EXHIBIT 10(u)
AGREEMENT OF SALE AND PURCHASE
by and among
SANTA FE ENERGY RESOURCES, INC.
SANTA FE ENERGY OPERATING PARTNERS, L.P.
and
BRIDGE OIL (U.S.A.) INC.
December 2, 1993
TABLE OF CONTENTS
Page
I. DEFINED TERMS AND REFERENCES ......................... 1
1.1. Defined Terms ................................. 1
1.2. References .................................... 1
II. AGREEMENT TO SELL AND PURCHASE ....................... 8
III. PURCHASE PRICE ....................................... 9
IV. THE CLOSING .......................................... 9
4.1. Closing ...................................... 10
4.2. Seller's Closing Obligations.................. 10
4.3. Buyer's Closing Obligations................... 10
V. REPRESENTATIONS AND WARRANTIES OF SELLER.............. 10
5.1. Organization.................................. 11
5.2. Qualification ................................ 11
5.3. Authority Relative to This Agreement ......... 11
5.4. Noncontravention.............................. 11
5.5. Governmental Consents ........................ 11
5.6. Legal Proceedings ............................ 12
5.7. Compliance With Laws ......................... 12
5.8. Commitments .................................. 12
5.9. Title to Oil and Gas Properties .............. 12
5.10. Compliance with Agreements ................... 13
5.11. Take or Pay Arrangements ..................... 13
5.12. Receipts and Payments ........................ 13
5.13. Payment of Expenses .......................... 14
5.14. Sales of Production .......................... 14
5.15. Area of Mutual Interest and Other Agreements.. 14
5.16. Certain Filings .............................. 14
5.17. ERISA ........................................ 15
5.18. Taxes ........................................ 15
5.19. Undeveloped Acreage........................... 15
5.20. FIRPTA Disclaimer ............................ 15
5.21. Imbalances ................................... 15
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5.22. Environmental Matters......................... 15
5.23. Registration Statement........................ 15
5.24. Taylorco Transaction ......................... 16
5.25. No Representation or Warranty ................ 16
VI. REPRESENTATION AND WARRANTIES OF BUYER................ 16
6.1. Organization ................................. 16
6.2. Qualification ................................ 16
6.3. Authority Relative to This Agreement ......... 17
6.4. Noncontravention.............................. 17
6.5. Governmental Approvals ....................... 17
6.6. Capitalization ............................... 17
6.7. Consideration Shares ......................... 18
6.8. Registration Statement ....................... 18
6.9. Charter and Bylaws ........................... 18
VII. COVENANTS AND AGREEMENTS OF THE PARTIES PRIOR TO,
AT AND AFTER THE CLOSING.............................. 18
7.1. Operation of Properties Prior to Closing...... 19
7.2. Conduct of Buyer's Business Prior to Closing.. 19
7.3. Access to Information ........................ 23
7.4. Confidentiality .............................. 24
7.5. HSR Act Notification ......................... 24
7.6. Public Offering .............................. 24
7.7. Registration Rights Agreement ................ 25
7.8. Investment Agreement ......................... 25
7.9. Exploration Agreement......................... 25
7.10. Notice of Litigation ......................... 26
7.11. Notification of Certain Matters .............. 26
7.12. Preferential Right to Purchase ............... 26
7.13. Public Announcements ......................... 27
7.14. Filing and Recording of Assignments, Etc ..... 27
7.15. Access to Records After Closing .............. 27
7.16. Transfer of Geoscience Data .................. 28
7.17. Santa Fe Separate Disclosure Schedule ........ 28
7.18. Sales and Other Taxes ........................ 28
7.19. Fees and Expenses ............................ 28
7.20. Brokers. ..................................... 28
7.21. Over-allotment Option After Closing .......... 29
7.22. Agreement to Convey .......................... 29
7.23. Britt Ranch Imbalance ........................ 29
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7.24. Wyoming Ad Valorem Tax ....................... 30
7.25. Purchase of Taylorco NPI ..................... 30
7.26. Further Assurances ........................... 30
VIII. TITLE DEFECTS AND RELATED PURCHASE PRICE ADJUSTMENTS.. 31
8.1. Notice of Title Defects ...................... 31
8.2. Purchase Price Reductions for Title Defects .. 31
8.3. Purchase Price Increases...................... 32
8.4. Adjustment to Purchase Price ................. 34
8.5. Right to Terminate ........................... 34
8.6. Certain Agreements Regarding Disputes ........ 34
8.7. Allocations .................................. 36
IX. CONDITIONS TO OBLIGATIONS OF SELLER .................. 36
9.1. Representations and Warranties True .......... 36
9.2. Covenants and Agreements Performed............ 36
9.3. Certificate................................... 36
9.4. Opinion of Counsel ........................... 36
9.5. HSR Act ...................................... 36
9.6. Legal Proceedings ............................ 37
X. CONDITIONS TO OBLIGATION OF BUYER .................... 37
10.1. Representations and Warranties True .......... 37
10.2. Covenants and Agreements Performed ........... 37
10.3. Certificate .................................. 37
10.4. Opinion of Counsel ........................... 37
10.5. HSR Act ...................................... 37
10.6. Legal Proceedings ............................ 37
XI. TERMINATION, AMENDMENT AND WAIVER .................... 38
11.1. Termination .................................. 38
11.2. Amendment .................................... 38
11.3. Waiver........................................ 38
XII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.......... 39
12.1. Survival ..................................... 39
12.2. Indemnification by Seller .................... 40
12.3. Indemnification by Buyer ..................... 40
12.4. Certain Limitations on Seller's Liability .... 41
12.5. Procedure for Indemnification ................ 41
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XIII. CASUALTY LOSS AND CONDEMNATION ....................... 42
XIV. CERTAIN ACCOUNTING ADJUSTMENTS........................ 43
14.1. Adjustments................................... 43
14.2. Accounting.................................... 44
XV. MISCELLANEOUS .......................................... 44
15.1. Notices ...................................... 44
15.2. Entire Agreement.............................. 45
15.3. Binding Effect: Successors and Assigns........ 45
15.4. Severability ................................. 46
15.5. No Third-Party Beneficiaries ................. 46
15.6. DTPA Waiver .................................. 46
15.7. Governing Law ................................ 46
15.8. Counterparts ................................. 47
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AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE dated December 2, 1993, is
made and entered into by and among Santa Fe Energy Resources, Inc., a
Delaware corporation ("SFER"), Santa Fe Energy Operating Partners,
L.P., a Delaware limited partnership ("SFEOP"), and Bridge Oil
(U.S.A.) Inc., a Delaware corporation ("BRIDGE").
RECITALS:
A. SFER and SFEOP desire to sell to Bridge certain oil, gas and
mineral properties and other assets on the terms and conditions set
forth herein and are herein sometimes collectively called the
"SELLER."
B. Bridge desires to purchase from Seller certain oil, gas and
mineral properties and other assets on the terms and conditions
contained herein and is herein sometimes called the "BUYER."
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants and agreements contained herein, Seller and Buyer
do hereby agree as follows:
I. DEFINED TERMS AND REFERENCES
1.1. DEFINED TERMS. When used in this Agreement, the following
terms shall have the respective meanings assigned to them in this
SECTION 1.1 or in the articles, sections, subsections or other
subdivisions referred to below:
"ADDITIONAL SHARES" shall have the meaning assigned to it in
SECTION 7.21.
"AGREED DEFECT'' shall mean a Title Defect arising pursuant
to SECTION 8.2 that is uncured, has not been waived prior to
Closing by Buyer and for which there is no disagreement between
Buyer and Seller as to whether it exists or has been cured or the
amount of the related Purchase Price reduction.
"AGREED INCREASE" shall mean an increase in the Purchase
Price arising pursuant to SECTION 8.3 for which there is no
disagreement between Buyer and Seller as to its existence or the
amount thereof.
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"AGREEMENT" shall mean this Agreement of Sale and Purchase,
as hereafter amended or modified in accordance with the terms
hereof.
"APPLICABLE LAW" shall mean any statute, law, rule, or
regulation or any judgment, order, writ, injunction, or decree of
any Governmental Entity to which a specified person or property
is subject.
"APPLICABLE CONTRACT" shall mean any joint operating
agreement or any purchase, sale, transportation, balancing,
processing, or treating agreement or any unitization,
communitization, pooling, lease, farm-out, farm-in, royalty,
overriding royalty, development, easement, right-of-way, or other
agreement with respect to any of the rights, titles, interests
and estates agreed to be sold to Buyer hereunder, or production
or the proceeds of production from any of such rights, titles,
interests and estates.
"BRIDGE COMMON STOCK" shall mean the shares of common stock
of Buyer, $.01 par value per share.
"BRIDGE LP" shall have the meaning assigned to it in
SECTION 15.3.
"BUYER" shall have the meaning assigned to it in PARAGRAPH B
of the Recitals.
"BUYER GROUP" shall have the meaning assigned to it in
SECTION 12.2.
"CASH PORTION OF PURCHASE PRICE" shall mean that portion of
the Purchase Price payable to Seller in cash as determined in
accordance with ARTICLES III, VIII and XIV and SECTIONS 7.1
and 7.12.
"CLAIMED DEFECT" shall mean a claimed Title Defect arising
pursuant to SECTION 8.2 for which there is a disagreement between
Buyer and Seller as to whether it exists or has been cured or the
amount of the related Purchase Price reduction and which has not
been waived by Buyer prior to Closing.
"CLAIMED INCREASE" shall mean a claimed increase in the
Purchase Price arising pursuant to SECTION 8.3 for which there is
a disagreement between Buyer and Seller as to whether it exists
or the amount thereof.
"CLOSING" shall have the meaning assigned to it in
SECTION 4.1.
"CLOSING DATE" shall have the meaning assigned to it in
SECTION 4.1.
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"CODE" shall mean the Internal Revenue Code of 1986 or any
successor statute or statutes, as amended from time to time.
"CONSIDERATION SHARES" shall mean the shares of Bridge
Common Stock to be issued to Seller as determined in accordance
with ARTICLE III and SECTION 7.21.
"DAMAGES" shall have the meaning assigned to it in
SECTION 12.2.
"EFFECTIVE DATE" shall mean 7:00 a.m., local time, at the
location of the Properties on December 1, 1993.
"ENVIRONMENTAL CLAIM" shall have the meaning assigned to it
in SECTION 12.1.
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating
to health, safety or the environment.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXCLUDED ASSETS" shall refer to any of the Properties that
are excluded from the transactions contemplated hereby pursuant
to SECTION 7.1, 7.12 or 8.2.
"EXPLORATION AGREEMENT" shall have the meaning assigned to
it in SECTION 7.9.
"GEOSCIENCE DATA" shall mean Seller's geological and
geophysical data related to the Oil and Gas Properties, including
(without limitation), prospect and other maps, the seismic
records listed in SCHEDULE C, well logs, scout tickets, and
completion cards related to the Oil and Gas Properties.
"GOVERNMENTAL ENTITY" shall mean any court or tribunal in
any jurisdiction (domestic or foreign) or any public,
governmental, or regulatory body, agency, department, commission,
board, bureau, or other authority or instrumentality (domestic or
foreign).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HYDROCARBONS" shall mean crude oil, natural gas, casinghead
gas, condensate, sulphur, natural gas liquids and other liquid or
gaseous hydrocarbons (including C02), and shall also refer to any
other minerals of every kind and character which may be covered
by or included in the Oil and Gas Properties.
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"IMBALANCE" shall mean any gas production imbalance existing
with respect to any of the Oil and Gas Properties, together with
any related rights or obligations as to future cash and/or gas
balancing (subject, however, to SECTION 7.23).
"INITIAL REGISTRATION STATEMENT" shall have the meaning
assigned to it in SECTION 6.8.
"INITIAL SHARES" shall have the meaning assigned to it in
ARTICLE III.
"INITIAL STOCK VALUE" shall have the meaning assigned to it
in ARTICLE III.
"INVESTMENT AGREEMENT" shall have the meaning assigned to it
in SECTION 7.8.
"NGPA" shall have the meaning assigned to it in
SECTION 5.16.
"NGPA REGULATIONS" shall have the meaning assigned to it in
SECTION 5.16.
"NON-OPERATED PROPERTIES" shall mean those Properties with
respect to which Seller is not serving as operator.
"OFFERING" shall mean the public offering of Bridge Common
Stock referenced in SECTION 7.6.
"OFFERING CLOSING DATE" shall mean the date on which Buyer
consummates the sale of the Bridge Common Stock pursuant to the
Offering.
"OFFERING PRICE" shall mean the public offering price set
forth on the cover page of the final prospectus relating to the
registration statement filed with the SEC with respect to the
Offering.
"OFFERING TERMINATION NOTICE" shall have the meaning
assigned to it in SECTION 7.6.
"OIL AND GAS PROPERTIES" shall mean the properties described
in PARAGRAPHS (a), (b), and (c) of the definition of
"Properties."
"PARENT" shall mean Bridge Oil Limited, an Australian
company.
"PERMITTED ENCUMBRANCES" shall mean any of the following
matters:
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(a) the terms, conditions, restrictions, exceptions,
reservation, limitations and other matters contained in the
agreements, instruments and documents which create or
reserve to Seller its interests in any of the Oil and Gas Properties,
provided they do not operate (i) to reduce the net revenue interest,
nor increase the working interest (without a corresponding increase in
the net revenue interest), of Seller in the Oil and Gas Properties as
reflected in SCHEDULE A hereto or (ii) to reduce the net acres of
Seller in the Oil and Gas Properties as reflected in SCHEDULE B
hereto;
(b) any tax, regulatory, mechanic's, materialman's,
contractor's, operator's, lessor's, or other liens or encumbrances
created by contract or law which are undetermined or inchoate;
(c) all Applicable Contracts listed in the Santa Fe Separate
Disclosure Schedule to the extent that any Applicable Contract does
not result in any mortgage, lien or security interest on any of the
Properties;
(d) easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other similar rights-of-
way, on, over, or in respect of property owned or leased by Seller or
over which Seller owns rights-of-way, easements, permits, or licenses
to the extent such matters, individually or in the aggregate, do not
interfere materially with oil and gas operations on the Oil and Gas
Properties;
(e) rights reserved to or vested in any Governmental Entity to
control or regulate any of the Properties in any manner;
(f) conventional rights of reassignment arising immediately
prior to the termination or expiration of an oil and gas lease or upon
a decision or election by the owner of an oil and gas lease to
surrender or abandon all or any portion of same;
(g) rights to consent by, required notices to, filings with, or
actions by Governmental Entities in connection with the sale, transfer
or conveyance of federal, state, Indian or other governmental agency
oil and gas leases or interests therein, where the same are
customarily obtained or made subsequent to the assignment of such oil
and gas leases or interests therein; and
(h) any agreement, contract, lease, instrument, permit,
amendment, or extension entered into by Seller following the date of
this Agreement in accordance with SECTION 7.1.
