<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 11, 1997
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-4219 C-74-1339132
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1717 ST. JAMES PLACE
SUITE 550
HOUSTON, TEXAS 77056
(Address of principal executive offices)
(713) 940-6100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On July 11, 1997, Zapata Corporation ("Zapata" or the "Company"),
completed the sale of its Bolivian oil and gas interests ("Bolivian
Interest") to Tesoro Bolivia Petroleum Company ("Tesoro") for $18.8
million cash and the assumption by Tesoro of certain liabilities
(collectively, the "Bolivian Sale"). The terms of the Bolivian Sale
were determined by negotiations between Zapata and Tesoro, Zapata's
co-venturer with respect to the Bolivian operations. In connection with
the Bolivian Sale, Zapata established a $4.0 million letter of credit
in favor of Tesoro as security against the possibility of a Bolivian
income tax liability incurred by Zapata as a result of the Bolivian
Sale. Zapata's obligations with respect to the letter of credit will
terminate on the first business day following the first to occur of the
recording of the assignment of Zapata's interest by Tesoro as a public
deed in Bolivia or the receipt by Tesoro of evidence of payment by
Zapata of all taxes due in Bolivia. The Bolivian Sale resulted in an
after-tax gain of approximately $5.0 million that will be recorded in
Zapata's fiscal 1997 fourth quarter which ends September 30, 1997.
The Bolivian Sale completes Zapata's exit from the energy business.
As a result, Zapata has restated its financial statements to reflect
its oil and gas operations as discontinued operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
Filed herewith is unaudited pro forma condensed consolidated
financial information for Zapata Corporation and subsidiary
companies reflecting the financial position of the Company as of
March 31, 1997 and the results of its operations for the six months
ended March 31, 1997 and the fiscal year ended September 30, 1996,
giving effect to the Bolivian Sale.
(c) EXHIBITS.
Exhibit 10(y) - Purchase and Sale Agreement for Contract Rights
and Assets Blocks XVIII and XX, Department of
Tarija, Bolivia dated as of July 11, 1997 by
and between Tesoro Bolivia Petroleum Company
and Zapata Exploration Company and
Zapata Corporation.
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ITEM 7. FINANCIAL STATEMENTS
(b) Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed consolidated balance
sheet and unaudited pro forma condensed consolidated income
statements (collectively, the "Pro Forma Financial Statements")
give effect to the Bolivian Sale. The pro forma condensed
consolidated balance sheet of Zapata at March 31, 1997 sets forth
the historical financial position of Zapata as if the Bolivian Sale
had been consummated on March 31, 1997. The pro forma condensed
consolidated income statements of Zapata for the six months ended
March 31, 1997 and for the twelve months ended September 30, 1996
reflect the historical results of Zapata as if the Bolivian Sale
had been consummated on October 1, 1995. The Pro Forma Financial
Statements should be read in conjunction with the historical
consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in Zapata's Report on Form 10-K
for the year ended September 30, 1996.
The Pro Forma Financial Statements set forth below may not be
indicative of what the actual results of operations would have
been had the Bolivian Sale occurred on the date indicated or that
may be obtained in the future.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Historical
Zapata Pro Forma Pro Forma
Corporation Adjustments Total
----------- ----------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 86,849 $14,800 $101,649
Restricted cash 337 4,000 4,337
Other current assets 37,852 (816) 37,036
-------- ------- --------
Total current assets 125,038 17,984 143,022
Investments and other assets 43,585 (4,164) 39,421
Property and equipment, net 45,783 (6,673) 39,110
-------- ------- --------
Total assets $214,406 $ 7,147 $221,553
======== ======= ========
Current liabilities $ 20,700 ($588) $ 20,112
-------- ------- --------
Long-term debt 19,782 --- 19,782
-------- ------- --------
Other liabilities 16,976 --- 16,976
-------- ------- --------
Stockholders' equity:
Preference stock 3 --- 3
Common stock 7,388 --- 7,388
Capital in excess of par value 131,961 --- 131,961
Reinvested earnings 17,596 7,735 25,331
-------- ------- --------
156,948 7,735 164,683
-------- ------- --------
Total liabilities and stockholders' equity $214,406 $ 7,147 $221,553
======== ======= ========
</TABLE>
(The accompanying notes are an integral part of
the Pro Forma Financial Statements.)
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NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following note sets forth the assumptions used in preparing the
unaudited pro forma condensed consolidated balance sheet as of March 31, 1997.
(1) To record the Bolivian Sale. In connection therewith, Zapata
established a $4.0 million letter of credit in favor of Tesoro as
security against the possibility of a Bolivian income tax liability incurred by
Zapata as a result of the Bolivian Sale. If such income taxes are incurred in
Bolivia, the Company expects to utilize a foreign tax credit generated by the
payment of such taxes against its U.S. federal income tax liability. At
March 31, 1997, the Bolivian Sale would have resulted in an after-tax gain
of $7.7 million. This gain includes a $3.0 million receipt from the
Bolivian government for certain unrecorded past-due receivables.
