
"Schedule TO") filed by Purchaser, Holdings and Comstock with the Commission in
connection with the Offer. The commitment letters may be examined and copies may
be obtained at the places set forth in "Section 7. Certain Information
Concerning DevX."
The Comstock Credit Facility will consist of a $350.0 million revolving
credit commitment and the DevX Credit Facility will consist of a $48.5 million
revolving credit commitment, each of which will provided by a
12
syndicate of banks for which TD Securities (USA), Inc. will serve as arranger
and Toronto Dominion (Texas), Inc. ("TDTX") will serve as administrative agent.
Indebtedness under the Comstock Credit Facility will be secured by
substantially all of Comstock's and certain of its subsidiaries' assets and
indebtedness under the DevX Credit Facility will be secured by substantially all
of the Surviving Corporation's assets. Each of the Credit Facilities will be
subject to borrowing base availability, which will be redetermined semiannually
based on the banks' estimates of the future net cash flows of the borrowers' oil
and gas properties. The borrowing base may be affected by the performance of the
respective borrower's properties and changes in oil and gas prices. The
determination of the borrowing base will be at the sole discretion of the
administrative agent and the bank group. The revolving credit line under the
Comstock Credit Facility will bear interest, based on the utilization of the
borrowing base, at the option of Comstock at either (i) LIBOR plus 1.0% to 2.0%
or (ii) the base rate plus 0% to 1.0%. The revolving credit line under the DevX
Credit Facility will bear interest, based on the utilization of the borrowing
base, at the option of the Surviving Corporation at either (i) LIBOR plus 2.0%
to 2.25% or (ii) the base rate plus 1.0% to 1.25%. Each Credit Facility will
mature on the third anniversary of the closing thereof or such earlier date as
the borrower may elect. Each Credit Facility will contain covenants that, among
other things, restrict the payment of cash dividends, limit the amount of
consolidated debt and limit the borrower's ability to make certain loans and
investments. Financial covenants will include the maintenance of a current
ratio, maintenance of tangible net worth and maintenance of an interest coverage
ratio.
Holdings has entered into a commitment letter for the Acquisition Loan, a
copy of which has been filed as an Exhibit to the Schedule TO. The commitment
letter may be examined and copies may be obtained at the places set forth in
"Section 11. Certain Information Concerning DevX."
The purpose of the Acquisition Loan is to provide a portion of the funds
for the acquisition of the Shares. Pursuant to the commitment letter, the
Acquisition Loan will consist of a $57.0 million credit commitment provided by a
syndicate of lenders for which FBR will serve as an advisor and arranger and
TDTX will serve as administrative agent. Indebtedness under the Acquisition Loan
will be secured by Purchaser's ownership of Shares and a pledge of 3,000,000
shares of unregistered common stock of Comstock. The Acquisition Loan will
consist of advances aggregating $57.0 million. The Acquisition Loan will bear
interest at a rate equal to the greater of (i) the rate publicly announced from
time to time by TDTX as its prime rate or (ii) the Federal Funds rate plus 0.50%
per annum, plus, in each case, (x) during days one through 14, 900 basis points,
(y) during days 15 through 30, 1,200 basis points, and (z) thereafter, 1,500
basis points. The Acquisition Loan will mature 90 days after closing and may be
prepaid at any time. Interest will be payable at maturity. The Acquisition Loan
will contain covenants that, among other things, restrict the payment of
dividends and distributions, limit the incurrence of debt and the issuance of
quasi-equity securities such as preferred stock, prohibit certain loans and
investments and restrict certain mergers or consolidations. Pursuant to the
commitment letter, financial covenants will include those usual and customary
for transaction of this nature.
FBR, an advisor and arranger for the Acquisition Loan, is also DevX's
financial advisor in connection with the Offer and the Merger. At the closing of
the Acquisition Loan, FBR will receive $125,000 as an arrangement fee.
In October 2001, Comstock engaged FBR to act as financial advisor to
Comstock in connection with a potential acquisition from third parties of oil
and gas properties in which DevX also owns an interest. In connection with such
engagement, Comstock has agreed to pay FBR a fee of $90,000. Comstock also
agreed to reimburse FBR for its out-of-pocket expenses incurred in connection
with performing its services, including the fees and disbursements of legal
counsel, and to indemnify FBR and related parties against certain liabilities,
including liabilities under federal securities laws, arising out of FBR's
engagement.
DevX retained FBR in August 1999 for an initial term of two years to act as
its financial advisor with respect to any purchase or sale of all or
substantially all of the assets of DevX or any similar stock purchase, merger,
acquisition, business combination, joint venture or other strategic transaction.
This term was subsequently extended to November 2002. The engagement letter
provides that FBR will assist DevX in identifying, evaluating and implementing
strategic alternatives including business combinations, capital raising and
self-tenders. Under the engagement, DevX has agreed to pay FBR (1) a transaction
fee of up to 2% of the
13
first $30 million of total consideration involved in the transaction, 1.5% of
amounts exceeding $30 million up to and including $50 million of total
consideration and 1% of amounts exceeding $50 million of total consideration
plus (2) FBR's out-of-pocket expenses incurred in connection with performing its
services, including the fees and disbursements of legal counsel and its
petroleum engineering consultants. Upon consummation of the Merger, the
transaction fee will be approximately $1,900,000. DevX also has agreed to
indemnify FBR and related parties against certain liabilities, including
liabilities under the federal securities laws, arising out of their engagement.
On November 10, 2000, Patrick J. Keeley, who serves as of FBR's managing
directors, became one of DevX's directors.
Pursuant to the engagement letter with DevX, FBR has provided financial
advisory and investment banking services to DevX since August 1999 and has
received customary compensation for the rendering of such services. During the
year ended December 31, 2000, FBR assisted DevX to implement a recapitalization,
which was completed on October 31, 2001. In addition, FBR acted as the lead
underwriter for the offering of 11,500,000 Shares, which was closed in October
and November 2000. Simultaneously with the underwriting, FBR assisted DevX to
execute a tender to repurchase $75.0 million of original principal amount of
DevX's senior notes. During the year 2000, DevX paid FBR fees totaling
approximately $5.7 million plus expenses.
10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT AND RELATED AGREEMENTS.
BACKGROUND OF THE OFFER
In January 2001, Patrick J. Keeley, one of DevX's directors and an officer
of FBR, contacted M. Jay Allison, Chairman and Chief Executive Officer of
Comstock, on behalf of DevX to determine whether Comstock might be interested in
pursuing merger discussions. On January 12, 2001, Mr. Keeley and Rehan Rashid of
FBR, Joseph T. Williams, Chairman of DevX, Mr. Allison, Roland O. Burns, the
Chief Financial Officer and a director of Comstock, and Michael W. Taylor, the
Vice President of Corporate Development of Comstock, met to discuss DevX's
recent restructuring and its current assets, reserves and production rate. On
January 15, 2001, DevX provided a set of publicly available information to
Comstock.
On January 16, 2001, Comstock and DevX entered into a confidentiality
agreement. DevX provided Comstock with its reserve report, asset profile and
financial information on January 17, 2001.
Over the following two weeks, several conversations were held between
representatives of Comstock and DevX relating to DevX's assets.
On February 16, 2001, DevX provided Comstock with a reserve report,
together with lease operating statements and financial information.
On March 8, 2001, representatives of DevX and Comstock met to discuss
assets and engineering data. On March 9, 2001, DevX provided Comstock with
information on DevX's employment costs, capital structure and working capital.
In the course of their review of the information provided by DevX,
representatives of Comstock held several telephone conversations with
representatives of DevX for the purpose of clarifying certain aspects of the
DevX information. On March 21, 2001, FBR provided Comstock with an analysis of
DevX. These initial discussions did not advance to any significant stage and
were abandoned at that time.
On September 24, 2001, Mike Mitchell of FBR contacted Mr. Allison to
determine whether Comstock had any interest in discussing a transaction with
DevX. Mr. Mitchell followed up this call with a meeting with Messrs. Allison and
Burns. At the meeting, Mr. Allison indicated that Comstock might be interested
in reopening discussions with DevX.
On October 4, 2001, Messrs. Mitchell, Allison, Burns and Taylor met at
Comstock's office to discuss a possible transaction between Comstock and DevX.