"PROCEEDINGS" shall mean all proceedings, actions, claims,
suits, investigations, and inquiries by or before any arbitrator or
Governmental Entity.
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"PROPERTIES" shall mean:
(a) All of Seller's right, title and interest in and to the lands
underlying the leases and other documents described in Schedules A and
B (and in and to any ratifications and/or amendments to such leases
and other documents, whether or not such ratifications or amendments
are described in such Schedules A and B) and all wells (including
wells which may be currently producing, not producing, in the process
of or awaiting completion, or drilling) located upon such lands or
upon any lands with which any portion of such leases or lands may be
pooled, communitized, or unitized (either voluntary or by compulsory
order);
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Seller in and to the
oil, gas and other minerals in and under and that may be produced from
the lands underlying the leases or other documents described in
Schedules A and B (including, without limitation, interests in oil,
gas and/or mineral leases covering such lands, overriding royalty
interests, production payments and net profits interests in such
lands, and fee royalty interests, fee mineral interests and other
interests in such oil, gas and other minerals);
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from all presently existing and valid oil, gas
and/or mineral unitization, pooling, and/or communitization
agreements, declarations and/or orders in and to the properties
covered and the units created thereby (including, without limitation,
units formed under orders, rules, regulations or other official acts
of any Governmental Entity having jurisdiction, voluntary unitization
agreements, designations and/or declarations, and so called "working
interest units" created under operating agreements or otherwise) which
relate to any of the properties described in paragraphs (a) and (b)above;
(d) All production from the properties described in paragraphs
(a), (b), and (c) above after the Effective Date and all merchantable
allowable oil or liquids owned by Seller and stored in tanks on the
lands covered by the leases and other documents described on Schedules
A and B on the Effective Date;
(e) All rights and obligations of Seller with respect to
Imbalances in existence as of the Effective Date (subject to Section 7.23).
(f) All rights, titles and interests of Seller in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts which relate to any of
the properties described in PARAGRAPHS (a), (b) and (c) above, or
which relate to the exploration, development, operation or maintenance
thereof or the
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treatment, storage, transportation or marketing of production
therefrom (or allocated thereto), including accounts receivable and
payable arising from any of the foregoing and attributable to any
period after the Effective Date;
(g) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not by way of
limitation, the items listed in Schedule D) appurtenant to the
properties described in PARAGRAPHS (a), (b) and (c) above; and
(h) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting or tax accounting records), Geoscience
Data, and all other files, documents and records which directly relate
to the properties described above (unless, subject to SECTION 7.16,
Seller is prohibited from transferring any such items pursuant to the
terms of a third-party agreement).
The Properties shall not include any properties or other assets
of Seller classified hereunder as Excluded Assets.
"PURCHASE PRICE" shall have the meaning assigned to it in
ARTICLE III.
"PURCHASE PRICE INCREASES" shall have the meaning assigned
to it in SECTION 8.3.
"PURCHASE PRICE REDUCTIONS" shall have the meaning assigned
to it in SECTION 8.2.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning
assigned to it in SECTION 7.7.
"REGISTRATION STATEMENT'' shall have the meaning assigned to
it in SECTION 7.6.
"RESERVE REPORT" shall mean that certain reserve report
attached as SCHEDULE E.
"ROYALTY TRUST" shall mean that certain Trust Agreement of
the Santa Fe Energy Trust dated November 19, 1992, between SFER
and Texas Commerce Bank, National Association, as Trustee.
"SANTA FE SEPARATE DISCLOSURE SCHEDULE" shall have the
meaning assigned to it in SECTION 7.17.
"SCHEDULE A" shall mean SCHEDULES A-1 and A-2.
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"SCHEDULE B" shall mean SCHEDULES B-1, B-2 and B-3.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SELLER" shall have the meaning assigned to it in PARAGRAPH
A of the Recitals.
"SELLER GROUP" shall have the meaning assigned to it in
SECTION 12.3.
"SFER SUB" shall have the meaning assigned to it in
SECTION 15.3.
"SPLIT POINT" shall have the meaning assigned to it in
SECTION 12.4(b).
"SURVIVAL DATE" shall have the meaning assigned to it in
SECTION 12.1.
"TAYLORCO" shall mean Taylorco, Inc.
"TAYLORCO PURCHASE AGREEMENT" shall mean that certain
Purchase Agreement dated as of August 22, 1988, by and between
SFEOP and Taylorco, as amended.
"THRESHOLD AMOUNT" shall have the meaning assigned to it in
SECTION 12.4 (b).
"TITLE DEFECT" shall refer to any matter which would cause
the representations of Seller in Section 5.9 not to be true.
"UNDERWRITERS" shall mean the underwriters named in the
Registration Statement.
"UNDERWRITING AGREEMENT" shall mean the underwriting agreement
to be entered into by Morgan Stanley & Co. Incorporated, Donaldson
Lufkin & Jenrette Securities Corporation, UBS Securities Inc. and S.G.
Warburg and Co. Inc., as representatives of the Underwriters, and
Buyer relating to the Offering.
1.2. REFERENCES. All references in this Agreement to articles,
sections, subsections and other subdivisions refer to corresponding
sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any
of such subdivisions are for convenience only and shall not constitute
part of such subdivisions and shall be disregarded in construing the
language contained in such subdivisions. The words "this
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Agreement", "herein", "hereby", "hereof", "hereunder" and words of
similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. Words in the
singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
II. AGREEMENT TO SELL AND PURCHASE
At the Closing and subject to the terms and conditions hereof,
Seller shall sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase, acquire, accept and pay for, the Properties.
III. PURCHASE PRICE
The total consideration for the Properties (the "PURCHASE
PRICE") shall be payable in cash and Bridge Common Stock as follows.
The portion of the Purchase Price to be paid by Buyer in cash shall be
$15,000,000 (unless otherwise adjusted as provided below). The portion
of the Purchase Price to be paid by Buyer in Bridge Common Stock
(unless otherwise adjusted as provided below) shall be that number of
shares of Bridge Common Stock (the "Initial Shares") which,
immediately upon the consummation of the Offering and the Closing
hereunder, shall equal 10% of all issued and outstanding shares of
Bridge Common Stock excluding any shares of Bridge Common Stock issued
under the Bridge Oil & Gas, Inc. 1993 Stock Option Plan in such amount
and as described in the Initial Registration Statement; provided, that
if the product of the Initial Shares and the Offering Price (the
"Initial Stock Value") is less than $36,000,000, then Buyer shall, at
its option, either (a) increase the portion of the Purchase Price to
be paid in cash by an amount equal to the difference between
$36,000,000 and the Initial Stock Value, (b) increase the number of
shares of Bridge Common Stock to be tendered by an amount such that
the product of the total shares of Bridge Common Stock so tendered and
the Offering Price equals $36,000,000 or (c) increase the portion of
the Purchase Price to be paid in cash and increase the number of
shares of Bridge Common Stock to be tendered such that the sum of (i)
the additional cash referred to above in this clause (c), plus (ii)
the product of the additional shares of Bridge Common Stock referred
to above in this clause (c) and the Offering Price, plus (iii) the
Initial Stock Value equals $36,000,000; provided further, that if
Buyer makes a determination not to consummate the Offering in
accordance with the provisions of Section 7.6, the number of shares of
Bridge Common Stock shall be reduced to zero and the portion of the
Purchase Price to be paid in cash shall be increased to $51,000,000
(unless otherwise adjusted as provided below); and, provided further,
that if Buyer consummates the Offering and (A) the aggregate proceeds
realized therefrom is an amount less than $75,000,000 (prior to
underwriting discounts and payment of expenses attributable to the
Offering) or (B) the proceeds received by Buyer from the sale of
Bridge Common Stock, after deducting therefrom all amounts paid or,
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at the Closing Date, anticipated to be paid to Parent out of such
proceeds is less than $25,000,000 (prior to underwriting discounts and
payment of expenses attributable to the Offering), then, at Seller's
option, the number of shares of Bridge Common Stock shall be reduced
to zero and the portion of the Purchase Price to be paid in cash shall
be increased to $51,000,000 (unless otherwise adjusted as provided
below). Buyer shall also be required to tender to Seller additional
shares of Bridge Common Stock under the circumstances described in
SECTION 7.21. The portion of the Purchase Price to be paid in cash
shall be subject to adjustment as provided in this ARTICLE III, in
SECTIONS 7.1 and 7.12 and in ARTICLES VIII and XIV.
IV. THE CLOSING
4.1. CLOSING. The Closing of the transactions contemplated
hereunder (the "CLOSING") shall take place in the offices of SFER, at
10:00 a.m. local time, or at such other place or time as the parties
may agree in writing, (a) if the Offering is consummated, on the
Offering Closing Date or (b) if the Offering is not consummated, on
the date which is 10 days after the date on which Seller receives the
Offering Termination Notice from Buyer (or, if such date on which the
Closing would otherwise occur under this CLAUSE (b) is not a business
day in the State of Texas, on the first business day in the State of
Texas immediately thereafter). The date on which the Closing is
required to take place is herein referred to as the "CLOSING DATE."
4.2. SELLER'S CLOSING OBLIGATIONS. At the Closing, Seller shall
deliver to Buyer the following:
(a) a duly executed Conveyance, substantially in the form of
EXHIBIT 4.2(a) in all material respects, effective as of the
Effective Date;
(b) letters in lieu of transfer order (or similar
documentation), in form acceptable to both parties;
(c) the certificate of Seller referred to in SECTION 10.3;
(d) the legal opinion referred to in SECTION 10.4; and
(e) evidence of Seller's compliance with the HSR Act.
4.3. BUYER'S CLOSING OBLIGATIONS. At the Closing, Buyer shall
deliver to Seller the following:
(a) the Cash Portion of the Purchase Price by wire transfer
of immediately available funds to a bank account or bank accounts
designated by Seller;
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(b) a certificate or certificates representing the
Consideration Shares registered in the name of Seller;
(c) the certificate of Buyer referred to in SECTION 9.3;
(d) the legal opinions referred to in SECTION 9.4; and
(e) evidence of Buyer's compliance with the HSR Act.
V. REPRESENTATIONS AND WARRANTIES OF SELLER
SFER and SFEOP, jointly and severally, hereby represent and
warrant to Buyer that:
5.1. ORGANIZATION. SFER is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and SFEOP is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Delaware.
Seller has all requisite power and authority to own, lease, and
operate the Properties and to carry on its business as now being
conducted.
5.2. QUALIFICATION. Seller is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
Properties are located to the extent such qualification or licensing
is required.
5.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery, and performance by Seller of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been
duly authorized by all necessary corporate (in the case of SFER) or
partnership (in the case of SFEOP) action of Seller. This Agreement
has been duly executed and delivered by Seller and constitutes, and
each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated
hereby has been, or when executed will be, duly executed and delivered
by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with their respective terms,
except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally.
5.4. NONCONTRAVENTION. The execution, delivery, and performance
by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby do not and will not (a) conflict with
or result in a violation of any provision of its Certificate of
Incorporation or Bylaws (in the case of SFER) or its partnership
agreement and other governing documents
11
(in the case of SFEOP), (b) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice
or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, agreement, or other
instrument or obligation to which Seller is a party or by which Seller
or any of the Properties may be bound, (c) result in the creation or
imposition of any lien, charge, pledge, mortgage, security interest,
easement or other encumbrances of every type or description, whether
imposed by law, agreement or otherwise, upon any of the Properties, or
(d) assuming compliance with the matters referred to in SECTION 5.5,
violate any Applicable Law binding upon Seller or any of the
Properties.
5.5. GOVERNMENTAL CONSENTS. No consent, authorization or
approval of any Governmental Entity is required for the execution and
delivery by Seller of this Agreement or the transfer to Buyer in
accordance with this Agreement of the Properties except (a) for the
requirements of the HSR Act and (b) for filings which constitute a
Permitted Encumbrance in accordance with PARAGRAPH (g) of the
definition thereof.
5.6. LEGAL PROCEEDINGS. Except as otherwise set forth in
SCHEDULE 5.6, there are no Proceedings pending or, to Seller's
knowledge, overtly threatened against or involving Seller which might
result in the impairment or loss of title to any of the Oil and Gas
Properties or the value thereof or impede the operation of any of the
Oil and Gas Properties or that, if adversely determined, would delay
or prevent the consummation of the transactions contemplated hereby.
5.7. COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 5.7,
Seller is not in violation of or in default under any Applicable Law
relating to the ownership or operation of the Oil and Gas Properties,
and no claim is pending or, to Seller's knowledge, overtly threatened
with respect to any such matters which if determined adversely to
Seller would have such effect (provided, that with respect to
Non-Operated Properties, the foregoing representation is limited to
Seller's knowledge). Without limitation of the foregoing, and except
as provided in SCHEDULE 5.7, all of the wells comprising a part of the
Oil and Gas Properties have been drilled and completed in accordance
with Applicable Law, and no well comprising a part of the Oil and Gas
Properties is or was subject to any penalty on production allowables
because of overproduction or any other violation of Applicable Law
which would now or hereafter prevent such well from being entitled to
its full legal and regular allowable production as prescribed by any
Governmental Entity (provided, that with respect to Non-Operated
Properties, the foregoing representation and warranty is limited to
Seller's knowledge).
5.8. COMMITMENTS. Except as provided in the Applicable
Contracts listed in the Santa Fe Separate Disclosure Schedule, the
oil, gas or mineral leases or other interests constituting the Oil and
Gas Properties listed on SCHEDULE A and the Applicable Contracts
relating thereto, under circumstances as they exist and will exist as
of the Closing Date (a) contain no provisions that
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require the drilling of additional wells or other material development
operations in order to earn or continue to hold all or a portion of
such Oil and Gas Properties and (b) contain no provisions that require
the commitment or investment of funds (other than routine expenses
incurred in the normal operation of existing wells on such Oil and Gas
Properties), which provisions described in CLAUSES (a) and (b) cannot
be avoided by no more than the release of all or part of such Oil and
Gas Properties.