Zapata recorded this receipt as revenue from discontinued operations in
May 1997 when the cash was received. As a result, the actual gain generated by
the Bolivian Sale will be reduced to approximately $5.0 million.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
ZAPATA PRO FORMA PRO FORMA
CORPORATION ADJUSTMENTS TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Revenues $49,724 ($1,137) $48,587
------- ------- -------
Expenses:
Operating 37,691 (454) 37,237
Depreciation, depletion and amortization 1,978 (123) 1,855
Selling, general and administrative 3,865 --- 3,865
------- ------- -------
43,534 (577) 42,957
------- ------- -------
Operating income 6,190 (560) 5,630
------- ------- -------
Other income (expense):
Interest income, net 873 (6) 867
Equity in loss of unconsolidated affiliates (838) --- (838)
Other 1,114 --- 1,114
------- ------- -------
1,149 (6) 1,143
------- ------- -------
Income from continuing operations
before taxes 7,339 (566) 6,773
------- ------- -------
Provision for income taxes 2,703 (198) 2,505
------- ------- -------
Income from continuing operations $ 4,636 ($368) $ 4,268
======= ======= =======
Per share data:
Income from continuing operations $ 0.16 ($0.02) $ 0.14
======= ======= =======
Average common and common equivalent
shares outstanding 29,571 --- 29,571
======= ======= =======
</TABLE>
(The accompanying notes are an integral part of
the Pro Forma Financial Statements.)
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NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
The following note sets forth the assumptions used in preparing the
unaudited pro forma condensed consolidated income statement for the six months
ended March 31, 1997.
(1) To record the Bolivian Sale. As a result, Zapata's income
statement has been restated to reflect the results from its oil and gas
operations as a discontinued operation.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
ZAPATA PRO FORMA PRO FORMA
CORPORATION ADJUSTMENTS TOTAL
---------------- ---------------- ------------------
<S> <C> <C> <C>
Revenues $95,678 ($2,069) $93,609
------- -------- -------
Expenses:
Operating 76,328 (1,080) 75,248
Provision for asset write-downs 5,477 (5,477) ---
Depreciation, depletion and amortization 3,492 (240) 3,252
Selling, general and administrative 9,229 (71) 9,158
------- -------- -------
94,526 (6,868) 87,658
------- -------- -------
Operating income 1,152 4,799 5,951
------- -------- -------
Other income (expense):
Interest income, net 678 --- 678
Equity in loss of unconsolidated affiliates (4,471) --- (4,471)
Other (892) --- (892)
------- -------- -------
(4,685) --- (4,685)
------- -------- -------
Income (loss) from continuing operations
before taxes (3,533) 4,799 1,266
------- -------- -------
Provision (benefit) for income taxes (1,012) 1,680 668
------- -------- -------
Income (loss) from continuing operations ($2,521) $3,119 $598
======= ======== =======
Per share data:
Income (loss) from continuing operations ($0.08) $0.10 $0.02
======= ======== =======
Average common and common equivalent
shares outstanding 29,565 --- 29,565
======= ======== =======
</TABLE>
(The accompanying notes are an integral part of
the Pro Forma Financial Statements.)
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NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
The following note sets forth the assumptions used in preparing the
unaudited pro forma condensed consolidated income statement for the twelve
months ended September 30, 1996.
(1) To record the Bolivian Sale. As a result, Zapata's income
statement has been restated to reflect the results from its oil and gas
operations as a discontinued operation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ZAPATA CORPORATION
By: /s/ Robert A. Gardiner
-------------------------------------
Robert A. Gardiner
Senior Vice President and
Chief Financial Officer
Date: July 28, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
Exhibit 10(y) Purchase and Sale Agreement for Contract Rights and
Assets Blocks XVIII and XX, Department of Tarija,
Bolivia dated as of July 11, 1997 by and between
Tesoro Bolivia Petroleum Company and Zapata Exploration
Company and Zapata Corporation.
</TABLE>
<PAGE> 1
EXHIBIT 10(y)
PURCHASE AND SALE AGREEMENT FOR
CONTRACT RIGHTS AND ASSETS
BLOCKS XVIII AND XX, DEPARTMENT OF TARIJA, BOLIVIA
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made as of this 11th
day of July, 1997, by and between Tesoro Bolivia Petroleum Company, a Texas
corporation ("Tesoro"), and Zapata Exploration Company, a Delaware corporation
("Zapata") and Zapata Corporation, a Delaware corporation.
WITNESSETH:
WHEREAS, Zapata owns certain rights, title and interest in two
Operation Contracts with Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"),
said contracts being evidenced by Deed dated March 21, 1977, covering Block
XVIII, Department of Tarija, Bolivia and by Deed dated April 26, 1978, covering
Block XX, Department of Tarija, Bolivia; and
WHEREAS, Tesoro and Zapata have executed Joint Operating Agreements
under which, Zapata owns an interest in certain equipment, inventory and other
assets relating to the Blocks XVIII and XX; and
WHEREAS, the two Operation Contracts must be converted into new Shared
Risk Contracts with YPFB, which is scheduled to occur on or before August 1,
1997; and
WHEREAS, Zapata desires to sell and assign all its right, title and
interest in the contracts and related assets to Tesoro with an effective date
of July 28, 1996 and Tesoro desires to purchase and accept all the right, title
and interest of Zapata in the contracts and related assets;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
ASSIGNMENT means the assignment, effective July 28, 1996, to Tesoro of Zapata's
undivided twenty-five percent interest (25%) in Block XVIII and related Oil and
Gas Assets and undivided twenty-seven and four tenths percent interest (27.4%)
in Block XX and related Oil and Gas Assets.
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BLOCK XVIII means the oil and gas operations area identified by the government
of Bolivia as Block XVIII, Department of Tarija, Bolivia and shall include the
contract covering such area.
BLOCK XX means the oil and gas operations area identified by the government of
Bolivia as Block XX, Department of Tarija, Bolivia and shall include the
contract covering such area.
BUSINESS DAY means a day on which the state and federal banks in San Antonio,
Texas are open for business.