On October 5, 2001, Mr. Taylor placed a telephone call to Ronald Idom,
Senior Vice President, Operations of DevX, to discuss the status of DevX's
reserves and assets. Mr. Idom provided additional data to Mr. Taylor on October
5, 2001, and, on October 8, 2001, Messrs. Idom and Taylor and various other
representatives of the two companies met at DevX's offices to discuss DevX's
reserve and asset information in greater detail.
14
On October 10, 2001, Comstock sent a letter of intent to DevX in which
Comstock indicated that it was prepared to purchase all of the outstanding
shares of DevX for $7.10 per share. The October 10 letter was subject to a
number of conditions.
Over the following ten days, discussions with the same principal
participants were held regarding unresolved elements of a transaction, including
the price per share, various closing conditions, termination fees and
restrictions on DevX's ability to continue or initiate merger discussions with
third parties.
On October 19, 2001, several telephone conversations took place between
Messrs. Williams and Allison during which the parties agreed to terms of the
letter of intent. The letter of intent was executed on behalf of both parties
later that day. The terms of the letter of intent are similar in all material
respects to those described in this Offer to Purchase.
Immediately upon signing the letter of intent, the parties instructed their
legal advisors to prepare a definitive agreement and the other documentation
required to effect the transaction. On the morning of October 22, 2001, Comstock
and DevX each issued a press release announcing that they had signed a non-
binding letter of intent relating to the acquisition of DevX by Comstock.
During the period from October 22 to November 8, Comstock through its
representatives conducted its due diligence investigation. Also during this
period, representatives of the parties conducted negotiations with respect to
finalizing the definitive agreement.
During this same period, FBR, DevX's financial advisor in connection with
the Offer and the Merger, and Comstock engaged in discussions regarding FBR's
possible assistance in facilitating financing a portion of the consideration for
the Offer and the Merger. As a result of these discussions, Holdings entered
into a commitment letter with FBR for the Acquisition Loan on the terms
described in "Section 9. Financing of the Offer and the Merger." In addition,
FBR is providing services to Comstock in connection with a potential acquisition
from third parties of oil and gas properties in which DevX also owns an
interest. The fees payable by Comstock and DevX to FBR in connection with these
matters are described above in "Section 9. Financing of the Offer and the
Merger."
The Comstock Board met on November 12, 2001 and unanimously approved the
definitive merger agreement and the other related transaction documents.
On November 12, 2001, the merger agreement was executed and delivered by
representatives of all of the parties. Prior to the opening of trading on
November 13, 2001, Comstock and DevX each issued press releases announcing the
execution of the definitive agreement.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger Agreement,
which is incorporated herein by reference, and a copy of which has been filed as
an Exhibit to Schedule TO. The Merger Agreement may be examined and copies may
be obtained at the places set forth in "Section 7. Certain Information
Concerning DevX."
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than seven business
days after November 12, 2001. The obligation of Purchaser to accept for payment
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain other conditions that are described in "Section
14. Certain Conditions of the Offer" hereof. Purchaser has agreed that no change
in the Offer may be made that decreases the Per Share Amount, changes the form
of consideration payable, reduces the maximum number of Shares to be purchased
in the Offer or imposes or modifies (other than waives) conditions to the Offer
in addition to those set forth in "Section 14. Certain Conditions of the Offer"
hereof without the prior consent of DevX.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, Purchaser will
be merged with and into DevX. As a result of the Merger, the separate corporate
existence of Purchaser will cease and DevX will continue as the surviving
corporation of the Merger (the "Surviving Corporation") and will become a wholly
owned subsidiary of
15
Holdings. Upon the consummation of the Merger, each Share issued and outstanding
immediately prior to the Effective Time (other than any Shares that are held in
the treasury of DevX, or owned by Purchaser, Holdings, Comstock or DevX, and any
Shares that are held by stockholders who have not voted in favor of the Merger
or consented thereto in writing and who have demanded properly in writing
appraisal for such Shares in accordance with Delaware Law) will be canceled and
converted automatically into the right to receive the Merger Consideration.
Pursuant to the Merger Agreement, each Share held in treasury of DevX and
each Share owned by Purchaser, Holdings, Comstock or DevX immediately prior to
the Effective Time will be canceled without any conversion thereof and no
payment or distribution will be made with respect thereto, and each share of
common stock of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for one share of common
stock of the Surviving Corporation.
The Merger Agreement provides that M. Jay Allison and Roland O. Burns will
be the initial directors and officers of the Surviving Corporation. The Merger
Agreement also provides that, at the Effective Time, the Certificate of
Incorporation of Purchaser, as in effect immediately prior to the Effective
Time, will be the Certificate of Incorporation of the Surviving Corporation,
except that, at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation will be amended to provide that the
name of the Surviving Corporation will be "DevX Energy, Inc." The Merger
Agreement further provides that, unless otherwise determined by Comstock prior
to the Effective Time and subject to the bylaws of Purchaser, at the Effective
Time, the By-laws of Purchaser, as in effect immediately prior to the Effective
Time, will be the By-laws of the Surviving Corporation.
Stock Options. DevX agreed in the Merger Agreement to use its reasonable
best efforts to cause all holders of options (and such holders' spouses) to
purchase Shares granted under DevX's 1997 Incentive Stock Option Plan and
Directors Non-Qualified Option Plan (the "Stock Option Plans") to execute prior
to the Initial Expiration Date an agreement to relinquish such holder's options
to purchase Shares (an "Option Relinquishment and Release Agreement"). At the
Expiration Date, Purchaser will cause each holder who has previously delivered
an Option Relinquishment and Release Agreement to be paid the cash amount equal
to the product of (i) the number of Shares subject to such option (irrespective
of whether such option is then exercisable) and (ii) the amount by which the Per
Share Amount exceeds the exercise or strike price per Share subject to such
option, less any required withholding taxes. If an option holder fails to
deliver an Option Relinquishment and Release Agreement prior to the Initial
Expiration Date, such holder's options (the "Outstanding Options") will, in
accordance with the terms and conditions of the governing Stock Option Plan and
the holder's stock option agreement(s), be converted without any action on the
part of the holder thereof into the right to receive Merger Consideration upon
the exercise of such holder's options in accordance with, and within the time
period prescribed by, the applicable Stock Option Plan and the holder's stock
option agreement(s). Purchaser also agreed in the Merger Agreement to pay or
cause to be paid to each holder of Outstanding Options, the Merger
Consideration, less any required withholding taxes, as promptly as practicable
after receiving a valid exercise of such options by the holder thereof. If any
holder of options to purchase Shares exercises such options prior to the
Effective Time, such holder will receive certificates evidencing the Shares
underlying the options and may surrender such certificates at the Effective Time
for payment in cash as provided in the Merger Agreement.
Warrants. DevX agreed in the Merger Agreement to send to holders of
warrants to purchase Shares written notice of the Offer and Merger and such
information required by the terms of such warrant, along with an agreement to
relinquish such warrants (a "Warrant Relinquishment and Release Agreement"), and
to use its reasonable best efforts to cause all holders of warrants (and such
holders' spouses) to execute prior to the Initial Expiration Date a Warrant
Relinquishment and Release Agreement. At the Expiration Date, Purchaser shall
cause such holders who have previously delivered a Warrant Relinquishment and
Release Agreement to be paid the cash amount equal to the product of (i) the
number of Shares subject to such warrant and (ii) the amount by which the Per
Share Amount exceeds the exercise price per share of Shares subject to such
warrant, less any required withholding taxes. If a warrant holder fails to
deliver a Warrant Relinquishment and Release Agreement prior to the Initial
Expiration Date, such holder's warrants (the "Outstanding Warrants") will, in
accordance with the terms and conditions of the Outstanding Warrant, be
converted without any action
16
on the part of the holder thereof into the right to receive Merger Consideration
upon the exercise of such holder's warrants in accordance with the warrant
agreement(s). The Purchaser agreed in the Merger Agreement to pay or cause to be
paid to each holder of Outstanding Warrants, the Merger Consideration, less any
required withholding taxes, as promptly as practicable after receiving a valid
exercise of such warrants by the holder thereof. If warrants to purchase Shares
are exercised by holders prior to the Effective Time, such holders shall receive
certificates evidencing the Shares underlying the warrants and may surrender
such certificates the Effective Time for payment in cash as provided in the
Merger Agreement.