5.9. TITLE TO OIL AND GAS PROPERTIES. Seller has good and
defensible title to the Oil and Gas Properties, free and clear of all
mortgages, liens, security interests, encumbrances and other burden
except for the Permitted Encumbrances. With respect to each Oil and
Gas Property listed on SCHEDULE A, the ownership of Seller in such Oil
and Gas Property (a) entitles Seller to receive not less than the net
revenue interest of Seller set forth in SCHEDULE A of the oil and gas
produced, saved and marketed from or attributable to such Oil and Gas
Property and (b) obligates Seller to bear the costs and expenses
relating to maintenance, development, production and operation in an
amount not greater than the working interest of Seller for such Oil
and Gas Property set forth in SCHEDULE A (without a corresponding
increase in the net revenue interest). With respect to each Oil and
Gas Property listed on SCHEDULE B, Seller has the right to explore
for, and produce and market, oil and gas attributable to the number of
net acres for such Oil and Gas Property stated on SCHEDULE B. All
preferential rights of purchase that exist with respect to the
transfer by Seller to Buyer of the Oil and Gas Properties will be as
set forth in the Santa Fe Separate Disclosure Schedule and will have
been exercised or waived prior to the Closing. All consents of third
parties that exist with respect to the transfer by Seller to Buyer of
the Oil and Gas Properties (exclusive of those described in SECTION
5.5) will be as set forth in the Santa Fe Separate Disclosure Schedule
and will have been obtained prior to the Closing. All of the wells
comprising a part of the Oil and Gas Properties have been drilled and
completed within the boundaries of the applicable leases or within
limits otherwise permitted by a valid and enforceable pooling, unit or
other agreement or contract.
5.10. COMPLIANCE WITH AGREEMENTS. The Santa Fe Separate
Disclosure Schedule will contain a complete and accurate list of all
Applicable Contracts in effect on the date of this Agreement, and
Seller is not in default with regard to any agreement listed therein
(except as to any such matters that may or would result in a Title
Defect); provided, however, that with respect to the Non-Operated
Properties, the representations and warranties in this SECTION 5.10
are made solely to the knowledge of Seller. Except as set forth in the
Santa Fe Separate Disclosure Schedule, Seller has not been notified or
advised in writing by any other party to an Applicable Contract of
such party's intention or desire to terminate or modify in any
material respect such Applicable Contract (exclusive, however, of any
such termination or modification permitted in SECTION 7.1).
5.11. TAKE OR PAY ARRANGEMENTS. Seller is not obligated by
virtue of a prepayment arrangement, "take or pay" arrangement,
production payment, or other instrument to deliver or
13
suffer the delivery of oil, gas and other minerals produced from the
Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor without deduction or credit on account
of such arrangement from the price which would otherwise be received,
except as described in the Applicable Contracts listed in the Santa Fe
Separate Disclosure Schedule.
5.12. RECEIPTS AND PAYMENTS. Except for those matters
identified on SCHEDULE 5.12, Seller is currently receiving for each
well listed on SCHEDULE A-l (other than a well identified as a
"composite well" on SCHEDULE A-1) payment for at least the net revenue
interest set forth in SCHEDULE A-1 for such well without (a) any delay
such that payment is not received within 90 days as to wells operated
by Seller and six months as to wells not operated by Seller after the
end of the month in which production occurs; (b) suspense; or (c) any
indemnity other than indemnities customarily given in connection with
division orders or sales or other applicable contracts. Except as
shown on SCHEDULE 5.12, Seller is not currently paying more than the
percentage of operating and other costs for each well listed on
SCHEDULE A-1 (other than a well identified as a "composite well" on
SCHEDULE A-l) than the working interest set forth in SCHEDULE A-l for
such well and Seller is current for all costs and expenses pertaining
thereto for which it has been billed.
5.13. PAYMENT OF EXPENSES. All expenses, (including, without
limitation, all bills for labor, materials and supplies used or
furnished for use in connection with the Oil and Gas Properties, and
all severance, production, ad valorem and other similar taxes) and
liabilities relating to the ownership or operation of the Oil and Gas
Properties, have been, and are being, paid on a timely basis
(provided, however, with respect to Non-Operated Properties, the
representations and warranties in this SECTION 5.13 are made solely to
the knowledge of Seller).
5.14. SALES OF PRODUCTION. There exist no agreements or
arrangements for the sale of production from the Oil and Gas
Properties (including, without limitation, calls on, or other rights
to purchase, production, whether or not the same are currently being
exercised) other than (a) as contained in the agreements or other
documents identified in the Santa Fe Separate Disclosure Schedule and
(b) agreements or arrangements which are cancelable on 60 days' notice
or less without penalty or detriment (provided, that with respect to
Non-Operated Properties, the foregoing representation and warranty is
limited to Seller's knowledge).
5.15. AREA OF MUTUAL INTEREST AND OTHER AGREEMENTS. Except for
those agreements or tax partnerships listed in the Santa Fe Separate
Disclosure Schedule or otherwise referred to in the agreements or
other documents identified in the Santa Fe Separate Disclosure
Schedule, no Oil and Gas Property is subject to (a) any area of mutual
interest agreements, (b) any farm-out agreement under which any party
thereto is entitled to receive assignments not yet made, or could earn
additional assignments after the Effective Date, or (c) any tax
partnership.
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5.16. CERTAIN FILINGS. With respect to Oil and Gas Properties
of which Seller is operator: (a) Seller has filed or caused to be
filed with applicable Federal agencies applications required to be
filed for well category determinations under the Natural Gas Policy
Act of 1978 (the "NGPA") and rules and regulations of the Federal
Energy Regulatory Commission under the NGPA (the "NGPA Regulations")
relating to the Oil and Gas Properties; (b) each such application has
been approved, withdrawn by Seller, or is pending approval by the
appropriate state and Federal agency; (c) all of such applications to
the extent filed and not amended or withdrawn are in compliance in all
material respects with the requirements of the NGPA and the NGPA
Regulations; and (d) no further applications are required under the
NGPA or the NGPA Regulations to allow the legal sale of all gas
produced from the Oil and Gas Properties at a price equal to the price
for such gas currently being received.
5.17. ERISA. Seller and its Related Companies (as defined
below) have paid and discharged when due all liabilities under ERISA
which if unpaid would result in the imposition of a lien against the
Properties. The term "Related Companies" means all corporations,
trades, or businesses during any period that they are, along with the
Seller, members of a controlled group of corporations or a controlled
group of trades or businesses (as described in Section 414(b) and (c),
respectively, of the Code).
5.18. TAXES. Seller and its affiliates have paid and discharged
when due all taxes due and owing by them which if unpaid would result
in a lien against the Properties. None of the Properties is subject to
any lease, safe harbor lease or other arrangement pursuant to which
Buyer will be treated after the Closing Date as the owner for Federal
income tax purposes.
5.19. UNDEVELOPED ACREAGE. With respect to the Properties
described in SCHEDULE B and except as otherwise contemplated in the
Exploration Agreement, Seller has not created any royalty interest,
overriding royalty interest or similar burdens in favor of Seller or
any affiliate of Seller.
5.20. FIRPTA DISCLAIMER. Seller is not a foreign person or
foreign corporation under the Deficit Reduction Act of 1984, 26 U.S.C.
Section 1445, ET SEQ. and none of the Purchase Price needs to be
withheld pursuant to such statute or the regulations promulgated
thereunder.
5.21. IMBALANCES. To Seller's knowledge, the information
relating to Imbalances stated in SCHEDULE 5.21 is true and correct as
of the date reflected in such Schedule.
5.22. ENVIRONMENTAL MATTERS. Except as described in SCHEDULE
5.22, Seller has complied with all applicable Environmental Laws
relating to the ownership and operation of the Oil and Gas Properties.
Except as described in SCHEDULE 5.22, there are no pending or, to
Seller's knowledge, overtly threatened, actions, suits, written
notices or Proceedings by any Governmental Entity or third party
relating to any violation or alleged violation by Seller of any
15
applicable Environmental Laws with respect to the Oil and Gas
Properties. Seller has obtained or filed all environmental notices,
permits or similar authorizations required to be obtained or filed in
connection with the ownership or operation of the Oil and Gas
Properties. Except as described in SCHEDULE 5.22, no condition exists
on or with respect to any of the Oil and Gas Properties which would
subject Seller, Buyer or any of the Oil and Gas Properties to any
remedial obligations under any applicable Environmental Laws. Buyer
hereby acknowledges that this SECTION 5.22 is the exclusive
representation and warranty made by Seller in this Agreement with
respect to applicable Environmental Laws and no other representation
and warranty in this Agreement shall be deemed to cover such matters.
5.23. REGISTRATION STATEMENT. None of the information supplied
by Seller in writing specifically for use in the Registration
Statement, at the time it becomes effective, will contain any
statement which, at such time and in light of the circumstances under
which it shall be made, is false or misleading with respect to any
material fact, or will omit to state any material fact necessary in
order to make the statement therein not false or misleading.
5.24. TAYLORCO TRANSACTION. "Payout" (as defined in the
Taylorco Purchase Agreement) has occurred under the terms of the
Taylorco Purchase Agreement.
5.25. NO REPRESENTATION OR WARRANTY. Notwithstanding anything
to the contrary in this Agreement (including this ARTICLE V), Seller
makes no representation or warranty with respect to, and Buyer assumes
the risk of and shall satisfy itself with respect to, the physical
condition of the equipment, personal property and other fixtures
included in the Properties. THE EQUIPMENT, PERSONAL PROPERTY AND OTHER
FIXTURES INCLUDED IN THE PROPERTIES IS SOLD "AS IS, WHERE IS" AND
SELLER MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, IN FACT OR IN
LAW, OF MERCHANTABILITY, FITNESS FOR ANY PURPOSE, STATE OF REPAIR,
CONDITION OR SAFETY OF THE EQUIPMENT, PERSONAL PROPERTY AND OTHER
FIXTURES INCLUDED IN THE PROPERTIES. Seller also makes no
representation or warranty with respect to the quality, quantity or
volume of the Hydrocarbons in and under the Oil and Gas Properties.
VI. REPRESENTATION AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
6.1. ORGANIZATION. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease, and
operate its properties and to carry on its business as now being
conducted.
16
6.2. QUALIFICATION. Buyer is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
property owned, leased, or operated by it or the conduct of its
business requires such qualification or licensing.
6.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has full power
and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery, and performance by Buyer of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action of Buyer. This
Agreement has been duly executed and delivered by Buyer and
constitutes, and each other agreement, instrument, or document
executed or to be executed by Buyer in connection with the
transactions contemplated hereby has been, or when executed will be,
duly executed and delivered by Buyer and constitutes, or when executed
and delivered will constitute, a valid and legally binding obligation
of Buyer, enforceable against Buyer in accordance with their
respective terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally.
6.4. NONCONTRAVENTION. The execution, delivery, and performance
by Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby do not and will not (a) conflict with
or result in a violation of any provision of the charter or bylaws of
Buyer, (b) conflict with or result in a violation of any provision of,
or constitute (with or without the giving of notice or the passage of
time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its
properties may be bound, (c) result in the creation or imposition of
any lien, charge, pledge, mortgage, security interest, easement or
other encumbrance of every type or description, whether imposed
by law, agreement or otherwise, upon the properties of Buyer, other
than the Properties, or (d) assuming compliance with the matters
referred to in SECTION 6.5, violate any Applicable Law binding upon
Buyer.
6.5. GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or
made by Buyer in connection with its execution, delivery, or
performance of this Agreement or the consummation by it of the
transactions contemplated hereby, other than (a) compliance with
any applicable requirements of the HSR Act; (b) compliance with any
applicable requirements of the Securities Act; (c) compliance with any
applicable state securities laws; and (d) filings with Governmental
Entities to occur in the ordinary course following the consummation of
the transactions contemplated hereby.
17
6.6. CAPITALIZATION. All issued and outstanding shares of
capital stock of Buyer have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of Buyer are subject to,
nor have any been issued in violation of, preemptive or similar
rights. Except for the obligations of Buyer pursuant to this Agreement
and except as otherwise disclosed in the Initial Registration
Statement, there are outstanding (a) no options or other rights to
acquire from Buyer, and no obligation of Buyer to issue or sell, any
shares of capital stock or other voting securities of Buyer or any
securities of Buyer convertible into or exchangeable for such capital
stock or voting securities, and (b) no equity equivalents, interests
in the ownership or earnings, or other similar rights of or with
respect to Buyer. There are no outstanding obligations of Buyer to
repurchase, redeem, or otherwise acquire any shares of its capital
stock.
6.7. CONSIDERATION SHARES. The Consideration Shares have been
duly authorized for issuance and, when issued and delivered by Buyer
in accordance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance of the
Consideration Shares under this Agreement is not subject to any
preemptive or similar rights.
6.8. REGISTRATION STATEMENT. The Registration Statement
initially filed with the SEC (the "INITIAL REGISTRATION STATEMENT")
shall conform in all material respects to the draft of such document
attached hereto as EXHIBIT 6.8. The Initial Registration Statement
shall comply with the form, disclosure and other requirements of the
Securities Act. None of the information included by Buyer in the
Initial Registration Statement will contain any statement which, at
such time and in light of the circumstances under which it will be
made, is false or misleading with respect to any material fact, or
will omit to state any material fact necessary in order to make the
statements therein not false or misleading; provided that Buyer
assumes no responsibility for, and makes no representation or warranty
with respect to, information in the Initial Registration Statement
which is provided in writing by Seller for inclusion therein. There
will be no material change in any of the information set forth in the
form of the Registration Statement on the date declared effective by
the SEC and on the Closing Date from that set forth in the Initial
Registration Statement. None of the information included by Buyer in
the Registration Statement at the time the Registration Statement
becomes effective and on the Closing Date, will contain any statement
which, at such time and in light of the circumstances under which it
will be made, is false or misleading with respect to any material
fact, or will omit to state any material fact necessary in order to
make the statements therein not false or misleading; provided that
Buyer assumes no responsibility for, and makes no representation or
warranty with respect to, information included in the Registration
Statement which is provided in writing by Seller specifically for
inclusion therein. The Registration Statement shall comply when
declared effective by the SEC and on the Closing Date with the form,
disclosure and other requirements of the Securities Act.