CLOSING OR CLOSE means the consummation of the purchase and sale transaction
contemplated by this Agreement.
CLOSING DATE means the date of Closing which shall be July 11, 1997.
CONSIDERATION means the Purchase Price and the assumption of liabilities set
forth in Article 3.
EFFECTIVE DATE means July 28, 1996.
HYDROCARBONS means oil, natural gas, associated liquids, condensate and other
petroleum substances.
JOINT OPERATIONS means those operations and activities carried out in
connection with oil and gas operations related to Block XVIII and Block XX by
Tesoro as operator pursuant to a joint operating agreement with Zapata.
JOINT PROPERTY means all wells, casing, tubing, tanks, facilities, machinery,
equipment, plants, pipelines, materials, inventory, buildings, furniture,
fixtures, oil in tanks or other Hydrocarbons, accounts receivable, automobiles
or other vehicles, the Wells Fargo Bank account balances, Bolivian bank account
balances, geological, geophysical and seismic data, and any and all other funds
and property of whatever kind or nature held for use in, received from and/or
relating to operations conducted in connection with Block XVIII and Block XX.
OIL AND GAS ASSETS mean all of Zapata's undivided right, title and interest in
and to: (i) the Operation Contract with YPFB for Block XVIII, evidenced by
public deed on March 21, 1977, and all other contracts and agreements relating
to this contract or operations relating to Block XVIII; and (ii) the Operation
Contract with YPFB for Block XX, evidenced by public deed on April 26, 1978,
and all other contracts and agreements relating to this contract or operations
relating to Block XX; and (iii) Contract of Conversion to the Regime of Shared
Risk for Block XVIII, designated Contract No. 138/96; and (iv) Contract of
Conversion to the Regime of Shared Risk for Block XX, designated Contract No.
136/96; and (v) Joint
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Property; and (vi) Hydrocarbons produced from Block XVIII and/or Block XX;
and (vii) the Farmout Agreement with Total Exploration Production Bolivie S.A.
dated June 19, 1997.
PURCHASE PRICE means the amount of money paid in accordance with Section 2.2.
RECORDING DATE means the date that the Assignment is recorded as a public deed
in Bolivia.
SHARED RISK CONTRACT means the contract with YPFB effective July 29, 1996,
which pursuant to the Law of Hydrocarbons No. 1689, oil and gas operations may
be conducted in Bolivia.
YPFB means Yacimientos Petroliferos Fiscales Bolivianos, a public corporation
(government) organized under the laws of Bolivia, and which is responsible for
administration of operations conducted by parties to oil and gas contracts in
Bolivia.
ARTICLE 2 - PURCHASE AND SALE
Section 2.1 Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, Zapata agrees to sell and convey to Tesoro for the
Consideration and Tesoro agrees to purchase for the Consideration and accept on
the Closing Date, but effective as of the Effective Date, the Oil and Gas
Assets.
Section 2.2 Purchase Price. On the Closing Date, subject to Section 2.3,
Tesoro shall pay to Zapata the sum of Eighteen Million Eight Hundred Thousand
Dollars (US $18,800,000.00).
Section 2.3 Letter of Credit.
(a) Zapata shall establish on the Closing Date at the time of Closing, a
cash collateralized irrevocable standby letter of credit ("letter of credit")
issued by a commercial United States bank, which bank is acceptable to Tesoro,
in the amount of U.S. Four Million Dollars ($4,000,000.00) in favor of Tesoro
and with a term of six months, which letter of credit may be renewed by Zapata
in accordance with its terms and this Agreement. The letter of credit is
established to provide security for Tesoro against any obligations of Zapata
for taxes of the type set forth in Section 3.5, which taxes, if any, are
required to be paid to the government of Bolivia or the tax authority of
Bolivia prior to the recording of the Assignment as a public deed in Bolivia
and if not paid would impair the ability of Tesoro to perfect its title to the
Oil and Gas Assets.
(b) The letter of credit shall be released by Tesoro on the first Business
Day following the earlier to occur of the Recording Date or Tesoro receiving
from the government of Bolivia or the tax authority of Bolivia evidence that
all taxes due by Zapata have been paid.
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(c) If following Closing the Bolivian government or the tax authority of
Bolivia assesses taxes of the type set forth in Section 3.5, or asserts that
such taxes are due to the Bolivian government or the tax authority of Bolivia,
Tesoro shall give notice to Zapata and Zapata shall have the right to contest
any such tax assessed or asserted as being due. At the time that any contest of
such taxes is finally determined, Zapata shall be responsible for the payment
of all taxes due, if any.
(d) The letter of credit shall be for an initial term of six months and
may be renewed by Zapata for a six month term, and subject to the provisions of
Section 2.3(e), may be renewed for additional terms. Tesoro agrees to reimburse
Zapata for the actual letter of credit fees paid by Zapata for the initial
letter of credit and for one six month renewal of such letter of credit,
subject to a cumulative maximum of fees to be reimbursed by Tesoro to Zapata in
the amount of Thirty Thousand Dollars ($30,000.00). Tesoro shall make such
reimbursement to Zapata within five Business Days after receipt of Zapata's
invoice with supporting invoice documents from the bank issuing the letter of
credit.