Conduct of Business by DevX Pending the Merger. DevX agreed in the Merger
Agreement that, between the date of the Merger Agreement and the Effective Time,
unless Comstock otherwise agrees in writing and except for actions taken or
omitted for the purpose of complying with the Merger Agreement, the businesses
of DevX and its subsidiaries will be conducted only in, and DevX and its
subsidiaries will not take any action except in, the ordinary course of business
and in a manner consistent with past practice; and DevX will use its reasonable
best efforts to preserve substantially intact the business organization of DevX
and its subsidiaries and to preserve the current relationships of DevX and its
subsidiaries with customers, suppliers and other persons with which DevX or any
of its subsidiaries has significant business relations.
The Merger Agreement provides that, by way of amplification and not
limitation, except as expressly contemplated therein, neither DevX nor any of
its subsidiaries will, between the date of the Merger Agreement and the
Effective Time, directly or indirectly, do any of the following without the
prior written consent of Comstock:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) split, combine, reclassify, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(c) issue (other than upon the exercise of options or warrants
previously granted to current or former officers, employees or directors of
DevX), purchase, redeem, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of
any shares of any class of capital stock of DevX or any of its
subsidiaries, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of DevX or any of its subsidiaries;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for dividends by any direct or indirect
wholly owned subsidiary of DevX or any other subsidiary;
(e) with certain exceptions, sell, transfer, assign, dispose of or
encumber any assets of DevX or any of its subsidiaries, or enter into any
agreement or commitment with respect to assets of DevX or its subsidiaries,
other than in the ordinary course consistent with past good business
practice and other than transfers between DevX and its subsidiaries;
(f) with certain exceptions, sell, transfer, assign, dispose of or
encumber any of DevX's oil and gas properties or enter into any agreement
or commitment with respect to any such sale, assignment, disposition or
encumbrance;
(g) other than in the ordinary course and consistent with past
business practice, incur or become contingently liable for any indebtedness
or guarantee any such indebtedness or redeem, purchase or acquire or offer
to redeem, purchase or acquire any debt;
(h) acquire or agree to acquire any assets other than in the ordinary
course and consistent with past business practice;
(i) modify or amend any existing agreement or enter into any new
agreement with DevX's financial advisors or other similar consultants,
including, without limitation, FBR;
17
(j) subject to certain provisos, elect not to participate in any well
to which proven reserves (as identified in the report of DevX's estimates
of its and its subsidiaries' oil and gas reserves as of June 30, 2001 (the
"Reserve Report")) have been attributed in the Reserve Report proposed
pursuant to any existing net profits agreement or joint operating
agreement;
(k) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof or any significant amount of assets, except for
purchases of inventory in the ordinary course of business consistent with
past practice, (ii) incur any indebtedness for borrowed money other than
draws under DevX's existing revolving credit facility or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible
for, the obligations of any person, or make any loans or advances, (iii)
except as provided in the Merger Agreement, enter into any contract or
agreement other than in the ordinary course of business and consistent with
past practice, (iv) issue any authorization for expenditure or authorize
any other individual capital expenditure in excess of $250,000 net to
DevX's interest or (v) except as provided in the Merger Agreement, enter
into or amend any contract, agreement, commitment or arrangement with
respect to any matter described in this paragraph (k);
(l) with certain exceptions, increase the compensation payable or to
become payable or the benefits provided to its directors, officers or
employees, except for increases in the ordinary course of business and
consistent with past practice in salaries or wages of employees of DevX or
any of its subsidiaries who are not directors or officers of DevX or any of
its material subsidiaries, or establish, adopt, enter into or amend (except
as may be required by law) any collective bargaining, bonus,
profit-sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
(m) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures;
(n) make any material tax election or settle or compromise any
material tax liability;
(o) with certain exceptions, pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with past
practice, of liabilities reflected or reserved against in DevX's balance
sheet dated June 30, 2001 or subsequently incurred in the ordinary course
of business and consistent with past practice or liabilities or obligations
owed to DevX or its subsidiaries;
(p) amend, modify or consent to the termination of any of DevX's
material contracts, or amend, waive, modify or consent to the termination
of DevX's or its subsidiaries' material rights thereunder;
(q) commence or settle any material litigation, suit, claim, action,
proceeding or investigation (an "Action"); or
(r) publicly announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
Stockholders' Meeting. Pursuant to the Merger Agreement, DevX, acting
through the Board, will, if required by applicable law in order to consummate
the Merger, duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders' Meeting") as promptly as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the Merger. If Purchaser acquires
at least a majority of the outstanding Shares, Purchaser will have sufficient
voting power to approve the Merger, even if no other stockholder votes in favor
of the Merger.
Proxy Statement. The Merger Agreement provides that DevX will, if approval
of DevX's stockholders is required by applicable law to consummate the Merger,
promptly following consummation of the Offer, file with the Commission under the
Exchange Act, and use its best efforts to have promptly cleared by the
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Commission, a proxy statement and related proxy materials (the "Proxy
Statement") with respect to the Stockholders' Meeting and will cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
stockholders of DevX at the earliest practicable time. DevX has agreed to
include in the Proxy Statement, and not subsequently withdraw or modify in any
manner adverse to Purchaser, Holdings or Comstock, the recommendation of the
Board that the stockholders of DevX approve and adopt the Merger Agreement and
the transactions contemplated thereby and to use its best efforts to obtain such
approval and adoption. The Merger Agreement also provides that, if Purchaser
acquires at least 90% of the then outstanding Shares, Comstock, Holdings,
Purchaser and DevX will take all necessary and appropriate action to cause the
Merger to become effective, in accordance with Delaware Law, as promptly as
reasonably practicable after such acquisition, without a meeting of DevX's
stockholders.
DevX Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of 50% of the outstanding Shares plus one Share
(including Shares purchased pursuant to the Offer), Purchaser will be entitled
to designate up to such number of directors, rounded up to the next whole
number, on the Board as will give Purchaser representation on the Board equal to
the product of the total number of directors on the Board (giving effect to the
directors elected pursuant to the provision described in this paragraph),
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser or any affiliate of Purchaser following such purchase bears
to the total number of Shares then outstanding, and DevX will, at such time,
promptly take all actions necessary to cause Purchaser's designees to be elected
as directors of DevX, including increasing the size of the Board or securing the
resignations of incumbent directors, or both. The Merger Agreement also provides
that, at such times, DevX will use its best efforts to cause persons designated
by Purchaser to constitute the same percentage as persons designated by
Purchaser will constitute of the Board of (i) each committee of the Board, (ii)
each board of directors of each subsidiary of DevX, and (iii) each committee of
each such board, in each case only to the extent permitted by applicable law.
DevX further agreed in the Merger Agreement that, until the Effective Time, at
the request of Comstock, DevX will use its best efforts to ensure that at least
two members of the Board and each committee of the Board and such boards and
committees of DevX's subsidiaries, as of the date of the Merger Agreement, who
are not employees of DevX will remain members of the Board and of such boards
and committees.
The Merger Agreement provides that, following the election or appointment
of Purchaser's designees in accordance with the provision described above and
prior to the Effective Time, any amendment of the Merger Agreement or the
Certificate of Incorporation or By-laws of DevX, any termination of the Merger
Agreement by DevX, any extension by DevX of the time for the performance of any
of the obligations or other acts of Comstock, Holdings or Purchaser, or waiver
of any of DevX's rights thereunder, will require the concurrence of a majority
of those directors of DevX then in office who neither were designated by
Purchaser nor are employees of DevX or any of its subsidiaries, and, if serving
on the Board currently, were disinterested directors in connection with the
Board's consideration of the Merger Agreement.
