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UNITED STATES
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): December 29, 1999
TESORO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-3473 95-0862768
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
300 CONCORD PLAZA DRIVE, SAN ANTONIO, TEXAS 78216-6999
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 210-828-8484
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 29, 1999, Tesoro Petroleum Corporation ("Tesoro" or "Company")
completed the sale of its Bolivian exploration and production operations to BG
International, Ltd., a subsidiary of BG plc, effective July 1, 1999. The sale
requires authorization from certain Bolivian authorities. The business sold
included five shared-risk contracts with an agency of the Bolivian government to
explore for and produce hydrocarbons on more than one million gross acres in two
producing blocks and three non-producing blocks. The cash sale price in the
purchase agreement totaled $100,000,000, which was adjusted on a preliminary
basis for revenues, expenses, capital expenditures, working capital changes and
certain other items after the effective date to approximately $100,776,000 in
cash received at closing. Under the terms of the purchase agreement, this
transaction was structured as a sale of stock in a subsidiary corporation. The
consideration received, which was determined through a competitive bidding
process and negotiations with BG International, Ltd., is subject to post-closing
adjustments within 150 days after closing for operations between July 1, 1999,
the effective date, and December 29, 1999, the closing date. The cash proceeds
will be used to repay debt.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma condensed financial statements of
the Company as of September 30, 1999 and for the year
ended December 31, 1998 and nine months ended
September 30, 1999, have been previously filed in the
Registrant's Current Report on Form 8-K dated December 17,
1999 and filed on January 3, 2000.
(c) EXHIBITS.
+2.1 Stock Purchase Agreement, dated as of November 19,
1999, by and between Tesoro Petroleum Corporation
and BG International Limited.
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+ Filed herewith
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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.
TESORO PETROLEUM CORPORATION
REGISTRANT
Date: January 13, 2000
By: /s/ JAMES C. REED, JR.
-----------------------------------
James C. Reed, Jr.
Executive Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
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EXHIBIT DESCRIPTION
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+2.1 Stock Purchase Agreement, dated as of November 19, 1999, by and
between Tesoro Petroleum Corporation and BG International Limited.
</TABLE>
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+ Filed herewith.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 19, 1999,
BY AND BETWEEN
TESORO PETROLEUM CORPORATION,
AS SELLER,
AND
BG INTERNATIONAL LIMITED,
AS BUYER
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
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ARTICLE 1 - CERTAIN DEFINITIONS........................................................................................1
Section 1.1 Certain Defined Terms..............................................................1
Section 1.2 References, Gender, Number.........................................................1
Section 1.3 Parties' Knowledge.................................................................1
ARTICLE 2 - SALE AND PURCHASE OF COMPANY SHARES........................................................................2
Section 2.1 Sale and Purchase..................................................................2
Section 2.2 Intercompany Accounts..............................................................2
Section 2.3 Pre-Closing Distributions..........................................................2
Section 2.4 Balance Sheet Changes Due to Continuing Operations.................................2
ARTICLE 3 - PURCHASE PRICE AND PAYMENT.................................................................................3
Section 3.1 Purchase Price.....................................................................3
Section 3.2 Settlement Price...................................................................3
Section 3.3 Closing Statement and Payment......................................................4
Section 3.4 Post-Closing Adjustment to the Settlement Price....................................4
(a) Settlement Statement.......................................................4
(b) Final Settlement Statement.................................................5
(c) Final Settlement...........................................................5
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES.............................................................................6
Section 4.1 Representations and Warranties of Seller...........................................6
(a) Organization and Qualification of Seller...................................6
(b) Organization and Qualification of the Company..............................6
(c) Authority..................................................................6
(d) Enforceability.............................................................6
(e) Company Shares.............................................................6
(f) Company Capitalization.....................................................7
(g) Company Balance Sheet......................................................7
(h) No Conflict or Violation...................................................8
(i) Consents...................................................................8
(j) Actions....................................................................8
(k) Compliance With Laws.......................................................8
(l) Brokerage Fees and Commissions.............................................8
(m) Bankruptcy.................................................................9
(n) Material Contracts.........................................................9
(o) Events Subsequent to Report Date..........................................10
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(p) Environmental Matters.....................................................11
(q) Tax Matters...............................................................11
(r) Pre-Payment Arrangements..................................................12
(s) Status of Operation of Oil and Gas Properties.............................12
(t) Powers of Attorney........................................................13
(u) Personnel.................................................................13
(v) Labor Matters.............................................................13
(w) Employee Plans............................................................14
(x) No Subsidiaries...........................................................15
(y) Compliance with Material Contracts........................................15
(z) Insurance.................................................................15
(aa) Third Party Compliance with Major Contracts...............................15
Section 4.2 Representations and Warranties of Buyer...........................................15
(a) Organization and Qualification............................................16
(b) Authority.................................................................16
(c) Enforceability............................................................16
(d) No Conflict or Violation..................................................16
(e) Consents..................................................................16
(f) Actions...................................................................16
(g) Brokerage Fees and Commissions............................................16
(h) Funds.....................................................................17
(i) No Distribution...........................................................17
(j) Bankruptcy................................................................17
Section 4.3 Additional Representation and Warranty of Seller..................................17
ARTICLE 5 - ACCESS TO INFORMATION; ENVIRONMENTAL MATTERS; ETC.........................................................17
Section 5.1 General Access....................................................................17
Section 5.2 Confidential Information..........................................................18
ARTICLE 6 - CONTRACT INTEREST REVIEW..................................................................................18
Section 6.1 Buyer's Contract Interest Review..................................................18
(a) Buyer's Assertion of Contract Defects.....................................18
(b) Seller's Opportunity to Cure..............................................19
(c) Adjustments for Pre-Closing Defect Interests..............................21
(d) Purchase Price Refunds for Post-Closing Defect Interests..................22
Section 6.2 Determination of Contract Defect Amounts..........................................22
Section 6.3 Determination of Contract Defects.................................................23
Section 6.4 No Duplication, Etc...............................................................24
ARTICLE 7 - ENVIRONMENTAL MATTERS.....................................................................................25
Section 7.1 Asbestos and NORM.................................................................25
Section 7.2 Environmental Review and Audit....................................................25
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(a) Environmental Access......................................................25
(b) Conduct of Review.........................................................26
(c) Buyer Responsibility for Review...........................................26
Section 7.3 Environmental Defects.............................................................27
(a) Buyer's Assertions of Environmental Defects...............................27
(b) Purchase Price Adjustments for Environmental Defects......................27
(c) Buyer's Obligation to Remediate...........................................27
ARTICLE 8 - CASUALTY LOSS.............................................................................................28
Section 8.1 No Termination....................................................................28
Section 8.2 Casualty Proceeds.................................................................28
Section 8.3 Risks of Other Losses.............................................................29
(a) Operations................................................................29
(b) Market Conditions.........................................................29
ARTICLE 9 - COVENANTS OF SELLER AND BUYER.............................................................................29
Section 9.1 Conduct of Business Pending Closing...............................................29
(a) Changes in Business.......................................................29
(b) Encumbrances..............................................................31
(c) Operation of Assets.......................................................32
(d) Contracts and Agreements..................................................32
Section 9.2 Qualifications on Conduct.........................................................33
(a) Emergencies; Legal Requirements...........................................33
(b) Non-Operated Properties...................................................33
(c) Certain Operations........................................................33
Section 9.3 Public Announcements..............................................................34
Section 9.4 Actions and Efforts by Parties....................................................34
Section 9.5 Further Assurances................................................................34
Section 9.6 Records...........................................................................35
Section 9.7 Maintenance of Indemnification Provisions.........................................35
Section 9.8 No Other Solicitations............................................................36
Section 9.9 Company Name; Removal of Logos, etc...............................................36
Section 9.10 Compliance with Anti-Bribery Laws.................................................36
Section 9.11 Reorganization of the Company.....................................................38
ARTICLE 10 - TAX AND EMPLOYEE MATTERS.................................................................................39
Section 10.1 Tax Matters.......................................................................39
(a) Tax Return Filing.........................................................39
(b) Consistent Tax Treatment..................................................39
(c) Exclusive Provision for Taxes.............................................40
Section 10.2 Employee Matters..................................................................40
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ARTICLE 11 - CLOSING CONDITIONS.......................................................................................40
Section 11.1 Seller's Closing Conditions.......................................................40
(a) Representations, Warranties and Covenants.................................40
(b) Officer's Certificate.....................................................41
(c) Closing Documents.........................................................41
(d) No Action.................................................................41
(e) Opinion of Counsel........................................................41
(f) Adjustments...............................................................41
(g) No Existing Order.........................................................41
Section 11.2 Buyer's Closing Conditions........................................................42
(a) Representations, Warranties and Covenants.................................42
(b) Officer's Certificate.....................................................42
(c) Closing Documents.........................................................42
(d) No Action.................................................................42
(e) Opinion of Counsel........................................................42
(f) Adjustments...............................................................42
(g) No Existing Order.........................................................43
Section 11.3 Deferred Claims and Disputes......................................................43
Section 11.4 Deferred Adjustment Claims Extension..............................................44
ARTICLE 12 - CLOSING..................................................................................................44
Section 12.1 Closing...........................................................................44
Section 12.2 Seller's Closing Obligations......................................................44
Section 12.3 Buyer's Closing Obligations.......................................................45
ARTICLE 13 - EFFECT OF CLOSING........................................................................................45
Section 13.1 Survival..........................................................................45
Section 13.2 Change of Ownership...............................................................46
ARTICLE 14 - LIMITATIONS..............................................................................................47
Section 14.1 Disclaimer of Warranties and Representations......................................47
Section 14.2 Damages...........................................................................48
Section 14.3 Plugging and Abandonment Obligations..............................................48
Section 14.4 Environmental Release.............................................................49
ARTICLE 15 - INDEMNIFICATION..........................................................................................49
Section 15.1 Indemnification By Buyer..........................................................49
Section 15.2 Indemnification By Seller.........................................................50
Section 15.3 Indemnification and Defense Procedures............................................50
Section 15.4 Seller's General Liability Limitation.............................................53
ARTICLE 16 - TERMINATION; REMEDIES....................................................................................53
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Section 16.1 Termination.......................................................................53
(a) Termination of Agreement..................................................53
(b) Effect of Termination.....................................................54
Section 16.2 Remedies..........................................................................54
(a) Seller's Remedies.........................................................54
(b) Buyer's Remedies..........................................................54
ARTICLE 17 - MISCELLANEOUS............................................................................................55
Section 17.1 Counterparts......................................................................55
Section 17.2 Governing Law; Jurisdiction; Process..............................................55
Section 17.3 Entire Agreement..................................................................55
Section 17.4 Expenses..........................................................................55
Section 17.5 Notices...........................................................................55
Section 17.6 Successors and Assigns............................................................56
Section 17.7 Amendments and Waivers............................................................56
Section 17.8 Appendices, Schedules and Exhibits................................................57
Section 17.9 Interpretation....................................................................57
Section 17.10 Arbitration.......................................................................57
Section 17.11 Agreement for the Parties' Benefit Only...........................................59
Section 17.12 Attorneys' Fees...................................................................59
Section 17.13 Severability......................................................................59
Section 17.14 Currency..........................................................................60
Section 17.15 Time of Essence...................................................................60
</TABLE>
Appendix A - Definitions
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EXHIBITS
Exhibit 9.11 -- NewCo Organization Documents
Exhibit 11.1(e) -- Buyer's Counsel's Opinion
Exhibit 11.2(e) -- Seller's Counsel's Opinion
Exhibit 12.2(e) -- Affidavit of Non-Foreign Status
Exhibit 12.3(d) -- Company Assumption Agreement
SCHEDULES
Schedule A -- Property Schedule
Schedule 4.1(e) -- Seller's Existing Bank Liens
Schedule 4.1(g) -- Balance Sheets
Schedule 4.1(i) -- Seller's Consents
Schedule 4.1(j) -- Company's Actions
Schedule 4.1(n) -- Material Contracts
Schedule 4.1(o) -- Events Subsequent to Report Date
Schedule 4.1(p) -- Environmental Matters
Schedule 4.1(s)(2) -- List of Wells
Schedule 4.1(s)(4) -- Proposed & Pending Operations
Schedule 4.1(t) -- Powers of Attorney
Schedule 4.1(u) -- List of Personnel
Schedule 4.1(w) -- Employee Plans
Schedule 4.1(z) -- Insurance Policies
Schedule 4.2(e) -- Buyer's Consents
Schedule 9.1 -- Conduct of Business
Schedule 9.1(c)(4) -- Approved Operations
Schedule 9.11 -- NewCo Capital Structure
Schedule 10.1(a) -- Existing Tax Sharing Agreements
Schedule 10.2(a) -- National Employees
Schedule 10.2(b) -- Expatriate Employees
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November
19, 1999, is entered into by and between Tesoro Petroleum Corporation, a
Delaware corporation ("Seller"), and BG International Limited, a company
incorporated under the laws of England and Wales ("Buyer").
WHEREAS, Tesoro Bolivia Petroleum Company, a Texas corporation (the
"Company"), owns certain oil and gas contract rights and related assets in
Bolivia and is a wholly owned subsidiary of Seller; and
WHEREAS, Seller will cause the Company to be reorganized as a
corporation under the laws of the Cayman Islands in a manner that causes the
reorganized Company to retain or succeed to all properties, assets, liabilities
and obligations of the Company prior to such reorganization (other than certain
assets excluded under the terms of this Agreement); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all of the issued and outstanding shares of the Company,
upon the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Defined Terms. Unless the context otherwise
requires, the respective terms defined in APPENDIX A attached hereto and
incorporated herein shall, when used herein, have the respective meanings
therein specified, with each such definition to be equally applicable both to
the singular and the plural forms of the term so defined.
Section 1.2 References, Gender, Number. All references in this
Agreement to an "Article," "Section," or "subsection" shall be to an Article,
Section, or subsection of this Agreement, unless the context requires
otherwise. Unless the context otherwise requires, the words "this Agreement,"
"hereof," "hereunder," "herein," "hereby," or words of similar import shall
refer to this Agreement as a whole and not to a particular Article, Section,
subsection, clause or other subdivision hereof. Whenever the context requires,
the words used herein shall include the masculine, feminine and neuter gender,
and the singular and the plural.
Section 1.3 Parties' Knowledge. All references in this Agreement to
the "knowledge of Seller," "Seller's knowledge," "known to Seller" or phrases
of similar import
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concerning a particular fact, circumstance or condition shall mean (a) the
actual knowledge of each director, officer or employee at a managerial or
higher level of the Company, (b) the actual knowledge of other employees of the
Company that could have been obtained from reasonable inquiry of those
employees of the Company that would normally be responsible for the matter to
which such fact, circumstance or condition relates, and (c) the actual
knowledge of each director, officer or employee at a managerial or higher level
of Seller or any Affiliate of Seller involved in the negotiation or performance
of, or any analysis or due diligence in connection with, this Agreement. All
references in this Agreement to the "knowledge of Buyer," "Buyer's knowledge,"
"known to Buyer" or phrases of similar import concerning a particular fact,
circumstance or condition shall mean the actual knowledge of each director,
officer or employee at a managerial or higher level of Buyer or any Affiliate
of Buyer involved in the negotiation or performance of, or any analysis or due
diligence in connection with, this Agreement. References herein to "actual
knowledge" do not include imputed knowledge.
ARTICLE 2
SALE AND PURCHASE OF COMPANY SHARES
Section 2.1 Sale and Purchase. On and subject to the terms and
conditions of this Agreement, Seller agrees to sell and convey to Buyer, and
Buyer agrees to purchase from Seller, all issued and outstanding Company
Shares.
Section 2.2 Intercompany Accounts. On or before the Closing Date,
Seller shall eliminate any intercompany accounts that exists between (a) Seller
and its Affiliates (other than the Company) and (b) the Company.
Section 2.3 Pre-Closing Distributions. On or before the Closing Date,
following the satisfaction in full of Seller's obligation contemplated under
Section 2.2, Seller (a) shall have the right to cause the Company to pay to
Seller or Seller's designee an amount equal to Seller's good faith estimate of
all cash and cash equivalents of the Company not held for the account of YPFB
or any third party joint interest owner as of the Closing Date, and (b) shall
assign or otherwise transfer all Excluded Assets to Seller or Seller's
designee.
Section 2.4 Balance Sheet Changes Due to Continuing Operations. Buyer
and Seller expressly recognize that the assets and liabilities of the Company
shall be affected by the effects of ongoing ownership and operation of the
Assets during the period from the Effective Time to the end of business on the
Closing Date (the "Adjustment Period").
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ARTICLE 3
PURCHASE PRICE AND PAYMENT
Section 3.1 Purchase Price. The unadjusted purchase price for the sale
and conveyance of the Company Shares to Buyer is US $100,000,000 (the "Purchase
Price") and shall be subject to adjustment in accordance with the terms of this
Agreement.
Section 3.2 Settlement Price. Pursuant to the provisions as described
below, the Purchase Price to be paid by Seller will be subject to certain
adjustments made at Closing and within one hundred fifty (150) days thereafter,
as set forth in this Article 3, to determine the Settlement Price amount that
will actually be paid by Buyer. The adjustments to the Purchase Price will be
calculated as follows:
(a) Upward Adjustments. The Purchase Price shall be adjusted upward by
the following amounts:
(1) An amount equal to the expenses of the Company properly
accrued in accordance with GAAP, consistent with the Company's past
practice, attributable to the Adjustment Period; provided, however,
that such expenses shall exclude all (i) depreciation, depletion and
amortization, (ii) interest expense, (iii) income and franchise taxes,
and (iv) additional expenses (in excess of the expenses incurred by
the Company in the ordinary course of its business, including joint
interest billings to the Company from the operator under a Major
Contract) paid or payable by the Company to a third party to cure a
matter which, if left uncured, would entitle Buyer to a reduction or
refund of any portion of the Purchase Price under Section 3.2(b)(2),
3.2(b)(3) or 6.1(d) or would constitute a Seller Environmental
Obligation;
(2) An amount equal to the capital expenditures of the Company
properly accrued in accordance with GAAP, consistent with the
Company's past practice, attributable to the Adjustment Period, but
excluding any capital expenditure incurred by the Company in violation
of Sections 9.1 and 9.2, unless subsequently approved by Buyer;
provided that Buyer shall not be entitled to any duplicate recovery
under this Section 3.2(a)(2) and Sections 9.1 and 9.2 on account of
any such violation; and provided further that Seller shall not be
entitled to any duplicate recovery under this Section 3.2(a)(2) and
Section 3.2(a)(1) or under this Section 3.2(a)(2) and Section
3.2(a)(3); and
(3) If the Working Capital Adjustment is a positive amount, then
an amount equal to the Working Capital Adjustment.
(b) Downward Adjustments. The Purchase Price shall be adjusted
downward by the following amounts:
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(1) An amount equal to the revenues of the Company properly
accrued in accordance with GAAP, consistent with the Company's past
practice, attributable to the Adjustment Period;
(2) An amount equal to any reduction in the Purchase Price
resulting from a Contract Defect, determined as provided in Article 6;
(3) An amount equal to any reduction in the Purchase Price
resulting from an Environmental Defect, determined as provided in
Article 7;
(4) An amount equal to any Casualty Price Reduction affecting the
Assets, determined as provided by Article 8; and
(5) If the Working Capital Adjustment is a negative amount, then
an amount equal to the Working Capital Adjustment (stated as a
positive number).
Subject to the amounts contemplated pursuant to Section 11.3 and without
limiting Buyer's covenants, agreements and indemnity obligations hereunder, the
total consideration to be received by Seller for the sale of the Company Shares
shall be the Purchase Price as adjusted pursuant to this Section 3.2 (the
"Settlement Price").
Section 3.3 Closing Statement and Payment. Not later than five
Business Days prior to the Closing Date, Seller shall prepare and deliver to
Buyer a statement (the "Closing Statement") of the estimated adjustments to the
Purchase Price in accordance with Section 3.2 and the estimated Settlement
Price (the "Closing Payment"), without taking into account any reductions in
Purchase Price attributable to Deferred Adjustment Claims pursuant to Section
11.3. At the Closing, Buyer shall wire transfer the Closing Payment in
immediately available funds to such account specified by Seller to Buyer on or
prior to the Business Day immediately preceding the Closing Date.
Section 3.4 Post-Closing Adjustment to the Settlement Price.
(a) Settlement Statement. On or before the date that is 150 days after
the Closing Date, Buyer shall prepare and deliver to Seller a statement (the
"Settlement Statement") which shall show the calculation of the Settlement
Statement adjustments to the adjusted Purchase Price in accordance with Section
3.2, based upon the best information then available. To the extent reasonably
required by Buyer, Seller shall assist in the preparation of the Settlement
Statement. Buyer will give (and cause the Company to give) personnel,
accountants and representatives of Seller reasonable access to the Assets and
Buyer's and the Company's premises and to Buyer's and the Company's respective
books and records for purposes of auditing the Settlement Statement and will
cause appropriate personnel of Buyer and the Company to assist Seller and
Seller's personnel, accountants and representatives in the audit of the
Settlement Statement. Seller shall provide to Buyer such data
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and information in Seller's possession as Buyer may reasonably request
supporting the amounts to be reflected in the Settlement Statement in order to
permit Buyer to prepare the Settlement Statement. The Settlement Statement
shall become final and binding upon the parties on the date that is 30 days
following receipt of the Settlement Statement by Seller (the "Final Settlement
Date"), except to the extent that Seller gives written notice of its
disagreement ("Notice of Disagreement") to Buyer prior to such date. Any Notice
of Disagreement must specify in detail the dollar amount, nature and basis of
any disagreement so asserted. If a Notice of Disagreement is received by Buyer
in a timely manner as aforesaid, then the Settlement Statement (as revised in
accordance with subsection (b) below) shall become final and binding upon the
parties on, and the Final Settlement Date shall be, the earlier of (i) the date
upon which Seller and Buyer agree in writing on all matters specified in all
Notices of Disagreement or (ii) the date when decisions have been rendered by
the arbitration panel on all matters to be determined by the arbitration panel
pursuant Section 3.4(b). Any Deferred Adjustment Claims, however, shall be
resolved pursuant to Section 11.3 and shall not be resolved or submitted to
arbitration pursuant to this Section 3.4.
(b) Final Settlement Statement. During the 30 days following the date
upon which Buyer receives the last Notice of Disagreement, Seller and Buyer
shall attempt to resolve in writing any differences that they may have with
respect to all matters specified in the Notices of Disagreement. If at the end
of such 30 day period (or earlier by mutual agreement to arbitrate), Buyer and
Seller have not reached agreement on such matters, the matters that remain in
dispute may be submitted to arbitration pursuant to Section 17.10. As used in
this Agreement, the term "Final Settlement Statement" shall mean the Settlement
Statement described in Section 3.4(a), as prepared by Buyer and as may be
subsequently adjusted to reflect any subsequent written agreement between the
parties with respect thereto, or if submitted to arbitration, the Settlement
Statement described in Section 3.4(a), as prepared by Buyer and as may be
subsequently adjusted to reflect any subsequent written agreement between the
parties with respect thereto and any adjustments issued by the arbitration
panel pursuant to this Section 3.4(b).