(e) If Tesoro has been unable to obtain the recording of the Assignment as
a public deed in Bolivia before fifteen Business Days prior to the expiration
of the initial term of the letter of credit or the first six month renewal
thereof or subsequent renewal which is allowed hereunder and Tesoro has not
received notice from the government of Bolivia or tax authority of Bolivia that
taxes of the type specified in Section 3.5 are assessed or asserted as being
due, then, Tesoro shall give notice to Zapata and Zapata may renew the letter
of credit. If Zapata fails to renew the letter of credit five Business Days
prior to its expiration, Tesoro may draw upon the letter of credit. In the
event that Tesoro draws upon the letter of credit as provided herein, the funds
shall be used only to pay taxes of the type specified in Section 3.5 and any of
such funds remaining after payment of Zapata's obligations for taxes, shall be
paid to Zapata. Funds drawn under the letter of credit by Tesoro shall earn
interest for the account of Zapata at the average rate earned by Tesoro for
overnight Eurodollar time deposits for such period beginning one business day
after the date drawn under the letter of credit and continuing up until one
Business Day prior to payment of such funds to the government of Bolivia or tax
authority of Bolivia or to Zapata. The letter of credit may continue to be
renewed by Zapata for six month terms so long as Tesoro has not received notice
of taxes assessed or asserted as being due as set forth in this provision.
(f) If Tesoro has been unable to obtain the recording of the Assignment as
a public deed in Bolivia before fifteen Business Days prior to the expiration
of the initial term of the letter of credit or the first six month renewal or
subsequent renewal pursuant to Section 2.3(e) thereof, and Tesoro has received
notice from the government of Bolivia or the tax authority of Bolivia that
taxes of the type specified in Section 3.5 are assessed or asserted to be due,
then Tesoro shall give notice to Zapata and Zapata shall have the right to pay
and discharge such tax obligation. If Zapata fails to pay such taxes and
provide Tesoro with evidence of such payment five Business Days prior to the
expiration of the letter of credit, Tesoro may draw upon the letter of credit.
In the event that Tesoro draws upon the letter of credit as provided herein,
the funds shall be used only to pay taxes of the
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type specified in Section 3.5 and any of such funds remaining after payment of
Zapata's obligations for taxes, shall be paid to Zapata. Funds drawn under the
letter of credit by Tesoro shall earn interest for the account of Zapata at the
average rate earned by Tesoro for overnight Eurodollar time deposits for such
period beginning one business day after the date drawn under the letter of
credit and continuing up until one Business Day prior to payment of such funds
to the government of Bolivia or tax authority of Bolivia or to Zapata.
(g) Prior to Tesoro making payment to the government of Bolivia or the tax
authority of Bolivia for taxes of the type specified in Section 3.5, it shall
provide Zapata with five Business Days notice and Zapata shall have the right
and obligation to pay any and all such taxes as may be assessed or asserted to
be due. If Zapata does not pay such taxes at the end of the five Business Days,
then Tesoro has the right to pay any and all such taxes with funds drawn under
the letter of credit and any funds from such letter of credit remaining after
payment of such taxes shall be paid by Tesoro to Zapata. Any payments made by
Tesoro for such taxes shall be made with a notation that they are paid under
protest to assist in preserving Zapata's rights to contest the taxes. In the
event that the funds from the letter of credit are not sufficient to pay such
taxes claimed to be due by the government or tax authority of Bolivia, Tesoro
shall have the right to pay the excess and Tesoro shall be entitled to enforce
the Indemnity provisions of this Agreement.
In the event Tesoro pays any such taxes claimed to be due by the
government or tax authority of Bolivia, Zapata shall have no claim, and hereby
releases Tesoro from any claim or demand that Tesoro wrongfully paid such
taxes.
(h) The standby letter of credit shall be established in the form attached
to this Agreement as Exhibit A.
(i) Any tax payment made by Tesoro to the government of Bolivia or tax
authority of Bolivia on behalf of Zapata shall be evidenced by a tax receipt
issued by the government or tax authority of Bolivia in the name of Zapata and
delivered to Zapata.
Section 2.4 Government Approval. The transfer of interest from Zapata to
Tesoro in the contracts covering Block XVIII and Block XX is subject to the
approval of the government of Bolivia, the tax authority of Bolivia and YPFB,
and the recording of the Assignment as a public deed in Bolivia. Tesoro agrees
to use its best efforts to obtain all governmental approvals and to record the
Assignment as a public deed on or before August 1, 1997, however the parties
recognize that such approvals and the recording of the Assignment may not be
obtained by this date. If the Assignment is not recorded as a public deed by
August 1, 1997, Tesoro agrees to continue to use its best efforts to obtain the
recording of the Assignment. Tesoro shall provide Zapata with notice of the
date of the YPFB approval of the Assignment and of the Recording Date.
Section 2.5 Allocation of Purchase Price. The Purchase Price shall be
allocated to the Oil and Gas Assets in the manner set forth on Exhibit B.
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Section 2.6 Manner of Payment. Tesoro shall pay the Purchase Price to
Zapata at Closing by wire transfer of immediately available funds to an account
in the United States to be designated by Zapata prior to the Closing Date.
Section 2.7 No Adjustments. Tesoro and Zapata agree to a fixed Purchase
Price with no adjustments for events prior to or following Closing and further
agree that there shall be no adjustments to the Joint Operations accounts .
Section 2.8 Assignment. Zapata shall execute at the time of Closing on the
Closing Date, the Assignment effective as of the Effective Date and in the form
attached as Exhibit C, conveying all rights, title and interest of Zapata in
the Oil and Gas Assets to Tesoro. Zapata agrees that following Closing, if YPFB
requires a different form of Assignment, Zapata will execute an Assignment that
is mutually agreeable to the parties hereto and YPFB.