6.9. CHARTER AND BYLAWS. Buyer has delivered to Seller accurate
and complete copies of the Certificate of Incorporation and Bylaws of
Buyer as currently in effect.
18
VII. COVENANTS AND AGREEMENTS OF THE PARTIES PRIOR TO,
AT AND AFTER THE CLOSING
7.1. OPERATION OF PROPERTIES PRIOR TO CLOSING. From and after
the date of execution of this Agreement and until the Closing, except
as otherwise consented to by Buyer in writing, Seller shall:
(a) continue to operate the Properties in the ordinary course
of business (and where Seller is not the operator of a Property, will
continue its actions as a non-operator in the ordinary course of
business), consistent with its past operating practices;
(b) maintain in full force and effect primary insurance
covering the Properties having the coverages, deductibles, retentions
and co-insurance provisions substantially as described in EXHIBIT
7.1(b);
(c) use its reasonable best efforts to preserve in full force
and effect all leases, operating agreements, easements, rights-of-way,
permits, licenses, contracts and other agreements which relate to the
Properties (except for those contracts or other agreements which
expire on their own term without action by Seller) and perform all
obligations of Seller in or under any such agreement relating to such
Properties;
(d) use its reasonable best efforts to maintain its
relationships with suppliers, customers and others having business
relations with Seller with respect to the Properties so that they will
be preserved for Buyer on and after the Closing Date;
(e) not enter into any agreement or arrangement granting any
preferential right to purchase any of the Properties or requiring the
consent of any person to the transfer and assignment of any of the
Properties hereunder, except in connection with performance by Seller
of any Applicable Contract;
(f) not enter into any sales or supply contracts relating to
the Properties that are not terminable on notice of sixty (60) days or
less;
(g) (i) not sell, farmout, transfer, release, abandon (in each
case other than as required by any Applicable Contract or Applicable
Law) or otherwise dispose of any of the Properties, other than the
sale of Hydrocarbons in the ordinary course of business or as
permitted in SECTIONS 7.12 and 15.3 or (ii) mortgage, pledge or
otherwise encumber any of the Properties;
19
(h) maintain all equipment included in the Properties in
accordance with customary industry operating practices and procedures
(to the extent that Seller is the operator with respect to such
Properties);
(i) promptly notify Buyer of the receipt of any notice or claim
of default, breach, termination or cancellation (whether by Seller or
another party) of any Applicable Contract (provided, however, that
with respect to the Non-Operated Properties, such notice shall be
delivered to Buyer promptly after Seller has knowledge of such);
(j) promptly notify Buyer of any destruction of or damage to
any of the Oil and Gas Properties which Seller reasonably estimates to
be in excess of $20,000 or of any event or condition that would in
Seller's reasonable opinion result in any such destruction or damage
(provided, however, that with respect to the Non-Operated Properties,
such notice shall be delivered to Buyer promptly after Seller has
knowledge of such);
(k) maintain the books, accounts and records of Seller relating
to the Oil and Gas Properties in the usual, regular and ordinary
manner of Seller on a basis consistent with prior years;
(l) safeguard, maintain and secure all files and records
(including computer programs and data banks), engineering, geological,
seismic and geophysical data, reports and maps and all other data of
Seller relating to the Oil and Gas Properties;
(m) not consent to any individual AFE exceeding $20,000
attributable to the Oil and Gas Properties;
(n) not make any other decision, including, without limitation,
casing point elections, which Seller expects to result in expenditures
after the date of this Agreement related to any Oil and Gas Property
in an amount greater than $20,000;
(o) not modify, amend, cancel or terminate any Applicable
Contract affecting any of the Oil and Gas Properties other than a
termination arising pursuant to the terms thereof without action by
Seller;
(p) not enter into any joint venture, partnership, mining
partnership or business association relating to any of the Oil and Gas
Properties, or enter into any unitization, communitization, pooling or
operating agreement relating to any of the Oil and Gas Properties
other than as required by Applicable Law;
20
(q) not decline to participate in or not refuse to consent to
an activity or project with respect to any of the Oil and Gas
Properties, whether by action or inaction, such that the Seller's net
revenue interest in such properties is diminished or reduced, except
where such election or refusal is as a result of an election of Buyer
not to approve an AFE which requires its consent pursuant to CLAUSE
(m) above or not to grant its consent under PARAGRAPH (n) above (and
the failure of Buyer to notify Seller of its consent within five days
(or such shorter time as specified by Seller, if the applicable
agreements or other exigent circumstances outside of Seller's control
so require) following prompt written notice of such AFE from Seller
(in the case of PARAGRAPH (m)) or following a prompt written request
therefor from Seller (in the case of PARAGRAPH (n)) shall be deemed to
constitute its disapproval);
(r) except as permitted by SECTION 15.3 and as provided with
respect to the "Master Gas Purchase Agreement" described below, not
enter into any new transaction with any affiliate of Seller affecting
the costs and revenues of the Properties after the Effective Date,
including an amendment to any existing such agreement with any
affiliate of Seller relating to the Properties;
(s) comply with all Applicable Laws pertaining to the
Properties;
(t) cause all delay rentals, shut-in royalties, minimum
royalties, and other royalties or payments that are necessary to
maintain in force Seller's rights in and to the Oil and Gas Properties
to be timely and properly paid (subject, however, to the limitations
described below in this SECTION 7.1); and
(u) not acquire any additional interests in the Oil and Gas
Properties or lands adjoining the Oil and Gas Properties.
Notwithstanding the other provisions of this SECTION 7.1: (i) Seller
may take any actions it determines to be reasonably necessary under
emergency circumstances and provided Buyer is notified as soon
thereafter as possible; and (ii) Seller shall have no liability to
Buyer for the incorrect payments under PARAGRAPH (t) above or for any
failure to make any such payments, except in those instances in which
Seller is contractually obligated to make such payments and such
contractual obligations have not been assumed by another party. Any
consent requested of Buyer with respect to the matters covered by this
SECTION 7.1 shall not be unreasonably withheld or action with respect
thereto unduly delayed. Buyer agrees that Seller is authorized to
execute and deliver that certain Master Gas Purchase Agreement by and
among SFER, SFEOP and Adobe Gas Pipeline Company, in the form of the
agreement attached as an exhibit to that certain Agreement of Merger
dated July 28, 1993, by and among SFER, Adobe Gas Pipeline
21
Company and Hadson Corporation, and (subject to the consummation of
the transactions contemplated hereby) Buyer agrees to expressly assume
SFER's obligations thereunder to the extent applicable to the Oil and
Gas Properties conveyed hereunder.
In connection with the provisions described in PARAGRAPHS (m),
(n) and (a) above, Seller and Buyer further agree as follows. If an
activity or other project is proposed with respect to an Oil and Gas
Property for which Seller is required to obtain Buyer's consent
pursuant to either PARAGRAPH (m) or PARAGRAPH (n) above, and (x) Buyer
declines to give its consent and (y) Seller, at the time of requesting
Buyer's consent, notifies Buyer that Seller desires to participate in
the proposed activity or other project (and to pay the costs
attributable to Seller's interest with respect thereto), then such Oil
and Gas Property will be excluded from the transactions contemplated
hereby (and will be deemed to be an Excluded Asset) and the Cash
Portion of the Purchase Price will be reduced by the amount allocated
to such Oil and Gas Property in SCHEDULE A or B. If an activity or
other project is proposed with respect to an Oil and Gas Property for
which Seller is required to obtain Buyer's prior consent pursuant to
either PARAGRAPH (m) or PARAGRAPH (n) above, and (x) Seller, at the
time of requesting Buyer's consent, informs Buyer in writing that
Seller would not recommend participation in such operation or
activity, (y) Seller is nonetheless required to participate in the
proposed activity or project pursuant to the provisions of PARAGRAPH
(q) above, and (z) the transactions contemplated by this Agreement are
not consummated and this Agreement is terminated pursuant to ARTICLE
XI, then, promptly after the point in time when this Agreement is so
terminated, Buyer shall purchase from Seller, and Seller shall convey
and assign to Buyer (without any warranties, of title or otherwise),
such Oil and Gas Property for an amount equal to the amount allocated
to such Oil and Gas Property in SCHEDULE A or B. In connection with
PARAGRAPH (u) above, Seller and Buyer further agree as follows. If
Seller is offered an additional interest in an Oil and Gas Property or
lands adjoining any Oil and Gas Property, Seller shall give prompt
notice to that effect to Buyer, which notice shall describe in
reasonable detail the interest involved, shall set forth the amount of
the proposed purchase price and any other obligations and commitments,
shall set forth whether Seller desires to acquire such interest for
its own account and shall set forth the time by which Buyer must
notify Seller as to whether or not Buyer consents to such acquisition.
If Buyer declines to grant its consent to the acquisition (or fails to
give a timely response) and Seller had indicated that it desired to
purchase the interest for its own account, then Seller may so purchase
such interest for its own account free and clear of any obligations to
Buyer hereunder. If Buyer grants its consent to the acquisition and
the transactions contemplated hereby are consummated, then Seller
shall convey such interest to Buyer at Closing and Buyer shall
reimburse Seller at the Closing for the amount of the purchase price
paid by Seller therefor and assume Seller's obligations and
commitments therewith. If Buyer grants its consent to the acquisition,
Seller had indicated it did not desire to purchase the interest for
its own account and the transactions contemplated hereby are not
consummated and this Agreement is terminated pursuant to ARTICLE XI,
then promptly after the
22
point in time when this Agreement is so terminated, Seller shall
convey such interest to Buyer (without any warranties of title or
otherwise) and Buyer shall reimburse Seller for the amount of the
purchase price therefor and assume Seller's obligations and
commitments therewith. Notwithstanding the foregoing or anything else
herein to the contrary (including specifically PARAGRAPH (u) above,
Santa Fe shall be permitted to make an acquisition of additional
interests in Oil and Gas Properties and/or the lands adjoining the Oil
and Gas Properties and shall have no obligations or duties to Buyer
hereunder with respect thereto, provided that such additional
interests comprise 20% or less of the total value of the oil and gas
properties and other interests to be acquired by Seller in connection
with such acquisition.
7.2. CONDUCT OF BUYER'S BUSINESS PRIOR TO CLOSING. During the
period from the date hereof to the Closing, Buyer (a) shall conduct
its business and operations in accordance in all material respects
with the conduct of its business and operations as described in the
Initial Registration Statement and in compliance with all Applicable
Laws; (b) shall use its reasonable best efforts to preserve, maintain,
and protect its properties; and (c) shall use its reasonable best
efforts to preserve intact its business organization, to keep
available the services of its officers and employees, and to maintain
existing relationships with licensors, licensees, suppliers,
contractors, distributors, customers, and others having business
relationships with it. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated in this
Agreement or as described in the Initial Registration Statement, prior
to the Closing, Buyer shall not, without the prior written consent of
Seller:
(i) amend its charter or bylaws;
(ii) (A) issue, sell, or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights
to purchase, or otherwise) any shares of its capital stock of any
class or any other securities or equity equivalents; or (B) amend in
any respect any of the terms of any such securities outstanding as of
the date hereof; or
(iii) (A) split, combine, or reclassify any shares of its
capital stock; (B) declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of its capital stock; (C) repurchase, redeem, or
otherwise acquire any of its securities; or (D) adopt a plan of
complete or partial liquidation or resolutions providing for or
authorizing a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of Buyer.
7.3. ACCESS TO INFORMATION. Between the date hereof and the
Closing, (a) Seller shall give Buyer and its authorized
representatives reasonable access to the offices, properties, records,
marketing agreements, files, seismic data, engineering reports and
evaluations, books of account, computer records and all other
information of Seller pertaining to the Properties, including all
23
land material, for the investigation of the Properties, the status
thereof and the title thereto, through Buyer's employees, attorneys,
independent public accountants or outside consultants and (b) Buyer
shall give Seller and its authorized representatives reasonable access
to the offices, properties, records, marketing arrangements, files,
etc. of Buyer; provided, however, that such investigations shall be
conducted during normal business hours and in a manner that does not
unreasonably interfere with Seller's or Buyer's, as the case may be,
normal operations and employee relationships. Each party shall cause
its personnel to assist the other party in making such investigation
and transferring the Properties, and the operations thereof, and shall
cause its counsel, accountants, employees and other representatives to
be reasonably available to the other party for such purposes. During
such investigation, each party shall have the right to make copies of
such records, files and other materials of the other party as such
party may deem advisable.
7.4. CONFIDENTIALITY. The confidentiality agreements (a) dated
October 8, 1993, between Seller and Buyer and (b) dated October 1,
1993, between Seller and Parent, as each are modified by that certain
letter dated October 8, 1993, among Seller, Buyer and Parent, shall
remain in full force and effect.
7.5. HSR ACT NOTIFICATION. To the extent required by the HSR
Act, each of the parties hereto shall (a) file or cause to be filed,
as promptly as practicable but in no event later than 15 days after
the execution and delivery of this Agreement, with the Federal Trade
Commission and the United States Department of Justice, all reports
and other documents required to be filed by such party under the HSR
Act concerning the transactions contemplated hereby and (b) use its
reasonable best efforts to promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the
United States Department of Justice for additional information
concerning such transactions, in each case so that the waiting period
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall expire as soon as practicable after the
execution and delivery of this Agreement. Each party hereto agrees to
request, and to cooperate with the other party or parties in
requesting, early termination of any applicable waiting period under
the HSR Act.