(c) Final Settlement. If the amount of the Settlement Price as set
forth on the Final Settlement Statement exceeds the amount of the Closing
Payment, then Buyer shall pay to Seller, within five days after the Final
Settlement Date, the amount by which the Settlement Price as set forth on the
Final Settlement Statement exceeds the amount of the Closing Payment plus
interest on such excess amount at the Agreed Rate. If the amount of the
Settlement Price as set forth on the Final Settlement Statement is less than
the amount of the Closing Payment, then Seller shall pay to Buyer, within five
business days after the Final Settlement Date, the amount by which the
Settlement Price as set forth on the Final Settlement Statement is less than
the amount of the Closing Payment plus interest on such deficit amount at the
Agreed Rate. Any post-Closing payment made pursuant to this Section 3.4(c)
shall be made by means of a wire transfer of immediately available funds to a
bank account designated by the party receiving the funds. Notwithstanding any
provision herein to the contrary, each party shall have a right to set-off any
amounts then due and owing pursuant to this Section 3.4(c) with any amounts
then due and owing as a result of a final arbitral decision as contemplated
under Section 11.3.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Seller. Except as set
forth in the Schedules hereto prepared by Seller and attached hereto at the
time of the execution hereof or as disclosed in, or is readily inferable from,
the financial statements referenced in Section 4.1(g), Seller represents and
warrants to Buyer that all of the following statements contained in this
Section 4.1 are true as of the date of this Agreement:
(a) Organization and Qualification of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Organization and Qualification of the Company. On the date of this
Agreement, the Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and has the requisite
company power to carry on its business as it is now being conducted. The
Company is duly qualified to do business, and is in good standing, in each
jurisdiction in which the Assets owned or leased by it makes such qualification
necessary, except where the failure to so qualify and be in good standing will
not have a Material Adverse Effect.
(c) Authority. Seller has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action on the part of Seller.
(d) Enforceability. This Agreement has been duly executed and
delivered by Seller, and, assuming due and valid authorization, execution and
delivery hereof by Buyer, constitutes a valid and binding agreement of Seller
enforceable against Seller in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application with respect to creditors, (ii) general principles
of equity and (iii) the power of a court to deny enforcement of remedies
generally based upon public policy.
(e) Company Shares. Except for liens, security interests and other
encumbrances set forth on SCHEDULE 4.1(e) that are currently held by banks or
other institutional lenders of Seller which will be released and discharged at
or prior to Closing, the Seller holds of record and owns beneficially all
issued and outstanding Company Shares free and clear of any security interests,
liens, options, warrants, purchase rights, or other encumbrances (except as
created by this Agreement and restrictions on sales of shares under applicable
securities laws). Upon the purchase of the Company Shares as contemplated by
this Agreement, the Buyer will obtain good and valid title to all issued and
outstanding Company Shares free and clear of all security interests, liens,
options, warrants, purchase rights, or other encumbrances (other than those
created by, through or under Buyer and restrictions on sales of shares under
applicable securities laws). Except for liens, security interests and other
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<PAGE> 14
encumbrances currently held by banks or other institutional lenders of Seller
which will be released and discharged at or prior to Closing, the Seller is not
a party to (i) any option, warrant, purchase right, or other contract or
commitment (other than this Agreement) that could require the Seller to sell,
transfer, or otherwise dispose of any Company Shares or (ii) any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
Company Shares.
(f) Company Capitalization. The entire authorized capital stock of the
Company as of the date of this Agreement consists of 50,000 Company Shares, par
value US $1.00 per share, of which only the 40,000 Company Shares held
beneficially and of record by the Seller are issued and outstanding as of the
date of this Agreement. All of the issued and outstanding Company Shares have
been duly authorized and are validly issued, fully paid and nonassessable and
were not issued in violation of the preemptive rights of any person. Except for
liens, security interests and other encumbrances currently held by banks or
other institutional lenders of Seller which will be released and discharged at
or prior to Closing, the Company does not have outstanding, and is not a party
to, any convertible security, call, preemptive right, option, warrant, purchase
right, or other contract or commitment that could, directly or indirectly,
require the Company to sell, issue, or otherwise dispose of any Company Shares.
(g) Company Balance Sheet. Attached hereto as SCHEDULE 4.1(g) is (i)
the unaudited balance sheet of the Company (including the notes thereto, the
"Balance Sheet") as at June 30, 1999 (the "Report Date"), and the related
summary of operations for the Company as and for the six months ended June 30,
1999, and (ii) the unaudited balance sheet of the Company, (including the notes
thereto, the "Interim Balance Sheet") as at September 30, 1999, and the related
summary of operations for the Company as and for the nine months ended
September 30, 1999. Such financial statements present fairly, in accordance
with GAAP (except as indicated in the notes thereto which will qualify that the
Company has been accounted for as part of a consolidated financial group with
its Affiliates and not as a completely separate stand-alone entity) applied on
a consistent basis throughout the periods covered thereby, the financial
condition of the Company as of such dates and the results of operations of the
Company for such periods; provided, however, that such financial statements are
subject to normal year-end adjustments and in some instances lack footnotes
(the effect of which will not, individually or in the aggregate, have a
Material Adverse Effect). If a balance sheet of the Company as at the date of
this Agreement were to be prepared in accordance with GAAP, applied on a
consistent basis with the Interim Balance Sheet, and containing notes thereto
prepared in a manner consistent with the manner in which the notes to the
Interim Balance Sheet were prepared, the financial condition of the Company as
at the date of this Agreement presented fairly, in accordance with GAAP applied
as aforesaid, in such hypothetical balance sheet, including the notes thereto,
would not reflect a material adverse change in the financial condition of the
Company from the financial condition of the Company as presented in the Interim
Balance Sheet, excluding (i) any adverse change resulting from any change in
economic, industry or market conditions (whether general or regional in nature
or limited to any area where any Assets are located) or from any change in Law
or regulatory policy and (ii) any adverse change for which Buyer is entitled to
a Casualty Price Reduction. Without limiting Seller's express representations,
warranties, covenants and agreements which are contained in
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other Sections of this Agreement, this Section 4.1(g) shall not constitute a
representation or warranty with respect to the title of the Company to any
Contract Interests, any pending or threatened Actions, any Plugging and
Abandonment Obligations, or the existence, non-existence or effect of any
Environmental Condition, Environmental Claims, Environmental Liabilities,
Environmental Defects or Environmental Matters.
(h) No Conflict or Violation. Except for any exceptions set forth in
Section 4.1(i) (or SCHEDULE 4.1(i)) or required by Section 9.11, neither the
execution and delivery of this Agreement nor the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Seller will (i) conflict with or result in a violation or breach of any
provision of the certificate of incorporation, by-laws or other similar
governing documents of Seller or the Company, (ii) conflict with or result in a
violation or breach of (with or without due notice or lapse of time or both) or
a default (or give rise to any right of termination, cancellation or
acceleration) under any material agreement, indenture or other instrument under
which Seller or the Company is bound, or (iii) violate or conflict with any Law
applicable to Seller or the Company or the Assets.
(i) Consents. Except for the consents, filings or notices expressly
described and set forth in SCHEDULE 4.1(i) or required by Section 9.11, no
consent, approval, authorization or permit of, or filing with or notification
to, any Person is required for or in connection with the execution and delivery
of this Agreement by Seller or for or in connection with the consummation of
the transactions and performance of the terms and conditions contemplated
hereby by Seller.
(j) Actions. Except as set forth on SCHEDULE 4.1(j) and with respect
to Environmental Claims for which Seller's sole representation and warranty is
set forth in Section 4.1(p), there is no Action pending against the Company
(with service of process therein having been made on the Company) or, to the
knowledge of Seller, threatened against the Company (or pending against the
Company without service of process therein having been made on the Company).
(k) Compliance With Laws. Except as set forth on SCHEDULE 4.1(j), (i)
the Company, has complied in a timely manner and in all material respects with
all Laws that materially affect the business, properties or Assets of the
Company, and (ii) no pending notice, charge, claim, action or assertion has
been received by the Company or has been filed or commenced against the Company
(with service of process therein having been made on the Company) or, to the
knowledge of Seller, threatened against the Company (or pending against the
Company without service of process therein having been made on the Company)
alleging that the Company has failed to comply in a timely manner and in all
material respects with all Laws that materially affect the business, properties
or Assets of the Company; provided that, Seller makes no representation or
warranty, express or implied, under this Section 4.1(k) relating to (i) any
Environmental Law or any Tax Law or (ii) the Company's title to any Assets or
the existence or non-existence of any Contract Defect.
(l) Brokerage Fees and Commissions. Neither Seller nor any Affiliate
of Seller has incurred any obligation or entered into any agreement for any
investment banking, brokerage or
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<PAGE> 16
finder's fee or commission in respect of the transactions contemplated by this
Agreement for which Buyer or the Company shall incur any liability.
(m) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings under any bankruptcy, insolvency, reorganization, moratorium or
other similar laws with respect to creditors pending against, being
contemplated by, or, to the knowledge of Seller, threatened against Seller or
the Company.
(n) Material Contracts. SCHEDULE 4.1(n) sets forth a list of the
following contracts, agreements or commitments (the "Material Contracts") to
which the Company is a party or by which the Company is bound:
(1) any contract or agreement with Seller or any Affiliate of
Seller relating to the provision of goods or services to the Company
by Seller or any Affiliate of Seller which will survive the Closing;
(2) any contract, agreement or commitment that commits the Company
to aggregate expenditures or that gives rise to anticipated receipts
with respect to the Company's interest of more than US $50,000 in any
calendar year; excluding the Major Contracts and any authority for
expenditure or other commitment, or any performance, under the Major
Contracts;
(3) any lease, sublease, installment purchase or similar
arrangement for the use or occupancy of any land, building or other
real property, excluding (i) the Major Contracts and (ii) the Farmout
Agreement;
(4) any contract, agreement or commitment that commits the Company
to sell, process or transport any hydrocarbon production attributable
to the Contract Interests; excluding (i) any such contract, agreement
or commitment which expires within 60 days or can be terminated by the
Company upon not more than 60 days notice without penalty, (ii) the
Major Contracts, and (iii) agreements for the sale, processing or
transportation of any condensate or similar liquid hydrocarbons;
(5) any indenture, trust agreement, loan agreement or note under
which the Company has outstanding indebtedness for borrowed money;
(6) any agreement of surety, guarantee or indemnification by the
Company, other than indemnities pursuant to Major Contracts, oil field
service contracts, maintenance service contracts and consulting
contracts; and
(7) any joint operating agreement with respect to the Contract
Interests, excluding the Major Contracts.
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<PAGE> 17
(o) Events Subsequent to Report Date. Except in each case as set forth
in SCHEDULE 4.1(o) or as otherwise disclosed in the financial statements
referenced in Section 4.1(g), during the period from the Report Date until the
date of this Agreement the Company has engaged in business in a manner
consistent with its past practices, and there has not been any:
(1) destruction, damage to, or loss of any assets of the Company
that (after giving effect to any insurance coverage with regard
thereto) is reasonably expected by Seller to have a Material Adverse
Effect;
(2) change in accounting policies or practices (including any
change in depreciation or amortization policies) by the Company,
except as required under GAAP;
(3) incurrence or assumption by the Company of any indebtedness
for borrowed money, other than intercompany accounts which will be
settled in accordance with Section 2.2;
(4) sale, lease or other disposition of any properties or Assets
of the Company, except (i) in the ordinary course of business, (ii)
any item of personal property or equipment having a value of less than
US $10,000, or (iii) any item of personal property or equipment which
is surplus or not operational;
(5) merger or consolidation by the Company with any other entity
or any acquisition by the Company of any other entity;
(6) transaction entered into by the Company outside its ordinary
course of business;
(7) mortgage, pledge, lien, charge, security interest or any other
encumbrance created with respect to any Asset (other than a Contract
Interest), except for encumbrances which would be Permitted
Encumbrances if such Asset were included in the Contract Interests;
(8) payment, discharge or satisfaction of any material liabilities
by the Company, other than (i) in the ordinary course of business and
(ii) either consistent with past practice or paid, discharged or
satisfied under a Major Contract or a contract existing at the
Effective Time;
(9) change in the Company's tax policies, methods or elections,
except as required by Law;
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<PAGE> 18
(10) employment agreement entered into by the Company, except for
those agreements that are terminable at will upon no more than 30 days
prior notice;
(11) (i) dividend or other distribution in respect of the Company
Shares or (ii) other transactions between the Company and the Seller
or any Affiliate of Seller which are not consistent with the Company's
past practices;
(12) change in any Employee Plan which would have a Material
Adverse Effect, except as required by Law;
(13) labor dispute or work stoppages or threats thereof by or with
respect to persons employed by the Company in either case which is
reasonably expected by Seller to have a Material Adverse Effect;
(14) settlement entered into or consent made to any order, decree
or judgment relating to or arising out of any Action relating to the
Company which is reasonably expected by Seller to have a Material
Adverse Effect; or
(15) any farmout, in whole or in part, of any Contract Interest,
other than existing obligations under the Farmout Agreement.
(p) Environmental Matters. There are no proceedings pending (with
service of process therein having been made on the Company) or, to the
knowledge of Seller, threatened (or pending without service of process therein
having been made on the Company), relating to any real property owned, leased
or operated by the Company under any Environmental Law by any Governmental
Authority or other person or entity. The Company has not received any written
notice from any Governmental Authority of any violation of any Environmental
Law or requesting Company to take remedial action with respect to the presence
of any Hazardous Material, except as set forth in SCHEDULE 4.1(p).
(q) Tax Matters. After the Closing Date, the Company has (or will have
by the Closing Date) caused to be duly filed in a timely manner with the
appropriate federal, state, local and other governmental authorities all
returns, information returns or statements and reports with respect to Taxes
(the "Tax Returns") which are required to be filed and have (or will have by
the Closing Date) caused to be paid or deposited all Taxes (including estimated
Taxes) required with respect to the periods covered by such Tax Returns, except
such Taxes as are being contested in good faith by appropriate proceedings for
which adequate reserves have been established in the financial statements of
the Company in accordance with GAAP consistently applied. Adequate provision
has (or will have by the Closing Date) been made for all Taxes due for all
periods through the Closing Date in accordance with GAAP consistently applied.
To Seller's knowledge, all Taxes required to be collected or withheld by the
Company have (or will have by the Closing Date) been duly collected or
withheld. Further, (i) the Tax Returns are or will be true and correct in all
material respects, and all
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<PAGE> 19
Taxes reported on such returns have been or will be paid or adequately provided
for; (ii) the Company (or the common parent of the affiliated group of which
the Company is a member) has not extended or waived the application of any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Tax; (iii) to the knowledge of Seller, there are no claims,
assessments, levies, administrative proceedings, or lawsuits pending or
threatened against the Company by any taxing authority, (iv) there are no tax
sharing or tax indemnity agreements to which the Company is a party, (v) no
extension of time is in effect with respect to the date on which any Tax Return
is to be filed by the Company; (vi) there are no outstanding agreements or
waivers by the Company extending the period for assessment or collection of any
Taxes; and (vii) no claim for assessment or collection of Taxes has been
asserted by any Taxing authority against the Company and no actual or proposed
Tax assessment has been made by any Taxing authority against the Company.
Notwithstanding anything in this Section 4.1(q) to the contrary, no
representation or warranty is made with respect to the amount, availability,
expiration, limitation or reduction of any net operating losses of the Company.
(r) Pre-Payment Arrangements. Except for circumstances under which the
Company has or is entitled to receive payment therefor after the Effective
Time, the Company is not obligated by virtue of a prepayment arrangement, "take
or pay" arrangement, production payment, or other similar arrangement, to
deliver or to suffer the delivery of oil, gas, or other minerals produced under
any Shared Risk Contract after the Effective Time (or make a cash payment in
lieu thereof) without then or thereafter receiving full payment therefor
without deduction or credit on account of such arrangement from the price that
would otherwise be received.
(s) Status of Operation of Oil and Gas Properties.
(1) To the knowledge of Seller, no party has threatened or taken
action to terminate or procure a judicial reformation of any Shared
Risk Contract.
(2) Each producing well to which the Shared Risk Contracts relate
is legally bottomed on the land on which it is located in accordance
with the applicable Shared Risk Contract, all as required by any
Governmental Authority having jurisdiction thereof. Set forth on
SCHEDULE 4.1(s)(2) is a complete list as of the date of this Agreement
of each well governed by a Shared Risk Contract and the status thereof
as of the date of this Agreement. To Seller's knowledge, all tangible
Assets used by the Company in the operation of any well described as
producing in SCHEDULE 4.1(s)(2), or in the production, treatment,
storage, gathering, and transportation by the Company of hydrocarbons
from such well, are in good operating condition, ordinary wear and
tear excepted, except for conditions and defects that do not, in the
aggregate, have a Material Adverse Effect.
(3) No other party to any joint operating agreement or other
contract binding on the properties which are the subject of the Shared
Risk Contracts is entitled to any adjustments of past accounts at the
expense of the Company, except as could
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<PAGE> 20
not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
(4) From the Effective Time to the date of this Agreement, except
for operations listed on SCHEDULE 4.1(s)(4), the Company has not
proposed or conducted for its own account any operation the reasonably
projected cost of which as of the date of this Agreement (net to the
Company's interest and without consideration of any cost overruns
after the date of this Agreement) is in excess of US $100,000, in the
aggregate with respect to such operation. As used in this subsection
4.1(s)(4) and in subsection 4.1(s)(5) and Sections 9.1 and 9.2, the
term "operation" shall mean all work which in the oil and gas industry
would customarily be included in a single authority for expenditure
(e.g., the drillsite preparation for a well and the drilling,
completing and equipping of such well for production (and plugging and
abandonment thereof if a dry hole) shall be considered a single
operation, but any deepening, recompletion or reworking of such well
(or subsequent plugging and abandonment thereof if not a dry hole)
shall each be a separate operation and the construction of any
gathering, transportation or processing facilities shall each be a
separate operation).
(5) From the Effective Time to the date of this Agreement, except
for operations listed on SCHEDULE 4.1(s)(4), the Company has not
agreed to participate in any reworking, deepening, drilling,
completion, recompletion, equipping or other operation that has been
proposed by a co-owner in any well or other Asset, to the extent that
the reasonably projected cost of such operation as of the date of this
Agreement (net to the Company's interest and without consideration of
any cost overruns after the date of this Agreement) is in excess of US
$100,000, in the aggregate with respect to such operation.
(t) Powers of Attorney. SCHEDULE 4.1(t) sets forth a list of all
powers of attorney of the Company in effect as of the Effective Time and those
which are currently in force and were granted by the Company prior to any
reorganization contemplated herein and the name of the individual upon whom
such power has been conferred.
(u) Personnel. SCHEDULE 4.1(u) sets forth a true and complete list of
(i) the names and current salaries of all part time, full time or contract
National Employees (together with the names of all officers and directors) of
the Company and (ii) all group insurance programs in effect for employees of
the Company. The Company is not in default with respect to any of its group
insurance programs referred to in the preceding sentence.
(v) Labor Matters.
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<PAGE> 21
(1) There is no labor strike, dispute, corporate campaign,
slowdown, stoppage or lockout actually pending, or to the knowledge of
Seller, threatened against the Company and during the past five years
there has not been any such action.
(2) The Company is not a party to or bound by any collective
bargaining or similar agreement with any labor organization or work
rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company.
(3) The Company is, and has at all times been, in compliance, in
all material respects, with all Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours
of work and occupational safety and health, and is not engaged in any
unfair labor practices, except as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
provided that, no representation or warranty is made under this
Section 4.1(v) with respect to Environmental Laws.
(4) There is no unfair labor practice charge or complaint pending
against the Company (with service of process therein having been made
on the Company) or, to the knowledge of the Seller, threatened against
the Company (or pending against the Company without service of process
therein having been made on the Company) before any Governmental
Authority.
(5) To the knowledge of Seller, no charge with respect to the
Company is pending before any Governmental Authority responsible for
the prevention of unlawful employment practices
(6) The Company has not received notice of the intent of any
Governmental Authority responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to the
Company, and no such investigation is in progress.
(7) Except as set forth on SCHEDULE 4.1(j), there are no
complaints, lawsuits or other proceedings pending against the Company
(with service of process therein having been made on the Company) or,
to the knowledge of the Seller, threatened against the Company (or
pending against the Company without service of process therein having
been made on the Company) in any forum by or on behalf of any present
or former employee of the Company, any applicant for employment or
classes of the foregoing alleging breach of any express or implied
contract of employment, any laws governing employment or the
termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship.
(w) Employee Plans.
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<PAGE> 22
(1) SCHEDULE 4.1(w) contains a true and complete list of all
Employee Plans with respect to the National Employees. The Company has
no commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or modify or change any
existing Employee Plan that would affect any National Employee or
former National Employee of the Company.
(2) The consummation of the transactions contemplated herein will
not (i) entitle any current or former National Employee of the Company
to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or by Law, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such National Employee.
(x) No Subsidiaries. The Company does not have any Subsidiaries.
(y) Compliance with Material Contracts. Each Material Contract, in all
material respects, is in full force and effect and constitutes a valid and
binding contract enforceable in accordance with its terms, subject to (x)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application with respect to creditors, (y) general principles
of equity and (z) the power of a court to deny enforcement of remedies
generally based upon public policy. The Company is not in material breach of or
material default under any Material Contract, and there does not exist under
any provision thereof, any event that, with the giving of notice or the lapse
of time or both, would constitute such a breach or default by the Company,
except for such breaches, defaults and events as to which requisite waivers or
consents have been or are being obtained or which would not have, individually
or in the aggregate, a Material Adverse Effect.
(z) Insurance. Attached hereto as SCHEDULE 4.1(z) is a true and
complete list of all insurance policies and contracts of insurance in force on
the date hereof with respect to the business or Assets of the Company. All such
policies and contracts of insurance are in full force and effect, all premiums
due thereon have been paid by the Company or an Affiliate of the Company, and
the Company is otherwise in compliance in all material respects with the terms
and provisions of such policies.
(aa) Third Party Compliance with Major Contracts. To the knowledge of
Seller, the parties (other than the Company) to any Major Contract are not in
material breach of or material default under such Major Contract, and there
does not exist under any provision thereof, any event that, with the giving of
notice or the lapse of time or both, would constitute such a breach or default
by such parties (other than the Company).
Section 4.2 Representations and Warranties of Buyer. As of the date of
this Agreement, Buyer represents and warrants to Seller as follows:
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(a) Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of England and
Wales and has the requisite corporate power to carry on its business as it is
now being conducted.
(b) Authority. Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of Buyer.
(c) Enforceability. This Agreement has been duly executed and
delivered by Buyer, and, assuming due and valid authorization, execution and
delivery hereof by Seller, constitutes a valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application with respect to creditors, (ii) general principles
of equity and (iii) the power of a court to deny enforcement of remedies
generally based upon public policy.
(d) No Conflict or Violation. Neither the execution and delivery of
this Agreement nor the consummation of the transactions and performance of the
terms and conditions contemplated hereby by Buyer will (i) conflict with or
result in a violation or breach of any provision of the certificate of
incorporation, bylaws or other similar governing documents of Buyer, (ii)
conflict with or result in a violation or breach of or a default under any
agreement, indenture or other instrument under which Buyer is bound, or (iii)
violate or conflict with any Law applicable to Buyer.
(e) Consents. Except for the consents, filings or notices expressly
described and set forth in SCHEDULE 4.2(e) or required by Section 9.11, no
consent, approval, authorization or permit of, or filing with or notification
to, any Person is required for or in connection with the execution and delivery
of this Agreement by Buyer or for or in connection with the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Buyer.
(f) Actions. There is no Action pending against Buyer (with service of
process therein having been made on Buyer) or, to the knowledge of Buyer,
threatened against Buyer (or pending against Buyer without service of process
therein having been made on Buyer), other than Actions which are not reasonably
expected to have a material adverse effect on Buyer or the transactions
contemplated by this Agreement.
(g) Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of
Buyer has incurred any obligation or entered into any agreement for any
investment banking, brokerage or finder's fee or commission in respect of the
transactions contemplated by this Agreement for which Seller or the Company
shall incur any liability.