Access to Information. Pursuant to the Merger Agreement, until the
Effective Time, DevX will, and will cause its subsidiaries and the officers,
directors, employees, auditors and agents of DevX and its subsidiaries to,
afford the officers, employees and agents of Comstock, Holdings and Purchaser
and persons providing or proposing to provide Comstock or Purchaser with
financing for the Offer and the Merger complete access at all reasonable times
to the officers, employees, agents, properties, offices, plants and other
facilities, books and records of DevX and each of its subsidiaries, and will
furnish Comstock, Holdings and Purchaser and persons providing or proposing to
provide Comstock, Holdings or Purchaser with financing for the transactions
contemplated by the Merger Agreement, with such financial, operating and other
data and information as Comstock, Holdings or Purchaser, through its officers,
employees or agents, may reasonably request, and Comstock, Holdings and
Purchaser have agreed to keep such information confidential, except in certain
circumstances.
No Solicitation of Transactions. DevX has agreed in the Merger Agreement
that neither it nor any of its subsidiaries through any officer, director,
advisor or other person acting on its behalf will, directly or indirectly,
solicit, initiate or encourage in any way any offer from any third party to
acquire by any means all or any substantial part of the assets or the shares of
capital stock of DevX or any of its subsidiaries (an "Acquisition Proposal").
Pursuant to the Merger Agreement, DevX may, however, furnish information to and
19
negotiate with a third party (a "Potential Acquirer") if the Potential Acquirer
has, in circumstances not involving any breach by DevX of the foregoing
provisions, made a tender or exchange offer for, or a proposal to the Board to
acquire 20% or more of the Shares, and (i) the Board determines in good faith,
based on the advice of outside counsel, that the failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties to the
stockholders of DevX under applicable law, and (ii) the Board is advised by its
financial advisor that such Potential Acquirer has the financial wherewithal to
consummate the acquisition and such acquisition would be more favorable to the
stockholders of DevX than the transactions contemplated by the Merger Agreement.
DevX has also agreed that neither the Board nor any committee thereof will
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Comstock, Holdings or Purchaser, the approval or recommendation by the Board or
any such committee of the Merger Agreement, the Offer, or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal or (iii) enter into any agreement with respect to any Acquisition
Proposal. The Merger Agreement provides that, notwithstanding the foregoing, in
the event that, prior to the Expiration Date, the Board determines in good faith
that it is required to do so by its fiduciary duties under applicable law after
having received advice from outside legal counsel, the Board may withdraw or
modify its approval or recommendation of the Offer and the Merger, but only to
terminate the Merger Agreement in accordance with the termination provisions
specified therein (and, concurrently with such termination, cause DevX to enter
into an agreement with respect to any Acquisition Proposal that the Board
determines, in its good faith judgment (after having received the advice of FBR
or such other financial advisor of recognized reputation), to be more favorable
to DevX's stockholders than the Offer and the Merger and for which financing, to
the extent required, is then committed (such Acquisition Proposal, a "Superior
Proposal")).
In the Merger Agreement, DevX agreed to, and agreed to direct or cause its
directors, officers, employees, representatives and agents to, immediately cease
and cause to be terminated any discussions or negotiations with third parties
that may be ongoing with respect to any Acquisition Proposal. DevX also agreed
to promptly advise Comstock in writing (within 48 hours) of the material terms
and conditions of such Acquisition Proposal.
Employee Matters. Pursuant to the Merger Agreement, Purchaser will provide
DevX a list of employees whom Purchaser intends to continue to employ, and a
summary of the material terms of such employment, which terms will not be less
favorable than such employee's current employment terms and provided that such
employees who are retained and for whom a retention bonus would be due and
payable will be paid such bonus on December 31, 2001. The Merger Agreement
provides that, at any time after receipt of such list, DevX may terminate any
employee whose name is not on such list and will pay any severance to such
employee to which he or she may be entitled under the terms of certain
employment contract, termination agreement or policy in existence as of October
19, 2001. Comstock agreed in the Merger Agreement to cause DevX to maintain
DevX's existing benefits for such period of time as is necessary for DevX to
fulfill its obligations under existing contracts and policies. Comstock agreed
in the Merger Agreement to, after the Effective Date, cause DevX to maintain
welfare benefit plans with benefits no less favorable to the persons covered
thereby than DevX's existing welfare benefit plans for such period of time as
necessary for DevX to fulfill its obligations under DevX's existing contracts
and policies.
Directors' and Officers' Indemnification Insurance. The Merger Agreement
provides that the Certificate of Incorporation of the Surviving Corporation will
contain provisions no less favorable with respect to indemnification than are
set forth in Article VI of the By-laws of DevX, and that such provisions will
not be amended, repealed or otherwise modified in any manner that would
materially and adversely affect the rights thereunder of individuals who, at or
prior to the Effective Time, were directors, officers, employees, fiduciaries or
agents of DevX, unless such modification is required by law.
In the Merger Agreement, Comstock agreed to maintain the directors' and
officers' liability insurance that serves to reimburse persons currently covered
by DevX's directors' and officers' liability insurance in full force and effect
for the continued benefit of such persons for a continuous period of not less
than two years from the Effective Time on terms that are not materially
different from DevX's insurance currently in effect
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(except that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions that are not less
favorable) with respect to matters occurring prior to the Effective Time.
The Merger Agreement further provides that if DevX, Comstock or the
Surviving Corporation or any of their respective successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision will be made so that the
successors and assigns of DevX, Comstock or the Surviving Corporation, as the
case may be, or at Comstock's option, Comstock, will assume the foregoing
indemnity obligations.
The foregoing indemnification obligations are in addition to and not in
lieu of DevX's indemnification obligations under agreements between DevX and
certain of its officers and directors.
Further Action; Reasonable Best Efforts. In the Merger Agreement, each of
the parties agreed to use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement. None of Purchaser, Holdings or Comstock is, however, required to take
any action, including entering into a consent decree, hold separate orders or
other arrangements, that (i) requires the divestiture of any assets of any of
Purchaser, Holdings, Comstock, DevX or any of their respective subsidiaries or
(ii) limits Comstock's ability to operate DevX and its subsidiaries or any
portion thereof or any of Comstock's or its affiliates' other assets or
businesses in a manner consistent with past practice. The Merger Agreement also
provides that in case, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of each party to the Merger Agreement are required
to use their reasonable best efforts to take all such action.
The Merger Agreement further provides that each of the parties will
cooperate and use its reasonable best efforts to vigorously contest and resist
any Action, including administrative or judicial Action, and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and that
restricts, prevents or prohibits consummation of the transactions contemplated
by the Merger Agreement, including, without limitation, by vigorously pursuing
all available avenues of administrative and judicial appeal.
Assumption of Agreements. Comstock agreed in the Merger Agreement to, at
the Expiration Date, enter into an assumption or guaranty agreement reasonably
satisfactory to Brian J. Barr and Edward J. Munden, each of whom is a former
officer of DevX, pursuant to which Comstock will assume or guaranty the
obligations of DevX under the termination agreement between DevX and each of
Messrs. Barr and Munden.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, among
others, representations by DevX as to the absence of certain changes or events
concerning DevX's business, oil and gas agreements, properties, compliance with
law, filings and financial statements, litigation, employee benefit plans, labor
and employment matters, property and leases, intellectual property,
environmental matters, taxes, material contracts, customers and suppliers,
insurance and brokers.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction,
at or prior to the Effective Time, of the following conditions:
(a) if and to the extent required by Delaware Law, the Merger
Agreement and the transactions contemplated thereby have been approved and
adopted by the affirmative vote of the stockholders of DevX;
(b) no governmental authority has enacted, issued, promulgated,
enforced or entered any law (whether temporary, preliminary or permanent)
that is then in effect and has the effect of making the acquisition of
Shares by Comstock, Holdings or Purchaser or any affiliate of any of them
illegal or
21
otherwise restricting, preventing or prohibiting consummation of the
transactions contemplated by the Merger Agreement; and
(c) Purchaser or its permitted assignee has purchased all Shares
validly tendered and not withdrawn pursuant to the Offer, except that this
condition will not be applicable to the obligations of Comstock, Holdings
or Purchaser if, in breach of the Merger Agreement, Purchaser fails to
purchase any Shares validly tendered and not withdrawn pursuant to the
Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated by the Merger Agreement by
the stockholders of DevX:
(a) by mutual written consent of each of Comstock, Holdings, Purchaser
and DevX duly authorized by the Boards of Directors of Comstock, Holdings,
Purchaser and DevX;
(b) by any of Comstock, Holdings, Purchaser or DevX if (i) the
Effective Time has not occurred on or before June 30, 2002, except that the
right to terminate the Merger Agreement as described in this clause (b)(i)
will not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, or (ii) any
governmental authority has enacted, issued, promulgated, enforced or
entered any injunction, order, decree or ruling that has become final and
nonappealable and has the effect of making consummation of the Offer or the
Merger illegal or otherwise preventing or prohibiting consummation of the
Offer or the Merger;
(c) by Comstock if (i) due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in "Section 14.