7.6. PUBLIC OFFERING. Buyer agrees that within ten days after
the execution and delivery of this Agreement, Buyer shall file a
registration statement (such registration statement, plus all
incorporated documents, exhibits and financial statements, and any
amendments thereto, being called the "REGISTRATION STATEMENT") with
the SEC in contemplation of a public offering of not less than
$75,000,000 of Bridge Common Stock. Buyer will use its best efforts to
cause the Registration Statement to become effective and to sell the
registered shares in the above contemplated public offering not later
than March 31, 1994, to realize aggregate proceeds therefrom in an
amount not less than $75,000,000 (prior to underwriting discounts and
payment of expenses attributable to the Offering) and to realize
proceeds, after deducting therefrom all amounts paid or, at the
Closing Date, anticipated to be paid to Parent out of such proceeds, in
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an amount not less than $25,000,000 (prior to underwriting discounts
and payment of expenses attributable to the Offering); provided, that
Buyer shall not be required to consummate such offering if it
determines in its sole and absolute discretion that the price per
share of Bridge Common Stock which would otherwise be received in
connection therewith is not an acceptable price per share of Bridge
Common Stock or that such offering is otherwise not in the best
interests of Buyer or Parent. If Buyer makes a determination not to
consummate the above contemplated public offering, it shall as
promptly as possible give written notice to that effect to Seller
(such notice being called the "OFFERING TERMINATION NOTICE") which
notice shall be given to Seller no later than March 31,1994; provided,
that if such offering is not consummated on or before March 31, 1994,
and if Seller has not otherwise received an Offering Termination
Notice by March 31, 1994, then Buyer shall be deemed to have given
Seller an Offering Termination Notice on March 31,1994. Seller will
cooperate with Buyer in the preparation of the Registration Statement
and will furnish or make available all information, including
financial information, with respect to the Properties which Buyer
reasonably requests for inclusion therein in order to comply with
Applicable Laws. Buyer will furnish to Seller a copy of the Initial
Registration Statement and each amendment or supplement thereto. Buyer
shall keep Seller informed from time to time as to the status of the
Registration Statement and in any event shall inform Seller (a) upon
the effectiveness of the Registration Statement under the Securities
Act, (b) upon pricing of the securities under the Registration
Statement or (c) upon receipt by Buyer of notice from the SEC of
notice of the issuance of a stop order with respect to the
Registration Statement. Seller and Buyer agree that a preliminary
closing of the transactions contemplated hereby shall be held on or
about one business day prior to the date on which the public offering
contemplated by the Registration Statement is consummated. At any such
preliminary closing, the closing documents under this Agreement shall
be presented and examined by Buyer and Seller and all documents deemed
satisfactory shall be held in escrow until the Closing.
7.7. REGISTRATION RIGHTS AGREEMENT. Seller and Buyer shall
enter into a "REGISTRATION RIGHTS AGREEMENT" (as herein called) at
(and subject to the occurrence of) the Closing in substantially the
form of such agreement as set forth as EXHIBIT 7.7 (provided, that at
the Closing Seller acquires Bridge Common Stock as provided in ARTICLE III).
7.8. INVESTMENT AGREEMENT. Seller, Buyer and Parent shall enter
into an "Investment Agreement" (as herein called) at (and subject to
the occurrence of) the Closing in substantially the form of such
agreement as set forth as EXHIBIT 7.8 (provided, that at the Closing
Seller acquires Bridge Common Stock as provided in ARTICLE III).
7.9. EXPLORATION AGREEMENT. SFEOP and Buyer shall enter into an
"Exploration Agreement" (as herein called) at (and subject to the
occurrence of) the Closing in substantially the form of such agreement
as set forth as EXHIBIT 7.9.
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7.10. NOTICE OF LITIGATION. Until the Closing, (a) Buyer, upon
learning of the same, shall promptly notify Seller of any Proceeding
which is commenced or threatened against Buyer and which affects this
Agreement or the transactions contemplated hereby and (b) Seller, upon
learning of the same, shall promptly notify Buyer of any Proceeding
which is commenced or threatened against Seller and which affects this
Agreement or the transactions contemplated hereby.
7.11. NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt
notice to Buyer of (a) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in ARTICLE V to be untrue or
inaccurate at or prior to the Closing and (b) any failure of Seller to
comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Seller hereunder. Buyer shall give
prompt notice to Seller of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to
cause any representation or warranty contained in ARTICLE VI to be
untrue or inaccurate at or prior to the Closing and (ii) any failure
of Buyer to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by Buyer hereunder. The
delivery of any notice pursuant to this Section shall not be deemed to
(A) modify the representations or warranties hereunder of the party
delivering such notice, (B) modify the conditions set forth in
ARTICLES IX and X, or (C) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
7.12. PREFERENTIAL RIGHT TO PURCHASE. Seller shall request,
from the appropriate parties (and in accordance with the documents
creating such rights or requirements), waivers of the preferential
rights to purchase, or requirements that consent to assignments be
obtained, which exist with respect to the transfer by Seller to Buyer
of any of the Oil and Gas Properties. Seller shall have no obligation
hereunder other than to so request such waivers (I.E., Seller shall
have no obligation to assure that such waivers are obtained), and if
any such waiver is not obtained, Buyer may treat such failure to
obtain such waiver as a matter which constitutes a Title Defect;
provided, however, that if the third party holding a preferential
right to purchase exercises such right and completes the purchase of
the subject Oil and Gas Property prior to the Closing, such Oil and
Gas Property shall be excluded from the transactions contemplated
hereby (and shall be deemed to be an Excluded Asset) and the Cash
Portion of the Purchase Price shall be reduced by the amount allocated
to such Oil and Gas Property on SCHEDULE A or B; provided, further,
that if a third party holding a right to consent to an assignment of
an Oil and Gas Property listed in SCHEDULE A or B, which consent was
not obtained prior to Closing and was not treated as a Title Defect,
notifies Buyer or Seller after the Closing but prior to the second
anniversary date of the Closing Date that such third party objects to
the transfer of such Oil and Gas Property to Buyer, Buyer and Seller
shall take either of the following actions, as mutually determined:
(a) title to such Oil and Gas Property shall be reassigned to Seller
as of the Effective Date, Seller shall pay to Buyer an amount equal to
the amount allocated to such Oil and Gas Property on
26
SCHEDULE A or B, and Buyer shall account to Seller for all revenues
and costs attributable to such Oil and Gas Property from and after the
Effective Date until the date of reassignment and tender to Seller the
amount of net income attributable to such Oil and Gas Property from
the Effective Date to the date of reassignment; or (b) title to such
Oil and Gas Property shall be reassigned to Seller, and Buyer and
Seller shall enter into a written arrangement on terms mutually
acceptable to the both of them the purpose of which will be to provide
Buyer the same economic benefits from such Oil and Gas Property as if
title to such Oil and Gas Property were still held by it.
7.13. PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior
to making any public announcement or statement with respect to the
transactions contemplated by this Agreement, the party desiring to
make such public announcement or statement shall consult with the
other party hereto and exercise its reasonable best efforts to (a)
agree upon the text of a joint public announcement or statement to be
made by both or such parties or (b) obtain approval of the other party
hereto to the text of a public announcement or statement to be made
solely by Seller or Buyer, as the case may be. Nothing contained in
this Section shall be construed to require either party to obtain
approval of the other party hereto to disclose information with
respect to the transactions contemplated by this Agreement to any
state or federal governmental authority or agency to the extent
required by Applicable Laws or necessary to comply with the disclosure
requirements of any stock exchange having jurisdiction over the
disclosing party.
7.14. FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be
solely responsible for all filings and recording of assignments and
other documents related to the Properties and for all fees connected
therewith, and Buyer shall furnish Seller with pertinent recording
data. Seller shall not be responsible for any loss to Buyer because of
Buyer's failure to file or record documents correctly or promptly.
Bearer shall promptly file all appropriate forms, declarations or
bonds with federal and state agencies relative to its assumption of
operations and Seller shall cooperate with Buyer in connection with
such filings.
7.15. ACCESS TO RECORDS AFTER CLOSING. Buyer agrees to maintain
the files and records of Seller that are acquired pursuant to this
Agreement until the fourth anniversary of the Closing Date (or for
such longer period of time as Seller shall advise Buyer is necessary
in order to have records available with respect to open years for tax
audit purposes), or, if any of such records pertain to any claim or
dispute pending on the fourth anniversary of the Closing Date, Buyer
shall maintain any of such records designated by Seller until such
claim or dispute is finally resolved and the time for all appeals has
been exhausted. Buyer shall provide Seller and its representatives
reasonable access to and the right to copy such files and records for
the purposes of (a) preparing and delivering any accounting provided
for under this Agreement and adjusting, prorating and settling the
charges and credits provided for in this Agreement, (b) complying with
any law, rule or regulation affecting Seller's interest in the
Properties prior to the Closing Date, (c) preparing any audit of the
books and records of any third party relating to Seller's interest in
the Properties
27
prior to the Closing Date or responding to any audit prepared by such
third parties, (d) preparing tax returns, (e) responding to or
disputing any tax audit or (f) asserting, defending or otherwise
dealing with any claim or dispute under this Agreement. In no event
shall Buyer destroy any such files and records without giving Seller
sixty (60) days advance written notice thereof and the opportunity, at
Seller's expense, to obtain such files and records prior to their
destruction.
7.16. TRANSFER OF GEOSCIENCE DATA. The parties hereto
acknowledge and agree that Seller shall be required to transfer the
Geoscience Data to the extent that if, in Seller's reasonable opinion
at the Closing, it can do so without incurring liability by violating
the terms of a third-party agreement; provided, however, that in those
instances in which Seller can avoid such liability by obtaining the
consent of a third party, it will use its reasonable efforts (without
any obligation to pay additional fees or incur any significant or
undue cost or expense) to do so; provided, further, that to the extent
that a transfer of such data is prohibited, but the review by Buyer of
such data is not, then Seller shall (without obligation to pay
additional fees or incur any substantial or undue cost or expense)
maintain such data which shall be maintained in Houston, Texas, as
long as Seller or any affiliate of Seller maintains an office in
Houston, Texas, and thereafter at Seller's principal place of business
for five years following the Closing and Buyer shall have the
continuing right to review such data.
7.17. SANTA FE SEPARATE DISCLOSURE SCHEDULE. As promptly as
reasonably practicable and in any event no later than December 20,
1993, Seller shall deliver to Buyer a schedule or schedules setting
forth: (a) a list of all Applicable Contracts in effect on the
Effective Date and all Applicable Contracts in effect on the date of
this Agreement; (b) a list of all preferential rights of purchase that
exist with respect to the transfer by Seller to Buyer of the Oil and
Gas Properties; and (c) a list of all consents of third parties that
exist with respect to the transfer by Seller to Buyer of the Oil and
Gas Properties. Such schedule or schedules shall be herein called the
"SANTA FE SEPARATE DISCLOSURE SCHEDULE."
7.18. SALES AND OTHER TAXES. Buyer shall bear and timely pay
(a) upon receipt of the invoice of Seller thereof, all state or local
government sales taxes incident to the transfer of the Properties to
Buyer, (b) all documentary, transfer and other similar state and local
government taxes incident to the transfer of the Properties to Buyer
and (c) all costs or fees required to obtain consents to assign any
Federal or state leases included in the Properties.
7.19. FEES AND EXPENSES. Except as otherwise expressly
provided in this Agreement, all fees and expenses, including fees and
expenses of counsel, financial advisors, and accountants, incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fee or expense,
whether or not the Closing shall have occurred.
7.20. BROKERS. Seller agrees to indemnify and hold harmless
Buyer (without regard to the limitations set forth in ARTICLE XII)
from and against any and all losses, claims, damages,
28
costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, Buyer may sustain or incur as a result
of any claim for a commission or fee by a broker or finder acting on
behalf of Seller. Buyer agrees to indemnify and hold harmless (without
regard to the limitations set forth in ARTICLE XII) Seller from and
against any and all losses, claims, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and
expenses, Seller may sustain or incur as a result of any claim for a
commission or fee by a broker or finder acting on behalf of Buyer.
7.21. OVER-ALLOTMENT OPTION AFTER CLOSING. If the Underwriters
exercise the over-allotment option granted to them by Buyer under the
Underwriting Agreement and the number of shares of Bridge Common Stock
has not been reduced to zero pursuant to ARTICLE III, Buyer shall,
within 15 days after the exercise of such option, deliver to Seller a
certificate or certificates representing shares (the "ADDITIONAL
SHARES") of Bridge Common Stock in an amount such that the sum of (a)
the shares of Bridge Common Stock tendered to Seller pursuant to
ARTICLE III plus (b) the Additional Shares, shall equal 10% of all
issued and outstanding shares of Bridge Common Stock excluding any
shares of Bridge Common Stock issued under the Bridge Oil & Gas Inc.
1993 Stock Option Plan in the amount and as described in the Initial
Registration Statement (but taking into account the exercise by the
Underwriters of such over-allotment option). In consideration therefor
and simultaneously therewith, Seller shall, in the event and to the
extent that the Initial Stock Value is less than $36,000,000, deliver
to Buyer cash in an amount equal to the number of Additional Shares
multiplied by the Offering Price.
7.22. AGREEMENT TO CONVEY. Except for any interest in any well,
which interest is burdened by the net profits interest conveyed to the
Royalty Trust, or except for any well located in any of the counties
listed in SCHEDULE 7.22, Seller agrees that to the extent not
otherwise conveyed to Buyer at the Closing, Seller will convey and
assign to Buyer any interest which Seller owns as of as of the date
hereof (exclusive of any interest disposed of by Seller in accordance
with SECTION 7.1) in any well that, under Applicable Law, is located
within one legal location of, and in the same reservoir as, any well
or unit listed on SCHEDULE A-1 or any proposed unit for an undrilled
well listed on SCHEDULE A-1.
7.23. BRITT RANCH IMBALANCE. Upon the consummation of the
transactions contemplated hereby, Buyer shall succeed to the position
of Seller with respect to the Imbalances. As a result of such
succession, Buyer shall (a) be entitled to receive any and all
benefits, including payments of proceeds of production in excess of
amounts which it would otherwise be entitled to produce and receive by
virtue of ownership of the Oil and Gas Properties, which Seller would
have been entitled to receive by virtue of such positions and (b)
shall be obligated to suffer any detriments (whether the same be in
the form of obligations to deliver production which would have
otherwise been attributable to its ownership of the Oil and Gas
Properties without receiving full payment therefor, or be in the form
of the obligation to make payment in cash) which Seller would have
been obligated to suffer by virtue of such positions. Notwithstanding
the foregoing or anything
29
else herein to the contrary, Buyer and Seller agree that Buyer shall
pay to Seller, and Seller shall be entitled to receive from Buyer, 75%
of all amounts that Buyer or its assigns hereafter receives that is
attributable to the "under-produced" position of Seller with respect
to the Oil and Gas Property identified on SCHEDULE 5.21 as (and herein
called) "Britt Ranch." Buyer agrees that from and after the Closing it
will use and will cause its assigns to use its reasonable best efforts
to collect all amounts due and owing it attributable to the above-described
underproduction and to otherwise enforce all rights and
privileges under the applicable gas balancing provisions governing
Britt Ranch. Payment of amounts due and owing Seller under this
SECTION 7.23 shall be made by Buyer promptly after receipt of the
underlying funds in which Seller is accorded the above described
rights. All payments to Seller under this Section shall be accompanied
by a schedule prepared by Buyer that sets forth a reasonably detailed
description of the facts and circumstances giving rise to such payment
and the manner in which the amount paid to Seller was calculated.