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<PAGE> 24
(h) Funds. Buyer has, and at all times prior to Closing will have,
sufficient funds available to enable Buyer to consummate the transactions
contemplated hereby and to pay the Closing Payment and all related fees and
expenses of Buyer.
(i) No Distribution. Buyer is an experienced and knowledgeable
investor in the oil and gas business, Buyer is able to bear the economic risks
of its acquisition and ownership of the Company and the Assets, and Buyer is
capable of evaluating (and has evaluated) the merits and risks of the Company
and the Assets and Buyer's acquisition and ownership of the Company. Prior to
entering into this Agreement, Buyer was advised by its counsel and such other
persons it has deemed appropriate concerning this Agreement and has relied
solely on an independent investigation and evaluation of, and appraisal and
judgment with respect to, the geologic and geophysical characteristics of the
Contract Interests, the estimated reserves recoverable therefrom, and the price
and expense assumptions applicable thereto. Buyer is an "accredited investor,"
as such term is defined in Regulation D of the Securities Act of 1933, as
amended, and will acquire the Company Shares for its own account and not with a
view to a sale or distribution thereof in violation of the Securities Act of
1933, as amended, and the rules and regulations thereunder, any applicable
state blue sky laws or any other applicable securities laws.
(j) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings under any bankruptcy, insolvency, reorganization, moratorium or
other similar laws with respect to creditors pending against, being
contemplated by, or to the knowledge of Buyer, threatened against Buyer.
Section 4.3 Additional Representation and Warranty of Seller.
Effective as of the Closing Date, Seller represents and warrants to Buyer that
the Company will be a corporation duly organized, validly existing and in good
standing under the laws of the Cayman Islands and will have the requisite
company power to carry on its business as it is then being conducted.
ARTICLE 5
ACCESS TO INFORMATION; ENVIRONMENTAL MATTERS; ETC.
Section 5.1 General Access. Subject to Section 7.2 (which shall govern
all environmental reviews, inspections and audits), promptly following the
execution of this Agreement and until the Closing Date (or earlier termination
of this Agreement), Seller shall cause the Company:
(a) to permit Buyer and its representatives to have reasonable access
at reasonable times in the Company's and Seller's offices, and in a manner
so as not to interfere unduly with the business operations of the Company
or Seller, to the Company's books, records, contracts, title opinions,
title files, ownership maps, assignments and documents relating to the
Assets insofar as the Company and Seller may do so without (i) violating
legal constraints or any legal obligation or (ii) waiving any
attorney/client, work product or like privilege; and
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<PAGE> 25
(b) subject to any required consent of any third Person, to permit
Buyer and its representatives at reasonable times and at Buyer's sole
risk, cost and expense, to conduct, in the presence of the Company's or
Seller's representatives, reasonable inspections of the Assets;
provided, however, that Buyer shall repair any material damage to the Assets
resulting from such inspections and Buyer does hereby indemnify and hold
harmless, release and agree to defend the Seller Indemnified Persons from and
against any and all Covered Liabilities to the extent arising from Buyer's
inspection of the Assets, REGARDLESS OF ANY CONCURRENT NEGLIGENCE OR STRICT
LIABILITY ON THE PART OF THE SELLER INDEMNIFIED PERSONS AND REGARDLESS OF THE
FORM OF CLAIM WHETHER AT COMMON OR CIVIL LAW, STRICT LIABILITY, NEGLIGENCE OR
UNDER ANY STATUTE OR REGULATION. Nothing in this Agreement shall be construed
to permit Buyer or its representatives to have access to any files, records,
contracts or documents of Seller or the Company relating to this transaction,
including any bids or offers received by Seller for the sale of the Company or
the Assets in competition with the Buyer's bid or offer, it being agreed that
all such competing bids or offers shall be the sole property of Seller.
Section 5.2 Confidential Information. Unless and until the Closing
occurs, Buyer agrees to maintain all information made available to it pursuant
to this Agreement confidential and to cause its directors, officers, employees,
agents, representatives, consultants and advisors to maintain all information
made available to them pursuant to this Agreement confidential, all as provided
in that certain confidentiality agreement dated June 21, 1999 (the
"Confidentiality Agreement"), by and between Seller and Buyer, the terms of
which are incorporated herein by reference and made a part of this Agreement.
ARTICLE 6
CONTRACT INTEREST REVIEW
Section 6.1 Buyer's Contract Interest Review.
(a) Buyer's Assertion of Contract Defects. Buyer shall perform
reasonable due diligence with respect to the Contract Interests during the
period commencing on the execution of this Agreement and ending five Business
Days prior to the Closing Date (the "Contract Examination Period"). Prior to
the expiration of the Contract Examination Period Buyer may furnish Seller
written notice meeting the requirements of this Section 6.1(a) (the "Contract
Defect Notice") setting forth any matters which, in Buyer's reasonable opinion,
constitute Contract Defects and which Buyer intends to assert as a Contract
Defect with respect to all or any portion of a Contract Interest pursuant to
this Article 6. Prior to the expiration of the period commencing on the Closing
and ending 730 calendar days thereafter (the "Title Survival Period"), Buyer
may furnish Seller a Contract Defect Notice setting forth any matters not
asserted prior to Closing which, in Buyer's reasonable opinion, constitute
Contract Defects and which Buyer intends to assert as a Contract Defect with
respect to all or any portion of a Contract Interest pursuant to this Article
6. For all purposes of this Agreement, Buyer shall be deemed to have waived any
Contract Defect which Buyer fails to assert as a Contract Defect
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by a Contract Defect Notice given to Seller on or before the expiration of the
Title Survival Period. To be effective, Buyer's Contract Defect Notice of a
Contract Defect must set forth in reasonable detail (i) the Contract Interest
affected by the asserted Contract Defect (or the portion of the Contract
Interest so affected if less than all of the Contract Interest is affected
thereby), (ii) a description of the matter constituting the asserted Contract
Defect, (iii) supporting documents reasonably necessary for Seller (as well as
any attorney or examiner hired by Seller) to verify the existence and nature of
such asserted Contract Defect, (iv) the claimed Contract Defect Amount
attributable thereto, and (v) the manner by which such Contract Defect Amount
was determined, together with sufficient supporting detail to enable Seller to
determine whether the asserted amount is appropriate and was determined in
accordance with this Agreement. To give Seller an opportunity to commence
reviewing and curing Contract Defects, on or before the end of each calendar
week during the Contract Examination Period, Buyer agrees to consult with
Seller regarding any Contract Defects discovered by Buyer during the calendar
week preceding the calendar week then ending, which may be preliminary in
nature and supplemented prior to the end of the Contract Examination Period.
(b) Seller's Opportunity to Cure.
(1) Seller shall have until three Business Days prior to the Closing
Date, at its cost and expense, if it so elects but without obligation, to
cure all or a portion of any Contract Defects asserted during the Contract
Examination Period pursuant to Section 6.1(a). Any asserted Contract
Defects which are waived by Buyer or cured within such time shall be
deemed "Permitted Encumbrances" hereunder. Subject to Section 6.1(b)(2)
and Seller's continuing right to dispute the existence of a Contract
Defect and/or the Contract Defect Amount asserted with respect thereto, if
Seller within such time fails to cure any Contract Defect of which Buyer
has given timely written notice as required above during the Contract
Examination Period, and Buyer has not waived and does not waive same on or
before the Closing Date, the Contract Interest affected by such uncured
and unwaived Contract Defect shall be a "Pre-Closing Defect Interest".
(2) If Buyer furnishes to Seller timely Contract Defect Notice(s) of
one or more Contract Defects during the Contract Examination Period and
the same are not waived or cured as provided in Section 6.1(b)(1), Seller
may elect to close the transactions contemplated hereby and retain the
right to cure any of such Contract Defects after Closing. In such event,
but subject to Seller's continuing right to dispute the existence of a
Contract Defect and/or the Contract Defect Amount asserted with respect
thereto, the Purchase Price shall be subject to reduction pursuant to
Section 6.1(c) taking into account all Contract Defect Amounts
attributable to the Pre-Closing Defect Interests affected by the Contract
Defects which Seller may elect to cure after Closing. Any attempt by
Seller to cure any alleged Contract Defect shall not waive Seller's right
to dispute the existence of a Contract Defect and/or the Contract Defect
Amount asserted with respect thereto. If Seller gives Buyer written notice
on or before 30 days after the Closing Date that Seller intends to attempt
to cure any such Contract Defect, then Seller shall have until the later
of the (i) 180 calendar days after the Closing Date or (iii) 90
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days after the point in time when a final and binding written decision of
the board of arbitrators is made with respect thereto in accordance with
the Arbitration Procedures, in which to attempt to cure any such Contract
Defect. Seller, Buyer and the Company shall each have the right to attempt
to cure and to cure any such Contract Defect during the aforesaid cure
period, however, as long as Seller is diligently pursuing the curing of
such Contract Defect on a reasonable basis Seller shall be allowed to cure
such Contract Defect in preference to Buyer and the Company. To the extent
Seller, Buyer and/or the Company are attempting to cure any such Contract
Defect, they each agree to coordinate and cooperate in their respective
efforts to cure such Contract Defect. If Seller cures any such Contract
Defect, then Buyer shall promptly pay Seller the Contract Defect Amount
with respect to the Contract Defect that is so cured, but not exceeding
the aggregate amount of the reductions in the Purchase Price which Buyer
received pursuant to Section 6.1(c) as a result of any Contract Defects,
together with interest on the amount due Seller from the Closing Date
through and including the date of payment at the Agreed Rate. Furthermore,
the Available Deductible Amount shall be restored to the extent any
portion of the Available Deductible Amount was applied as a credit against
the Contract Defect Amount attributable to such cured Contract Defect. If
a positive balance exists in the Available Deductible Amount after any
restorations thereof pursuant to the foregoing or pursuant to Section
6.1(c), and Seller has suffered a reduction in the Purchase Price as a
result of any one or more uncured Contract Defects, Buyer shall pay to
Seller an amount equal to the lesser of (i) the amount by which the
Purchase Price was reduced as a result of such uncured Contract Defects
and (ii) the then existing balance of the Available Deductible Amount,
together with interest on such lesser amount from the Closing Date through
and including the date of payment at the Agreed Rate on the amount due
Seller. For purposes of Section 6.1(d), any amount paid to Seller pursuant
to the preceding sentence shall be deemed to have been applied to offset
uncured Contract Defects asserted during the Contract Examination Period
pursuant to Section 6.1(a).
(3) Subject to Seller's right to cure the same and Seller's continuing
right to dispute the existence of a Contract Defect and/or the Contract
Defect Amount asserted with respect thereto, if Buyer has given timely
written notice of a Contract Defect as required above pursuant to Section
6.1(a) during the Title Survival Period, and Buyer has not waived and does
not waive the same, the Contract Interest affected by such uncured and
unwaived Contract Defect shall be a "Post-Closing Defect Interest". Any
attempt by Seller to cure any alleged Contract Defect shall not waive
Seller's right to dispute the existence of a Contract Defect and/or the
Contract Defect Amount asserted with respect thereto. If Seller gives
Buyer written notice on or before 30 days after the Contract Defect Notice
with respect thereto is received by Seller that Seller intends to attempt
to cure any such Contract Defect, then Seller shall have until the later
of the (i) expiration of the Title Survival Period, (ii) 180 calendar days
after the Contract Defect Notice with respect thereto is received by
Seller, or (iii) 90 days after the point in time when a final and binding
written decision of the board of arbitrators is made with respect thereto
in accordance with the Arbitration Procedures, at its cost and expense, if
it so elects but without obligation, to cure all or a portion of any such
Contract Defect which is
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asserted during the Title Survival Period pursuant to Section 6.1(a). Any
asserted Contract Defects which are waived by Buyer or cured by Seller
within such time shall be deemed "Permitted Encumbrances" hereunder.
Seller, Buyer and the Company shall each have the right to attempt to cure
and to cure any such Contract Defect during the aforesaid cure period,
however, as long as Seller is diligently pursuing the curing of such
Contract Defect on a reasonable basis Seller shall be allowed to cure such
Contract Defect in preference to Buyer and the Company. To the extent
Seller, Buyer and/or the Company are attempting to cure any such Contract
Defect, they each agree to coordinate and cooperate in their respective
efforts to cure such Contract Defect.
(4) If Seller cures any Contract Defect asserted during the Title
Survival Period pursuant to Section 6.1(a), or if any such asserted
Contract Defect is determined in accordance with this Agreement not to
constitute a Contract Defect, and if Seller has paid any amount pursuant
to Section 6.1(d), then Buyer shall promptly pay Seller the Contract
Defect Amount with respect to the Contract Defect that is so cured or so
determined not to exist, but not exceeding the aggregate amount of the
refunds in the Purchase Price which Buyer received pursuant to Section
6.1(d) as a result of any Contract Defects, together with interest on the
amount due Seller from the Closing Date through and including the date of
payment at the Agreed Rate. Furthermore, the Title Defect Deductible shall
be restored to the extent any portion of the Title Defect Deductible was
applied as a credit against the Contract Defect Amount attributable to
such cured Contract Defect. If a positive balance exists in the Title
Defect Deductible after any restorations thereof pursuant to the foregoing
or pursuant to Section 6.1(d), and Seller has refunded any portion of the
Purchase Price pursuant to Section 6.1(d) as a result of any one or more
uncured Contract Defects, Buyer shall pay to Seller an amount equal to the
lesser of (i) the amount by which the Purchase Price was refunded as a
result of such uncured Contract Defects and (ii) the then existing balance
of the Title Defect Deductible, together with interest on such lesser
amount from the Closing Date through and including the date of payment at
the Agreed Rate on the amount due Seller.
(c) Adjustments for Pre-Closing Defect Interests. As Buyer's sole and
exclusive remedy with respect to Contract Defects asserted pursuant to Section
6.1(a) during the Contract Examination Period, Buyer shall be entitled to
reduce the Purchase Price by the amount, if any, by which the aggregate amount
of Contract Defect Amounts with respect to all Pre-Closing Defect Interests
exceeds US $500,000 (the "Available Deductible Amount"). The Available
Deductible Amount shall be restored to the extent that any portion thereof is
applied as a credit against a Contract Defect Amount attributable to a Contract
Defect which, in accordance with the terms of this Agreement, is subsequently
cured by Seller or determined or agreed not to constitute a Contract Defect. If
an asserted Contract Defect Amount is subsequently determined or agreed, in
accordance with this Agreement, to be a lesser amount, any portion of the
Available Deductible Amount which was applied as a credit to the amount of such
reduction shall be restored to the Available Deductible Amount.
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(d) Purchase Price Refunds for Post-Closing Defect Interests. As
Buyer's sole and exclusive remedy with respect to Contract Defects asserted
pursuant to Section 6.1(a) during the Title Survival Period, Buyer shall be
entitled to a refund of a portion of the Purchase Price equal to the amount, if
any, by which the aggregate amount of Contract Defect Amounts with respect to
all Post-Closing Defect Interests exceeds the Title Defect Deductible. The
"Title Defect Deductible" shall be equal to US $1,000,000 less the portion (or
all as the case may be) of the Available Deductible Amount which has been
applied (and not subsequently restored) to offset uncured Contract Defects
asserted during the Contract Examination Period pursuant to Section 6.1(a). The
Title Deductible Amount shall be restored to the extent that any portion
thereof is applied as a credit against a Contract Defect Amount attributable to
a Contract Defect which, in accordance with the terms of this Agreement, is
subsequently cured by Seller or determined or agreed not to constitute a
Contract Defect. If an asserted Contract Defect Amount is subsequently
determined or agreed, in accordance with this Agreement, to be a lesser amount,
any portion of the Title Defect Deductible which was applied as a credit to the
amount of such reduction shall be restored to the Title Defect Deductible.
Without limiting Seller's right to cure the same or Seller's right to dispute
the existence of a Contract Defect and/or the Contract Defect Amount asserted
with respect thereto, any refund payable by Seller pursuant to this Section
6.1(d), together with interest thereon from the Closing Date through and
including the date of payment at the Agreed Rate, shall be due and payable by
Seller to Buyer within 30 days after the later of (i) the date on which the
Contract Defect Notice with respect thereto is received by Seller or (ii) if
submitted to arbitration, the date on which Buyer becomes entitled to such
refund under the final and binding written decision of the board of
arbitrators.
Section 6.2 Determination of Contract Defect Amounts. "Contract Defect
Amount" shall mean, with respect to a Defect Interest, the amount by which the
value of such Defect Interest is impaired as a result of the existence of one
or more uncured and unwaived Contract Defects, which amount shall be determined
as follows and subject to the following conditions:
(a) If the Contract Defect results from the existence of a lien,
encumbrance or other charge which is liquidated in amount, the Contract Defect
Amount shall be an amount sufficient to discharge such lien, encumbrance or
charge.
(b) If the Contract Defect results from any matter not described in
paragraph (a) above, the Contract Defect Amount shall be an amount equal to the
difference between the value of the Defect Interest affected by such Contract
Defect with such Contract Defect and the value of such Defect Interest without
such Contract Defect (taking into account the Purchase Price for the Company
and fairly allocating such Purchase Price among the Assets of the Company, it
being agreed for purposes of this Agreement that the aggregate value of the
Assets shall not exceed the Purchase Price); provided, however, that if such
Contract Defect is reasonably susceptible of being cured, the Contract Defect
Amount shall not be greater than the lesser of (i) the reasonable cost and
expense of curing such Contract Defect or (ii) the share of such curative work
cost and expense which is allocated to such Defect Interest pursuant to Section
6.2(d).
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(c) If a Contract Defect is not effective or does not affect a Defect
Interest throughout the entire productive life of such Defect Interest, such
fact shall be taken into account in determining the Contract Defect Amount.
(d) The Contract Defect Amount with respect to a Defect Interest shall
be determined without duplication of any costs or losses (i) included in
another Contract Defect Amount hereunder, (ii) asserted by Buyer as an
Environmental Value Reduction or a Casualty Price Reduction, or (iii) for which
Buyer receives indemnity, reimbursement or payment from Seller on account of a
Seller Uninsured Liability. To the extent that the cost to cure any Contract
Defect will result in the curing of all or a part of one or more other Contract
Defects, such cost of cure shall be allocated among the Defect Interests so
affected on a fair and reasonable basis so that no duplication of such cost of
cure will be included in the Contract Defect Amounts for such Defect Interests.
(e) If the event or circumstance which results in the existence of a
Contract Defect also results in an increase in the Company's rights,
privileges, benefits and interests in a Major Contract, the Contract Defect
Amount shall be reduced by the value of such increase in the Company's rights,
privileges, benefits and interests.
(f) If the Contract Defect Amount determined pursuant to the foregoing
with respect to a Pre-Closing Defect Interest or a Post-Closing Defect Interest
is less than US $10,000, then the Contract Defect Amount with respect to such
Pre-Closing Defect Interest or Post-Closing Defect Interest shall be deemed
zero.
Section 6.3 Determination of Contract Defects. For purposes of
asserting a Contract Defect pursuant to Section 6.1(a) during the Contract
Examination Period, a Contract Interest shall be deemed to have a "Contract
Defect" only if any one or more of the following statements in paragraphs (a),
(b), (c), (d) and (e) of this Section 6.3 is untrue with respect to such
Contract Interest as of the Closing Date. For purposes of asserting a Contract
Defect pursuant to Section 6.1(a) during the Title Survival Period, a Contract
Interest shall be deemed to have a "Contract Defect" only if any one or more of
the following statements in paragraphs (d) and (e) of this Section 6.3 is
untrue with respect to such Contract Interest as of the Closing Date.
Notwithstanding any other provisions of this Agreement to the contrary, the
existence of a Permitted Encumbrance shall never constitute, give rise to, or
be asserted as a Contract Defect. Furthermore, no Contract Defect shall be
deemed to exist under paragraph (a) or paragraph (c) of this Section 6.3 by
virtue of the unenforceability, non-effectiveness, invalidity or non-binding
effect of any term or provision of a Major Contract if such unenforceability,
non-effectiveness, invalidity or non-binding effect can be determined solely by
an examination of the terms and provisions of such Major Contract and a
knowledge of the Law in effect and applicable thereto on the date of this
Agreement.
(a) Such Contract Interest is in full force and effect and constitutes
a valid and binding contractual right enforceable in accordance with its terms,
subject to (x) applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application with
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respect to creditors, (y) general principles of equity, and (z) the power of a
court to deny enforcement of remedies generally based upon public policy.
(b) The Company is not in material breach of or material default under
the Major Contract giving rise to such Contract Interest, and there does not
exist under any provision of such Major Contract any event that, with the
giving of notice or the lapse of time or both, would constitute such a breach
or default by the Company.
(c) The Company owns such Contract Interest, free and clear of all (i)
overriding royalty interests, net profits interests, production payments and
other similar burdens, (ii) liens, security interests, pledges and collateral
assignments, (iii) Non-Permissible Preference Rights, and (iv) other
encumbrances.
(d) Except for any contractual obligations which are no longer in
effect, the Company has not assigned or transferred, or contracted to assign or
transfer, such Contract Interest or any interest therein.
(e) The Contract Interests are free and clear of all (i) overriding
royalty interests, net profits interests, production payments and other similar
burdens, (ii) liens, security interests, pledges and collateral assignments,
(iii) Non-Permissible Preference Rights, and (iv) other encumbrances.
If a Contract Defect only affects a portion of a Contract Interest, then only
that portion of the Contract Interest shall be deemed to have a Contract Defect
as a result thereof. Notwithstanding any other provision in this Agreement to
the contrary, any encumbrance, loss of title or defect resulting from the
Company's conduct of its business in compliance with Sections 9.1 and 9.2 shall
be deemed to be Permitted Encumbrances, shall not be asserted as Contract
Defects, and shall not constitute Contract Defects.
Section 6.4 No Duplication, Etc.. Notwithstanding anything herein
provided to the contrary, if a Contract Defect results from any matter which
could also result in the breach of any representation or warranty of Seller set
forth in Section 4.1, then Buyer shall only be entitled to assert such matter
as a Contract Defect pursuant to this Article 6 and shall be precluded from
also asserting such matter as the basis of the breach of any such
representation or warranty. Buyer's sole remedies with respect to or in any
manner relating to the Company's title or lack thereof with respect to a Major
Contract or a Contract Defect are set forth in this Article 6, and all other
remedies of Buyer with respect to such matters are expressly hereby waived and
released. To the extent that the Buyer receives a reduction in, or a refund of
any portion of, the Purchase Price pursuant to this Article 6 on account of a
Contract Defect for which the Company has a claim or cause of action against
another Person, then, to the maximum extent permitted by Law, Seller shall be
subrogated to the Company's rights, title and interests in such claim and cause
of action and Buyer shall cause the Company to assign the Company's rights,
title and interests in such claim and cause of action to Seller.
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ARTICLE 7
ENVIRONMENTAL MATTERS
Section 7.1 Asbestos and NORM. Buyer acknowledges that the Assets may
currently or have in the past contained asbestos or asbestos containing
materials or naturally occurring radioactive materials ("NORM") and that
special procedures may be required for the assessment, remediation, removal,
abatement, transportation or disposal of such asbestos, asbestos containing
materials and NORM. Notwithstanding anything contained in this Agreement to the
contrary, Buyer agrees to accept full responsibility for and shall pay all
costs, expenses and other Covered Liabilities associated with the assessment,
remediation, removal, abatement, transportation and disposal of the asbestos,
asbestos containing materials or NORM associated with the Assets, and shall not
be entitled to claim the fact that the assessment, remediation, removal,
abatement, transportation or disposal of the asbestos, asbestos containing
materials or NORM is not complete or that additional cost will be required to
complete the assessment, remediation, removal, abatement, transportation or
disposal of the asbestos, asbestos containing materials or NORM as a failure of
a condition to Closing, an Environmental Defect, a breach of Seller's
representations and warranties or a breach of any of Seller's other obligations
under this Agreement, and Buyer (on behalf of itself, its officers, agents,
employees, Affiliates, successors and assigns) irrevocably waives such claims.