Certain Conditions of the Offer" hereto, Purchaser has (A) failed to
commence the Offer within 30 days following the date of the Merger
Agreement, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to accept Shares for payment pursuant to
the Offer within 90 days following the commencement of the Offer (except
that the applicable time periods specified in (A) and (C) above will be
extended until June 30, 2002), unless such action or inaction under (A),
(B) or (C) has been caused by or resulted from the failure of Comstock,
Holdings or Purchaser to perform, in any material respect, any of their
covenants or agreements contained in the Merger Agreement, or the material
breach by Comstock, Holdings or Purchaser of any of their representations
or warranties contained in the Merger Agreement or (ii) prior to the
purchase of Shares pursuant to the Offer, the Board or any committee
thereof has withdrawn or modified in a manner adverse to Purchaser,
Holdings or Comstock its approval or recommendation of the Merger
Agreement, the Offer or the Merger, or has recommended or approved any
Acquisition Proposal, or has resolved to do any of the foregoing;
(d) by DevX, upon approval of the Board, if (i) Purchaser has (x)
failed to commence the Offer within seven business days following the date
of the Merger Agreement, or (y) terminated the Offer without having
accepted any Shares for payment thereunder, unless such action or inaction
described in (x) or (y) has been caused by or resulted from a failure of
DevX to perform, in any material respect, any of its material obligations
or agreements contained in the Merger Agreement or the material breach by
DevX of any of its material representations or warranties contained in the
Merger Agreement, (ii) the Expiration Date has not occurred by January 1,
2002 (but subject to the occurrence of an extension of the Offer pursuant
to the Merger Agreement), unless such failure of the Expiration Date to
occur has been caused by or resulted from a failure of DevX to perform, in
any material respect, any of its material obligations or agreements
contained in the Merger Agreement or the material breach by DevX of any of
its material representations or warranties contained in the Merger
Agreement, (iii) Comstock, Holdings or Purchaser has committed a material
breach of the Merger Agreement or (iv) prior to the Expiration Date, the
Board determines in good faith that it is required to do so by its
fiduciary duties under applicable law after having received advice from
outside legal counsel in order to enter into a definitive agreement with
respect to a Superior Proposal, upon two calendar days' prior written
notice to Comstock, setting forth in reasonable detail the identity of the
person making, and the final terms and conditions of,
22
the Superior Proposal (with any termination of the Merger Agreement
pursuant to the provisions described in this clause (d)(iv) not being
effective until DevX has made full payment of all amounts described below
under the section entitled "Fees").
The Merger Agreement also provides that, in each case, the time periods and
deadlines summarized above in paragraphs (c) and (d) may be extended, at the
option of any party as reasonably necessitated by the occurrence of a Suspension
Event for such period of time as may be reasonably necessary (but not to exceed
five business days) following the conclusion of a Suspension Event, but in no
event to exceed January 31, 2002. As used in the Merger Agreement, "Suspension
Event" means the occurrence of any of the following: (i) any general suspension
of trading in, or limitation on prices for, securities on any national
securities exchange, Nasdaq or in the over-the-counter market in the United
States, (ii) a declaration of a general banking moratorium or any suspension of
payments in respect of banks in the United States or (iii) any limitation
(whether or not mandatory) by any governmental authority on, or other event that
materially and adversely affects, the extension of credit by banks or other
lending institutions.
Effect of Termination. The Merger Agreement provides that in the event of
the termination of the Merger Agreement, the Merger Agreement will forthwith
become void, and there will be no liability on the part of any party thereto,
except (i) as described below under the section entitled "Fees" and (ii) nothing
in the Merger Agreement will relieve any party from liability for any
intentional breach thereof prior to the date of such termination. The
Confidentiality Agreement will, however, survive any termination of the Merger
Agreement.
Fees. The Merger Agreement provides that if the Merger Agreement is
terminated pursuant to the termination provisions described above in (c)(ii) or
(d)(iv), then, in any such event, DevX will pay Comstock promptly (but in no
event later than one business day after the first of such events has occurred) a
fee in immediately available funds of $3,500,000 (the "Fee").
Except as described in this Section "Fees," all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such expenses, whether or not any
transaction is consummated. If DevX fails to pay the Fee, it is also obligated
to pay interest on such unpaid Fee, commencing on the date that the Fee became
due, at a rate equal to the rate of interest publicly announced by Citibank,
N.A., from time to time, in the City of New York, as such bank's Base Rate.
Amendment and Waiver. Subject to the provisions describe above under "DevX
Board Representation," the Merger Agreement may be amended by the parties
thereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time, except that, after the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the stockholders of DevX, no amendment may be made that would reduce the amount
or change the type of consideration into which each Share will be converted upon
consummation of the Merger. Also subject to the provisions described above under
"DevX Board Representation," at any time prior to the Effective Time, any party
to the Merger Agreement may (a) extend the time for the performance of any
obligation or other act of any other party thereto, (b) waive any inaccuracy in
the representations and warranties of any other party contained therein or in
any document delivered pursuant thereto and (c) waive compliance with any
agreement of any other party or any condition to its own obligations contained
therein.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement dated January 16, 2001 (the "Confidentiality Agreement") between
Comstock and DevX. This summary is qualified in its entirety by reference to the
Confidentiality Agreement, which is incorporated herein by reference, and a copy
of which has been filed with the Commission as an exhibit to the Schedule TO.
The Confidentiality Agreement may be examined and copies may be obtained at the
places set forth in "Section 7. Certain Information Concerning DevX."
Comstock agreed in the Confidentiality Agreement to utilize the
Confidential Information (as defined below) only for the purpose of evaluating a
transaction between Comstock and DevX and preparing proposals
23
with respect thereto and to protect the confidentiality of the Confidential
Information with the same degree of care, but in any case no less than a
reasonable standard of care, as Comstock uses to protect its own Confidential
Information. Comstock also agreed in the Confidentiality Agreement not to
disclose the Confidential Information to any third party, with certain
exceptions, and to direct all employees and third party consultants to whom
Comstock provides access to the Confidential Information not to disclose such
Confidential Information or the fact that any discussions or negotiations are
taking place between the parties and to remain liable for any unauthorized
disclosure or use of Confidential Information by such employees or third party
consultants notwithstanding such direction.
The restrictions on use and disclosure of the Confidential Information set
out in the Confidentiality Agreement will continue until January 16, 2003.
The parties to the Confidentiality Agreement agreed that, except with
respect to the matters specifically addressed in the Confidentiality Agreement,
unless and until they execute and deliver a definitive agreement concerning a
transaction, (i) neither of them is under any obligation whatsoever with respect
to each other whether by virtue of the Confidentiality Agreement or any other
understanding or agreement, and (ii) DevX may make, entertain or solicit similar
offers from third parties or conduct any process with respect thereto, except
that before January 16, 2003, Comstock may not participate directly or
indirectly in any transaction pertaining to any publicly traded securities of
DevX that has not been approved by the Board.
For purposes of the Confidentiality Agreement, "Confidential Information"
means all tangible forms of information, documents, memoranda or other materials
pertaining to and prepared by or on behalf of DevX or any of its subsidiaries
and affiliates, or of the business, properties and assets thereof, excluding
information that (i) is or becomes generally available to the public as a result
of an authorized disclosure by a party or (ii) is or becomes available to
Comstock on a non-confidential basis from another source that is not bound by a
confidentiality agreement with or other obligation of secrecy to or for the
benefit of DevX.
11. PURPOSE OF THE OFFER; PLANS FOR DEVX AFTER THE OFFER AND THE MERGER; EFFECT
ON SENIOR NOTES.