ARTICLE 3 - ASSUMPTION OF OBLIGATIONS AND INDEMNITIES
Section 3.1 Social Liability to Employees. Tesoro shall assume the
obligations for any and all social liability under Bolivian law to employees
employed in the Joint Operations and shall save harmless and indemnify Zapata
from and against such liability.
Section 3.2 Bolivian Transactions Tax. Tesoro shall assume and pay the
Bolivian Transactions Tax due under Bolivian law for the transfer of the Oil
and Gas Assets.
Section 3.3 Environmental. Tesoro shall assume any and all liability for
environmental compliance and remediation, whether arising from acts or
omissions before or after the Closing Date and shall save harmless and
indemnify Zapata from and against such liabilities.
Section 3.4 Liabilities of Operations. Tesoro shall assume the obligation
for and save harmless and indemnify Zapata from and against any and all
royalties, fees and other payments and liabilities pertaining to the Joint
Operations arising from acts or omissions before or after the Closing Date, but
excluding any taxes measured by the income or profits of Zapata, and any
profits tax or other taxes assessed on Zapata as a result of the sale to Tesoro
or assessed on the transfer to Tesoro of the Oil and Gas Assets except the
Bolivian Transactions Tax.
Section 3.5 Taxes of Zapata. Zapata and Zapata Corporation, individually,
shall assume, save harmless and indemnify Tesoro from and against all taxes
measured by the income or profits of Zapata, and any profits tax or other taxes
assessed on Zapata as a result of the sale to Tesoro or assessed on the
transfer to Tesoro of the Oil and Gas Assets, except for the Bolivian
Transactions Tax. The provision for a letter of credit set forth in Section 2.3
does not replace or negate the obligation of Zapata and Zapata Corporation
pursuant to this Section.
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Section 3.6 Notice by Indemnitee. Any party entitled to indemnity under
this Agreement is referred to herein as an indemnitee and a party obligated
hereunder to indemnify another is referred to herein as an indemnitor. Any
indemnitee agrees promptly to notify any indemnitor upon being notified of any
claims, complaint, lawsuit, citation, proceeding or other matter which may be
subject to indemnification under this Agreement. Indemnitor agrees to defend
against any claims brought or actions filed against indemnitee with respect to
the subject of an indemnity contained in this Agreement. In the event a claim
should be brought or action filed with respect to the subject of an indemnity
in the Agreement indemnitor agrees that indemnitee may employ attorneys of its
own selection to appear and defend the claim or action on behalf of indemnitee.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations of Zapata. Zapata represents and warrants to
Tesoro as of the date hereof and will so represent and warrant to Tesoro on the
Closing Date as follows:
(a) Zapata is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware, is validly registered in
Bolivia and has the corporate power to own the Oil and Gas Assets.
(b) Zapata has the corporate power, authority and right to enter into and
deliver this Agreement and all other documents and instruments required
hereunder and to transfer the legal and beneficial title and ownership of the
Oil and Gas Assets to Tesoro and the Oil and Gas Assets when transferred shall
be free and clear of all liens, charges, encumbrances and any other adverse
claims or rights of others.
(c) There is no contract or any other right of another binding upon Zapata
or which at any time in the future may become binding upon Zapata to sell,
transfer, assign, charge, mortgage or in any other way dispose or encumber the
Oil and Gas Assets other than pursuant to this Agreement and for operations in
the ordinary course of business pursuant to the joint operating agreements with
Tesoro.
(d) Neither the entering into this Agreement nor the completion of the
transactions contemplated hereby by Zapata shall result in the violation of any
law, rule or regulation applicable to Zapata.
(e) Zapata acknowledges and confirms that it has independently determined
that the Consideration to be received from Tesoro for the Oil and Gas Assets is
fair and reasonable.
(f) Zapata is not a party to any action, suit or other legal,
administrative or arbitration proceeding or government investigation, actual or
threatened, which might reasonably be expected to result in impairment or loss
of Zapata's interest in the Oil and
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<PAGE> 8
Gas Assets or any part thereof.
(g) Zapata has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of the transaction
contemplated hereby for which Tesoro shall have any obligation or liability.
(h) This Agreement has been duly executed and delivered by Zapata and
constitutes the valid and binding obligation of Zapata, enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally and to general principles
of equity.
(i) Zapata has paid or will pay all taxes of the type specified in Section
3.5 which are due and payable by Zapata.
Section 4.2 Representations of Zapata Corporation. Zapata Corporation
represents and warrants to Tesoro as of the date hereof and will so represent
and warrant to Tesoro on the Closing Date as follows:
(a) Zapata Corporation is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware and is
the parent corporation of Zapata.
(b) Zapata Corporation has the corporate power, authority and right to
enter into and deliver this Agreement and all other documents and instruments
required hereunder.
(c) Zapata Corporation is not a party to any action, suit or other legal,
administrative or arbitration proceeding or government investigation, actual or
threatened, which might reasonably be expected to result in impairment or loss
of Zapata's interest in the Oil and Gas Assets or any part thereof.
(d) This Agreement has been duly executed and delivered by Zapata
Corporation and constitutes the valid and binding obligation of Zapata
Corporation, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency or other laws relating to or affecting creditors' rights
generally and to general principles of equity.
(e) Zapata has paid or will pay all taxes of the type specified in Section
3.5 which are due and payable by Zapata.
Section 4.3 Representations of Tesoro. Tesoro represents and warrants to
Zapata as of the date hereof and will so represent and warrant to Zapata on the
Closing Date as follows:
(a) Tesoro is a corporation duly organized and validly existing and in
good standing under the laws of the State of Texas, is validly registered in
Bolivia and has the
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<PAGE> 9
corporate power to own the Oil and Gas Assets.