In conducting the duties and obligations contained in this Section 7.1, Buyer
shall comply with all Laws.
Section 7.2 Environmental Review and Audit.
(a) Environmental Access. For the period ending two Business Days
prior to the Closing Date (the "Environmental Examination Period"), subject to
the restrictions contained in this Agreement and any required consent or waiver
of any third Person, Seller shall cause the Company (i) to permit Buyer and its
representatives to have reasonable access at reasonable times in the Company's
and Seller's offices, and in a manner so as not to interfere unduly with the
business operations of the Company or Seller, to Seller's and the Company's
environmental files and records possession relating to the Assets insofar as
Seller and the Company may do so without waiving any attorney/client, work
product or like privilege and (ii) to permit Buyer and the Environmental
Consultant to have reasonable access to the Assets for the purpose of allowing
Buyer and the Environmental Consultant to inspect and/or audit the Assets for
any Environmental Defects (collectively, "Buyer's Environmental Review"), all
at Buyer's sole risk, cost and expense. Buyer agrees to perform reasonable
environmental due diligence with respect to the Company and the Assets during
the Environmental Examination Period. Buyer expressly acknowledges and
understands that the Assets have been utilized by the Company and others for
the purposes of exploration, development and production of oil and gas, for
related oilfield operations and possibly for the storage and disposal of waste
materials or Hazardous Materials generated in association with oil and gas
exploration and production activities, and that the Assets also contain buried
pipelines, the locations of which may not now be known by Seller or the Company
or readily apparent by a physical inspection of the Assets.
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(b) Conduct of Review. Prior to conducting Buyer's Environmental
Review, Buyer shall furnish Seller with a proposed scope of Buyer's
Environmental Review, including a description of the activities to be conducted
and the locations of such activities. No third Person, other than the
Environmental Consultant, may conduct Buyer's Environmental Review. Buyer shall
not commence any activity proposed to be included in Buyer's Environmental
Review unless and until such activity (including the location thereof) has been
approved in writing by Seller, which approval shall not be unreasonably
withheld. Seller shall have the right to be present during any inspection
(including Buyer's Environmental Review) of the Assets and shall have the
right, at its option and expense, to split samples with Buyer.
(c) Buyer Responsibility for Review. In connection with Buyer's
Environmental Review, Buyer agrees that Buyer, the Environmental Consultant and
Buyer's employees, agents and contractors shall comply with all Laws and the
Company's and any third party operator's safety procedures, and shall exercise
due care with respect to the Assets and their condition, taking into
consideration the characteristics of any wastes or substances found thereon,
and in light of all relevant facts and circumstances. Specifically, but without
limitation, when handling solid waste or hazardous substances, if any,
discovered during the inspection of the Assets, Buyer, the Environmental
Consultant and Buyer's employees, agents and contractors shall handle such
waste or substances in accordance with all Laws. Any soil or water samples
taken by Buyer from the Assets shall become the sole property and possession of
Buyer and will be managed consistent with the applicable rules and regulations
of any Governmental Authority having regulatory authority over such activities.
Promptly after completing Buyer's Environmental Review, Buyer shall, at its
sole cost and expense, repair any material damage to the Assets caused by
Buyer's Environmental Review and restore the Assets to their previous
condition, in accordance with good engineering practice, if materially changed
due to Buyer's Environmental Review. Buyer shall maintain and shall cause its
officers, employees, agents, representatives, contractors, consultants
(including the Environmental Consultant) and advisors to maintain all
information obtained by Buyer and the Environmental Consultant pursuant to the
Buyer's Environmental Review as strictly confidential and shall not disclose
same to any third Person, unless required by a Governmental Authority, without
the prior written consent of Seller. Buyer shall provide Seller's counsel with
copies of any reports prepared and analytical test results received by Buyer or
the Environmental Consultant promptly following Buyer's or the Environmental
Consultant's preparation or receipt of same. Buyer does hereby indemnify and
hold harmless, release and agree to defend the Seller Indemnified Persons and
the Company from and against any and all losses, costs, damages, obligations,
claims, liabilities, expenses and causes of action, including all Environmental
Liabilities, arising out of any violation by Buyer or Buyer's officers,
employees, agents, representatives, contractors, consultants (including the
Environmental Consultant) and advisors of the provisions of this subsection or,
to the extent arising from Buyer's or the Environmental Consultant's inspection
or testing of the Assets, including claims for personal injuries, property
damage and reasonable attorney's fees and expenses, REGARDLESS OF ANY
NEGLIGENCE OR STRICT LIABILITY ON THE PART OF ANY SELLER INDEMNIFIED PERSON OR
THE COMPANY AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT COMMON OR CIVIL LAW,
STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR REGULATION.
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Section 7.3 Environmental Defects.
(a) Buyer's Assertions of Environmental Defects. Prior to the
expiration of the Environmental Examination Period, Buyer may notify Seller in
writing of any matters which, in Buyer's reasonable opinion, constitute
Environmental Defects. Buyer's written notice must set forth in reasonable
detail (i) a specific description of each Asset (or portion thereof) that is
affected by the alleged Environmental Defect, (ii) a description of the alleged
Environmental Defect and the facts and circumstances giving rise thereto,
including all evidence compiled by Buyer which supports the existence of such
alleged Environmental Defect and supporting documents reasonably necessary for
Seller (or an environmental consultant hired by Seller) to verify the
existence, extent and nature of such asserted Environmental Defect, (iii) a
calculation of the Environmental Value Reduction (itemized in reasonable
detail) that Buyer asserts is attributable to such Environmental Defect, and
(iv) the manner by which such Environmental Value Reduction was determined,
together with sufficient supporting detail to enable Seller to determine
whether the asserted amount is an appropriate valuation and was determined in
accordance with this Agreement. Buyer's calculation of any Environmental Value
Reduction must identify all assumptions used by the Buyer in calculating the
Environmental Value Reduction.
(b) Purchase Price Adjustments for Environmental Defects. Without
limiting or waiving Seller's right to then or thereafter dispute Buyer's
compliance with Section 7.3(a), the existence of an Environmental Defect or the
alleged Environmental Defect Amount, if Buyer timely notifies Seller in writing
of an Environmental Defect as required by Section 7.3(a), then as Buyer's sole
and exclusive remedy with respect to such Environmental Defect, Buyer shall be
entitled to reduce the Purchase Price by the amount (the "Environmental Defect
Amount"), if any, by which the Environmental Value Reduction with respect to
the Environmental Conditions giving rise to such Environmental Defect exceeds
that part, if any, of US $500,000.00 (the "Environmental Defect Deductible")
which Seller elects to apply as an offset or deduction against such
Environmental Value Reduction. It is expressly understood and agreed that the
Environmental Defect Deductible represents an aggregate deductible for
Environmental Defects which may be apportioned and applied by Seller as
provided in this Section 7.3(b) rather than as a separate deductible for each
individual Environmental Defect. The Environmental Defect Deductible shall be
restored to the extent that any portion thereof is applied as a credit against
an Environmental Defect Amount attributable to an Environmental Defect which,
in accordance with the terms of this Agreement, is subsequently cured by Seller
or determined or agreed not to constitute an Environmental Defect. If an
asserted Environmental Defect Amount is subsequently determined or agreed, in
accordance with this Agreement, to be a lesser amount, any portion of the
Environmental Defect Deductible which was applied as a credit to the amount of
such reduction shall be restored to the Environmental Defect Deductible.
(c) Buyer's Obligation to Remediate. From and after the Closing, (1)
the Company shall be deemed to have assumed responsibility for Remediation of
each Environmental Defect asserted by Buyer pursuant to Section 7.3(a) for
which Buyer receives a Purchase Price reduction, (2) such Environmental Defect
shall be deemed to constitute a Company Liability and (3) Buyer hereby
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covenants and agrees to cause the Company to Remediate such Environmental
Defect substantially in the manner described in Buyer's written notice given
under Section 7.3(a) or in such other manner as may be required by applicable
Governmental Authority. Upon reasonable advance notice to the Company, Seller
shall have the right to audit all Remediation required by this Section 7.3(c)
to confirm compliance by Buyer with this Agreement. Such audit shall be on
terms and in a manner which is substantially similar to audit and inspection
rights granted to Buyer under Section 7.2, mutatis mutandis.
ARTICLE 8
CASUALTY LOSS
Section 8.1 No Termination. Subject to Seller's obligations under
Section 8.2, Seller does not assume any risk of loss with respect to any loss
of, reduction in value of or damage to the Assets. If after the Effective Time
and prior to the Closing, all or any part of the Assets should be damaged or
destroyed by fire or other casualty, this Agreement shall remain in full force
and effect notwithstanding any such damage or destruction, except as expressly
provided in Article 11.
Section 8.2 Casualty Proceeds. In the event of any damage to, or
destruction of, all or any part of the Assets from the Effective Time until
Closing, Seller shall either (a) at the Closing assign (or cause to be
assigned) to the Company all of Seller's and its Affiliates' rights in any
insurance proceeds, third party damage payments or other amounts paid or to be
paid by reason of such damage or destruction, less any costs and expenses
incurred by Seller or its Affiliates in collecting same, or (b) prior to
Closing, use or have the Company apply such sums (less any costs and expenses
incurred by Seller or its Affiliates in collecting same) to repair, restore or
replace such damaged or destroyed Assets. In addition, Seller shall at Closing
assign (or cause to be assigned) to the Company all of the right, title and
interest of Seller and its Affiliates in and to any claims for destruction of
or damage to the Assets, that they have against third parties (other than
Seller or any of Seller's Affiliates) with respect to the event or circumstance
causing such destruction or damage, less any costs and expenses previously
incurred by Seller or its Affiliates in investigating, asserting or attempting
to collect said claim. The Settlement Price shall be reduced by the Casualty
Price Reduction, if any, attributable to casualty losses that are not fully
covered by insurance. The reduction in value of any Asset as a result of a
casualty causing damage to or destruction of such Asset shall take into account
the Purchase Price for the Company and fairly allocate such Purchase Price
among the Assets of the Company, it being agreed for purposes of this Agreement
that the aggregate value of the Assets shall not exceed the Purchase Price.
Notwithstanding anything to the contrary in this Section 8.2, neither Seller,
the Company nor any other Affiliates of Seller shall be obligated to carry or
maintain, nor shall they have any obligation or liability to Buyer for their
failure to carry or maintain any insurance coverage with respect to any of the
Assets, except as required by Section 9.1.
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Section 8.3 Risks of Other Losses. Except as otherwise expressly
provided in this Agreement, Buyer shall assume all risks of loss with respect
to the Company's ownership or operation of the Assets after the Effective Time,
including without limitation, the following risks:
(a) Operations. With respect to each Asset, Buyer shall assume all
risk of loss with respect to any loss of value or change in the condition of
the Asset, and all wells thereon, after the Effective Time, relating to the
production of oil, gas and/or other hydrocarbons, including, without limitation
normal depletion, water encroachment, coning, pressure depletion, formation
changes, sand infiltration, paraffin or asphalt deposits, corrosion, scale,
mechanical difficulties, collapsed or parted casing or tubing, and the
breakage, damage, destruction or depreciation of pipelines, tanks, equipment
and other personal property. The Company shall continue to bear its
proportionate share of the risks allocated under any applicable joint operating
agreements and assume its proportionate share of the risks that such operations
may be unsuccessful, and Closing shall not be conditioned upon the success of
any operations.
(b) Market Conditions. With respect to each Asset, Buyer shall assume
all risk of loss with respect to any change in market conditions affecting any
Asset or production therefrom after the Effective Time, and this Agreement
shall not be terminated or suspended, nor shall Closing be delayed, due to any
such change in market conditions.
ARTICLE 9
COVENANTS OF SELLER AND BUYER
Section 9.1 Conduct of Business Pending Closing. Subject to Section
9.2 and the constraints and requirements of applicable operating agreements and
other existing agreements, from the date hereof through the Closing, except as
disclosed in SCHEDULE 9.1, or as otherwise consented to or approved by Buyer
(which consent or approval shall not be unreasonably withheld or delayed),
Seller covenants and agrees that:
(a) Changes in Business. The Company shall not:
(1) except as contemplated by Section 9.11, conduct its business in
any manner other than in the ordinary course of business;
(2) amend or otherwise modify, or assign or terminate any Major
Contract or any Material Contract disclosed in SCHEDULE 4.1(n) on the date
of this Agreement;
(3) enter into any Material Contract that would be required to be
disclosed in SCHEDULE 4.1(n);
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(4) except as contemplated by Article 2 and Section 9.11, declare or
pay any dividends, or make any distributions, in respect of, or issue any
of, its equity securities or securities convertible into its equity
securities, or repurchase, redeem or otherwise acquire any such securities
or make or propose to make any other change in its capitalization;
(5) except as contemplated by Section 9.11, merge into or with or
consolidate with any other corporation or acquire all or substantially all
of the business or assets of any corporation or other Person;
(6) except as contemplated by Section 9.11, (i) amend its certificate
of incorporation or by-laws or similar organizational documents, or (ii)
issue, sell, transfer, pledge, dispose of or encumber any shares of any
class or series of its capital stock, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of any class or series of its capital
stock;
(7) except as contemplated by Section 9.11, make any change in its
articles of incorporation or by-laws;
(8) purchase any securities of any corporation or other Person, except
for investments made in the ordinary course of business and consistent
with prior practices and except as contemplated by Section 9.11;
(9) enter into any agreement of surety, guarantee or indemnification
by the Company, other than indemnities pursuant to Major Contracts, oil
field service contracts, maintenance service contracts and consulting
contracts;
(10) incur any indebtedness for borrowed money, other than
intercompany accounts which will be settled in accordance with Section
2.2;
(11) other than pursuant to the requirements of existing contracts or
commitments, sell, lease or otherwise dispose of any of the Assets, except
(i) Assets sold, leased or otherwise disposed of in the ordinary course of
business and (ii) any item of personal property or equipment which is
surplus or not operational or has a value of less than US $10,000;
(12) except as contemplated by Article 2 and Section 9.11, take any
action or enter into any commitment with respect to or in contemplation of
any liquidation, dissolution, recapitalization, reorganization or other
winding up of its business or operations;
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(13) enter into any settlement of any pending or threatened Action,
unless the settlement involves the payment of money damages by the Company
of not more than US $10,000, in the aggregate, and does not impose an
injunction or similar equitable relief upon the Company or materially
impair the Company's defense of any other Action then pending or
threatened against the Company of which the Company has knowledge;
(14) make, institute, or introduce any method of purchase, sale,
lease, billings or operations that are inconsistent with past practices;
(15) except as contemplated by Section 9.11, change its accounting
policies or practices (including any change in depreciation or
amortization policies), except as required under GAAP, make or change an
election relating to Taxes, adopt or change an accounting method related
to Taxes, unless required by GAAP, enter into any closing agreement
related to Taxes, settle any claim or assessment to Taxes or consent to
any claim or assessment relating to Taxes or any waiver of the stature of
limitations for any such claim or assessment;
(16) (i) enter into any employment agreement not terminable at will
upon no more than 30 days prior notice or (ii) make any change in the
compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than normal recurring
increases in the ordinary course of business of wages payable to employees
who are not officers or directors of the Company) or to Persons providing
management services, or enter into or amend any employment, severance,
consulting, termination or other agreement with, or employee benefit plan
for, or make any loan or advance to, any of its officers, directors,
employees, Affiliates, agents or consultants or make any change in its
existing borrowing or lending arrangements for or on behalf of any of such
Persons pursuant to an employee benefit plan or otherwise;
(17) create or change any Employee Plan in any manner, except as
required by Law; or
(18) pay, discharge or satisfy any material liabilities of the
Company, other than (i) in the ordinary course of business and (ii) either
consistent with past practice or paid, discharged or satisfied under a
Major Contract or a contract existing at the date of this Agreement.
(b) Encumbrances. The Company shall not create any lease, license,
mortgage, pledge, encumbrance or create a lien or security interest on any
Assets, except to the extent (i) required or permitted incident to the
exploration, operation or development of the Assets and the business of the
Company pursuant to this Section 9.1, (ii) required or evidenced by the Major
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Contracts, or (iii) required or evidenced by any contract or agreement required
to be disclosed pursuant to Section 4.1(n).
(c) Operation of Assets. The Company shall:
(1) cause the Assets to be maintained and operated in the ordinary
course of business in accordance with the Company's past practices
(including the repair or replacement of damaged, destroyed, obsolete,
depreciated, non-working or non-economical items of equipment or other
personal property without regard to the limitation of Section 9.1(c)(4)
below), maintain insurance now in force and naming the Company as a
beneficiary, and pay or cause to be paid all costs and expenses in
connection therewith promptly when due;
(2) maintain and keep the Assets in full force and effect, except for
items not approved by Buyer as provided for herein; and
(3) use the Company's reasonable best efforts to maintain its
relationships with suppliers, customers and others having material
business relations with the Company so that they will be preserved for
Buyer on and after the Closing Date; and
(4) except as set forth on SCHEDULE 9.1(c)(4), not commit to
participate in any reworking, deepening, drilling, completion,
recompletion, equipping or other operation to the extent that the
projected cost of such operation (net to the Company's interest and
without consideration of any cost overruns) exceeds US $100,000, in the
aggregate, without the advance written consent of Buyer; provided,
however, that Seller shall have the right to conduct, at its sole election
and discretion, any operation (i) listed on SCHEDULE 9.1(c)(4), (ii)
required by Law, (iii) required under a Major Contract or a binding
Material Contract disclosed on SCHEDULE 4.1(n), (iv) for which the
reasonably projected cost (net to the Company's interest and without
consideration of any cost overruns) is US $100,000 or less, or (v) that is
required to avoid the forfeiture of any Shared Risk Contract or any
acreage under a Shared Risk Contract.
(d) Contracts and Agreements. The Company shall not:
(1) grant or create any Preference Right or Transfer Requirement with
respect to the Assets except (i) in connection with the performance by the
Company of an obligation or agreement existing on the date hereof or
pursuant to this Agreement or (ii) in connection with the acquisition of
Assets after the Effective Time if granting or creating such Preference
Right or Transfer Requirement is a condition of such acquisition;
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(2) enter into any oil, gas or other hydrocarbon sales, exchange,
processing or transportation contract with respect to the Assets having a
term in excess of one year which is not terminable without penalty on
notice of ninety (90) days or less; or
(3) voluntarily relinquish the Company's position as operator or right
to become operator with respect to any of the Assets.
Section 9.2 Qualifications on Conduct.
(a) Emergencies; Legal Requirements. Seller or the Company may take
(or not take, as the case may be) any of the actions mentioned in this Article
9 to the extent reasonably necessary under emergency circumstances (or if
required or prohibited, as the case may be, pursuant to Law) and provided Buyer
is notified as soon thereafter as practicable.
(b) Non-Operated Properties. If the Company is not the operator of a
particular portion of the Assets, the obligations of the Company in Section 9.1
above with respect to such portion of the Assets, which have reference to
operations or activities that pursuant to existing contracts are carried out or
performed by the operator, shall be construed to require only that the Company
use its reasonable best efforts (without being obligated to incur any expense
or institute any cause of action) to cause the operator of such portion of the
Assets to take such actions or render such performance within the constraints
of the applicable operating agreements and other applicable agreements.
(c) Certain Operations. The Company agrees to approve the Block XX
West budget for year 2000, including the drilling, completion and equipping of
the Itau X2 well. Should the Company not wish to participate in any other
reworking, deepening, drilling, completion, equipping or other operation on or
with respect to any well or other operation with respect to the Contract
Interests which may otherwise be required by Section 9.1, the Company shall
give Buyer written notice thereof promptly after the Company receives notice of
such proposed operation from the operator of such property. The Company shall
not be obligated to elect to participate in any such operation in which the
Company does not wish to participate unless the Company receives from Buyer,
within a reasonable time prior to the date when such election is required to be
made by the Company, (i) the written election and agreement of Buyer (1) to
require the Company to take such action and (2) to pay all costs and expenses
of the Company with respect to such operation and (ii) the funds necessary for
such operation as contained in the applicable authorization for expenditure
therefor or estimated by the Company. If Buyer advances any funds pursuant to
this Section 9.2(c) with respect to a particular portion of the Assets, Closing
does not occur (other than as a result of default by Buyer), and such funds are
not reimbursed to Buyer within thirty (30) days after the termination of this
Agreement, then with respect to such particular portion of the Assets, Buyer
shall be entitled to receive the penalty, if any, that the Company, as
nonconsenting party, would have suffered under the applicable operating or
other agreement with respect to such operations as if Buyer were a consenting
party thereunder; in each case, subject to and after deduction of any damages
or other relief to which the Company may be
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entitled with respect to any breach by Buyer of this Agreement. If Buyer
advances any funds pursuant to this Section 9.2(c), Closing does not occur as a
result of default by Buyer, then neither the Company nor Seller shall be
obligated to repay or refund such funds to Buyer.
Section 9.3 Public Announcements. Prior to the Closing Date, without
the prior written approval of the other party hereto, which approval shall not
be unreasonably withheld, no party hereto will issue, or permit any agent or
Affiliate of it to issue, any press releases or otherwise make, or cause any
agent or Affiliate of it to make, any public statements with respect to this
Agreement and the transactions contemplated hereby, except where such release
or statement is deemed in good faith by the releasing party to be required by
Law or under the rules and regulations of any public stock exchange on which
the shares of such party or any of its Affiliates are listed. In each case to
which such exception applies, the releasing party will use its reasonable best
efforts to provide a copy of such release or statement to the other party prior
to releasing or making the same.
Section 9.4 Actions and Efforts by Parties. Without limiting the
respective warranties, representations, covenants and agreements of the parties
contained herein, each of the parties agrees to use its reasonable efforts to
satisfy the conditions to Closing set forth in Article 11 and to refrain from
taking any action within its control which would cause a breach of a
representation or warranty set forth herein. Without limiting the respective
warranties, representations, covenants and agreements of the parties contained
herein, each of the parties agrees to use its reasonable best efforts (and to
cause its Affiliates to use their reasonable best efforts) to refrain from
taking any action within its control which would cause a breach of any of its
representations and warranties contained in Article 4 or which would prevent it
from delivering to the other party the certificate which it is required to
deliver pursuant to Section 11.1(b) or 11.2(b), as the case may be. Seller
agrees to cooperate with Buyer before the Closing Date, and for 120 days
thereafter, in arranging meetings between Buyer and YPFB, Bolivian governmental
bodies, and any Persons which purchase hydrocarbons from the Contract
Interests, in each case as Buyer shall reasonably request concerning the
transactions contemplated by this Agreement, however, any additional travel or
other out of pocket costs incurred by Seller in connection therewith following
the Closing shall be borne by Buyer. To the extent any consent or authorization
from any Bolivian Governmental Authority is required to be obtained by either
party in order for such party to perform its obligations hereunder, the parties
agree to assist and cooperate with each other in obtaining such consents or
authorizations, however, any additional travel or other out of pocket costs
incurred by Seller in connection therewith following the Closing shall be borne
by Buyer.
Section 9.5 Further Assurances. Seller and Buyer each agrees that from
time to time after the Closing Date, each of them will execute and deliver or
cause their respective Affiliates (including the Company) to execute and
deliver such further instruments, and take (or cause their respective
Affiliates, including the Company, to take) such other action, as may be
necessary to carry out the purposes and intents of this Agreement.