Purpose of the Offer. The Offer is being made pursuant to the Merger
Agreement. The purpose of the Offer and the Merger is for Comstock to acquire
control of, and the entire equity interest in, DevX. The Offer, as the first
step in the acquisition of DevX, is intended to facilitate the acquisition of
all of the Shares. The purpose of the Merger is for Comstock to acquire all
Shares not purchased pursuant to the Offer. Upon consummation of the Merger,
DevX will become an indirect wholly owned subsidiary of Comstock.
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby. The Board
has determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to, and in the best
interest of, the holders of Shares, has approved, adopted and declared advisable
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and has resolved to recommend that the holders of Shares
accept the Offer and tender their Shares pursuant to the Offer. Unless the
Merger is consummated pursuant to the short-form merger provisions under
Delaware Law described below, the only remaining required corporate action of
DevX is the approval and adoption of the Merger Agreement and the Merger by the
affirmative vote of the holders of a majority of Shares. Accordingly, if the
Minimum Condition is satisfied, Purchaser will have sufficient voting power to
cause the approval and adoption of the Merger Agreement and the Merger without
the affirmative vote of any other stockholder.
In the Merger Agreement, DevX has agreed to duly call, give notice of,
convene and hold an annual or special meeting of its stockholders as promptly as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the Transactions, including the
Offer and the Merger, if such action is required by Delaware Law in order to
consummate the Merger. Comstock, Holdings and Purchaser intend to vote all
Shares owned by them and their subsidiaries in favor of the approval and
adoption of the Merger Agreement and the Merger.
24
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of 50% of the outstanding Shares plus one Share (including Shares purchased
pursuant to the Offer), Purchaser will be entitled to designate representatives
to serve on the Board in proportion to Purchaser's ownership of Shares following
such purchase. See "Section 10. Background of the Offer; the Merger Agreement
and Related Agreements." Purchaser expects that such representation would permit
Purchaser to exert substantial influence over DevX's conduct of its business and
operations.
Short-Form Merger. Under Delaware Law, if Purchaser acquires, pursuant to
the Offer or otherwise, at least 90% of the then outstanding Shares, Purchaser
will be able to approve the Merger without a vote of DevX's stockholders. In
such event, Comstock, Holdings, Purchaser and DevX have agreed in the Merger
Agreement to take all necessary and appropriate action to cause the Merger to
become effective as promptly as reasonably practicable after such acquisition,
without a meeting of DevX's stockholders. If, however, Purchaser does not
acquire at least 90% of the outstanding Shares pursuant to the Offer or
otherwise and a vote of DevX's stockholders is required under Delaware Law, a
significantly longer period of time would be required to effect the Merger. In
such event, Purchaser may, if possible, act by written consent to approve and
adopt the Merger Agreement.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders who have not tendered
their Shares will have rights under Delaware Law to dissent from the Merger and
demand appraisal of, and to receive payment in cash of the fair value of, their
Shares. Stockholders who perfect such rights by complying with the procedures
set forth in Section 262 of the Delaware Law ("Section 262") will have the "fair
value" of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) determined by the Delaware Court of
Chancery and will be entitled to receive a cash payment equal to such fair value
for the Surviving Corporation. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things,
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in an appraisal proceeding. The Weinberger court also noted that
under Section 262, fair value is to be determined "exclusive of any element of
value arising from the accomplishment or expectation of the merger." In Cede &
Co. v. Technicolor, Inc., however, the Delaware Supreme Court stated that, in
the context of a two-step cash merger, "to the extent that value has been added
following a change in majority control before cash-out, it is still value
attributable to the going concern," to be included in the appraisal process. As
a consequence, the value so determined in any appraisal proceeding could be the
same, more or less than the purchase price per Share in the Offer or the Merger
Consideration.
In addition, several decisions by Delaware courts have held that, in some
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders that requires that the merger be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of consideration to be received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court stated in Weinberger
and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy ordinarily available
to minority stockholders in a cash-out merger is the right to appraisal
described above. However, a damages remedy or injunctive relief may be available
if a merger is found to be the product of procedural unfairness, including
fraud, misrepresentation or other misconduct.
Comstock does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, Shares. Comstock
intends, however, to cause the Surviving Corporation to argue in an appraisal
proceeding that, for purposes of such proceeding, the fair value of each Share
is less than or equal to the Merger Consideration. In this regard, stockholders
should be aware that opinions of investment banking firms as to the
25
fairness from a financial point of view (including FBR) are not necessarily
opinions as to "fair value" under Section 262.
The foregoing summary of the rights of dissenting stockholders under
Delaware Law does not purport to be a complete statement of the procedures to be
followed by stockholders desiring to exercise any dissenters' rights under
Delaware Law. The preservation and exercise of dissenters' rights require strict
adherence to the applicable provisions of Delaware Law.
Going Private Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act, which is applicable to certain "going private" transactions
and which may under certain circumstances be applicable to the Merger or another
business combination following the purchase of Shares pursuant to the Offer in
which Purchaser seeks to acquire the remaining Shares not held by it or its
affiliates. Purchaser believes that Rule 13e-3 will not be applicable to the
Merger. Rule 13e-3 requires, among other things, that certain financial
information concerning DevX and certain information relating to the fairness of
the proposed transaction and the consideration offered to minority stockholders
in such transaction be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
Plans for DevX. Except as disclosed in this Offer to Purchase, none of
Comstock, Holdings or Purchaser has any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, purchase or sale or transfer of a material amount
of assets, involving DevX or any of its subsidiaries, or any material changes in
DevX's capitalization, corporate structure, business or composition of its
management or the Board. Comstock will continue to evaluate and review DevX and
its business, assets, corporate structure, capitalization, operations,
properties, policies, management and personnel with a view towards determining
how optimally to realize any potential benefits which arise from the
rationalization of the operations of DevX with those of other business units and
subsidiaries of Comstock. Such evaluation and review is ongoing and is not
expected to be completed until after the consummation of the Offer and the
Merger. If, as and to the extent that Comstock acquires control of DevX,
Comstock will complete such evaluation and review of DevX and will determine
what, if any, changes would be desirable in light of the circumstances and the
strategic business portfolio which then exist. Such changes could include, among
other things, restructuring DevX through changes in DevX's business, corporate
structure, Certificate of Incorporation, By-laws, capitalization or management
or could involve consolidating and streamlining certain operations and
reorganizing other businesses and operations.
Comstock, Holdings, Purchaser or an affiliate of Comstock may, following
the consummation or termination of the Offer, seek to acquire additional Shares
through open market purchases, privately negotiated transactions, a tender offer
or exchange offer or otherwise, upon such terms and at such prices as they may
determine, which may be more or less than the price paid in the Offer.
Effect on Senior Notes. At September 30, 2001, $50.0 million aggregate
principal amount of the Senior Notes was outstanding. The Offer is not being
made for (nor will tenders be accepted of) any of the Senior Notes. Comstock may
approach the holders of the Senior Notes to discuss a possible acquisition of
their Senior Notes.
The Indenture provides that upon a "Change of Control" of DevX, the holders
of the Senior Notes have the right, at such holder's option, pursuant to an
offer (subject to the conditions required by applicable law, if any) by DevX
(the "Change of Control Offer"), to require DevX to repurchase all or any party
of such holder's Senior Notes (as long as the principal amount of such Senior
Notes is $1,000 or an interval thereof) on a date (the "Change of Control
Payment Date") that is no fewer than 30 days and no later than 60 days from the
date of the Change of Control Offer, at a cash price equal to 101% of the
principal amount of the Senior Notes plus accrued and unpaid interest to the
Change of Control Payment Date. The consummation of the Offer on the terms
described in this Offer to Purchase will constitute a Change of Control under
the Indenture.
Within 30 days following the Change in Control, a written notice will be
sent to the Trustee and to each holder of Senior Notes (and to beneficial owners
as required by applicable law). Such notice will state, among other things, (i)
that a Change of Control has occurred and a Change of Control Offer is being
made pursuant
26
to the Indenture and that all Senior Notes (or portions thereof) properly
tendered will be accepted for payment; (ii) the purchase price and the Change of
Control Payment Date; (iii) that any Senior Note (or portion thereof) accepted
for payment (and duly paid on the Change of Control Payment Date) pursuant to
the Change of Control Offer will cease to accrue interest on the Change of
Control Payment Date; (iv) that any Senior Notes (or portion thereof) not
properly tendered will continue to accrue interest; (v) a description of the
transaction or transactions constituting the Change of Control; (vi) the
procedures that holders of Senior Notes must follow in order to tender their
Senior Notes (or portions thereof) for payment and the procedures that holders
of Senior Notes must follow in order to withdraw an election to tender Senior
Notes (or portions thereof) for payment; and (vii) all other instructions and
material necessary to enable holders to tender Senior Notes pursuant to the
Change of Control Offer.
12. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that DevX will not, between the date of the
Merger Agreement and the Effective Time, without the prior written consent of
Comstock, (a) issue (other than upon the exercise of options or warrants
previously granted to current or former officers, employees or directors of
DevX), purchase, redeem, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of any shares of
any class of capital stock of DevX or any of its subsidiaries, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of DevX or any of its subsidiaries;
(b) with certain exceptions, sell, transfer, assign, dispose of or encumber any
assets of DevX or any of its subsidiaries, or enter into any agreement or
commitment with respect to assets of DevX or its subsidiaries, other than in the
ordinary course consistent with past good business practice; (c) with certain
exceptions, sell, transfer, assign, dispose of or encumber any of DevX's oil and
gas properties or enter into any agreement or commitment with respect to any
such sale, assignment, disposition or encumbrance; (d) acquire or agree to
acquire any assets other than in the ordinary course and consistent with past
business practice; (e) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for dividends by any direct or indirect wholly
owned subsidiary to DevX or any other subsidiary; or (f) split, combine,
reclassify, subdivide or redeem, or purchase or otherwise acquire, directly or
indirectly, any of its capital stock. See "Section 10. Background of the Offer;
the Merger Agreement and Related Agreements."
13. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR SHARES, NASDAQ LISTING,
MARGIN REGULATIONS AND EXCHANGE ACT REGISTRATION.
Possible Effects of the Offer on the Market for the Shares. The purchase
of Shares by Purchaser in the Offer will reduce the number of Shares that might
otherwise trade publicly and will reduce the number of holders of Shares, which
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
Comstock intends to cause the delisting of the Shares from Nasdaq following
consummation of the Offer.
Nasdaq Listing. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the standards for continued listing on
Nasdaq. According to Nasdaq's published guidelines, Shares would not be eligible
to be included for listing if, among other things, the number of Shares publicly
held falls below 500,000, the number of beneficial owners of Shares falls below
300 or the market value of such publicly held Shares is not at least $1,000,000.
If, as a result of the purchase of Shares pursuant to the Offer, the Merger or
otherwise, the Shares no longer meet the requirements of Nasdaq for continued
listing, the listing of the Shares will be discontinued. In such event, the
market for the Shares would be adversely affected. In the event the Shares were
no longer eligible for listing on Nasdaq, quotations might still be available
from other sources. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of such Shares remaining at such time, the interest in maintaining a
market in such Shares on the part of securities firms, the possible termination
of registration of such Shares under the Exchange Act as described below and
other factors.
27
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by DevX to
the Commission if the Shares are not listed on a "national securities exchange"
and there are fewer than 300 record holders. The termination of the registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by DevX to holders of Shares and to the Commission and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) or 14(c) of the Exchange Act and the related requirements of an annual
report, and the requirements of Rule 13e-3 under the Exchange Act with respect
to "going private" transactions, no longer applicable to the Shares. In
addition, "affiliates" of DevX and persons holding "restricted securities" of
DevX may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for Nasdaq reporting. Purchaser currently intends to
seek to cause DevX to terminate the registration of the Shares under the
Exchange Act as soon after consummation of the Offer as the requirements for
termination of registration are met.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), which has the effect, among other things,
of allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding listing and
market quotations, following the Offer it is possible that the Shares might no
longer constitute "margin securities" for purposes of the margin regulations of
the Federal Reserve Board, in which event such Shares could no longer be used as
collateral for loans made by brokers. In addition, if registration of the Shares
under the Exchange Act were terminated, such Shares would no longer constitute
"margin securities."
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Purchaser is not required
to accept for payment any Shares tendered pursuant to the Offer, and may extend,
terminate or amend the Offer if (i) immediately prior to the expiration of the
Offer, the Minimum Condition has not been satisfied, or (ii) at any time on or
after the date of the Merger Agreement and prior to the Expiration Date, any of
the following conditions exist:
(a) there has been instituted or be pending any Action by any
governmental authority (i) challenging or seeking to make illegal, delay,
or otherwise, directly or indirectly, restrain or prohibit or make
materially more costly, the making of the Offer, the acceptance for payment
of any Shares by Comstock, Holdings, Purchaser or any other affiliate of
Comstock, or the consummation of any other transaction contemplated by the
Merger Agreement, or seeking to obtain damages in connection with any
transaction contemplated by the Merger Agreement; (ii) seeking to prohibit
or limit the ownership or operation by DevX, Comstock or any of their
subsidiaries of all or any of the business or assets of DevX, Comstock or
any of their subsidiaries or to compel DevX, Comstock or any of their
subsidiaries, as a result of the Offer or the Merger, to dispose of or to
hold separate all or any portion of the business or assets of DevX,
Comstock or any of their subsidiaries; (iii) seeking to impose or confirm
any limitation on the ability of Comstock, Holdings, Purchaser or any other
affiliate of Comstock to exercise effectively full rights of ownership of
any Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer or otherwise on all matters
properly presented to DevX's stockholders, including, without limitation,
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby; (iv) seeking to require divestiture by Comstock,
Holdings, Purchaser or any other affiliate of Comstock of any Shares; or
(v) that otherwise is likely to materially and adversely affect Comstock or
have a material adverse effect on DevX;
(b) any governmental authority or court of competent jurisdiction has
issued an order, decree, injunction or ruling or taken any other action (i)
permanently restraining, enjoining or otherwise prohibiting or preventing
the Offer or the Merger and such order, decree, injunction, ruling or other
action shall have become final and non-appealable, or (ii) that is
reasonably likely to result, directly or indirectly, in any of the
consequences described in clause (i) through (v) of paragraph (a) above;
28
(c) there has been any statute, rule, regulation, legislation or
interpretation enacted, promulgated, amended, issued or deemed applicable
to (i) Comstock, DevX or any subsidiary or affiliate of Comstock or DevX or
(ii) any transaction contemplated by the Merger Agreement, by any United
States legislative body or governmental authority with appropriate
jurisdiction, that is reasonably likely to result, directly or indirectly,
in any of the consequences described in clauses (i) through (v) of
paragraph (a) above;
(d) (i) the Board, or any committee thereof, has withdrawn or
modified, in a manner adverse to Comstock, Holdings or Purchaser, the
approval or recommendation of the Offer, the Merger, the Agreement, or
approved or recommended any Acquisition Proposal or any other acquisition
of Shares other than the Offer, the Merger or (ii) the Board, or any
committee thereof, has resolved to do any of the foregoing;
(e) (i) any representation or warranty of DevX in the Merger Agreement
that is qualified as to material adverse effect is not true and correct as
so qualified or (ii) any representation or warranty that is not so
qualified is not true and correct (except where the failure to be true and
correct would not have a material adverse effect on DevX or any subsidiary
of DevX), in each case as if such representation or warranty was made as of
such time on or after the date of the Merger Agreement (except as to any
representation or warranty made as of a specified date);
(f) DevX has failed to perform, in any material respect, any
obligation or to comply, in any material respect, with any agreement or
covenant of DevX to be performed or complied with by it under the Merger
Agreement; or
(g) the Merger Agreement has been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Purchaser, Holdings
and Comstock and may be asserted by Purchaser, Holdings or Comstock regardless
of the circumstances giving rise to any such condition or may be waived by
Purchaser, Holdings or Comstock in whole or in part at any time and from time to
time in their sole discretion. The failure by Comstock, Holdings or Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right; the waiver of any such right with respect to particular facts
and other circumstances will not be deemed a waiver with respect to any other
facts and circumstances; and each such right will be deemed an ongoing right
that may be asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Based upon Purchaser's review of publicly available information
regarding DevX and the review of information furnished by DevX to Comstock and
discussions between representatives of Comstock and representatives of DevX (see
"Section 10. Background of the Offer; the Merger Agreement and Related
Agreements"), none of Purchaser, Holdings or Comstock is aware of (i) any
license or other regulatory permit that appears to be material to the business
of DevX or any of its subsidiaries, taken as a whole, which might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or (ii)
except as described below, of any approval or other action by any domestic
(federal or state) or foreign Governmental Authority that would be required
prior to the acquisition of Shares by Purchaser pursuant to the Offer. Should
any such approval or other action be required, it is Purchaser's present
intention to seek such approval or action. Purchaser does not currently intend,
however, to delay the purchase of Shares tendered pursuant to the Offer pending
the outcome of any such action or the receipt of any such approval (subject to
Purchaser's right to decline to purchase Shares if any of the conditions in
"Section 14. Certain Conditions of the Offer" have occurred). There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the business of DevX, Comstock, Holdings or Purchaser or that certain parts of
the business of DevX, Comstock, Holdings or Purchaser might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action or in the event that such approval
was not obtained or such other action was not taken. Purchaser's obligation
under the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
"Section 15.