(b) Tesoro has the corporate power, authority and right to enter into and
deliver this Agreement and all other documents and instruments required
hereunder to purchase the Oil and Gas Assets.
(c) Neither the entering into this Agreement nor the completion of the
transactions contemplated hereby by Tesoro shall result in the violation of any
law, rule or regulation applicable to Tesoro.
(d) To the best of Tesoro's knowledge, the information furnished by Tesoro
to Zapata is materially a full and fair disclosure as of the date of this
Agreement and that no material information has been omitted.
(e) Tesoro has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of the transaction
contemplated hereby for which Zapata shall have any obligation or liability.
(f) This Agreement has been duly executed and delivered by Tesoro and
constitutes the valid and binding obligation of Tesoro, enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally and to general principles
of equity.
ARTICLE 5 - INTERIM PERIOD
Section 5.1 Operations. During the period from the date hereof until the
Closing Date, and thereafter the parties agree that Tesoro shall have control
of operations and beneficial ownership of the Oil and Gas Assets and that
Zapata shall not be required to take any action in connection with Joint
Operations.
Section 5.2 Negative Covenants. During the period from the date hereof
until the Closing Date, Zapata shall not sell, transfer or dispose of, or grant
a security interest in or in respect of, the whole or any part of the Oil and
Gas Assets.
ARTICLE 6 - CONDITIONS TO CLOSING
Section 6.1 Conditions for the Benefit of Tesoro. The obligation of Tesoro
to purchase the Oil and Gas Assets pursuant to this Agreement is subject to the
satisfaction of the following conditions at or prior to the Closing:
(a) The representations and warranties of Zapata and Zapata Corporation
set forth in Sections 4.1 and 4.2 shall be true and correct in all material
respects on the Closing Date as though made on and as of that date.
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<PAGE> 10
(b) Zapata and Zapata Corporation shall have performed in all material
respects the obligations, covenants and conditions of this Agreement to be
performed or complied with by them at or prior to the Closing.
(c) Tesoro shall have been furnished with a certificate of an officer of
Zapata stating that the terms, covenants and conditions contained in this
Agreement to have been performed or complied with by Zapata at or prior to the
Closing have been performed and complied with and that the representations and
warranties of Zapata herein given are true and correct in all material respects
at the Closing.
(d) Tesoro shall have been furnished with a certificate of an officer of
Zapata Corporation stating that the terms, covenants and conditions contained
in this Agreement to have been performed or complied with by Zapata Corporation
at or prior to the Closing have been performed and complied with and that the
representations and warranties of Zapata Corporation herein given are true and
correct in all material respects at the Closing.
(e) No suit, action or other proceeding by a third party or a governmental
authority shall be pending or threatened which seeks damages from Tesoro in
connection with, or seeks to restrain, enjoin or otherwise prohibit, the
consummation of the transactions contemplated by this agreement.
Section 6.2 Conditions for the Benefit of Zapata. The obligation of Zapata
to sell the Oil and Gas Assets pursuant to this Agreement is subject to the
satisfaction of the following conditions at or prior to the Closing:
(a) The representations and warranties of Tesoro set forth in Section 4.3
shall be true and correct in all material respects on the Closing Date as
though made on and as of that date.
(b) Tesoro shall have performed in all material respects the obligations,
covenants and conditions of this Agreement to be performed or complied with by
it at or prior to the Closing.
(c) Zapata shall have been furnished with a certificate of an officer of
Tesoro stating that the terms, covenants and conditions contained in this
Agreement to have been performed or complied with by Tesoro at or prior to the
Closing have been performed and complied with and that the representations and
warranties of Tesoro herein given are true and correct in all material respects
at the Closing.
(d) No suit, action or other proceeding by a third party or a governmental
authority shall be pending or threatened which seeks damages from Zapata in
connection with, or seeks to restrain, enjoin or otherwise prohibit, the
consummation of the transactions contemplated by this agreement.
10
<PAGE> 11
ARTICLE 7 - GENERAL
Section 7.1 Governing Law. This Agreement and all instruments executed in
accordance herewith shall be governed by and interpreted in accordance with the
laws of the State of Texas, without regard to conflict of law rules that would
direct application of the laws of another jurisdiction.
Section 7.2 Entire Agreement. This Agreement and the Exhibits hereto
constitute the entire agreement between the parties in regard to the purchase
and sale of the Oil and Gas Assets and supersede all prior agreements,
understandings, negotiations, discussions and representations, whether oral or
written, of the parties in regard to the purchase and sale of the Oil and Gas
Assets.
Section 7.3 Amendments and Waiver. No modification of or amendment to this
Agreement shall be valid or binding unless set forth in writing and duly
executed by both of the parties hereto and no waiver of any of the provisions
of this Agreement shall effective or binding unless made in writing and signed
by the party purporting to give the same and no waiver so given shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar).
Section 7.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
Section 7.5 Assignability. Neither party hereto shall assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party, which consent may be withheld for any or no
reason. Any assignment of this Agreement made without such consent shall be
void. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
Section 7.6 Notices. Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by facsimile with
confirmed answer back, personal delivery, overnight courier or by registered or
certified U.S. mail, addressed to the party to be notified, postage prepaid,
return receipt requested. Notice deposited in the mail in the manner
hereinabove described shall be deemed to have been given and received on the
date of the delivery as shown on the return receipt. Notice by facsimile shall
be deemed given and received on the date sent with answer back unless sent
after 5:00 p.m. in which case notice will be deemed given and received on the
next Business Day. Notice served in any other manner shall be deemed to have
been given and received only if and when actually received by the addressee.