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Section 9.6 Records. Buyer agrees to maintain (or cause the Company to
maintain) the Company Records until the fifth anniversary of the Closing Date
(or for such longer period of time as Seller shall advise Buyer (or the
Company) in writing is necessary in order to have Company Records available
with respect to open years for tax audit purposes), or, if any of the Company
Records pertain to any claim or dispute pending on the fifth anniversary of the
Closing Date, Buyer shall maintain any of the Company Records designated by
Seller until such claim or dispute is finally resolved and the time for all
appeals has been exhausted. Buyer shall provide (or cause the Company to
provide) Seller and its representatives reasonable access to and the right to
copy the Company Records for the purposes of (i) preparing and delivering any
accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement, (ii) complying
with any Law affecting Seller's interest in the Company Shares or the Company's
interest in the Assets prior to the Closing Date, (iii) preparing any audit of
the books and records of any third party relating to Seller's interest in the
Company Shares or the Company's interest in the Assets prior to the Closing
Date, or responding to any audit prepared by such third parties, (iv) preparing
Tax returns, (v) responding to or disputing any Tax audit or (vi) asserting,
defending or otherwise dealing with any claim or dispute under this Agreement
or with respect to the Company or the Assets. During the period set forth in
this Section 9.6, none of Buyer, the Company or any of their Affiliates shall
destroy any Company Records without giving Seller sixty (60) days' advance
written notice thereof and the opportunity, at Seller's expense, to obtain such
Company Records prior to their destruction.
Section 9.7 Maintenance of Indemnification Provisions. In addition to
and without limiting the Company's and Buyer's respective obligations under
Articles 14 and 15, from and after the Closing Date, the Company shall
indemnify and hold harmless each present and former director and officer of the
Company as to all claims, actions, suits, proceedings, or investigations
arising out of or pertaining to matters existing or occurring at or prior to
the Closing Date arising out of actions, failures to act or damages that
occurred in Bolivia, REGARDLESS OF ANY NEGLIGENCE OR STRICT LIABILITY ON THE
PART OF SUCH DIRECTOR OR OFFICER AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT
COMMON OR CIVIL LAW, STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR
REGULATION, all as and to the extent provided in the Company's certificate of
incorporation and bylaws (or similar governing documents) as in effect on the
date hereof (to the extent consistent with Law), which provisions shall survive
the Closing Date and shall continue in full force and effect for a period of
not less than five years from the Closing Date with respect only to the
officers and directors of the Company as of and prior to the Closing; the
Company will not amend those provisions for such period to the extent such
amendment would affect the Company's indemnity obligations under this Section
9.7 with respect to the period at or prior to the Closing Date; and the Company
shall advance expenses to each person indemnified hereunder to the fullest
extent permitted by Law. If any claim or claims are asserted or made as to
matters subject to the foregoing indemnity provisions within such five year
period, all rights to indemnification in respect of any such claim or claims
shall continue until the disposition thereof. Buyer shall take all steps
necessary to assure the Company's compliance with the foregoing covenants. This
Section 9.7 shall not prevent the dissolution, merger or reorganization of the
Company provided
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the indemnification obligations in this Section 9.7 are carried forward to the
Company's successor by merger or reorganization or are adequately provided for
in the event of a dissolution.
Section 9.8 No Other Solicitations. Seller will not solicit or
entertain any other offers to acquire an interest in the Company, and will
vigorously oppose, in consultation with Buyer, any effort by a third party to
preempt Buyer's rights hereunder. Seller (a) does not believe that the
structure of the transaction contemplated by this Agreement triggers any
preferential, preemptive or other rights in the Contract Interests and (b)
hereby covenants that neither Seller nor its officers, agents or
representatives will solicit, encourage, or entertain any inquiries or
assertions from any third-party in such regard, will immediately contact Buyer
of any such occurrence, and will vigorously oppose the same.
Section 9.9 Company Name; Removal of Logos, etc. Seller hereby agrees
that the Company and its successors may continue to use "Tesoro Bolivia
Petroleum Company" as its corporate or company name during the period of the
corporate or company existence of the Company and its successors, but only so
long as the Company or a successor to the Company continues to use "Tesoro
Bolivia Petroleum Company" as its corporate or company name without
interruption of more than 90 days. Following the Closing, except as provided in
the preceding sentence, neither Buyer nor the Company will be entitled to use
(a) the name "Tesoro" or any variations and derivations thereof (including any
logo, trademark or design containing such name) or (b) any logo, service mark,
trade name or trademark which constitutes an Excluded Asset. Accordingly,
promptly following the Closing, Buyer shall cause the destruction, disposal or
replacement of stationery, business cards and similar items so to avoid the use
of such Excluded Assets, other than as expressly permitted by this Section 9.9.
In addition, as soon as reasonably practicable, but in any event within four
months following the Closing, Buyer shall cause the Company to remove or paint
over, as appropriate, any logo, service mark, trade name or trademark which
constitutes an Excluded Asset and is on any of the Assets.
Section 9.10 Compliance with Anti-Bribery Laws. While under prior
management and in relation to activities prior to the enactment of the FCPA,
Seller entered into the Consent Order which remains in effect. Seller
represents and warrants to Buyer that Seller has complied with the Consent
Order with respect to the Company, the Company's business and the Assets, but
otherwise makes no warranties, representations or covenants with respect to any
actions or matters of the kind or type described below in this Section
occurring prior to the Consent Order. Subject to the foregoing, and insofar as
related to the Company, the Company's business, the Assets, this Agreement or
any actions taken pursuant to or in performance of this Agreement, each party
hereby represents, warrants and covenants to the other party that neither it
(or its Affiliates) nor any of its (or any of its Affiliate's) officers,
directors or employees have made or will make, nor will any agent, advisor or
consultant of it be directed or authorized to make, directly or indirectly, in
violation of the FCPA (or, in the case of Buyer and to the extent Buyer is not
subject to the FCPA, in violation of the terms of the OECD Convention or in a
manner which would cause Seller or its Affiliates to incur any liability or
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penalty under the FCPA) any offer, payment, promise to pay, or authorization of
any of the foregoing, of money or anything of value to:
(a) any foreign official for purposes of:
(1) (i) influencing any act or decision of such foreign official
in his official capacity, (ii) inducing such foreign official
to do or omit to do any act in violation of the lawful duty of
such official, or (iii) securing any improper advantage; or
(2) inducing such foreign official to use his influence with a
foreign government or instrumentality thereof, to affect or
influence any act or decision of such government or
instrumentality,
in order to assist such party or any of its Affiliates in
obtaining or retaining business for or with, or directing business
to, any Person;
(b) any foreign political party or official thereof or any candidate
for foreign political office for purposes of:
(1) (i) influencing any act or decision of such party, official,
or candidate in its or his official capacity, (ii) inducing
such party, official, or candidate to do or omit to do any act
in violation of the lawful duty of such party, official, or
candidate, or (iii) securing any improper advantage; or
(2) inducing such party, official, or candidate to use its or his
influence with a foreign government or instrumentality thereof
to affect or influence any act or decision of such government
or instrumentality,
in order to assist such party or any of its Affiliates in
obtaining or retaining business for or with, or directing business
to, any Person; or
(c) any person, while knowing that all or a portion of such money or
thing of value will be offered, given or promised, directly or
indirectly, to any foreign official, to any foreign political
party or official thereof, or to any candidate for foreign
political office, for purposes of:
(1) (i) influencing any act or decision of such foreign official,
political party, party official, or candidate in his or its
official capacity, (ii) inducing such foreign official,
political party, party official, or candidate to do or omit to
do any act in violation of the lawful duty of such foreign
official, political party, party official, or candidate; or
(iii) securing any improper advantage; or
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(2) inducing such foreign official, political party, party
official, or candidate to use his or its influence with a
foreign government or instrumentality thereof to affect or
influence any act or decision of such government or
instrumentality,
in order to assist such party or any of its Affiliates in
obtaining or retaining business for or with, or directing business
to, any Person.
Subject to the foregoing, Seller hereby represents and warrants to Buyer that
the Company has not established or maintained, in violation of the FCPA, any
fund or asset which has not been recorded in the books of the Company. The
above representations, warranties and covenants shall not apply to any
facilitating or expediting payment to a foreign official, political party, or
party official the purpose of which is to expedite or secure the performance of
a "routine governmental action", as that term is defined in the FCPA. The term
"routine governmental action" does not include any decision by a foreign
official whether, or on what terms, to award new business to or to continue
business with a particular party, or any action taken by a foreign official
involved in the decision-making process to encourage a decision to award new
business to or continue business with a particular party. All other terms or
words used above in this Section which are defined, explained or construed in
the FCPA shall have the same meaning as in the FCPA, notwithstanding that any
such term may be defined differently in this Agreement.
Section 9.11 Reorganization of the Company. On or before the Closing,
Seller, at Seller's sole cost, shall cause (a) the Company to be reorganized
(by merger, conversion and continuation, or other appropriate means) as a
corporation under the laws of the Cayman Islands ("NewCo") and (b) the
reorganization of the Company to be accomplished in a manner that (i) results
in all issued and outstanding Company Shares being (or continuing to be) held
of record and beneficially owned by Seller and (ii) causes NewCo to retain or
succeed to all properties, assets, liabilities and obligations of the Company
prior to such reorganization (other than certain assets excluded under the
terms of this Agreement); provided, however, that Buyer, at Buyer's cost, shall
be responsible for any necessary qualifications, registrations and filings with
Bolivian Governmental Authorities after Closing which are required as a result
of the change in the jurisdiction of organization of the Company from Texas to
the Cayman Islands. Buyer hereby directs that the Company (or Seller on behalf
of the Company) file prior to Closing Form 8832 with the U.S. Internal Revenue
Service electing for NewCo to be classified as a corporation for U.S. tax
purposes under Treas. Reg. 301.7701-3. Seller agrees to cause Form 8832 to be
filed on behalf of NewCo as so directed, however, Seller makes no
representation or warranty as the effect or effectiveness of such filing. The
name of NewCo shall be "Tesoro Bolivia Petroleum Company" or such other name as
may be agreed by Seller and Buyer. All Taxes, if any, incurred by the Company
arising out of or in connection with said reorganization transaction shall be
paid and borne solely by Seller, however, the Company and Seller, as
appropriate and permitted by applicable law, may use and receive the benefit of
any Tax losses and credits of the Company with respect to such Taxes. Unless
the context requires otherwise, all references herein to the "Company" shall
refer to the Company following its reorganization. NewCo shall have
organizational documents substantially identical to those attached hereto as
EXHIBIT
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9.11. NewCo shall have the capital structure and initial capitalization
described in SCHEDULE 9.11. The 40,000 initially issued and outstanding shares
of the common stock of NewCo shall be evidenced by a duly completed certificate
issued in the name of Seller.
ARTICLE 10
TAX AND EMPLOYEE MATTERS
Section 10.1 Tax Matters.
(a) Tax Return Filing. Seller shall include the Company in its
consolidated federal income Tax return, and in those state, local and foreign
income or franchise Tax returns that are filed on a consolidated, combined or
unitary basis, for its Tax period that includes the Closing Date or to the
extent required by Law file separate Tax returns for the Company covering all
Tax periods which end on or before the Closing Date. Such Tax returns shall
include (i) the income and gains, if any, resulting from the reorganization of
the Company described in Section 9.11 hereof, and (ii) all other items of
income, gain, loss, deduction and credit of the Company for the period up to
and including the Closing Date; provided, however, that such Tax returns shall
not include any income, gain, loss, deduction or credit of the Company arising
as a result of actions of Buyer or the Company taken after the Closing. Seller
shall cause the Company to properly file all foreign, state and local Tax
returns required to be filed by the Company for all taxable periods or portions
thereof which are due on or before the Closing Date and which are not described
in the preceding sentence, and to pay all Taxes due with respect to such Tax
returns. After the Closing Date, the Buyer shall cause the Company to properly
file all foreign, state and local Tax returns required to be filed by the
Company for all Taxable periods or portions thereof which include the Closing
Date and which are not described in the preceding sentence, and to pay all
Taxes due with respect to such Tax returns. The Seller shall cause all existing
Tax sharing agreements or arrangements disclosed on SCHEDULE 10.1(a) to be
terminated as of the Closing Date, but after payment by the Company of its
obligation for Taxes and after receipt by the Company of any amounts due it
under such Tax sharing agreements with respect to the pre-Closing period.
Except as otherwise provided in the preceding sentence, after the Closing Date,
the Company shall not have any further rights or obligations under any such
agreements.
(b) Consistent Tax Treatment. Seller and Buyer hereby agree and
acknowledge that the transactions set forth in this Agreement are intended to
be treated for Bolivian Tax purposes as a sale of the shares of Company and
further agree to consistently report (or cause the Company to report) such
transaction as a sale of the shares of Company for all such Bolivian purposes.
Until specifically required to do otherwise by Bolivian Tax authorities, Buyer
further agrees to calculate (or cause Company to calculate) all Bolivian Tax
liabilities and to prepare (or cause Company to prepare) all Bolivian Tax
returns, reports or computations based upon the following principles:
(1) the tax basis of all assets associated with the Contract Interests
will be unaffected by the transactions set forth in this Agreement; and
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(2) the amount of consideration paid to Seller pursuant to this
Agreement will not affect the basis of any asset associated with the Contract
Interests.
(c) Exclusive Provision for Taxes. In the event of a conflict between
the provisions of this Section 10.1 and any other provisions of this Agreement,
the provisions of this Section 10.1 shall control.
Section 10.2 Employee Matters.
(a) "National Employee" means an employee employed directly by the
Company who is paid on the local national employee payroll immediately prior to
the Closing. A list of the names and positions of all National Employees as of
the date of this Agreement who are expected to continue in such assignments up
to the Closing is provided in SCHEDULE 10.2(a). At the Closing, Seller shall
deliver to Buyer a revised list updating such information as of the Closing
Date. All National Employees employed by the Company immediately prior to the
Closing shall continue to be National Employees immediately after the Closing.
At the Company's sole risk, cost and expense, the Company, at its discretion
and subject to applicable Bolivian Law, may discharge, reassign, demote,
promote or take any other action with respect to employment matters relating to
a National Employee after Closing.
(b) "Expatriate Employee" means a U.S. citizen or Person of another
nationality who is paid on a U.S. dollar payroll of Seller, the Company or
another Affiliate of Seller, who performs work in Bolivia for the Company, and
who (i) resides in Bolivia, or (ii) is on a rotational status traveling on a
specified schedule to and from Bolivia or (iii) is on temporary assignment in
Bolivia for the Company and in each case who continues in such assignment
immediately prior to the Closing. A complete list of the names and positions of
the Expatriate Employees as of the date of this Agreement who are expected to
continue in such assignments up to the Closing is provided in SCHEDULE 10.2(b).
At the Closing, Seller shall deliver to Buyer a revised list updating such
information as of the Closing Date. All Expatriate Employees employed by the
Company prior to the Closing shall cease to be employees of the Company at or
prior to the time of Closing, unless such Expatriate Employee, with the mutual
consent of Seller and Buyer, elects to become a National Employee and continue
his or her employment with the Company.
ARTICLE 11
CLOSING CONDITIONS
Section 11.1 Seller's Closing Conditions. The obligation of Seller to
proceed with the Closing contemplated hereby is subject, at the option of
Seller, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(a) Representations, Warranties and Covenants. The (i) representations
and warranties of Buyer contained in this Agreement shall be true and correct
in all material respects (and in all respects, in the case of representations
and warranties which are qualified by materiality or by the requirement of
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a material adverse effect) on and as of the Closing Date as though made as of
the Closing Date, and (ii) covenants and agreements of Buyer to be performed on
or before the Closing Date in accordance with this Agreement shall have been
duly performed in all material respects (and in all respects, in the case of
covenants and agreements which are qualified by materiality).
(b) Officer's Certificate. Seller shall have received a certificate
dated as of the Closing Date, executed on behalf of Buyer by a duly authorized
officer of Buyer, to the effect that the conditions set forth in subsection (a)
of this Section 11.1 have been satisfied.
(c) Closing Documents. On or prior to the Closing Date, Buyer shall
have delivered, or be standing ready to deliver (or cause to be delivered) at
Closing, all agreements, instruments and other documents that Buyer is required
to deliver or cause to be delivered pursuant to Section 12.3.
(d) No Action. On the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Seller or any of its
Affiliates) shall be pending or threatened before any court or governmental
agency or body of competent jurisdiction seeking to enjoin or restrain the
consummation of the Closing or recover damages from Seller or any Affiliate of
Seller resulting therefrom, excluding the Action, motion or request against the
Company referenced as item (4) in Schedule 4.1(j) unless (1) a court order or
judgment has been entered with respect thereto which enjoins, restrains or
otherwise prevents (or seeks to enjoin, restrain or prevent) any performance or
action which is necessary to the consummation of the Closing on the part of
Seller and (2) such order or judgment has not been rescinded or overturned by
the court which issued the same or overturned or reversed on appeal, in each
case in a manner which is final and no longer subject to appeal.
(e) Opinion of Counsel. Buyer shall have delivered to Seller the
written opinion, dated as of the Closing Date, of legal counsel to Buyer,
substantially in the form attached hereto as EXHIBIT 11.1(e).
(f) Adjustments. The sum of:
(1) the aggregate reductions in the Purchase Price on account of (i)
Contract Defect Amounts and Environmental Defect Amounts and (ii) Casualty
Price Reductions pursuant to Section 8.2, plus
(2) the aggregate amount of Contract Defect Amounts, Environmental
Defect Amounts and Casualty Price Reductions claimed by Buyer with respect
to unresolved Deferred Adjustment Claims as of the Closing Date,
shall not exceed an amount equal to 10% of the Purchase Price.
(g) No Existing Order. No order or judgment shall have been entered by
a Bolivian court which enjoins, restrains or otherwise prevents (or seeks to
enjoin, restrain or prevent) either (i) the
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Company from modifying, altering or changing the documentation relating to the
corporate or administrative structure of the Company or (ii) the SENAREC
(Registry of Corporations) in Bolivia from authorizing modifications,
alterations or changes to the documentation relating to the corporate or
administrative structure of the Company, except for any such order or judgment
which has been rescinded or overturned by the court which issued the same or
overturned or reversed on appeal, in each case in a manner which is final and
no longer subject to appeal.
Section 11.2 Buyer's Closing Conditions. The obligation of Buyer to
proceed with the Closing contemplated hereby is subject, at the option of
Buyer, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(a) Representations, Warranties and Covenants. The (i) representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects (and in all respects, in the case of representations
and warranties which are qualified by materiality or by the requirement of a
Material Adverse Effect) on and as of the Closing Date as though made as of the
Closing Date, except for any necessary qualifications, registrations and
filings with Bolivian Governmental Authorities which are required as a result
of the change in the jurisdiction of organization of the Company from Texas to
the Cayman Islands, and (ii) covenants and agreements of Seller to be performed
on or before the Closing Date in accordance with this Agreement shall have been
duly performed in all material respects (and in all respects, in the case of
covenants and agreements which are qualified by materiality).
(b) Officer's Certificate. Buyer shall have received a certificate
dated as of the Closing Date, executed on behalf of Seller by a duly authorized
officer of the Seller, to the effect that the conditions set forth in
subsection (a) of this Section 11.2 have been satisfied.
(c) Closing Documents. On or prior to the Closing Date, Seller shall
have delivered, or be standing ready to deliver (or cause to be delivered) at
the Closing, all agreements, instruments and documents that Seller is required
to deliver or cause to be delivered pursuant to Section 12.2.
(d) No Action. On the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Buyer or any of its
Affiliates) shall be pending or threatened before any court or governmental
agency or body of competent jurisdiction seeking to enjoin or restrain the
consummation of the Closing or recover damages from Buyer or any Affiliate of
Buyer resulting therefrom.
(e) Opinion of Counsel. Seller shall have delivered to Buyer the
written opinion, dated as of the Closing Date, of legal counsel to Seller,
substantially in the form attached hereto as EXHIBIT 11.2(e).
(f) Adjustments. The sum of:
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(1) the aggregate reductions in the Purchase Price on account of (i)
Contract Defect Amounts and Environmental Defect Amounts and (ii) Casualty
Price Reductions pursuant to Section 8.2, plus
(2) the aggregate amount of Contract Defect Amounts, Environmental
Defect Amounts and Casualty Price Reductions claimed by Buyer with respect
to unresolved Deferred Adjustment Claims as of the Closing Date,
shall not exceed an amount equal to 10% of the Purchase Price.
(g) No Existing Order. No order or judgment shall have been entered by
a Bolivian court which enjoins, restrains or otherwise prevents (or seeks to
enjoin, restrain or prevent) either (i) the Company from modifying, altering or
changing the documentation relating to the corporate or administrative
structure of the Company or (ii) the SENAREC (Registry of Corporations) in
Bolivia from authorizing modifications, alterations or changes to the
documentation relating to the corporate or administrative structure of the
Company, except for any such order or judgment which has been rescinded or
overturned by the court which issued the same or overturned or reversed on
appeal, in each case in a manner which is final and no longer subject to
appeal.
Section 11.3 Deferred Claims and Disputes. In the event that Buyer and
Seller have not agreed on or prior to the Closing Date upon (i) the existence
or amount of one or more Contract Defects, Contract Defect Amounts, or one or
more adjustments, credits or offsets claimed by Buyer or Seller pursuant to and
in accordance with the requirements of Article 6 or (ii) the existence or
amount of one or more Environmental Defects, any Remediation, Environmental
Value Reduction or plan therefor, or one or more adjustments, credits or
offsets claimed by Buyer or Seller pursuant to Article 7 or (iii) the existence
or amount of any Casualty Price Reduction pursuant to Section 8.2, any such
dispute or claim (a "Deferred Adjustment Claim") shall be settled pursuant to
this Section 11.3 and, except as provided in Section 11.1(f) and 11.2(f), shall
not prevent or delay Closing. In no event shall any Contract Defect Amount,
Environmental Defect Amount or Environmental Value Reduction asserted by Buyer
as a Deferred Adjustment Claim exceed the amount asserted by Buyer therefor
prior to the end of the Contract Examination Period in accordance with Section
6.1 or the Environmental Examination Period in accordance with Section 7.3, as
applicable. With respect to each potential Deferred Adjustment Claim, Buyer and
Seller shall deliver to the other a written notice describing each such
potential Deferred Adjustment Claim, the amount in dispute and a statement
setting forth the facts and circumstances that support such party's position
with respect to such Deferred Adjustment Claim. At Closing, the Purchase Price
shall not be adjusted on account of, and, except as provided in Section 11.1(f)
and 11.2(f), no effect shall be given to, the Deferred Adjustment Claim. On or
prior to the thirtieth (30th) consecutive calendar day following the Closing
Date (the "Deferred Matters Date"), the Seller and Buyer shall attempt in good
faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to
resolve by written agreement all disputes regarding the Deferred Adjustment
Claims. Any Deferred Adjustment Claims which are not so resolved on or before
the Deferred Matters Date may be submitted by either party to final and binding
arbitration in accordance with the Arbitration Procedures; provided, however,
that the Seller
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may elect at any time to resolve all disputes relating to the Deferred
Adjustment Claims by the payment to Buyer of the amount by which the Purchase
Price would have been reduced at Closing on account of the Contract Defects or
Environmental Defects which constitute Deferred Adjustment Claims if same did
not constitute Deferred Adjustment Claims, together with interest thereon from
the Closing Date to the date of such payment at the Agreed Rate. The amount of
any reduction in the Purchase Price to which Buyer becomes entitled under the
final and binding written decision of the board of arbitrators shall be
promptly refunded by Seller to Buyer, together with interest thereon from the
Closing Date to the date of payment at the Agreed Rate.