Buyer agrees to provide Seller and its representatives with reasonable
access during Buyer's normal business hours to Buyer's books and
records maintained in connection with the Imbalance on Britt Ranch and
to such other information in Buyer's possession as Seller may
reasonably request with respect thereto.
7.24. WYOMING AD VALOREM TAX. Seller and Buyer specifically
agree that all ad valorem taxes in respect of the Properties imposed
by the State of Wyoming that are due and payable in calendar year 1994
and thereafter, shall be the sole responsibility of Buyer (and Seller
shall have no liability with respect thereto) and shall not be
included in the adjustments to the Purchase Price under ARTICLE XIV.
7.25. PURCHASE OF TAYLORCO NPI. If, prior to the transfer
hereunder by Seller to Buyer of an Oil and Gas Property that is
burdened with a net profits interest in favor of Taylorco pursuant to
the Taylorco Purchase Agreement, Taylorco elects to sell such net
profits interest to Seller pursuant to Section 4.8(b) of the Taylorco
Purchase Agreement at a price satisfactory to Buyer, Buyer shall
reimburse Seller at Closing for the amount paid by Seller to Taylorco.
7.26. FURTHER ASSURANCES. After the Closing each of the parties
will execute, acknowledge and deliver to the other such further
instruments, and take such other action, as may be reasonably
requested in order to more effectively assure to said party all of the
respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the
benefit of such party in consummation of the transactions contemplated
hereby.
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VIII. TITLE DEFECTS AND RELATED PURCHASE PRICE ADJUSTMENTS
8.1. NOTICE OF TITLE DEFECTS. Buyer shall, by no later than
December 27, 1993, give Seller written notice of any claimed Title
Defect, which notice shall set forth (a) a brief description of the
matter constituting the claimed Title Defect; (b) supporting documents
reasonably necessary for Seller to verify the claimed Title Defect;
(c) the identity of the Oil and Gas Property that is affected by the
claimed Title Defect; and (d) any claimed Purchase Price reduction
attributable to the claimed Title Defect. Buyer shall be deemed to
have waived all Title Defects of which Seller has not been given such
notice by such date. Seller shall have the right, but not the
obligation, to attempt to cure any claimed Title Defect within 20 days
after Seller receives Buyer's notice of Title Defect. Buyer shall be
obligated to notify Seller in writing of Buyer's acceptance or
rejection of the result obtained by Seller in its efforts to cure any
claimed Title Defects not more than five days after Seller notifies
Buyer in writing of such result. If Seller disagrees that a Title
Defect exists or is uncured or disagrees with the amount of the
related Purchase Price reduction claimed by Buyer in any notice given
in accordance with this SUBSECTION (A), then Buyer and Seller shall
promptly meet and negotiate in good faith in an attempt to resolve the
disagreement. If Buyer and Seller are unable to resolve their
disagreement and if the item is not waived by Buyer as a Title Defect
prior to Closing, then, for purposes hereof, the item which is the
subject of disagreement shall be deemed to be a Title Defect.
8.2. PURCHASE PRICE REDUCTIONS FOR TITLE DEFECTS. With respect
to any uncured Title Defect determined to exist pursuant to SECTION
8.1 and not waived by Buyer prior to the Closing, the amount allocated
to any Title Defect shall be determined as follows:
(a) If the Title Defect results in a complete failure of
Seller's title to any Oil and Gas Property listed on SCHEDULE A-1,
the amount allocated to that Title Defect shall equal the
dollar amount allocated to that Oil and Gas Property as set forth
in SCHEDULE A-1 attached hereto.
(b) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE A-1 but results in a decrease in the net revenue
interest for that Oil and Gas Property from that shown in
SCHEDULE A-1, then the amount allocated to that Title Defect
shall be equal to the product of the dollar amount allocated to
that Oil and Gas Property as set forth in SCHEDULE A-1 multiplied
by a fraction the numerator of which is the difference between
(A) the net revenue interest for that Oil and Gas Property set
forth in SCHEDULE A-1 and (B) the actual net revenue interest of
Seller in that Oil and Gas Property, and the denominator of which
is the net revenue interest for that Oil and Gas Property set
forth in SCHEDULE A-1.
(c) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE A-1 that is not a "composite property" (as
31
reflected in such Schedule) but results in an increase in the
working interest for that Oil and Gas Property from that shown in
SCHEDULE A-1, then the amount allocated to such Title Defect
shall be an amount equal to the present value as of the Effective
Date (discounted at 10% compounded annually) of the future costs
and expenses related to the maintenance, development and
operation of such Oil and Gas Property which are forecasted in
the Reserve Report, multiplied by the amount (expressed in terms
of a percentage) that the increase in working interest in such
Oil and Gas Property exceeds any corresponding increase in net
revenue interest in such Oil and Gas Property from that shown in
SCHEDULE A-1.
(d) If the Title Defect results in a complete failure of
Seller's title to any Oil and Gas Property listed on SCHEDULE B,
then the amount allocated to such Title Defect shall be an amount
equal to the product of the dollar amount per acre set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the number
of net acres set forth in SCHEDULE B for that Oil and Gas
Property.
(e) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE B but results in a reduction in the number of net acres
for that Oil and Gas Property from that shown in SCHEDULE B, then
the amount allocated to such Title Defect shall be an amount
equal to the product of the dollar amount per acre set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the
difference between (A) the number of net acres set forth in
SCHEDULE B for that Oil and Gas Property and (B) the actual
number of net acres of Seller in that Oil and Gas Property.
The sum of the amounts allocated to the Title Defects described above
shall be herein called the "PURCHASE PRICE REDUCTIONS." If a Title
Defect that is not waived by Buyer prior to Closing results in a
complete failure of Seller's title to an Oil and Gas Property, such
Oil and Gas Property shall be excluded from the transactions
contemplated hereby. If a Title Defect that is not waived by Buyer
prior to Closing does not result in a complete failure of Seller's
title to an Oil and Gas Property, that portion of such Oil and Gas
Property that is affected by the Title Defect shall be excluded from
the transactions contemplated hereby to the extent practicable.
8.3. PURCHASE PRICE INCREASES. Seller shall, by no later than
December 27, 1993, give Buyer written notice of any matters of the
type described in SUBSECTIONS (A) through (C) below, which Seller
believes should result in an increase in the Purchase Price. Such
notice shall set forth: (a) a brief description of the matter giving
rise to the claimed increase in the Purchase Price; (b) supporting
documents reasonably necessary for Buyer to verify the claimed
increase in Purchase Price; (c) the identity of the Oil and Gas
Property that is affected by the claimed increase in Purchase Price;
and (d) the amount of the claimed increase in Purchase Price. If Buyer
disagrees that a claimed increase in Purchase Price is warranted or
disagrees with the
32
amount of the related increase in the Purchase Price claimed by Seller
in any notice given in accordance with this SECTION 8.3, then Buyer
and Seller shall promptly meet and negotiate in good faith in an
attempt to resolve the disagreement. If Buyer and Seller are unable to
resolve their disagreement and if Seller does not waive its claim for
an increase in the Purchase Price prior to the Closing, then, for
purposes hereof, the matter which is the subject of disagreement shall
result in an increase in the Purchase Price. The Purchase Price shall,
in any event, be increased in the event the circumstances described in
SUBSECTION (D) below are operative. An increase in the Purchase Price,
to the extent not waived by Seller prior to the Closing, shall be
determined as follows:
(a) If it is determined that the ownership by Seller of an
Oil and Gas Property listed in SCHEDULE A-1 entitles Seller to a
net revenue interest in that Oil and Gas Property in excess of
that shown in SCHEDULE A-1, then the amount of the increase to
the Purchase Price shall equal the product of the dollar amount
allocated to that Oil and Gas Property as set forth on SCHEDULE
A-1 multiplied by a fraction, the numerator of which is the
difference between (a) the actual net revenue interest of Seller
for that Oil and Gas Property and (B) the net revenue interest
for that Oil and Gas Property set forth in SCHEDULE A-1 and the
denominator of which is the net revenue interest for that Oil and
Gas Property set forth in SCHEDULE A-1.
(b) If it is determined that with respect to an Oil and Gas
Property listed in SCHEDULE A-1 (other than a "composite
property" as reflected thereon) that Seller's working interest
for that Oil and Gas Property is less than that shown on SCHEDULE
A-1, then the amount of the increase in the Purchase Price shall
be an amount equal to the present value as of the Effective Date
(discounted at 10% compounded annually) of the future costs and
expenses related to the maintenance, development and operation of
such Oil and Gas Property which are forecasted in the Reserve
Report, multiplied by the amount (expressed in terms of a
percentage) that the decrease in working interest in such Oil and
Gas Property exceeds any corresponding decrease in net revenue
interest in such Oil and Gas Property from that shown in SCHEDULE
A-1.
(c) If it is determined that the ownership by Seller of an
Oil and Gas Property listed in SCHEDULE B entitles Seller to net
acres in that Oil and Gas Property in excess of that shown in
SCHEDULE B, then the amount of the increase in the Purchase Price
shall equal the product of the dollar amount set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the
difference between (A) the actual number of net acres of Seller
in that Oil and Gas Property and (B) the number of net acres set
forth in SCHEDULE B for that Oil and Gas Property.
(d) If (i) Seller owns a well that is not an Oil and Gas
Property and that, under Applicable Law, is more than one legal
location removed from and in the same reservoir
33
as a well or unit that is listed on SCHEDULE A-1 or any proposed
unit for an undrilled well listed on SCHEDULE A-1, and with
respect to which Seller elects to offer to Buyer for inclusion
with the Properties to be conveyed hereunder and (ii) Seller and
Buyer mutually agree upon the purchase price for such well and to
include it with the Properties to be conveyed, then the Purchase
Price shall be increased by the amount of the mutually agreed
upon purchase price.
The sum of the increases in the Purchase Price described above shall
be herein called the "PURCHASE PRICE INCREASES."
8.4. ADJUSTMENT TO PURCHASE PRICE. If the Purchase Price
Reductions are greater than the Purchase Price Increases, then the
Cash Portion of the Purchase Price payable by Buyer at Closing shall
be reduced to the extent of the difference between such amounts. If
the Purchase Price Increases are greater than the Purchase Price
Reductions, then the Cash Portion of the Purchase Price shall be
increased to the extent of the difference between A and B, where A is
the difference between the Purchase Price Increases and the Purchase
Price Reductions, and where B is $400,000.
8.5. RIGHT TO TERMINATE. If the amount of the reduction or
increase to the Cash Portion of the Purchase Price determined pursuant
to SECTION 8.4 equals or exceeds $1,000,000, then, subject to
SUBSECTIONS (b) and (c) below of SECTION 8.6, either Seller or Buyer
shall have the right to terminate this Agreement.
8.6. CERTAIN AGREEMENTS REGARDING DISPUTES.
(a) If (i) neither party has the right to terminate this
Agreement pursuant to SECTION 8.5, (ii) the parties hereto were
unable to resolve their disagreement over any Claimed Defects or
any Claimed Increases pursuant to the terms hereof and (iii) the
Closing occurs, then, (A) at the Closing, the Cash Portion of the
Purchase Price shall be reduced by the amount of Agreed Defects
and increased by the amount of Agreed Increases and (B) within
five days after the Closing, either party hereto may submit its
disagreement over any Claimed Defects or any Claimed Increases
for resolution pursuant to the provisions of SUBSECTION (d)
below.
(b) If (i) either party has the right to terminate this
Agreement pursuant to SECTION 8.5, and (ii) the parties hereto
were unable to resolve their disagreement over Claimed Defects or
Claimed Increases pursuant to the terms hereof, then, upon the
election of Buyer, Seller shall forfeit its right to terminate
this Agreement pursuant to SECTION 8.5, provided, that (A) at the
Closing, the Cash Portion of the Purchase Price shall be reduced
by the amount of Agreed Defects and increased by the amount of
Agreed Increases (provided, that in no event can the Cash Portion
of the Purchase Price be
34
reduced by more than $1,000,000), (B) within five days after the
Closing, either party hereto may submit its disagreement over
such Claimed Defects or Claimed Increases for resolution pursuant
to the provisions of SUBSECTION (D) below and (C) in no event can
the amount of the reduction to the Purchase Price, giving effect
to all Agreed Defects and Agreed Increases and after operation of
SUBSECTION (d) below, exceed $1,000,000.
(c) If (i) either party has the right to terminate this
Agreement pursuant to SECTION 8.5 and (ii) the parties hereto
were unable to resolve their disagreement over Claimed Defects or
Claimed Increases pursuant to the terms hereof, then, upon the
election of Seller, Buyer shall forfeit its right to terminate
this Agreement pursuant to SECTION 8.5, provided that (A) at the
Closing, the Cash Portion of the Purchase Price shall be reduced
by the amount of Agreed Defects and increased by the amount of
Agreed Increases (provided that in no event can the Cash Portion
of the Purchase Price be increased by more than $1,000,000) and
(B) within five days after the Closing, either party hereto shall
submit its disagreement over such Claimed Defects or Claimed
Increases for resolution pursuant to SUBSECTION (d) below and (C)
in no event can the amount of the increase to the Purchase Price,
giving effect to Agreed Defects and Agreed Increases and after
operation of SUBSECTION (d) below, exceed $1,000,000.