Any party hereto may change its address for notices by giving notice to the
other parties. For purposes of notice, the addresses of the parties shall be as
follows:
ZAPATA and/or ZAPATA CORPORATION: TESORO:
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<TABLE>
<S> <C>
Zapata Exploration Company Tesoro Bolivia Petroleum Company
Attn: Robert A. Gardiner Attn: Robert W. Oliver, President
1717 St. James Place, Suite 550 8700 Tesoro Drive
Houston, Texas 77056 San Antonio, Texas 78217
Tel: 713/940-6100 Tel: 210/828-8484
Fax: 713/940-6122 Fax: 210/283-2152
</TABLE>
Section 7.7 Expenses. Each party shall be solely responsible for all
expenses incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own legal counsel and accountants).
Section 7.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any rule of law, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in a materially adverse manner
with respect to either party.
Section 7.9 Damages. The parties waive any rights to punitive and
incidental or consequential damages resulting from a breach of this Agreement,
including, without limitation, loss of profits.
Section 7.10 No Third Party Beneficiary. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party
under doctrines concerning third party beneficiaries.
Section 7.11 Survival. The representations and warranties of the parties
under this Agreement shall survive the Closing for a period of one year
excepting those contained in Subsections 4.1(i) and 4.2(e), shall survive the
Closing for a period of time until the relevant taxing authority is barred from
asserting a claim.
Section 7.12 Books and Records. Upon consummation of the transactions
contemplated herein and for a period of five years thereafter, Tesoro agrees
that upon the reasonable written request of Zapata, Tesoro will provide Zapata
with full access during normal business hours to the accounting and tax records
retained by Tesoro pursuant to the Joint Operations and to Tesoro personnel
familiar with such records. All costs and expenses associated with providing
such records (or copies thereof) shall be borne by Zapata. Nothing herein shall
be deemed to require Tesoro to maintain or refrain from disposing of any books
or records pursuant to the Joint Operations for any period of time after the
Closing. However, if Tesoro desires to dispose of any such books or records,
Tesoro agrees to give Zapata notice of such intention and the opportunity to
retain such books and records at Zapata's expense.
Section 7.13 Public Announcements. No public announcement or press release
concerning the sale and purchase of the Oil and Gas Assets shall be made by
either party
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<PAGE> 13
without the prior consent of the other party, such consent not to be
unreasonably withheld; provided that nothing contained herein shall prevent
either party at any time furnishing any information to any governmental agency
or regulatory authority or to the public if required by applicable law or on
advice of its counsel.
Section 7.14 Construction of Ambiguity. In the event of any ambiguity in
any of the terms or conditions of this Agreement, including any Exhibits hereto
and whether or not placed of record, such ambiguity shall not be construed for
or against any party hereto on the basis that such party did or did not author
the same.
Section 7.15 Facsimile Execution. The parties hereto shall be entitled to
rely upon delivery of an executed facsimile copy of this Agreement and such
facsimile copy shall be legally effective to create a valid and binding
agreement among the parties hereto.
Section 7.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. No party shall be bound
by this Agreement until all parties have executed a counterpart.
Section 7.17 Further Assurances. Each of the parties hereto shall from
time to time execute and deliver all such further documents and instruments and
do all acts and things as the other party may, either before or after Closing,
reasonably require to effectively obtain the approval of the government of
Bolivia or YPFB and to carry out or perfect the full intent and meaning of this
Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
ZAPATA EXPLORATION COMPANY
By: /s/ ROBERT A. GARDINER
-------------------------------------
Robert A. Gardiner
President and Chief Executive Officer
TESORO BOLIVIA PETROLEUM COMPANY
By: /s/ ROBERT W. OLIVER
-------------------------------------
Robert W. Oliver
President
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<PAGE> 14
EXHIBIT "A"
ISSUING BANK:
NATIONSBANK N.A.
ISSUE DATE:
LETTER OF CREDIT NO.
BENEFICIARY:
ATTN:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. _____________
IN BENEFICIARY'S FAVOR FOR THE ACCOUNT OF _____________, UP TO THE AGGREGATE
SUM OF US $_________________ (____________________________) EXPIRING ON
______________ AT THE COUNTERS OF ________________________ AVAILABLE WITH US
ACCOMPANIED BY THE FOLLOWING:
A WRITTEN STATEMENT PURPORTEDLY SIGNED BY THE BENEFICIARY WITH THE FOLLOWING
WORDING:
"THE AMOUNT OF THIS DRAWING USD ________________________________ UNDER LETTER
OF CREDIT NO. __________________________ REPRESENTS FUNDS DUE TESORO BOLIVIA
PETROLEUM COMPANY PURSUANT TO THE TERMS OF THE PURCHASE AND SALE AGREEMENT FOR
CONTRACT RIGHTS AND ASSETS BLOCKS XVIII AND XX DEPARTMENT OF TARIJA, BOLIVIA,
DATED JULY 10, 1997, BETWEEN ZAPATA EXPLORATION COMPANY AND TESORO BOLIVIA
PETROLEUM COMPANY."
SPECIAL CONDITIONS:
1. PARTIAL DRAWINGS ALLOWED/PROHIBITED ANY DRAFT DRAWN UNDER THIS CREDIT
MUST BE MARKED "DRAWN UNDER IRREVOCABLE STANDBY LETTER OF CREDIT NO. _____
ISSUED BY NATIONSBANK N.A."