Section 11.4 Deferred Adjustment Claims Extension. Notwithstanding
Section 11.2(f), if Buyer elects not to proceed with the Closing as a result of
the non-satisfaction of the condition set forth in Section 11.2(f) and such
condition would have been satisfied but for the amount of Environmental Defect
Amounts, Contract Defect Amounts and Casualty Price Reduction claimed by Buyer
with respect to unresolved Deferred Adjustment Claims, Seller may elect to
delay the Closing Date and Closing until the tenth Business Day following the
date when a sufficient amount of such Deferred Adjustment Claims have been
resolved pursuant to Section 11.3 to determine that the condition set forth in
Section 11.2(f) has been satisfied or has not been satisfied. A Deferred
Adjustment Claim will be deemed resolved pursuant to Section 11.3 when a final
and binding written decision of the board of arbitrators is made with respect
thereto in accordance with the Arbitration Procedures.
ARTICLE 12
CLOSING
Section 12.1 Closing. The Closing shall be held on the Closing Date at
10:00 a.m., local time, at the office of BG do Brasil Ltda. at Rua Laura Muller
116, Office 3202, Torre Rio Sul, Rio de Janeiro, Brazil, or at such other time
or place as Seller and Buyer may otherwise agree in writing.
Section 12.2 Seller's Closing Obligations. At Closing, Seller shall
execute and deliver, or cause to be executed and delivered, to Buyer the
following:
(a) The share certificates representing all Company Shares, endorsed
in blank or accompanied by duly executed assignment documents, or such other
transfer procedure which is mutually acceptable to Buyer and Seller;
(b) The officer's certificate of Seller referred to in Section
11.2(b), with such exceptions thereto which are scheduled in such certificate
with respect to matters discovered, occurring or arising after the date of this
Agreement as may be necessary to make the statements contained therein true and
correct;
(c) The legal opinion referred to in Section 11.2(e);
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(d) Resignations or terminations of the officers, directors and
attorneys-in-fact of the Company from their status as officers, directors or
attorneys-in-fact effective as of the Closing that are requested by Buyer at
least four days prior to the Closing Date;
(e) A non-foreign affidavit, as such affidavit is referred to in
Section 1445(b)(2) of the Internal Revenue Code of 1986 (as amended), in form
attached hereto as EXHIBIT 12.2(e), dated as of the Closing Date; and
(f) Any other agreements, instruments and documents which are required
by other terms of this Agreement to be executed and/or delivered by Seller to
Buyer at the Closing.
Section 12.3 Buyer's Closing Obligations. At Closing, Buyer shall (i)
deliver, or cause to be delivered, the Closing Payment to Seller in immediately
available funds to the bank account as provided in Section 3.3 and (ii) execute
and deliver, or cause to be executed and delivered, to Seller the following:
(a) The officer's certificate of Buyer referred to in Section 11.1(b),
with such exceptions thereto which are scheduled in such certificate with
respect to matters discovered, occurring or arising after the date of this
Agreement as may be necessary to make the statements contained therein true and
correct;
(b) The legal opinion referred to in Section 11.1(e);
(c) Written evidence satisfactory to Seller that a substitute letter
of credit has been provided by Buyer to Total Exploration Production Bolivie to
fully replace and release the existing letter of credit in the amount of US
$2,003,750 issued by Banque Paribas in favor of Total Exploration Production
Bolivie in connection with the Bereti Block Property;
(d) The Assumption Agreement executed by an officer of the Company, in
the form attached hereto as EXHIBIT 12.3(d); and
(e) Any other agreements, instruments and documents which are required
by other terms of this Agreement to be executed and/or delivered by Buyer to
Seller at the Closing.
ARTICLE 13
EFFECT OF CLOSING
Section 13.1 Survival. Except as provided in this Section 13.1, no
representations, warranties, covenants and agreements made herein shall survive
the Closing. Each representation, warranty, covenant and agreement made herein
shall terminate and cease to be of further force and effect as of the Closing
or such later date after Closing as is expressly stipulated in this Section
13.1 for the
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survival thereof. Neither the officer's certificate of Buyer referred to in
Section 11.1(b) or 12.3(ii)(a) nor the officer's certificate of Seller referred
to in Section 11.2(b) or Section 12.2(b) shall operate or cause any underlying
representation or warranty referenced or certified to therein, or Buyer's or
Seller's obligations under said certificate with respect to such representation
or warranty, to survive later than the time stipulated for the survival of such
representation and warranty in this Section 13.1. Following the Closing or such
later date stipulated in this Section 13.1 for the survival thereof, such
representation, warranty, covenant or agreement shall not form the basis for or
give rise to any claim, demand, cause of action, counterclaim, defense, damage,
indemnity, obligation or liability which is asserted, claimed, made or filed by
a party to this Agreement (or its successors or assigns as permitted herein)
following the Closing or such later date stipulated for survival. It is
expressly agreed that the terms and provisions of:
(a) Section 4.1(g) shall survive the Closing for a period of 150 days
from the Closing Date,
(b) Article IV (other than Sections 4.1(p) and 4.1(q) and except as
provided in clause (a) above or clause (d) below) and Sections 8.2, 9.1,
9.2 and 9.4 shall survive the Closing for a period of one (1) year from
the Closing Date,
(c) Section 9.10 shall survive the Closing for a period of two (2)
years from the Closing Date, and
(d) Sections 1.1, 1.2, 1.3, 2.2, 2.3, 3.2, 3.4, 4.1(c), 4.1(e),
4.1(f), 4.1(l), 4.1(x), 4.2(b), 4.2(g), 4.2(i), 8.3, 9.5, 9.6, 9.7, 9.9,
9.11, and 11.3, Articles 6, 7, 10, 13, 14, 15, 16 and 17, and Buyer's
indemnity and hold harmless of the Seller Indemnified Persons under
Sections 5.1 and 7.2 shall survive the Closing indefinitely or for such
shorter period of time as may be stipulated in such provisions.
In addition, the definitions set forth in Appendix A to this Agreement or in
any other provision of this Agreement which are used in the representations,
warranties, covenants and agreements which survive the Closing pursuant to this
Section 13.1 shall survive the Closing to the extent necessary to give
operative effect to such surviving representations, warranties, covenants and
agreements. Subject to the limitations on survival contained in this Section
13.1, the delivery by a party, and the acceptance by the other party, of an
officer's certificate pursuant to Section 12.2(b) or 12.3(ii)(a) containing any
exceptions shall not operate to release or waive any claim or cause of action
which the other party might have for breach by the party delivering such
officer's certificate of any of its representations and warranties made as of
the date of this Agreement or any of its covenants and agreements hereunder.
Section 13.2 Change of Ownership. Seller's obligations to refund any
portion of the Purchase Price pursuant to Section 6.1(d) and Seller's
obligations under this Agreement with respect to any Seller Environmental
Obligations shall immediately cease and be fully released and discharged at
such time as the Company ceases to be neither directly nor indirectly owned and
controlled by a BG Entity or an Affiliate of a BG Entity. Seller's obligations
to refund any portion of the Purchase Price pursuant to
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Section 6.1(d) with respect to a Contract Defect affecting a Contract Interest
and Seller's obligations under this Agreement with respect to any Seller
Environmental Obligations with respect to a Contract Interest or another Asset
shall immediately cease and be fully released and discharged at such time as
such Contract Interest or such other Asset ceases to be neither directly nor
indirectly owned by a BG Entity or an Affiliate of a BG Entity, except to the
extent such Contract Interest or such other Asset is relinquished to YPFB or
any Bolivian Governmental Authority.
ARTICLE 14
LIMITATIONS
Section 14.1 Disclaimer of Warranties and Representations.
NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF
THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS
NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES EXPRESSLY
GIVEN IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY
PRECEDING SENTENCE AND WITHOUT LIMITING THE EXPRESS REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT, SELLER HEREBY (I) EXPRESSLY
DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT
COMMON OR CIVIL LAW, BY STATUTE OR OTHERWISE, RELATING OR WITH RESPECT TO (A)
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (B) ANY
INFRINGEMENT BY SELLER OR ANY OF ITS AFFILIATES OF ANY PATENT OR PROPRIETARY
RIGHT OF ANY THIRD PARTY, (C) ANY ENVIRONMENTAL MATTERS (INCLUDING ANY
ENVIRONMENTAL CONDITION) AND BUYER HEREBY ACKNOWLEDGES AND AGREES THAT BUYER'S
SOLE REMEDY FOR ANY ENVIRONMENTAL MATTER (INCLUDING ANY ENVIRONMENTAL DEFECT OR
ENVIRONMENTAL CONDITION) WITH RESPECT TO ANY OF THE ASSETS SHALL BE PURSUANT TO
THE PROCEDURES SET FORTH IN ARTICLE 7 AND IN SECTION 15.2 WITH RESPECT TO ANY
SELLER ENVIRONMENTAL OBLIGATIONS, (D) THE ACCURACY OR COMPLETENESS OF THE
INFORMATION, RECORDS, DATA AND INTERPRETATIONS NOW, HERETOFORE OR HEREAFTER
MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT BY SELLER , ANY
AFFILIATE OF SELLER OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, REPRESENTATIVE,
INVESTMENT BANKER, COUNSEL, CONSULTANT OR ADVISOR OF SELLER OR ANY AFFILIATE OF
SELLER (COLLECTIVELY, A "SELLER SOURCE"); INCLUDING ANY PRICING ASSUMPTIONS,
POTENTIAL FOR PRODUCTION OF OIL, GAS OR OTHER HYDROCARBONS FROM THE CONTRACT
INTERESTS, PROJECTED DEVELOPMENT COSTS, PROJECTED PLUGGING AND ABANDONMENT
COSTS, OR ANY MATTERS WHICH MAY BE CONTAINED IN OR RELATED TO ANY RESERVE
REPORT; ANY
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ACQUIRED OR LICENSED DATA OR ANY INTERPRETATIONS THEREOF; (E) THE COMPANY'S
TITLE TO ANY OF THE ASSETS AND BUYER HEREBY ACKNOWLEDGES AND AGREES THAT
BUYER'S SOLE REMEDY FOR ANY DEFECT OF TITLE, INCLUDING ANY CONTRACT DEFECT,
WITH RESPECT TO ANY OF THE ASSETS SHALL BE PURSUANT TO THE PROCEDURES SET FORTH
IN ARTICLE 6 (INCLUDING ANY RIGHT OF BUYER TO ADJUST THE PURCHASE PRICE BY
OPERATION OF SECTION 6.1), AND (F) THE PLUGGING AND ABANDONMENT OBLIGATIONS;
AND (II) NEGATES ANY RIGHTS OF BUYER UNDER STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION AND ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF LATENT OR HIDDEN
VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF SELLER
AND BUYER THAT THE ASSETS ARE TO BE ACCEPTED BY BUYER IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
Section 14.2 Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT (BUT SUBJECT TO SELLER'S
RIGHTS AND REMEDIES EXPRESSLY PROVIDED UNDER SECTION 16.2(a), SELLER AND BUYER
AGREE THAT THE RECOVERY BY EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR
INCURRED BY IT AS A RESULT OF ANY BREACH BY THE OTHER PARTY OF ANY OF ITS
REPRESENTATIONS, WARRANTIES OR OBLIGATIONS UNDER THIS AGREEMENT SHALL BE
LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY
AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS HEREUNDER AND IN NO EVENT SHALL THE BREACHING PARTY
BE LIABLE TO THE NON-BREACHING PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL,
EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST PROFITS
OR OPPORTUNITIES, BUSINESS INTERRUPTION OR LOST OR DELAYED PRODUCTION) SUFFERED
OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
BREACHING PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS
HEREUNDER. For purposes of the foregoing, actual damages may, however, include
indirect, consequential, special, exemplary or punitive damages to the extent
(i) the injuries or losses resulting in or giving rise to such damages are
incurred or suffered by a Person which is not a Seller Indemnified Person, a
Buyer Indemnified Person or an Affiliate of any of the foregoing and (ii) such
damages are recovered against an Indemnified Person by a Person which is not a
Seller Indemnified Person, a Buyer Indemnified Person or an Affiliate of any of
the foregoing. This Section 14.2 shall operate only to limit a party's
liability and shall not operate to increase or expand any contractual
obligation of a party hereunder or cause any contractual obligation of a party
hereunder to survive longer than provided in Section 13.1.
Section 14.3 Plugging and Abandonment Obligations. THE PARTIES AGREE
FOR ALL PURPOSES OF THIS AGREEMENT THAT (I) THE PLUGGING AND ABANDONMENT
OBLIGATIONS CONSTITUTE COMPANY LIABILITIES, (II) THE PLUGGING AND
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ABANDONMENT OBLIGATIONS SHALL NOT CONSTITUTE ENVIRONMENTAL CONDITIONS,
ENVIRONMENTAL CLAIMS, ENVIRONMENTAL LIABILITIES, ENVIRONMENTAL DEFECTS, OR
ENVIRONMENTAL MATTERS, AND (III) SELLER SHALL HAVE NO LIABILITIES OR
OBLIGATIONS WITH RESPECT TO PLUGGING AND ABANDONMENT OBLIGATIONS.
Section 14.4 Environmental Release. From and after Closing and except
for the rights and remedies expressly provided in Section 15.2 with respect to
any Seller Environmental Obligations, the Buyer Indemnified Persons shall have
no rights to recovery or indemnification for Environmental Liabilities or any
Environmental Matters under this Agreement or Law, and all rights or remedies
which any Buyer Indemnified Person may have at or under Law with respect to any
Environmental Liabilities or Environmental Matters are expressly waived. FROM
AND AFTER CLOSING, BUT WITHOUT LIMITING OR RELEASING ANY OF THE RIGHTS AND
REMEDIES EXPRESSLY PROVIDED IN SECTION 15.2 WITH RESPECT TO SELLER
ENVIRONMENTAL OBLIGATIONS, BUYER AND ALL BUYER INDEMNIFIED PERSONS DO HEREBY
AGREE, WARRANT AND COVENANT TO RELEASE, ACQUIT AND FOREVER DISCHARGE SELLER AND
ALL SELLER INDEMNIFIED PERSONS FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF
ACTION OF WHATSOEVER NATURE, INCLUDING WITHOUT LIMITATION ALL CLAIMS, DEMANDS
AND CAUSES OF ACTION FOR CONTRIBUTION AND INDEMNITY UNDER STATUTE, COMMON OR
CIVIL LAW, WHICH COULD BE ASSERTED NOW OR IN THE FUTURE AND THAT RELATE TO OR
IN ANY WAY ARISE OUT OF ENVIRONMENTAL LIABILITIES OR ENVIRONMENTAL MATTERS.
FROM AND AFTER CLOSING AND EXCEPT FOR THE RIGHTS AND REMEDIES EXPRESSLY
PROVIDED IN SECTION 15.2 WITH RESPECT TO ANY SELLER ENVIRONMENTAL OBLIGATIONS,
BUYER, THE COMPANY AND ALL OTHER BUYER INDEMNIFIED PERSONS WARRANT, AGREE AND
COVENANT NOT TO SUE OR INSTITUTE ARBITRATION AGAINST THE SELLER OR ANY SELLER
INDEMNIFIED PERSON UPON ANY CLAIM, DEMAND OR CAUSE OF ACTION FOR INDEMNITY AND
CONTRIBUTION THAT HAVE BEEN ASSERTED OR COULD BE ASSERTED FOR ANY ENVIRONMENTAL
LIABILITIES OR ENVIRONMENTAL MATTERS.
ARTICLE 15
INDEMNIFICATION
Section 15.1 Indemnification By Buyer. From and after the Closing, the
Company shall pay, perform, fulfill and discharge all Company Liabilities.
Buyer (and the Company with respect to all Company Liabilities under clause (i)
of this Section 15.1) shall indemnify and hold harmless the Seller, the
Seller's respective Affiliates (other than the Company), each of their
respective past, present and future directors, officers, employees, consultants
and agents, each of the Company's past and present (and, through the Closing,
future) directors, officers, employees, consultants and agents), and each of
the directors, officers, heirs, executors, successors and assigns of any of the
foregoing (collectively, the "Seller
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Indemnified Persons") from and against (i) any and all Company Liabilities
incurred by or asserted against any of the Seller Indemnified Persons,
INCLUDING ANY COMPANY LIABILITY BASED ON NEGLIGENCE, GROSS NEGLIGENCE OR STRICT
LIABILITY OF THE SELLER INDEMNIFIED PERSON OR ANY OTHER THEORY OF LIABILITY,
WHETHER IN LAW (WHETHER COMMON, CIVIL OR STATUTORY) OR EQUITY and (ii) subject
to the limitations of Section 13.1 and Article 14, any Covered Liability
resulting from any breach or nonfulfillment of any representation, warranty,
covenant or agreement on the part of Buyer which is expressly set forth in this
Agreement. Buyer's indemnity obligations under clause (i) of this Section 15.1
shall not extend to or cover any Covered Liabilities arising out of claims or
Actions filed, asserted or threatened more than five years after the Closing
Date, however, Buyer's indemnity obligations under clause (i) of this Section
15.1 shall extend to and cover all Covered Liabilities arising out of claims or
Actions filed, asserted or threatened prior to the end of said five-year
period.
Section 15.2 Indemnification By Seller. Subject to the provisions of
Section 15.4, from and after the Closing, Seller shall indemnify and hold
harmless the Buyer, the Company, each of their respective present and future
directors, officers, employees, consultants and agents, and each of the
directors, officers, heirs, executors, successors and assigns of any of the
foregoing (collectively, the "Buyer Indemnified Persons") from and against any
and all (i) Seller Environmental Obligations and Seller Uninsured Liabilities
incurred by or asserted against any of the Buyer Indemnified Persons, INCLUDING
ANY SELLER ENVIRONMENTAL OBLIGATIONS AND SELLER UNINSURED LIABILITIES BASED ON
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY OF THE BUYER INDEMNIFIED
PERSON OR ANY OTHER THEORY OF LIABILITY, WHETHER IN LAW (WHETHER COMMON, CIVIL
OR STATUTORY) OR EQUITY (but subject to the limitations contained in the
definitions of Seller Environmental Obligations and Seller Uninsured
Liabilities), and (ii), subject to the limitations of Section 13.1 and Article
14, any Covered Liability resulting from any breach or nonfulfillment of any
representation, warranty, covenant or agreement on the part of Seller which is
expressly set forth in this Agreement. Seller's indemnity obligations under
clause (i) of this Section 15.2 with respect to Seller Uninsured Liabilities
shall not extend to or cover any Seller Uninsured Liabilities arising out of
claims or Actions filed, asserted or threatened more than five years after the
Closing Date, however, Seller's indemnity obligations under clause (i) of this
Section 15.1 with respect to Seller Uninsured Liabilities shall extend to and
cover all Seller Uninsured Liabilities arising out of claims or Actions filed,
asserted or threatened prior to the end of said five-year period.
Section 15.3 Indemnification and Defense Procedures. A Person which is
entitled to be indemnified under Section 5.1, 7.2, 15.1 or 15.2 is herein
referred to as an "Indemnified Person" and the party which is obligated to
indemnify an Indemnified Person under Section 5.1, 7.2, 15.1 or 15.2 is herein
referred to as the "Indemnifying Party" with respect to the matter for which it
is obligated to indemnify such Indemnified Person. All claims for
indemnification under Sections 5.1, 7.2, 15.1 and 15.2 shall be asserted and
resolved as follows:
(a) If a third party claim for which an Indemnified Person is entitled
to indemnity under Sections 5.1, 7.2, 15.1 and/or 15.2 (an "Indemnified Claim")
is made against an Indemnified Person, and
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if Buyer or Seller intends to seek indemnity with respect thereto by or from an
Indemnifying Party pursuant to Sections 5.1, 7.2, 15.1 and/or 15.2, then the
party electing to seek indemnity on behalf of such Indemnified Person shall
promptly transmit to the Indemnifying Party a written notice ("Claim Notice")
(i) notifying such Indemnifying Party of such Indemnified Claim and request
indemnity on behalf of such Indemnified Person with respect to such Indemnified
Claim under Sections 5.1, 7.2, 15.1 and/or 15.2, as the case may be, (ii)
setting forth the full name, address for all notices and the authorized
representatives of such Indemnified Person with respect to such Indemnified
Claim, and (iii) describing in reasonable detail the nature of the Indemnified
Claim, including a copy of all papers served with respect to such Indemnified
Claim (if any) and the basis of such request for indemnification under Sections
5.1, 7.2, 15.1 and/or 15.2, as the case may be. Failure to provide such Claim
Notice promptly shall not affect the right of the Indemnified Person to
indemnification hereunder except to the extent the Indemnifying Party is
prejudiced thereby; provided that, the Indemnifying Party shall not be
obligated to defend, indemnify or otherwise hold harmless an Indemnified Person
with respect to a third party claim until a Claim Notice meeting the foregoing
requirements is furnished to the Indemnifying Party by the party seeking
indemnity hereunder. Within 30 days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the party who sent the
Claim Notice (A) whether the Indemnifying Party disputes its potential
liability to indemnify the Indemnified Person under Sections 5.1, 7.2, 15.1
and/or 15.2, as the case may be, with respect to such third party claim and (B)
whether the Indemnifying Party desires to defend the Indemnified Person against
such third party claim; provided that, if the Indemnifying Party fails to so
notify the Indemnified Person during the Election Period, the Indemnifying
Party shall be deemed to have elected to dispute such liability and not to
defend against such third party claim. The aforesaid election or deemed
election by the Indemnifying Party not to assume the defense of the Indemnified
Person with respect to such Indemnified Claim, however, shall be subject to the
right of the Indemnifying Party to subsequently assume the defense of the
Indemnified Person with respect to such Indemnified Claim at any time prior to
settlement or final determination thereof.
(b) If the Indemnifying Party notifies the party who sent the Claim
Notice within the Election Period that the Indemnifying Party (i) does not
dispute its liability to indemnify the Indemnified Person under Sections 5.1,
7.2, 15.1 and/or 15.2, as the case may be (or reserves the right to dispute
whether such claim is an Indemnified Claim under Sections 5.1, 7.2, 15.1 and/or
15.2) and (ii) elects to assume the defense of such Indemnified Person with
respect to such third party claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such third party claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently by
the Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 15.3(b). If an
Indemnifying Party elects pursuant to the foregoing to assume the defense of an
Indemnified Person with respect to a third party claim which is subsequently
determined not to be an Indemnified Claim, then, without limiting any action
the Indemnifying Party may have on account of actual fraud, the Indemnifying
Party shall not be entitled to recover from the other party or the Indemnified
Person the costs and expenses incurred by the Indemnifying Party in providing
such defense. The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof; provided that
the Indemnifying Party shall not enter into any settlement agreement (or settle
or compromise any such third party claim in a manner) which provides for or
results in any payment by or
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liability of the Indemnified Person of or for any damages or other amount, any
lien, charge or encumbrance on any property of the Indemnified Person, any
finding of responsibility or liability on the part of the Indemnified Person or
any sanction or restriction upon the conduct of any business by the Indemnified
Person without the Indemnified Person's express written consent, which consent
shall not be unreasonably withheld. The Indemnified Person is hereby
authorized, at the sole cost and expense of the Indemnifying Party (but only if
the Indemnified Person is actually entitled to indemnification hereunder), to
file, during the Election Period, any motion, answer or other pleadings which
the Indemnified Person shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not reasonably expected to be
prejudicial to the Indemnifying Party. If requested by the Indemnifying Party,
the Indemnified Person agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any such third party claim which the Indemnifying Party elects to contest,
including the making of any related counterclaim or cross-complaint against any
Person (other than a Buyer Indemnified Person, if the Indemnified Person is a
Buyer Indemnified Person, or a Seller Indemnified Person, if the Indemnified
Person is a Seller Indemnified Person). The Indemnified Person may participate
in, but not control, any defense or settlement of any third party claim
controlled by the Indemnifying Party pursuant to this Section 15.3(b), and the
Indemnified Person shall bear its own costs and expenses with respect to such
participation. The prosecution of the defense of a third party claim with
reasonable diligence shall include the taking of such action (including the
posting of a bond, deposit or other security) as may be necessary to prevent
any action to foreclose a lien against or attachment of the property of the
Indemnified Person for payment of such third party claim.