(d) Any disagreement between the parties hereto of the type
referenced in SUBSECTION (A), SUBSECTION (B) or SUBSECTION (C)
above, shall be finally settled by arbitration conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except as such rules may conflict with
the provisions of this SUBSECTION (D) (in which event the
provisions of this SUBSECTION (D) shall control). Each party
shall choose one arbitrator and a third arbitrator shall be
selected by mutual agreement of the party-appointed arbitrators
within 30 days after the date of the last party-appointed
arbitrator. If for any reason a vacancy occurs in the panel of
arbitrators, a replacement arbitrator shall be appointed by the
party who selected the predecessor arbitrator (or, if the
predecessor arbitrator was appointed by the party-appointed
arbitrators, the party-appointed arbitrators shall appoint the
replacement arbitrator). Any decision of the arbitrators shall be
final and binding upon the parties hereto. If, as a result of the
decision of the arbitrators, the Cash Portion of the Purchase
Price should be reduced, Seller shall pay to Buyer in cash by
wire transfer of immediately available funds, within two business
days after the decision of the arbitrators, an amount equal to
such reduction with interest thereon from the Closing Date until
payment at the lower of the prime rate of interest charged by
Bank of Montreal (as adjusted from time to time to reflect
changes in such rate) or the highest lawful rate permitted by
applicable law. If, as a result of the decision of the
arbitrators, the Cash Portion of the Portion Price should be
increased, Buyer shall pay to Seller in cash by wire transfer of
immediately available funds, within two business days after the
decision of the arbitrators, an amount equal to such increase
with interest thereon from the Closing Date until payment at the
35
lower of the prime rate of interest charged by Bank of Montreal
(as adjusted from time to time to reflect changes in such rate)
or the highest lawful rate permitted by applicable law. The fees
of the arbitrators and the costs of the arbitration shall be
shared equally by the parties hereto.
8.7. ALLOCATIONS. It is hereby agreed that the dollar amount
allocated to any Oil and Gas Property on either SCHEDULE A or SCHEDULE
B shall be used only for the purposes set forth in SECTION 7.1, in
this ARTICLE VIII and for purposes of determining value in the event
of the exercise of any preferential right of purchase relating to any
of the Oil and Gas Properties, and is not intended as a measure of
value for any other or general purpose.
IX. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on
or prior to the Closing Date of each of the following conditions:
9.1. REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of Buyer contained in this Agreement,
and in any agreement, instrument, or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date,
shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date.
9.2. COVENANTS AND AGREEMENTS PERFORMED. Buyer shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with
by it on or prior to the Closing Date.
9.3. CERTIFICATE. Seller shall have received a certificate
executed by a duly authorized officer of Buyer, dated the Closing
Date, representing and certifying that the conditions set forth in
SECTIONS 9.1 and 9.2 have been fulfilled.
9.4. OPINION OF COUNSEL. Seller shall have received an opinion
of Fulbright & Jaworski L.L.P., dated the Closing Date, covering the
matters described in EXHIBIT 9.4A and in a form reasonably acceptable
to Seller. Seller shall have received an opinion of legal counsel to
Parent (which counsel shall be reasonably acceptable to Seller) dated
the Closing Date, covering the matters described in EXHIBIT 9.4B and
in a form reasonably acceptable to Seller.
9.5. HSR ACT. All waiting periods (and any extensions thereof)
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
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9.6. LEGAL PROCEEDINGS. No Proceedings shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby.
X. CONDITIONS TO OBLIGATION OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on
or prior to the Closing Date of each of the following conditions:
10.1. REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of Seller contained in this Agreement,
and in any agreement, instrument, or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date,
shall be true and correct on and as of the Closing Date as if made on
and as of such date, except for such breaches of or inaccuracies in
such representations and warranties which individually or in the
aggregate would not result in any material adverse change in or
relating to the value to Buyer of the Properties taken as a whole
immediately after the Closing.
10.2. COVENANTS AND AGREEMENTS PERFORMED. Seller shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with
by it on or prior to the Closing Date.
10.3. CERTIFICATE. Buyer shall have received a certificate
executed by a duly authorized officer of Seller, dated the Closing
Date, representing and certifying that the conditions set forth in
SECTIONS 10.1 and 10.2 have been fulfilled.
10.4. OPINION OF COUNSEL. Buyer shall have received an opinion
of Thompson & Knight, P.C., dated the Closing Date, covering the
matters described in EXHIBIT 10.4 and in a form reasonably acceptable
to Buyer.
10.5. HSR ACT. All waiting periods (and any extensions thereof)
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
10.6. LEGAL PROCEEDINGS. No Proceedings shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby.
37
XI. TERMINATION, AMENDMENT AND WAIVER
11.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the
Closing in the following manner:
(a) by mutual written consent of Seller and Buyer; or
(b) by either Seller or Buyer, if:
(i) the Closing shall not have occurred on or
before April 11, 1994, unless such failure to close
shall be due to a breach of this Agreement by the party
seeking to terminate this Agreement pursuant to this
CLAUSE (i); or
(ii) there shall be any statute, rule, or
regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or
a Governmental Entity shall have issued an order,
decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the
consummation of the transactions contemplated hereby,
and such order, decree, ruling, or other action shall
have become final and nonappealable; or
(c) by either Seller or Buyer as the case may be, as
provided in SECTION 8.5; or
(d) by Buyer, as provided in ARTICLE XIII.
In the event of the termination of this Agreement pursuant to this
SECTION 11.1 by Seller or Buyer, written notice thereof shall
forthwith be given to the other party specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall
become void and have no effect, except that the agreements contained
in this Section and in SECTIONS 7.4, 7.13 and 7.19 and 7.20 shall
survive the termination hereof. Nothing contained in this Section
shall relieve any party from liability for any breach of this
Agreement.
11.2. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the partieshereto.
11.3. WAIVER. Each of Seller and Buyer may (a) waive any
inaccuracies in the representations and warranties of the other
contained herein or in any document, certificate, or writing delivered
pursuant hereto or (b) waive compliance by the other with any of the
other's agreements or fulfillment of any conditions to its own
obligations contained herein. Any agreement on the part of a party
hereto to any such waiver shall be valid only if set forth in an
38
instrument in writing signed by or on behalf of such party. No failure
or delay by a party hereto in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or
privilege.
XII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
12.1. SURVIVAL. The representations, and warranties of the
parties hereto contained in this Agreement or in any certificate,
instrument, or document delivered pursuant hereto and the covenants of
the parties shall not survive the Closing, regardless of any
investigation made by or on behalf of any party, except as hereinafter
provided: (a) the representations and warranties of Seller contained
in SECTION 5.22 shall not survive the Closing, except as to any
Environmental Claim (as defined below), in which case such
representations and warranties shall survive until the fifth
anniversary of the Closing Date, (b) the representations and
warranties of Seller and Buyer contained in SECTIONS 5.23 and 6.8
shall survive until the expiration of the limitation period under the
applicable statute of limitations, (c) the representations and
warranties of Seller in SECTIONS 5.1, 5.2, 5.3, 5.4, 5.5, 5.8, 5.10,
5.11, 5.14, 5.15, 5.17, 5.18, 5.19, 5.20 and 5.24 shall survive until
the second anniversary of the Closing Date, (d) all representations
and warranties of Buyer, other than those contained in SECTION 6.8,
shall survive until the second anniversary of the Closing Date, (e)
the covenants of the parties in SECTIONS 7.1, 7.2, and 7.21 and in the
second proviso of SECTION 7.12 shall survive until the second
anniversary of the Closing Date, and (f) the covenants of the parties
in SECTIONS 7.14, 7.15, 7.16, 7.18, 7.19, 7.20, 7.22, 7.23, 7.24 and
7.26 shall survive the Closing Date (each such anniversary and time of
expiration, if any, a "SURVIVAL DATE"). From and after a Survival
Date, no party hereto or any shareholder, director, officer, employee,
or affiliate of such party shall be under any liability whatsoever
(whether pursuant to this SECTION 12.1 or otherwise with respect to
any representation, warranty or covenant to which such Survival Date
relates unless before the Survival Date for such representation or
warranty it shall have received from the party seeking indemnification
written notice of the existence of the claim for or in respect of
which indemnification is sought. Such notice shall set forth with
reasonable specificity, to the extent then known (i) the basis under
this Agreement, and the facts that otherwise form the basis, of such
claim, (ii) an estimate of the amount of such claim (which estimate
shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate, including a statement
of any significant assumptions employed therein, and (iii) the date on
and manner in which the party delivering such notice became aware of
the existence of such claim. As used herein, "ENVIRONMENTAL CLAIM"
shall mean any claim, action, suit or proceeding made, brought or
filed, as the case may be, by a Governmental Entity or other third
party against Buyer, arising out of or relating to a condition
existing as of the Closing or an event occurring prior to the Closing
that is in contravention of or in breach of any of the representations
and warranties made by Seller in SECTION 5.22 as of the date hereof or
as of the Closing.
39
12.2. INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this ARTICLE XII, Seller shall indemnify, defend, and
hold harmless Buyer, its affiliates, their respective directors,
officers, employees, and agents, and each of the heirs, legal
representatives, successors, and assigns of any of the foregoing
(collectively, the "BUYER GROUP"), from and against any and all
claims, actions, causes of action, demands, assessments, losses,
damages, liabilities, judgments, settlements, penalties, costs, and
expenses (including reasonable attorneys' fees and expenses), of any
nature whatsoever (collectively, "DAMAGES"), asserted against,
resulting to, imposed upon, or incurred by any member of the Buyer
Group, directly or indirectly, by reason of or resulting from:
(a) any inaccuracy in or breach of any representation
or warranty of Seller contained in this Agreement which
survives the Closing Date;
(b) any breach by Seller of any of its covenants or
agreements contained in this Agreement which survives the
Closing Date;
(c) any claim, action or proceeding made or brought by
a third party arising out of or attributable to the
ownership or operation of the Properties prior to the
Closing Date (other than matters covered in the
representations of Seller in SECTION 5.9 and described in
CLAUSE (D) below) and then only if Buyer gives notice to
Seller of the claim of Buyer for such indemnification prior
to the second anniversary of the Closing Date; and
(d) any Environmental Claim.
12.3. INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this ARTICLE XII, Buyer shall indemnify, defend, and
hold harmless Seller, its affiliates, their respective directors,
officers, employees, and agents, and each of the heirs, legal
representatives, successors, and assigns of any of the foregoing
(collectively, the "SELLER GROUP"), from and against any and all
Damages asserted against, resulting to, imposed upon, or incurred by
any member of the Seller Group, directly or indirectly, by reason of
or resulting from:
(a) any inaccuracy in or breach of any representation
or warranty of Buyer contained in this Agreement which
survives the Closing Date;
(b) any breach by Buyer of any of its covenants or
agreements contained in this Agreement which survives the
Closing Date; and
(c) any claim, action or proceeding made or brought by
a third party arising out of or attributable to the
ownership or operation of the Properties after the Closing
Date.
40
12.4. CERTAIN LIMITATIONS ON SELLER'S LIABILITY.
Notwithstanding anything in this ARTICLE XII or elsewhere in this
Agreement to the contrary:
(a) No indemnification shall be required to be made by
Seller pursuant to SECTIONS 12.2(A), (B) and (C), until and
except to the extent that the aggregate amount of Damages
thereunder exceeds $1,000,000.
(b) The indemnification obligation of Seller under SECTION
12.2(d) shall be subject to the following. No indemnification
shall be required to be made by Seller pursuant to SECTION
12.2(d), until and except to the extent that the aggregate amount
of Damages thereunder exceeds $1,000,000 (the "THRESHOLD
AMOUNT"). Thereafter, Seller shall be required to indemnify the
Buyer Group for all Damages under SECTION 12.2(d) in excess of
the Threshold Amount until that point in time when Seller has
indemnified the Buyer Group for Damages in an aggregate amount
equal to $2,000,000 (the "SPLIT POINT"). From and after the Split
Point, Seller shall be required to indemnify the Buyer Group for
(i) 75% of all Damages under SECTION 12.2(d), to the extent that
Buyer gives notice to Seller of the claim of Buyer for such
indemnification prior to the second anniversary of the Closing
Date and (ii) 50% of all Damages under SECTION 12.2(d), to the
extent that Buyer gives notice to Seller of the claim of Buyer
for such indemnification on or after the second anniversary of
the Closing Date but prior to the fifth anniversary of the
Closing Date. Seller shall have no further liability under
Environmental Laws with respect to the Oil and Gas Properties as
to any claims in connection therewith arising after the fifth
anniversary of the Closing Date.
(c) The amount of Damages required to be paid by Seller to
indemnify the Buyer Group pursuant to this ARTICLE XII shall be
reduced to the extent of any amounts in excess of $1,000,000
actually received by any member of the Buyer Group after the
Closing Date pursuant to the terms of the insurance policies (if
any) covering the subject claim.
12.5. PROCEDURE FOR INDEMNIFICATION. Within ten days after
receipt by an indemnified party under SECTION 12.2 or 12.3 of notice
of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party
under such Section, give written notice to the indemnifying party of
the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may
have to any indemnified party except to the extent the indemnifying
party demonstrates that the defense of such action is materially
prejudiced thereby. In case any such action shall be brought against
an indemnified party and it shall give written notice to the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. If the indemnifying party
elects to assume the defense of such action,
41
the indemnified party shall have the right to employ separate counsel
at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the
defense of such action, the indemnified party shall be entitled to
assume the defense of such action with counsel of its own choice, at
the expense of the indemnifying party. If the action is asserted
against both the indemnifying party and the indemnified party and
there is a conflict of interests which renders it inappropriate for
the same counsel to represent both the indemnifying party and the
indemnified party, the indemnifying party shall be responsible for
paying for separate counsel for the indemnified party; provided,
however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties,
regardless of the number of indemnified parties. If the indemnifying
party elects to assume the defense of such action, (a) no compromise
or settlement thereof may be effected by the indemnifying party
without the indemnified party's written consent (which shall not be
unreasonably withheld) unless the sole relief provided is monetary
damages that are paid in full by the indemnifying party and (b) the
indemnifying party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent
(which shall not be unreasonably withheld).