29
Certain Legal Matters and Regulatory Approvals." See "Section 14. Certain
Conditions of the Offer" for certain conditions of the Offer.
State Takeover Laws. DevX is incorporated under the laws of the State of
Delaware. In general, Section 203 of the Delaware Law prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On November 4,
2001, prior to the execution of the Merger Agreement, the Board approved the
Merger Agreement, determined that each of the Offer and the Merger is fair to,
and in the best interest of, the stockholders of DevX. Accordingly, Section 203
is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States
held that the State of Indiana may, as a matter of corporate law and, in
particular, with respect to those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders. The state law before the Supreme Court was by its terms applicable
only to corporations that had a substantial number of stockholders in the state
and were incorporated there.
DevX, directly or through its subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and it has not complied with any such laws.
Should any person seek to apply any state takeover law, Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Purchaser might be required to
file information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer, and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See "Section 14. Certain
Conditions of the Offer."
Antitrust Compliance. Comstock, Holdings, Purchaser and DevX believe that
the Offer and the Merger may be consummated without notification being given or
information being furnished to the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and that no waiting period requirements under the HSR Act are
applicable to the Offer or the Merger. At any time, however, before or after the
purchase of Shares pursuant to the Offer, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Comstock, DevX or their
respective subsidiaries. Private parties and state attorneys general may also
bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Comstock
relating to the businesses in which Comstock, DevX and their respective
subsidiaries are engaged, Comstock, Holdings and Purchaser believe that the
Offer will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made,
30
what the result would be. See "Section 14. Certain Conditions of the Offer" for
certain conditions to the Offer, including conditions with respect to
litigation.
16. FEES AND EXPENSES.
Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer.
Purchaser, Holdings and Comstock have retained Innisfree M&A Incorporated
as the Information Agent, and American Stock Transfer & Trust Company as the
Depositary, in connection with the Offer and the Merger. The Information Agent
may contact holders of Shares by mail, telephone, telex, telecopy, telegraph and
personal interview and may request banks, brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners of
Shares. As compensation for acting as Information Agent in connection with the
Offer and the Merger, Purchaser will pay the Information Agent reasonable and
customary compensation for its services in connection with the Offer and the
Merger, plus reimbursement for out-of-pocket expenses, and will indemnify the
Information Agent against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including under federal securities laws.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
Purchaser for customary handling and mailing expenses incurred by them in
forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is being made solely by this Offer to Purchase and the related
Letter of Transmittal and is being made to holders of Shares. Purchaser is not
aware of any jurisdiction where the making of the Offer or the acceptance of
Shares pursuant thereto is prohibited by any administrative or judicial action
or by any valid state statute. If Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of
Purchaser by the one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
Purchaser has not authorized any person to give any information or make any
representation on its behalf not contained in this Offer to Purchase or in the
Letter of Transmittal, and if given or made, holders of Shares should not rely
on such information or representation as having been authorized.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Comstock, Holdings and Purchaser have filed with the Commission
the Schedule TO, together with exhibits, furnishing certain additional
information with respect to the Offer. The Schedule TO and any amendments
thereto, including exhibits, may be inspected at, and copies may be obtained
from, the same places and in the same manner as set forth in "Section 11.
Certain Information Concerning DevX" (except that they will not be available at
the regional offices of the Commission).
COMSTOCK ACQUISITION INC.
Dated: November 15, 2001
31
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF COMSTOCK, HOLDINGS AND PURCHASER
DIRECTORS AND EXECUTIVE OFFICERS OF COMSTOCK
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Comstock. The current business address of each person is
c/o Comstock Resources, Inc., 5300 Town and Country Blvd., Suite 500, Frisco,
Texas 75034. Each such person is a citizen of the United States of America.
<Table>
<Caption>
MATERIAL POSITIONS HELD
NAME POSITIONS AND OFFICES HELD WITH COMSTOCK DURING THE PAST FIVE YEARS
- ---- ---------------------------------------- --------------------------
M. Jay Allison President, Chief Executive Officer and Director of Comstock since 1987,
Chairman of the Board of Directors President and Chief Executive
Officer of Comstock since 1988 and
Chairman of the Board of Directors
of Comstock since 1997.
Roland O. Burns Director, Senior Vice President, Chief Director of Comstock since 1999
Financial Officer, Secretary and and Senior Vice President of
Treasurer Comstock since 1994.
Cecil E. Martin, Jr. Director Director of Comstock since 1988.
An independent commercial real
estate developer since 1991.
David W. Sledge Director Director of Comstock since 1996.
An investor in oil and gas
activities since 1996.
David K. Lockett Director Director of Comstock since July
2001. Employed by Dell Computer
Corporation since 1991, and
currently serves as a vice
president and head of its Small
and Medium Business Group.
</Table>
I-1
DIRECTORS AND EXECUTIVE OFFICERS OF HOLDINGS
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Holdings. The current business address of each person is
c/o Comstock Resources, Inc., 5300 Town and Country Blvd., Suite 500, Frisco,
Texas 75034. Each such person is a citizen of the United States of America.
<Table>
<Caption>
MATERIAL POSITIONS HELD
NAME POSITIONS AND OFFICES HELD WITH HOLDINGS DURING THE PAST FIVE YEARS
- ---- ---------------------------------------- --------------------------
M. Jay Allison President and Director Director of Comstock since 1987,
President and Chief Executive
Officer of Comstock since 1988 and
Chairman of the Board of Directors
of Comstock since 1997. Director
and President of Holdings since
November 5, 2001.
Roland O. Burns Vice President, Secretary and Treasurer Director of Comstock since 1999
and Director and Senior Vice President of
Comstock since 1994. Director and
Vice President, Secretary and
Treasurer of Holdings since
November 5, 2001.
</Table>
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of Purchaser. The current business address of each person is
c/o Comstock Resources, Inc., 5300 Town and Country Blvd., Suite 500, Frisco,
Texas 75034. Each such person is a citizen of the United States of America.
<Table>
<Caption>
MATERIAL POSITIONS HELD
NAME POSITIONS AND OFFICES HELD WITH PURCHASER DURING THE PAST FIVE YEARS
- ---- ----------------------------------------- --------------------------
M. Jay Allison President and Director Director of Comstock since 1987,
President and Chief Executive
Officer of Comstock since 1988 and
Chairman of the Board of Directors
of Comstock since 1997. Director
and President of Purchaser since
November 5, 2001.
Roland O. Burns Vice President, Secretary and Treasurer Director of Comstock since 1999
and Director and Senior Vice President of
Comstock since 1994. Director and
Vice President, Secretary and
Treasurer of Purchaser since
November 5, 2001.
</Table>
I-2
The Letter of Transmittal, manually signed, and certificates evidencing
Shares and any other required documents should be sent or delivered by each
stockholder or such stockholder's broker, dealer, commercial bank, trust company
or other nominee to the Depositary at its address set forth below
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By First Class Mail, by Overnight Courier or by Hand:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
By Facsimile Transmission
for Eligible Institutions only:
(718) 234-5001
Confirm by Telephone:
(718) 921-8200
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, NY 10022
Call Toll Free: (888) 750-5834
Banks and Brokers Call Collect: (212) 750-5833