THIS LETTER OF CREDIT IS SUBJECT TO THE 1993 REVISION OF THE UNIFORM CUSTOMS
AND PRACTICE FOR DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE
(PUBLICATION NO. 500).
WE HEREBY ENGAGE WITH YOU THAT DRAFTS UNDER AND IN COMPLIANCE WITH THE TERMS OF
THIS CREDIT, WILL BE DULY HONORED ON PRESENTATION TO NATIONSBANK OF TEXAS,
N.A., ATTN: LETTERS OF CREDIT DEPT. 9TH FLOOR, 901 MAIN STREET, DALLAS, TEXAS
75202 ON OR BEFORE THE EXPIRATION DATE SHOWN ABOVE.
<PAGE> 15
EXHIBIT B
This Exhibit provides for the allocation of the Consideration. Terms
not defined herein shall have the meaning given to such terms in the Purchase
and Sale Agreement.
TESORO and ZAPATA agree that the Consideration for the Oil and Gas
Assets shall be allocated in the following manner:
Intangible contract rights - $15,000,000.00
Working capital - $4,000,000.00
Equipment and inventory $1,000,000.00
<PAGE> 16
EXHIBIT "C"
ASSIGNMENT AGREEMENT
By means of this document an Assignment and Transfer Agreement ("Assignment
Agreement") is entered in respect to the Operation Contracts for the
Exploration, Exploitation and Commercialization of Hydrocarbons in Block XX and
Block XVIII, located in the Department of Tarija, Republic of Bolivia, in
accordance with the terms that follow:
FIRST CLAUSE: CONTRACTING PARTIES.
The parties to this Agreement are: TESORO BOLIVIA PETROLEUM COMPANY, a company
incorporated under the laws of the State of Texas, United States of America,
that has a Branch duly established and registered with legal capacity
recognized in Bolivia by the Direction of Registry of Commerce and Corporations
(RECSA), by Administrative Resolution No. 27 of July 28, 1978 and Commerce
Registration No. 7-00617-1, with legal residence in the city of Santa Cruz de
la Sierra, Bolivia, henceforth called "TESORO", on one part, and on the other,
ZAPATA EXPLORATION COMPANY, a company incorporated under the laws of the State
of Delaware, United States of America, that has a Branch duly established and
registered with legal capacity recognized in Bolivia by the Direction of
Registry of Commerce and Corporations (RECSA), by Administrative Resolution No.
111 of April 24, 1979 and Commerce Registration No. 7-2502-1, with legal
residence in the city of Santa Cruz, Bolivia, henceforth called "ZAPATA".
SECOND CLAUSE: BACKGROUND.
By means of Public Deed of April 26, 1978, TESORO and ZAPATA entered with
YACIMIENTOS PETROLIFEROS FISCALES BOLIVIANOS, henceforth called "YPFB", a
Petroleum Operation Contract to execute work in Block XX, Department of Tarija,
Bolivia and by means of Public Deed of March 21, 1977, TESORO and ZAPATA
entered with YPFB, a Petroleum Operation Contract to execute work in Block
XVIII, Department of Tarija, Bolivia, such agreements being referred to as
Contracts. The area under the Contracts is defined in the map and coordinates
that are part of said Contracts.
THIRD CLAUSE: PURPOSE.
In consideration of the sum of U.S. Sixteen Million Dollars ($16,000,000.00) to
be paid by TESORO to ZAPATA hereunder and the mutual agreements reached by the
parties, effective as of July 28, 1996, ZAPATA assigns and transfers to TESORO
all of its undivided contractual interests, rights and obligations in the
Contracts together with its interest in all agreements, equipment, materials,
property and assets relating to said Contracts. Therefore, by means of this
Assignment Agreement TESORO shall be the
<PAGE> 17
title holder of one hundred percent (100%) of the contractual interests, rights
and obligations in the Contracts as of the effective date of this Assignment.
FOURTH CLAUSE: EFFECTIVE DATE.
This Assignment Agreement is effective on July 28, 1996 subject to the approval
required by applicable law.
FIFTH CLAUSE: NECESSARY DOCUMENTS.
TESORO and ZAPATA agree to execute and deliver all the documents and comply
with all such acts as may be necessary to give legal effect to this Assignment
Agreement and to obtain all approvals necessary for its perfection.
SIXTH CLAUSE: PARTIES AGREEMENT.
In conformity with all the previous Clauses, the parties have signed this
Assignment Agreement on July _____, 1997.
ZAPATA EXPLORATION COMPANY
By:
------------------------------
Robert A. Gardiner
President and Chief Executive Officer
TESORO BOLIVIA PETROLEUM COMPANY
By:
------------------------------
Robert W. Oliver
President
On this day personally appeared before me, the undersigned authority,
Robert A. Gardiner, personally known to me to be the President and Chief
Executive Officer of Zapata Exploration Company, a corporation, and acknowledge
to me that he executed the foregoing instrument for the purposes and
consideration therein expressed as the act and deed of Zapata Exploration
Company.
Given under my hand and notarial seal this _____ day of July, 1997.
-------------------------------
Notary Public, State of Texas
2
<PAGE> 18
On this day personally appeared before me, the undersigned authority,
Robert W. Oliver, personally known to me to be the President of Tesoro Bolivia
Petroleum Company, a corporation, and acknowledge to me that he executed the
foregoing instrument for the purposes and consideration therein expressed as
the act and deed of Tesoro Bolivia Petroleum Company.
Given under my hand and notarial seal this _____ day of July, 1997.
-------------------------------
Notary Public, State of Texas
3