(c) If the Indemnifying Party (i) fails to notify the party who sent
the Claim Notice within the Election Period that the Indemnifying Party elects
to defend the Indemnified Person pursuant to Section 15.3(b) or (ii) elects to
defend the Indemnified Person pursuant to Section 15.3(b) but fails to
prosecute the defense of (or to settle) the third party claim with reasonable
diligence, then the Indemnified Person shall have the right to defend, at the
sole cost and expense of the Indemnifying Party (but only if the Indemnified
Person is actually entitled to indemnification hereunder), the third party
claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Person to a final conclusion or
settled. Unless and until such defense is assumed by the Indemnifying Party as
permitted in Section 15.3(a), the Indemnified Person shall have full control of
such defense and proceedings; provided, however, that the Indemnifying Party,
without assuming the defense of such Indemnified Claim, may participate in, but
not control, any defense or settlement controlled by the Indemnified Person
pursuant to this Section 15.3(c), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. The Indemnified Person
may not enter into any compromise or settlement of such third party claim,
without the Indemnifying Party's express written consent, which shall not be
unreasonably withheld.
(d) If an Indemnified Person is entitled to indemnity under Sections
5.1, 7.2, 15.1 and/or 15.2 for a claim or other matter which does not involve a
third party claim, and if Buyer or Seller intends to seek indemnity on behalf
of an Indemnified Person with respect thereto by or from an Indemnifying Party
pursuant to Sections 5.1, 7.2, 15.1 and/or 15.2, then the party electing to
seek indemnity on behalf of an Indemnified Person shall promptly transmit to
the Indemnifying Party a written notice describing in
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reasonable detail the nature of such claim or other matter, the Indemnified
Person's best estimate of the amount of damages attributable to such claim or
other matter and the basis for the Indemnified Person's entitlement to
indemnification under Sections 5.1, 7.2, 15.1 and/or 15.2, as the case may be.
If the Indemnifying Party does not notify the party who sent such notice within
30 days from its receipt of such notice that the Indemnifying Party does not
dispute such claim for indemnity, the Indemnifying Party shall be deemed to
have disputed such claim.
(e) To the extent any claim, action, suit or proceeding includes one
or more Indemnified Claims with respect to an Indemnified Person and one or
more third party claims which are not Indemnified Claims with respect to such
Indemnified Person, any such non-Indemnified Claim insofar as it is with
respect to such Indemnified Person shall not be covered by the indemnity in
Sections 5.1, 7.2, 15.1 and 15.2, the Indemnifying Party shall not be obligated
to undertake, conduct and control the defense or settlement of such
non-Indemnified Claim insofar as it is with respect to such Indemnified Person,
and such Indemnified Person shall be responsible for its own defense and
settlement of such non-Indemnified Claim. The seeking by a party of indemnity
hereunder on behalf of any Indemnified Person with respect to any third party
claim or other claim or matter shall not prevent such party from then or
thereafter also seeking indemnity hereunder on behalf of any other Indemnified
Person with respect to such third party claim or other claim or matter and
shall not prevent the other party from seeking indemnity hereunder on behalf of
any Indemnified Person with respect to the same third party claim or other
claim or matter.
Section 15.4 Seller's General Liability Limitation. Notwithstanding
anything herein provided to the contrary, Seller shall have no liability to
Buyer or any of the other Buyer Indemnified Persons pursuant to Section 15.2 or
for any breach by Seller of this Agreement to the extent that the aggregate
amount of all Covered Liabilities covered by Section 15.2 or attributable to
any breach by Seller of this Agreement exceeds an amount equal to 100% of the
Settlement Price as set forth on the Final Settlement Statement.
ARTICLE 16
TERMINATION; REMEDIES
Section 16.1 Termination.
(a) Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(1) By the mutual consent of Seller and Buyer; or
(2) If the Closing has not occurred by the close of business on the
latter of February 29, 2000, or the delayed Closing Date provided in
Section 11.4, then (i) by Seller if any condition specified in Section
11.1 has not been satisfied on or before such close of business, and shall
not theretofore have been waived by Seller, or (ii) by Buyer if any
condition specified in Section 11.2 has not been satisfied on or before
such close of business, and shall not theretofore have been
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waived by Buyer; provided, in each case, that the failure to consummate
the transactions contemplated hereby on or before such date did not result
from the failure by the party or parties seeking termination of this
Agreement to fulfill any undertaking or commitment provided for herein on
the part of such party or parties that is required to be fulfilled on or
prior to Closing.
(b) Effect of Termination. In the event of termination of this
Agreement by Seller, on the one hand, or Buyer, on the other hand, pursuant to
Section 16.1(a), written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Agreement shall thereupon terminate; provided, however, that following such
termination Buyer will continue to be bound by its obligations set forth in
Sections 5.1, 5.2 and 7.2(c). If this Agreement is terminated as provided
herein all filings, applications and other submissions made to any Governmental
Authority shall, to the extent practicable, be withdrawn from the Governmental
Authority to which they were made.
Section 16.2 Remedies.
(a) Seller's Remedies. Notwithstanding anything herein provided to the
contrary, if this Agreement is not terminated by Buyer pursuant to Section
16.1(a) and Buyer fails to satisfy on or prior to the Closing Date the
conditions to Closing or the Closing obligations, as the case may be, set forth
in Sections 11.1(a), 11.1(b), 11.1(c), 11.1(e) or 12.3, Seller, at its sole
option, may (i) enforce specific performance of this Agreement or (ii)
terminate this Agreement (without waiving or releasing Buyer's obligations
under Sections 5.1, 5.2 and 7.2) and recover from Buyer any and all actual
damages, costs and expenses sustained or incurred by Seller as a result of
Buyer's failure to Close and to perform Buyer's obligations under Section 12.3
and other provisions of this Agreement, including the recovery of damages equal
to the difference between the Purchase Price provided herein and any lesser
sales price which Seller may obtain for the Company Shares in a subsequent sale
of the Company Shares. Such remedies shall be Seller's sole and exclusive
remedies for such failure, all other remedies being expressly waived by Seller.
(b) Buyer's Remedies. Notwithstanding anything herein provided to the
contrary, if this Agreement is not terminated by Seller pursuant to Section
16.1(a) and Seller fails to satisfy on or prior to the Closing Date the
conditions to Closing or the Closing obligations, as the case may be, set forth
in Sections 11.2(a), 11.2(b), 11.2(c), 11.2(e) or 12.2, Buyer, at its sole
option, may (i) enforce specific performance of this Agreement, or (ii)
terminate this Agreement and, if Seller, in an attempt to avoid Closing, has
willfully and wrongfully failed to satisfy the Closing conditions or Closing
obligations referenced at the beginning of this sentence which are in Seller's
control, recover from Seller any and all actual damages, costs and expenses
sustained or incurred by Buyer as a result of Seller's failure to Close and to
perform Seller's obligations under Section 12.2 and other provisions of this
Agreement, or (iii) terminate this Agreement and recover from Seller any and
all actual damages, costs and expenses sustained or incurred by Buyer as a
result of Seller's failure to Close and to perform Seller's obligations under
Section 12.2 and other provisions of this Agreement; provided, however, that
the aggregate amount of damages, costs and expenses recoverable by Buyer under
this clause (iii) shall not exceed the sum of (x) the attorneys' fees,
accounts' fees, consultants' fees and other transactional expenses with respect
to the
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transaction evidenced by this Agreement incurred by Buyer through the date of
Buyer's termination of this Agreement, (y) the actual damages, if any, which
Buyer would have been able to recover against Seller if Buyer had closed its
purchase of the Company Shares as contemplated by this Agreement and had
brought a breach of contract action against Seller for breach of those
representations, warranties, covenants and agreements of Seller, the breach or
nonperformance of which by Seller gave rise to Buyer's right to terminate this
Agreement, and (z) any attorneys' fees and costs recoverable by Buyer under
Section 17.12. Such remedies shall be Buyer's sole and exclusive remedies for
such failure, all other remedies being expressly waived by Buyer.
ARTICLE 17
MISCELLANEOUS
Section 17.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.
Section 17.2 Governing Law; Jurisdiction; Process. THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION; PROVIDED, HOWEVER, THAT
MATTERS CONCERNING TITLE TO AND OPERATIONS UNDER THE SHARED RISK CONTRACTS AND
THE EXISTENCE AND EXTENT OF ENVIRONMENTAL CONDITIONS SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF BOLIVIA.
Section 17.3 Entire Agreement. This Agreement (including the
Confidentiality Agreement) and the Appendices, Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to
herein.
Section 17.4 Expenses. All other costs and expenses incurred by each
party hereto in connection with all things required to be done by it hereunder,
including attorney's fees, accountant fees and the expense of environmental and
title examination, shall be borne by the party incurring same.
Section 17.5 Notices. All notices authorized or required by any of the
provisions of this Agreement, unless otherwise specifically provided, shall be
in writing and delivered in person or by United States mail, courier service,
telegram, or telephone facsimile, postage or charges prepaid, and addressed to
the parties at the respective addresses set forth below:
If to Seller: Tesoro Petroleum Corporation
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8700 Tesoro Drive
San Antonio, Texas 75217
Attention: James C. Reed, Jr.
Fax Number: (210) 283-2400
Phone Number: (210) 828-8484
With a copy to: Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: George F. Kutzschbach
Fax Number: (713) 651-5246
Phone Number: (713) 651-5151
If to Buyer BG Bolivia
Av. Busch #500
Santa Cruz, Bolivia
Attention: Edward E. Miller
Fax Number: 005913-34-1601
Phone Number: 005913-34-1600
With a copy to: BG do Brasil Ltda.
Rua Laura Muller 116
Office 3202, Torre Rio Sul
Rio de Janeiro, Brazil
Attention: Richard Williams
Fax Number: 005521-543-3043
Phone Number: 005521-543-3086
Any party may, by written notice so delivered to the other, change the address
to which delivery shall thereafter be made.
Section 17.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the respective rights and
obligations of the parties hereto shall not be assignable or delegable by any
party hereto without the express written consent of the non-assigning or
non-delegating party.
Section 17.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party hereto may, only by an instrument in writing, waive
compliance by another party hereto with any term or provision of this Agreement
on the part of such other party hereto to be performed or complied with. The
waiver by any party hereto of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
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Section 17.8 Appendices, Schedules and Exhibits. All Appendices,
Schedules and Exhibits hereto which are referred to herein are hereby made a
part hereof and incorporated herein by such reference.
Section 17.9 Interpretation. It is expressly agreed that this
Agreement shall not be construed against any party, and no consideration shall
be given or presumption made, on the basis of who drafted this Agreement or any
particular provision hereof or who supplied the form of Agreement. Each party
agrees that this Agreement has been purposefully drawn and correctly reflects
its understanding of the transaction that this Agreement contemplates. In
construing this Agreement:
(a) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(b) the word "includes" and its derivatives means "includes, but is
not limited to" and corresponding derivative expressions;
(c) a defined term has its defined meaning throughout this Agreement
and each Appendix, Exhibit and Schedule to this Agreement, regardless of
whether it appears before or after the place where it is defined;
(d) each Exhibit and Schedule to this Agreement is a part of this
Agreement, but if there is any conflict or inconsistency between the main body
of this Agreement (including Appendices A and B which shall be considered part
of the main body of this Agreement) and any Exhibit or Schedule, the provisions
of the main body of this Agreement shall prevail; and
(e) the headings and titles herein are for convenience only and shall
have no significance in the interpretation hereof.
Section 17.10 Arbitration.
(a) It is agreed, as a severable and independent arbitration agreement
separately enforceable from the remainder of this Agreement, that if the
parties hereto, the Company, the Indemnified Persons or their respective
successors, assigns, heirs or legal representatives of any of the foregoing are
unable to amicably resolve any dispute or difference arising under or out of,
in relation to or in any way connected with this Agreement (whether
contractual, tortious, equitable, statutory or otherwise), such matter shall be
finally and exclusively referred to and settled by arbitration under the
Arbitration Rules of the International Chamber of Commerce ("ICC"); provided
that, the foregoing shall not prevent Seller, the Company or their Affiliates
from seeking specific performance, an injunction or other equitable relief with
respect to their rights under the Confidentiality Agreement through judicial
means in any jurisdiction. In the event of any conflict between the Arbitration
Rules of the ICC and the provisions of this Section 17.10, the provisions of
this Section 17.10 shall govern and control.
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(b) The arbitration shall be heard and determined by three (3)
arbitrators. Each side shall appoint an arbitrator of its choice within five
(5) days of the submission of a notice of arbitration. The party-appointed
arbitrators shall in turn appoint a presiding arbitrator of the tribunal within
ten (10) days following the appointment of both party-appointed arbitrators. If
the party-appointed arbitrators cannot reach agreement on a presiding
arbitrator of the tribunal and/or one party fails or refuses to appoint its
party-appointed arbitrator within the prescribed period, the appointing
authority for the presiding arbitrator and/or such party-appointed arbitrator
shall be the ICC, who, in each case, shall appoint an independent arbitrator
who does not have any financial interest in the dispute, controversy or claim
or any bear relationship to either party. The presiding arbitrator shall not be
of the same nationality as any of the parties or their ultimate parent
entities. If an arbitrator should die, withdraw or otherwise become incapable
of serving, or refuse to serve, a successor arbitrator shall be selected and
appointed in the same manner as the original arbitrator.
(c) Unless otherwise expressly agreed in writing by the parties to the
arbitration proceedings:
(1) The arbitration proceedings shall be held in New York, New York,
United States of America;
(2) The arbitration proceedings shall be conducted in the English
language and the arbitrator(s) shall be fluent in the English language;
(3) The arbitrators shall be and remain at all times wholly
independent and impartial;
(4) The arbitration proceedings shall be conducted under the
Arbitration Rules of the International Chamber of Commerce, as amended
from time to time;
(5) Any procedural issues not determined under the arbitration rules
selected pursuant to Section 17.10(c)(4) shall be determined by the
arbitration act and any other applicable laws of the State of New York,
U.S.A., other than those laws which would refer the matter to another
jurisdiction;
(6) All decisions and awards by the arbitration tribunal shall be made
by majority vote;
(7) The decision of a majority of the arbitrators shall be reduced to
writing; shall be final and binding without the right of appeal; and shall
be the sole and exclusive remedy regarding any claims, counterclaims,
issues or accountings presented to the arbitrators; any damage awards by
the arbitrators shall be stated in U.S. Dollars, and promptly paid in U.S.
Dollars free of any deduction or offset; and any costs or fees incident to
enforcing the award, shall to the maximum extent permitted by law be
charged against the party resisting such enforcement;
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(8) Consequential, indirect, special, exemplary, punitive or other
similar damages shall not be allowed except those payable to third parties
for which liability is allocated among the parties by the arbitration
award;
(9) Any award of damages shall include interest from the date of any
breach or violation of this Agreement, as determined by the arbitration
award, and from the date of the award until paid in full, at the Agreed
Rate in effect at the end of the first trading day of each month during
which such amount was owed;
(10) The costs of the arbitration proceedings (including attorneys'
fees and costs) shall be borne in the manner determined by the
arbitrator(s);
(11) Judgment upon the award may be entered in any court having
jurisdiction over the person or the assets of the party owing the
judgment, or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be;
(12) The arbitration shall proceed in the absence of a party who,
after due notice, fails to answer or appear; an award shall not be made
solely on the default of a party, but the arbitrator(s) shall require the
party who is present to submit such evidence as the arbitrator(s) may
determine is reasonably required to make an award.
Section 17.11 Agreement for the Parties' Benefit Only. This Agreement
is for the sole benefit of Buyer, Seller and their respective successors and
assigns as permitted herein and no other Person shall be entitled to enforce
this Agreement, rely on any representation, warranty, covenant or agreement
contained herein, receive any rights hereunder or be a third party beneficiary
of this Agreement. Any Indemnified Person which is a third party shall be
indemnified and held harmless under the terms of this Agreement only to the
extent that a party expressly elects to exercise such right of indemnity and
hold harmless on behalf of such third party Indemnified Person pursuant to
Section 15.3; and no party shall have any direct liability or obligation to any
third party or be liable to any third party for any election or non-election or
any act or failure to act under or in regard to any term of this Agreement. Any
claim for indemnity or hold harmless hereunder on behalf of an Indemnified
Person must be made and administered by a party to this Agreement. Any claim on
behalf of an Indemnified Person may only be brought against the defaulting
party or parties.
Section 17.12 Attorneys' Fees. The prevailing party in any legal
proceeding brought under or to enforce this Agreement shall be additionally
entitled to recover court costs and reasonable attorneys' fees from the
nonprevailing party.
Section 17.13 Severability. If any term, provision or condition of
this Agreement, or any application thereof, is held invalid, illegal or
unenforceable in any respect under any Law, this Agreement shall be reformed to
the extent necessary to conform, in each case consistent with the intention of
the parties, to such Law, and to the extent such term, provision or condition
cannot be so reformed, then such
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term, provision or condition (or such invalid, illegal or unenforceable
application thereof) shall be deemed deleted from (or prohibited under) this
Agreement, as the case may be, and the validity, legality and enforceability of
the remaining terms, provisions and conditions contained herein (and any other
application such term, provision or condition) shall not in any way be affected
or impaired thereby. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 17.14 Currency. All monetary amounts stated in this Agreement
or otherwise related to the transaction shall be computed in United States
currency. If any monetary amounts are received or paid in another currency,
then for purposes of this transaction, they shall be converted into the
equivalent amounts of United States currency, based upon the applicable
Citibank exchange quoted at the close of business on the day such amounts were
received or paid, or if no such rate is quoted on such day, at the Citibank
exchange rate quoted at the opening of business on the next Business Day.
Section 17.15 Time of Essence. Time is of the essence in this
Agreement. If the date specified in this Agreement for giving any notice or
taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a date which is
not a Business Day), then the date for giving such notice or taking such action
(and the expiration date of such period during which notice is required to be
given or action taken) shall be the next day which is a Business Day.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
SELLER:
Tesoro Petroleum Corporation
By: /s/ ROSS WELGEHAUSEN
-------------------------------------
Name: Ross Welgehausen
Title: Vice President-Finance
BUYER:
BG International Limited
By: /s/ EDWARD E. MILLER
-------------------------------------
Name: Edward E. Miller
Title: Attorney-in-Fact
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APPENDIX A
TO
STOCK PURCHASE AGREEMENT
DEFINITIONS
"Action" shall mean any action, suit, proceeding, condemnation or
audit by or before any court or other Governmental Authority or any arbitration
proceeding.
"Adjustment Period" shall be as defined in Section 2.4.
"Affiliate" shall mean, as to the Person specified, any Person
controlling, controlled by or under common control with such specified Person.
The concept of control, controlling or controlled as used in the aforesaid
context means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise. No Person shall
be deemed an Affiliate of any Person by reason of the exercise or existence of
rights, interests or remedies under this Agreement.
"Agreed Rate" shall mean an annual rate of interest equal to the
lesser of (i) nine percent (9%) and (ii) the maximum rate of interest allowed
by Law.
"Arbitration Procedures" shall mean the arbitration procedures set
forth in Section 17.10.
"Assets" shall mean all the assets and properties of the Company,
tangible and intangible, real, personal and mixed, excluding only (i) the
Excluded Assets and (ii) such assets and properties which are sold or otherwise
disposed of in the ordinary course of the Company's business, distributed or
conveyed to Seller or Seller's designee as permitted under this Agreement, or
as otherwise sold, transferred or disposed of in accordance with this
Agreement. Without limiting the generality of the foregoing, the Assets
include, without limitation, the Contract Interests and the Incidental Rights.
"Available Deductible Amount" shall be as defined in Section 6.1(c).
"Balance Sheet" shall be as defined in Section 4.1(g).
"Bereti Block Property" shall mean the Bereti Block, Department of
Tarija, Bolivia, Bereti Block Contract Area covered by the applicable Shared
Risk Contract.
"BG Entity" shall mean BG International Limited, a company
incorporated under the laws of England and Wales, or an entity which succeeds
to BG International Limited or substantially all of the assets of BG
International Limited.
<PAGE> 69
"Block XX West Property" shall mean Block XX West, Department of
Tarija, Bolivia, Block XX West Contract Area covered by the applicable Shared
Risk Contract
"Bolivia" shall mean the Republic of Bolivia.
"Business Day" shall mean any day which is not a Saturday, Sunday or
legal holiday recognized by the United States of America or England.
"Buyer Indemnified Persons" shall be as defined in Section 15.2.
"Buyer's Environmental Review" shall be as defined in Section 7.2.
"Casualty Price Reduction" shall mean the amount, if any, computed as
provided in Section 8.2, by which (a) the aggregate reduction in the value of
the Assets that is caused by the occurrence after the Effective Time, but
before the Closing Date, of one or more casualties which cause damage to or
destruction of all or a portion of the Assets exceeds (b) the sum of (i) all
deductible amounts required to be borne or paid by Seller or any Affiliate of
Seller under the terms of any applicable insurance policies or insurance
contracts providing insurance coverage to the Company for such casualty losses
(but excluding any portion of any individual insurance policy or insurance
contract deductible amount with respect to a claim to the extent such
individual deductible amount with respect to such claim exceeds US $250,000),
plus (ii) the sum of all insurance proceeds and other compensatory proceeds
owed to or received by Seller, the Company or any other Affiliate of Seller as
a result of such casualty losses; provided that, the Company shall bear all
costs, expenses and risks of managing, pursuing, handling and collecting claims
under any such policy or contract of insurance and, to the extent Seller
suffers any reduction in the Purchase Price on account of a Casualty Price
Reduction, Seller shall be subrogated, to the maximum extent permitted by Law,
to all rights, claims and causes of action of the Company against third Persons
arising out of or attributable to such Actions or claims, but in each case
subject and subordinate to all subrogation rights of insurers and indemnitors
under any such policy or contract of insurance.
"Claim Notice" shall be as defined in Section 15.3.
"Closing" shall be the consummation of the transaction contemplated by
Article 12.
"Closing Date" shall mean the later of (a) December 20, 1999, or (b)
such other date as may be mutually agreed to by Seller and Buyer.
"Closing Date Working Capital" shall mean, the positive or negative
amount obtained by subtracting (a) the sum of all accounts payable, accrued
current liabilities, other current liabilities and other long term liabilities
of the Company as of the end of business on the Closing Date (but excluding
certain Covered Liabilities as hereinafter provided), from (b) the sum of all
cash, accounts receivable, inventories, prepaid expenses, other current assets
and other long term assets of the Company as of the
Appendix A, Page 2
<PAGE> 70
end of business on the Closing Date; all as computed in accordance with GAAP,
consistent with the Company's past practice, and calculated in a manner
substantially consistent with the calculation of such items in the Balance
Sheet. The types of assets and liabilities included in each of the aforesaid
asset or liability categories (e.g., "other long term assets" and "other long
term liabilities") shall be consistent with the general types of assets and
liabilities included in the line item for such category in the Balance Sheet.
For example, "other long term assets" will include inventories of supplies and
materials, but will not include property, plant and equipment. In addition,
deferred tax assets and deferred tax liabilities shall be excluded from the
calculation of Closing Date Working Capital. Notwithstanding the foregoing, the
Closing Date Working Capital and the determination thereof shall not include or
take into account any Covered Liabilities attributable to (i) any Title Defect
or any other title loss or defect with respect to the Assets, (ii) any Plugging
and Abandonment Obligation, Environmental Condition, Environmental Claim,
Environmental Liabilities, Environmental Defects or Environmental Matters,
(iii) any loss, damage or destruction of or to the Assets by fire or other
casualty, or (iv) any pending or threatened Actions.