XIII. CASUALTY LOSS AND CONDEMNATION
If after the Effective Date and prior to the Closing, any part
of the Properties shall be destroyed by fire or any other cause (but
not to a substantial extent) or shall be taken by condemnation or the
exercise of eminent domain (but not to a substantial extent), then if
Closing occurs, Seller shall pay at Closing to Buyer all proceeds of
insurance or condemnation (to the extent then received and not subject
to payment or reimbursement by Seller or its affiliates) which were
paid in respect of such loss or taking; if any proceeds of insurance
or condemnation, to the extent not subject to payment or reimbursement
by Seller or its affiliates, are received by Seller after the Closing,
Seller shall promptly tender such proceeds to Buyer. In the event that
either so much of the Properties are damaged or destroyed by fire or
other event or taken by condemnation or purchase in lieu thereof,
after the Effective Date but before the Closing, to the extent that
the value allocated to all those Properties so affected, as set forth
on SCHEDULE A, exceeds $5,000,000, then the Properties shall be deemed
to have been destroyed or harmed to a substantial extent for the
purpose of this ARTICLE XIII. If the Properties are destroyed or
harmed to a substantial extent as above described, then Buyer shall
have the right to elect either (a) to close this transaction as if the
Properties had not been destroyed or harmed to a substantial extent,
whereupon Seller shall make the payments described in the first
sentence of this ARTICLE XIII, or (b) to terminate this Agreement,
whereupon Seller and Buyer shall be released and relieved of all
further obligation hereunder, as provided in ARTICLE XI.
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XIV. CERTAIN ACCOUNTING ADJUSTMENTS
14.1. ADJUSTMENTS. Except as otherwise provided herein, (x) all
costs and revenues attributable to the Properties and the operations
thereon prior to the Effective Date shall be the obligation of and for
the benefit of Seller and (y) all costs and revenues attributable to
the Properties and the operations thereon after the Effective Date
shall be the obligation of and for the benefit of Buyer. The Purchase
Price shall be adjusted upward by the following: (i) the value of all
merchantable, allowable oil in storage on the Effective Date at the
location of each Property that is credited to the Property, based upon
the actual prices being paid less the cost of transportation, however
paid, and less taxes and other expenses, if any, deducted by the
purchaser of the oil; and (ii) the amount (less amounts which have
been collected from others in reimbursement of the following direct
expenditures) of all actual expenditures of Seller (including
royalties, delay rentals and other charges, and ad valorem, property,
production, excise, severance, windfall profit and other taxes (other
than income taxes), based upon or measured by the ownership of
property or the production of Hydrocarbons or the receipt of proceeds
therefrom), expenses, including drilling and completion expenses,
billed under applicable operating agreements and, in the absence of an
operating agreement, expenses of the sort customarily billed under
such agreements, but excluding any of Seller's or any of its
affiliate's overhead and administrative expenses or office lease
expenses, paid by or on behalf of Seller and to the extent, in
accordance with generally accepted accounting principles, in
connection with the Properties in the ordinary course of business
after the Effective Date, plus an amount calculated at the rate of
$40,000 per month to the Closing as the sole compensation to Seller
for its overhead and administrative expenses and office lease expenses
in connection with supervising the Properties, plus the amount of any
expenditures attributable to the Oil and Gas Properties prior to the
Effective Date with respect to the projects or other activities listed
on SCHEDULE 14.1 or hereafter approved by Buyer.
The Purchase Price shall be adjusted downward by the following:
(A) the proceeds received by Seller in connection with the Properties
to the extent, in accordance with generally accepted accounting
principles, attributable to the period after the Effective Date,
including income resulting from combined fixed rate overhead charges
under applicable operating agreements and the proceeds received by
Seller from the disposition after the Effective Date (with or without
the prior consent from Buyer as provided in SECTION 7.1) of all or any
portion of the Properties; (B) an amount equal to all ad valorem,
property, production, excise, severance, windfall profit and similar
taxes and assessments (but not including income taxes) based upon or
measured by the ownership of property or the production of
Hydrocarbons or the receipt of proceeds therefrom accruing or relating
to the Properties prior to the Effective Date to the extent not paid
by Seller before the Closing Date and thereafter assumed by Buyer; (C)
the amount of all actual direct expenditures of Seller (including
royalties, rentals and other charges, expenses, including drilling and
completion expenses, billed under applicable operating agreements and,
in the absence of an operating agreement, expenses of the sort
customarily billed under such
43
agreements), that are, in accordance with generally accepted
accounting principles, attributable to the ownership or the operation
of the Properties before the Effective Date, to the extent not paid by
the Seller before the Closing Date and thereafter assumed by Buyer;
(D) all amounts collected by Seller as operator (or otherwise) from
other working interest owners attributable to such parties' shares of
the costs and expenses of an operation or operations after the
Effective Date for which (and to the extent) Seller has not yet
actually paid such costs and expenses; and (E) the proceeds received
by Seller in connection with the Properties described in SCHEDULE 14.1
attributable to the period prior to the Effective Date.
14.2. ACCOUNTING. No later than 15 days prior to Closing,
Seller shall furnish Buyer with an estimated accounting showing in
reasonable detail the adjustments described in and subject to SECTION
14.1. If pursuant to such estimated accounting either Seller or Buyer
shall owe any obligation to the other, then the Cash Portion of the
Purchase Price paid at Closing shall be adjusted to reflect such
charges and credits which are necessary to accomplish such adjustment.
Promptly after the Closing Date (but not later than one hundred eighty
(180) days thereafter), Seller shall furnish Buyer with a final
accounting showing in reasonable detail the adjustments described in
and subject to SECTION 14.1. For a period of 90 days following receipt
by Buyer of such accounting, Seller shall provide Buyer and its
representatives with access to all records reasonably required to
compute all adjustments pursuant to this ARTICLE XIV. If within ninety
(90) days after Seller furnishes such final accounting to Buyer, Buyer
and Seller are unable to agree on such final accounting, then either
Seller or Buyer may submit such dispute to the accounting firm of
Arthur Andersen & Co. and the determination made as to such dispute by
such accounting firm shall be final and binding upon Seller and Buyer.
Final settlement shall be made within thirty (30) days following
agreement by the Buyer and Seller or final determination by said
accounting firm. The fees charged by said accounting firm for making
determinations under this SECTION 14.2 shall be paid one-half (1/2) by
Buyer and one-half (l/2) by Seller. The parties agree that if actual
ad valorem taxes on the Oil and Gas Properties for a particular state
for calendar year 1993 are still not known at the time of the final
accounting, appropriate adjustments consistent with SECTION 14.1 will
be made to reflect such actual ad valorem taxes after the final
accounting, provided such adjustments are made within one year after
the Closing.
XV. MISCELLANEOUS
15.1. NOTICES. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing
and shall be given either (a) in person, (b) by United States mail,
certified or registered, return receipt requested, postage prepaid,
(c) by prepaid telegram, telex, telecopy or similar means (with signed
confirmed copy to follow by mail
44
in the same manner as provided in CLAUSE (B) above) or (d) by
expedited delivery service with proof of delivery, to the parties at
the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to Seller:
Santa Fe Energy Resources, Inc.
Santa Fe Energy Operating Partners, L.P.
1616 South Voss Road, Suite 1000
Houston, Texas 77057
ATTN: John R. Womack
Fax: 713/268-5341
If to Buyer:
Bridge Oil (U.S.A.) Inc.
12404 Park Central Drive
Suite 400
Dallas, Texas 75251
ATTN: Dr. George G. Fenton
Fax: 214-788-0656
For purposes of the foregoing, any notice required or permitted to be
given shall be deemed to be delivered and given on the date actually
delivered to the address specified above.
15.2. ENTIRE AGREEMENT. This Agreement, together with the
Schedules, Exhibits and the other writings referred to herein or
delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
15.3. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, that prior to the
Closing, either SFER or SFEOP (or both) may assign all or a portion of
its respective interest in the Properties to a wholly-owned subsidiary
of SFER (the "SFER SUB"), subject to the following: (a) SFER or SFEOP
(as appropriate) shall cause the SFER Sub to convey the Properties so
assigned to it to Buyer at the Closing in accordance with the terms
hereof; (b) SFER and SFEOP shall notify Buyer no later than two
business days prior to the Closing as to which of the parties (SFER,
SFEOP and SFER Sub) shall receive the Cash Portion of the Purchase
Price
45
and the Bridge Common Stock to be delivered at the Closing; (c) SFER
Sub shall agree (in a form reasonably acceptable to Buyer) that it
will be jointly and severally liable with Seller for Seller's duties
and obligations to Buyer hereunder; and (d) in no event shall the
assignment of Properties by SFER or SFEOP to the SFER Sub in any way
relieve SFER or SFEOP of its duties and obligations hereunder;
provided, further, that Buyer shall have the right to designate Bridge
Oil Company, L.P., a Delaware limited partnership ("BRIDGE LP"), as
the party to whom Seller shall convey the Properties at the Closing
and assign its rights hereunder with respect thereto, subject to the
prior receipt by Seller of an agreement (in a form reasonably
acceptable to Seller) of Bridge LP to become jointly and severally
liable with Buyer for Buyer's duties and obligations to Seller
hereunder.
15.4. SEVERABILITY. If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and
such provision shall be deemed inoperative to the extent it is deemed
unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to
the maximum extent permitted by applicable law.
15.5. NO THIRD-PARTY BENEFICIARIES. It is the intent of the
parties hereto that no third-party beneficiary rights be created or
deemed to exist in favor of any person not a party to this Agreement,
unless otherwise expressly agreed to in writing by the parties.
15.6. DTPA WAIVER. TO THE EXTENT APPLICABLE TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, BUYER WAIVES THE PROVISIONS OF THE
TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTION
17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.55A, WHICH IS
NOT WAIVED), TEX. BUS. & COMM. CODE. IN ORDER TO EVIDENCE ITS ABILITY
TO GRANT SUCH WAIVER, BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER
THAT BUYER (A) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY PURCHASE
OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (B) HAS
ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, (C) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND (D) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
46
15.8. COUNTERPARTS. This Agreement may be executed by the
parties hereto in any number of counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the
same agreement.
IN WITNESS WHEREOF. THIS AGREEMENT HAS BEEN EXECUTED AS OF THE
DAY AND YEAR FIRST ABOVE WRITTEN.
SELLER
SANTA FE ENERGY RESOURCES, INC.
By: J. R. WOMACK
Name: J. R. Womack
Title: Vice President
SELLER:
SANTA FE ENERGY OPERATING
PARTNERS, L.P.
By: SANTA FE PACIFIC EXPLORATION
COMPANY, Managing Partner
By: J. R. WOMACK
Name: J. R. Womack
Title: Vice President
BUYER:
BRIDGE OIL (U.S.A.) INC.
By: GEORGE G. FENTON
Name: George G. Fenton
Title: President
47
EXHIBIT 9.4A
BUYER
1. Buyer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by Buyer of the
Agreement, the Registration Rights Agreement, the Investment Agreement
and the Exploration Agreement (the "Buyer Documents") are within the
corporate power and authority of Buyer and do not (i) contravene or
violate any provisions of the Certificate of Incorporation or Bylaws
of Buyer, as amended to the date hereof, or (ii) contravene or result
in any breach of or constitute a default under any applicable law,
rule or regulation or any material loan, note or other agreement or
instrument known to us to which Buyer is a party or by which it or any
of its properties are bound.
3. The execution, delivery and performance by Buyer of the
Buyer Documents have each been duly authorized by the Board of
Directors of Buyer, and no other corporate or shareholder action is
required to be taken to authorize such execution, delivery andperformance.
4. The Buyer Documents have each been duly executed and
delivered by Buyer and constitute legal, valid and binding obligations
of Buyer enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
Buyer of the Buyer Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement.
6. The Consideration Shares issued pursuant to the Agreement
have been duly authorized and are validly issued, fully paid and
nonassessable.
7. The Registration Statement has become effective and, to the
best of our knowledge, no stop order suspending its effectiveness has
been issued.
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EXHIBIT 9.4B
PARENT
1. Parent is a corporation duly organized, validly existing and
in good standing under the laws of Australia.
2. The execution, delivery and performance by Parent of the
Investment Agreement are within the corporate power and authority of
the Parent and do not (i) contravene or violate any provisions of the
charter provisions of Parent, as amended to the date hereof, or (ii)
contravene or result in any breach of or constitute a default under
any applicable law, rule or regulation or any material loan, note or
other agreement or instrument known to us to which Parent is a party
or by which it or any of its properties are bound.
3. The execution, delivery and performance by Parent of the
Investment Agreement has been duly authorized by the Board of
Directors of Parent, and no other corporate or shareholder action is
required to be taken to authorize such execution, delivery and
performance.
4. The Investment Agreement has been duly executed and
delivered by Parent and constitutes a legal, valid and binding
obligation of Parent enforceable in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
Parent of the Investment Agreement.
1
EXHIBIT 10.4
SFER
1. SFER is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by SFER of the
Agreement, the Registration Rights Agreement and the Investment
Agreement (the "SFER Documents") are within the corporate power and
authority of SFER and do not (i) contravene or violate any provisions
of the Certificate of Incorporation or Bylaws of SFER, as amended to
the date hereof, or (ii) contravene or result in any breach of or
constitute a default under any applicable law, rule or regulation or
any material loan, note or other agreement or instrument known to us
to which SFER is a party or by which it or any of its properties are
bound.
3. The execution, delivery and performance by SFER of the SFER
Documents have each been duly authorized by the Board of Directors of
SFER, and no other corporate or shareholder action is required to be
taken to authorize such execution, delivery and performance.
4. The SFER Documents have each been duly executed and
delivered by SFER and constitute legal, valid and binding obligations
of SFER enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
SFER of the SFER Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement and except no opinion is
expressed with respect to any preferential rights or consents to
assignment applicable to the Properties.
1
EXHIBIT 10.4
SFEOP
1. SFEOP is a limited partnership duly formed, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by SFEOP of the
Agreement and the Exploration Agreement (the "SFEOP Documents") are
within the partnership power and authority of the SFEOP and do not (i)
contravene or violate any provisions of the Agreement of Limited
Partnership of SFEOP, as amended to the date hereof, or (ii)
contravene or result in any breach of or constitute a default under
any applicable law, rule or regulation or any material loan, note or
other agreement or instrument known to us to which SFEOP is a party or
by which it or any of its properties are bound.
3. The execution, delivery and performance by SFEOP of the
SFEOP Documents have each been duly authorized in accordance with the
Agreement of Limited Partnership of SFEOP, as amended to the date
hereof, and no other partnership or partner action is required to be
taken to authorize such execution, delivery and performance.
4. The SFEOP Documents have each been duly executed and
delivered by SFEOP and constitute legal, valid and binding obligations
of SFEOP enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
SFEOP of the SFEOP Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement and except no opinion is
expressed with respect to any preferential rights or consents to
assignment applicable to the Properties.
1