"Closing Payment" shall be as defined in Section 3.3.
"Closing Statement" shall be as defined in Section 3.3.
"Company" shall be as defined in the recitals to this Agreement and
Section 2.2.
"Company Liabilities" shall mean (i) all Covered Liabilities of the
Company, (ii) the Plugging and Abandonment Obligations, (iii) all Covered
Liabilities arising out of or attributable to the ownership, use, construction,
maintenance or operation of any of the Assets, and (iv) all Environmental
Liabilities and any and all other Covered Liabilities arising out of or
attributable to any Environmental Matter; provided that, the Company
Liabilities shall not include any Covered Liability resulting from any breach
or nonfulfillment of any representation, warranty, covenant or agreement on the
part of Seller hereunder for which Seller is obligated to indemnify the Buyer
pursuant to Section 15.2.
"Company Records" shall mean any and all of the Company's books,
records, contracts, agreements and files, held in Bolivia or elsewhere,
existing on the Closing Date.
"Company Share" shall mean any share of the capital stock or equity of
the Company.
"Confidentiality Agreement" shall be as defined in Section 5.2.
"Consent Order" shall mean that Final Judgment filed on November 20,
1980, in Civil Action No. 80-2961 in the United States District Court for the
District of Columbia.
"Contract Defect" shall be as defined in Section 6.3.
"Contract Defect Amount" shall be as defined in Section 6.2.
Appendix A, Page 3
<PAGE> 71
"Contract Defect Notice" shall be as defined in Section 6.1(a).
"Contract Examination Period" shall be as defined in Section 6.1(a).
"Contract Interest" shall mean, respectively as to each Major
Contract, the undivided interest in, to and under such Major Contract which is
specified in the Property Schedule.
"Corrective Action" shall mean any remedial, removal, response,
construction, closure, disposal or other corrective action, including the
obtaining of any required permits.
"Covered Liabilities" shall mean any and all debts, losses,
liabilities, duties, claims (including those arising out of any demand,
assessment, settlement, judgment or compromise relating to any actual or
threatened Action), Taxes, costs and expenses (including any attorneys' fees
and any and all expenses whatsoever incurred in investigating, preparing or
defending any Action), matured or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, including any of the
foregoing arising under, out of or in connection with any Action, any order or
consent decree of any Governmental Authority, any award of any arbitrator, or
any Law, contract, commitment or undertaking.
"Defect Interest" shall mean a Pre-Closing Defect Interest or a
Post-Closing Defect Interest.
"Deferred Adjustment Claim" shall be as defined in Section 11.3.
"Deferred Matters Date" shall be as defined in Section 11.3.
"Effective Date Working Capital" shall mean, the positive or negative
amount obtained by subtracting (a) the sum of all accounts payable, accrued
current liabilities, other current liabilities and other long term liabilities
of the Company as of the end of business on the Report Date (but excluding
certain Covered Liabilities as hereinafter provided), from (b) the sum of all
cash, accounts receivable, inventories, prepaid expenses, other current assets
and other long term assets of the Company as of the end of business on the
Report Date; all as computed in accordance with GAAP, consistent with the
Company's past practice, and calculated in a manner substantially consistent
with the calculation of such items in the Balance Sheet. The types of assets
and liabilities included in each of the aforesaid asset or liability categories
(e.g., "other long term assets" and "other long term liabilities") shall be
consistent with the general types of assets and liabilities included in the
line item for such category in the Balance Sheet. For example, "other long term
assets" will include inventories of supplies and materials, but will not
include property, plant and equipment. In addition, deferred tax assets and
deferred tax liabilities shall be excluded from the calculation of Effective
Date Working Capital. Notwithstanding the foregoing, the Effective Date Working
Capital and the determination thereof shall not include or take into account
any Covered Liabilities attributable to (i) any Title Defect or any other title
loss or defect with respect to the Assets, (ii) any Plugging and Abandonment
Obligation, Environmental Condition, Environmental Claim,
Appendix A, Page 4
<PAGE> 72
Environmental Liabilities, Environmental Defects or Environmental Matters,
(iii) any loss, damage or destruction of or to the Assets by fire or other
casualty, or (iv) any pending or threatened Actions.
"Effective Time" shall mean 6:00 a.m., local time for each property
subject to a Shared Risk Contract, on July 1, 1999.
"Election Period" shall be as defined in Section 15.3.
"Environmental Claim" shall mean any Action or written notice by any
third Person (excluding Buyer and any Affiliate of Buyer or the Company)
alleging potential liability of the Company arising out of or resulting from an
Environmental Condition with respect to the Assets, excluding any liabilities
or obligations of the Company under or with respect to any of the matters
covered by the Manifesto.
"Environmental Condition" shall mean (a) a condition existing at the
Effective Time or the Closing Date with respect to the air, soil, subsurface,
surface waters, groundwaters, and/or sediments that causes (i) any claim,
action, cause of action, investigation or notice (written or oral) by any third
Person (excluding Buyer and any Affiliate of Buyer or the Company) alleging
actual or potential liability for investigatory, property damages, or personal
injuries, attorney's fees or penalties relating to the exposure to, or release
into the environment of, any Hazardous Material to be brought against the
Company, (ii) an Asset or the Company not to be in compliance with any
Environmental Law (other than any Future Law), or (iii) an Asset to be required
to be remediated (or other corrective action taken with respect to such Asset)
under any Environmental Law (other than any Future Law) or (b) the
non-compliance by the Company at the Effective Time or the Closing Date with
any permit, record keeping, notification, disclosure or reporting requirements
under any Environmental Law.
"Environmental Consultant" shall mean an environmental consulting firm
approved by Seller, which approval will not be withheld unreasonably, which is
retained by Buyer in connection with Buyer's Environmental Review.
"Environmental Defect" shall mean an Environmental Condition with
respect to the Assets; provided, however, that if the reasonably anticipated
Environmental Value Reduction with respect to such Environmental Condition is
less than US $10,000, such Environmental Condition shall not constitute an
Environmental Defect. The foregoing determinations shall not take into account
any asserted Environmental Value Reduction with respect to an Environmental
Condition which, in accordance with the terms of this Agreement, is
subsequently cured by Seller or determined or agreed not to constitute an
Environmental Defect. An Environmental Condition shall not constitute an
Environmental Defect to the extent the same has been cured or Remediated by the
Company in the ordinary course of its business prior to Closing or by Seller
(or by the Company at the cost and expense of Seller) prior to Closing. Any
conditions that are inherent in normal, prudent oil and gas exploration,
development, production and gathering operations, in compliance with Laws
applicable to the Assets, shall not constitute Environmental Defects.
Environmental Defects shall in no event include any of the following
conditions:
Appendix A, Page 5
<PAGE> 73
(a) asbestos, asbestos containing materials or NORM;
(b) Basic Sediment and Water (BSW) and similar materials contained
inside storage tanks and tank bottoms;
(c) Materials contained within firewalls surrounding tanks and
equipment, provided that such materials have not contaminated the
groundwater;
(d) Materials in or from pits which have been closed in accordance
with all Laws applicable to the Assets and in effect at the time of
closure;
(e) Existing tanks, pits, disposal wells, and materials contained
therein which were in compliance with regulatory and permit requirements
at the Effective Time and at the Closing Date;
(f) Plugging and abandonment requirements for any wells which were in
compliance with regulatory and permit requirements at the Effective Time
and at the Closing Date;
(g) Remediation and surface restoration requirements pertaining to any
wells drilled during the 1998 or 1999 calendar years; or
(h) Any condition identified in or required to be remediated or
corrected pursuant to the Manifesto.
"Environmental Defect Amount" shall be as defined in Section 7.3.
"Environmental Defect Deductible" shall be as defined in Section 7.3.
"Environmental Examination Period" shall be as defined in Section 7.2.
"Environmental Laws" shall mean all Laws of Bolivia relating to (a)
the control of any potential pollutant, or protection of the air, water or
land, (b) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation, and (c) exposure to hazardous, toxic or
other substances alleged to be harmful, including any permits, record keeping,
notification, disclosure or reporting with respect to such matters.
"Environmental Liabilities" shall mean any and all costs (including
costs of Remediation), damages, settlements, expenses, penalties, fines, taxes,
prejudgment and post-judgment interest, court costs and attorneys' fees
incurred or imposed (i) pursuant to any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Authority
of Bolivia to the extent arising out
Appendix A, Page 6
<PAGE> 74
of or under Environmental Laws (excluding any claim or cause of action of Buyer
or any Affiliate of Buyer or the Company) or (ii) pursuant to any claim or
cause of action by a Governmental Authority of Bolivia or other third Person
(other than Buyer and any Affiliate of Buyer or the Company) for personal
injury, property damage, damage to natural resources, remediation or response
costs to the extent arising out of or attributable to any violation of, or any
remedial obligation under, any Environmental Law or any Environmental
Condition.
"Environmental Matters" shall mean (i) any order, notice of
responsibility, directive (including requirements embodied in Environmental
Laws), injunction, judgment or similar act (including settlements) by any
Governmental Authority arising out of or under any Environmental Laws or (ii)
any claim or cause of action by a Governmental Authority or other Person for
personal injury, property damage, damage to natural resources, remediation or
response costs arising out of or attributable to any Hazardous Materials or any
violation of, or any remedial obligation under, any Environmental Law.
"Environmental Value Reduction" shall mean, with respect to an
Environmental Condition, the present value as of the Closing Date (using an
annual discount rate of 10%) of the cost of the most cost effective Remediation
of such Environmental Condition, taking into account any prior Remediation of
such Environmental Condition.
"Employee Plan" shall mean each existing written understanding,
program or arrangement related to deferred compensation or incentive
compensation, stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; severance or termination pay, medical,
surgical, hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(1) of ERISA); profit-sharing, stock
bonus or other "pension" plan, fund or program (within the meaning of Section
3(2) of ERISA); employment, termination or severance agreement; and any other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed
to by the Company or by any ERISA Affiliate, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
director, employee or former employee of the Company or their spouses,
dependents or beneficiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
Appendix A, Page 7
<PAGE> 75
"Excluded Assets" shall mean the following:
(a) the right to retain (i) originals of all Company Tax returns, Tax
filings and other Company Records relating to Taxes of the United States
of America or of any Governmental Authority subject to the jurisdiction of
the United States of America and (ii) copies (but not the originals) of
all other Company Records; and
(b) subject to the rights granted to the Company under Section 9.9,
(i) the names "Tesoro" and "Tesoro Bolivia Petroleum Company" and (ii) any
logo, service mark, copyright, trade name or trademark of or associated
with Seller or any Affiliate of Seller or any business of Seller or of any
Affiliate of Seller.
"Expatriate Employee" shall be as defined in Section 10.2(b).
"Farmout Agreement" shall mean the Farmout Agreement dated June 19,
1997, between the Company and TOTAL Exploration Production Bolivie S.A.,
covering a portion of the Block XX West Property, as such Farmout Agreement has
been amended and supplemented.
"FCPA" shall mean the Foreign Corrupt Practices Act, 15 U.S.C. Section
78dd-1, et seq., as in effect on the date of this Agreement and as may be
amended prior to the Closing.
"Final Settlement Date" shall be as defined in Section 3.4.
"Final Settlement Statement" shall be as defined in Section 3.4.
"Floor Amount" shall mean shall be equal to US $1,000,000 less the
portion (or all as the case may be) of the Environmental Defect Deductible
which has been applied (and not subsequently restored) to offset uncured
Environmental Defects asserted during the Environmental Examination Period
pursuant to Article 7.
"Future Laws" shall mean (i) any statutes, laws or ordinances enacted
or decreed after the Effective Time to the extent the liabilities or
requirements sought to be imposed under such subsequent statutes, laws or
ordinances could not have been imposed under statutes, laws or ordinances
existing as of the Effective Time and (ii) any regulations, rules, rulings or
orders promulgated after the Effective Time to the extent such regulations,
rules, rulings or orders implement new requirements for matters not addressed
or otherwise regulated in regulations, rules, rulings or orders existing as of
the Effective Time or implement more stringent requirements for matters
addressed or otherwise regulated in regulations, rules, rulings or orders
existing as of the Effective Time.
Appendix A, Page 8
<PAGE> 76
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
"Governmental Authority" shall mean (i) the United States of America,
(ii) the Republic of Bolivia, (iii) any state, province, county, municipality
or other governmental subdivision within the United States of America or the
Republic of Bolivia, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America, of the Republic of Bolivia or of any state, province, county,
municipality or other governmental subdivision within the United States of
America or the Republic of Bolivia.
"Hazardous Materials" shall mean any explosive, radioactive material,
petroleum (including crude oil and any fraction thereof) or petroleum
by-product, asbestos or asbestos-containing material, urea formaldehyde,
hydrocarbon contaminant, underground tank, pollutant, contaminant, hazardous,
corrosive or toxic substance, special waste or waste of any kind, including
compounds known as chlorobiophenyls and any other chemical, material or
substance that is designated, classified or regulated as hazardous or toxic or
as a pollutant or contaminant under or pursuant to any Environmental Law.
"ICC" shall be as defined in Section 17.10.
"Incidental Rights" shall mean all right, title and interest of the
Company in and to or derived from the following: (a) all rights with respect to
the use and occupancy of the surface of and the subsurface depths under the
Lands; (b) all rights with respect to any pooled, communitized or unitized
acreage by virtue of any Contract Interest being a part thereof; (c) all
agreements and contracts, easements, rights-of-way, servitudes and other
estates related or attributable to the Lands or the Contract Interests; and (d)
all real and personal property located upon the Lands and used in connection
with the exploration, development or operation of the Contract Interests; and
(e) the Company Records.
"Indemnified Claim" shall be as defined in Section 15.3.
"Indemnifying Party" shall be as defined in Section 15.3.
"Indemnified Person" shall be as defined in Section 15.3.
"Interim Balance Sheet" shall be as defined in Section 4.1(g).
"knowledge" shall be as defined in Section 1.3.
"Lands" shall mean all right, title, and interest of the Company in
and to the lands covered by or subject to the Contract Interests.
Appendix A, Page 9
<PAGE> 77
"Law" shall mean any applicable statute, law (including civil and
common law), ordinance, regulation, rule, ruling, order, writ, injunction,
decree or other official act of or by any Governmental Authority.
"Major Contracts" shall mean (a) the Shared Risk Contracts, (b) the
Operating Agreement dated effective as of December 18, 1997, between the
Company and TOTAL Exploration Production Bolivie S.A., covering a portion of
the Block XX West Property, as amended by the Block XX West Agreement dated May
1999, and (c) the two (2) Back-to-Back Gas Sales Contracts between the Company
and YPFB executed in 1999.
"Material Adverse Effect" shall mean a material adverse effect on the
value of the Company (after taking into account any insurance, indemnity and
other recoveries payable in respect thereof), excluding (i) any effect
resulting from any change in economic, industry or market conditions (whether
general or regional in nature or limited to any area where any Assets are
located) or from any change in Law or regulatory policy and (ii) any matter for
which Buyer is entitled to a Casualty Price Reduction.
"Manifesto" shall mean the Manifiesto Ambiental por Planta de Gas "La
Vertiente," Pozos Escondido, Taiguati, La Vertiente, Tarija, Prov. Gran Chaco
dated July 1998, as approved by Declaracion Jurada de Ministerio de Desarrollo
Sostenible y Medio Ambiente, Secretaria Nacional de Recursos Naturales y Medio
Ambiente, Subsecretaria de Medio Ambiente, Direccion de Control de Calidad
Ambiental.
"Material Contracts" shall be as defined in Section 4.1(n).
"National Employee" shall be as defined in Section 10.2(a).
"Non-Permissible Preference Right" shall mean any right or agreement
which enables any Person, other than Buyer, to purchase or acquire any Asset or
any interest therein or portion thereof as a result of or in connection with
the sale of the Company Shares to Buyer as contemplated by this Agreement.
"NORM" shall be as defined in Section 7.1.
"Notice of Disagreement" shall be as defined in Section 3.4.
"OECD Convention" shall mean the Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions adopted by the
members of the Organization for Economic Co-operation and Development (OECD) on
November 21, 1997, and signed on December 17, 1997.
Appendix A, Page 10
<PAGE> 78
"Permitted Encumbrances" shall mean any of the following matters:
(a) the respective terms and provisions of any Major Contract, the
Farmout Agreement, any contract for the sale of condensate or similar
liquid hydrocarbons to YPBF, and any Material Contract listed in Schedule
4.1(n), as well as any matters to which the Major Contracts are expressly
made subject under the terms thereof;
(b) all agreements, instruments, documents, liens, encumbrances, and
other matters which are described in any Schedule or Exhibit to this
Agreement;
(c) any (i) undetermined or inchoate liens or charges constituting or
securing the payment of expenses which were incurred incidental to
maintenance, development, production or operation of the Contract
Interests or for the purpose of developing, producing or processing oil,
gas or other hydrocarbons therefrom or therein and (ii) materialman's,
mechanics', repairman's, employees', contractors', operators' or other
similar liens, security interests or charges for liquidated amounts
arising in the ordinary course of business incidental to construction,
maintenance, development, production or operation of the Contract
Interests or the production or processing of oil, gas or other
hydrocarbons therefrom, that are not delinquent and that will be paid in
the ordinary course of business or, if delinquent, that are being
contested in good faith;
(d) any liens for Taxes not yet delinquent or, if delinquent, that are
being contested in good faith in the ordinary course of business;
(e) any liens or security interests created by Law or reserved in a
Shared Risk Contract for royalty or rental or for compliance with the
terms of a Shared Risk Contract;
(f) all Transfer Requirements;
(g) any easements, rights-of-way, servitudes, permits, licenses,
surface leases, operating rights, concurrent use rights and other rights
with respect to surface operations to the extent such matters do not
interfere in any material respect with the Company's operation of the
portion of the Contract Interests burdened thereby;
(h) all agreements and obligations relating to (1) imbalances with
respect to the production, transportation or processing of gas, (2) calls
or purchase options on oil, gas or other minerals or products thereof in
favor of
Appendix A, Page 11
<PAGE> 79
YPFB or a Governmental Authority of Bolivia, or (3) processing rights or
commitments;
(i) all royalties, overriding royalties, net profits interests,
carried interests, reversionary interests and other burdens to the extent
that the net cumulative effect of such burdens, as to a particular Shared
Risk Contract, does not operate to reduce the Contract Interest of the
Company in such Shared Risk Contract as specified in the Property
Schedule;
(j) any encumbrance, title defect or other matter (whether or not
constituting a Contract Defect) waived or deemed waived by Buyer pursuant
to Article 6; and
(k) rights reserved to or vested in any Governmental Authority to
control or regulate any of the wells or units included in the Assets and
all applicable laws, rules, regulations and orders of such authorities so
long as the same have not been applied to decrease the Company's Contract
Interest below the Contract Interest shown in the Property Schedule.
"Person" shall mean any Governmental Authority or any individual,
firm, partnership, corporation, joint venture, trust, unincorporated
organization or other entity or organization.
"Plugging and Abandonment Obligations" shall mean any and all Covered
Liabilities arising out of or attributable to the plugging, abandonment or
removal (including any remediation in connection therewith), or any obligation
to plug, abandon or remove (including any remediation in connection therewith),
any well, platform, pipeline, facilities, equipment, fixtures or other property
described or referenced in the Property Schedule or located on the Assets which
as of the Effective Time has not been plugged, abandoned and removed in
accordance with the terms of the Contract Interests and all Laws applicable
thereto.
"Post-Closing Defect Interest" shall be as defined in Section
6.1(b)(3).
"Pre-Closing Defect Interest" shall be as defined in Section
6.1(b)(1).
"Preference Right" shall mean any right or agreement that enables or
may enable any Person to purchase or acquire any Asset or any interest therein
or portion thereof as a result of or in connection with the sale, assignment,
encumbrance or other transfer (or the proposed sale, assignment, encumbrance or
other transfer) of any Asset or any interest therein or portion thereof, other
than any Non-Permissible Preference Right.
"Property Schedule" means SCHEDULE A attached to and made a part of
this Agreement.
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"Purchase Price" shall be as defined in Section 3.1.
"Remediation" shall mean, with respect to an Environmental Condition,
the implementation and completion of any Corrective Actions (including the
obtaining of any required permits) required under Environmental Laws to correct
or remove such Environmental Condition; provided, however, that such
Remediation shall not extend to or cover any Corrective Actions to the extent
required under Future Laws or to the extent required to correct or remove any
condition or any aggravation of or effect on such Environmental Condition
which, in any material respect, is caused or contributed to by any act or
omission of any Person after the Closing Date, other than Seller or Seller's
employees, consultants, contractors or agents.
"Report Date" shall be as defined in Section 4.1(g).
"Seller Environmental Obligations" shall mean, subject to the
limitations contained herein, all Environmental Liabilities to the extent
arising out of any Environmental Claim, but only to the extent such
Environmental Claim arises or results from an Environmental Condition existing
at the Closing Date and only if:
(a) neither such Environmental Claim nor the Environmental Condition
from which such Environmental Claim arises or results is set forth in
Schedule 4.1(p) to this Agreement;
(b) the Environmental Condition on or from which such Environmental
Claim arises or results was not asserted by Buyer as an Environmental
Defect under to Article 7;
(c) Buyer, within 1,095 calendar days after the Closing Date, provides
Seller written notice of such Environmental Claim in the manner provided
in Section 15.3 (however, notice of a lawsuit or administrative proceeding
filed against Buyer prior to the end of such 1,095-day period shall always
be timely if Buyer gives Seller notice thereof within ten Business Days
after being served therewith); and
(d) the reasonably anticipated Environmental Liabilities with respect
to such Environmental Claim are US $10,000 or more;
provided that;
(i) the Environmental Liabilities with respect to such Environmental
Claim shall not include any Environmental Liabilities to the extent that
such Environmental Liabilities arise out of or result from any act or
omission of any Person (other than Seller or Seller's employees,
consultants, contractors or
Appendix A, Page 13
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agents) after the Closing Date which causes, contributes to, aggravates or
adversely affects, in any material respect, any Environmental Condition or
such Environmental Claim;
(ii) the Seller Environmental Obligations (1) shall not include any
Environmental Liabilities until the aggregate Environmental Liabilities
incurred by the Company with respect to all Environmental Claims which
would otherwise qualify as Seller Environmental Obligations, but for this
clause (ii), have exceeded the Floor Amount and (2) shall then include
only 50% of that portion of such aggregate Environmental Liabilities which
exceed the Floor Amount and are less than US $10,000,000; it being agreed
that the portion of such aggregate Environmental Liabilities which are
less than the Floor Amount, the other 50% of aggregate Environmental
Liabilities which exceed the Floor Amount and are less than US
$10,000,000, and the portion of such aggregate Environmental Liabilities
which are more than US $10,000,000 shall all be Company Liabilities;
(iii) such Environmental Liabilities shall not include any
Environmental Liabilities to the extent arising out of or resulting from
any Future Law;
(iv) unless Seller otherwise agrees, any Corrective Action required
with respect to an Environmental Condition giving rise to a Seller
Environmental Obligation must be implemented by the most cost effective
means reasonably available;
(v) any conditions that are inherent in normal, prudent oil and gas
exploration, development, production and gathering operations, in
compliance with Laws applicable to the Assets, shall not constitute
Environmental Conditions for purposes of this definition of Seller
Environmental Obligations or give rise to any Seller Environmental
Obligations; and
(vi) any of the conditions that are listed in any of paragraphs (a)
through (h) of the definition of Environmental Defect shall not constitute
Environmental Conditions for purposes of this definition of Seller
Environmental Obligations or give rise to any Seller Environmental
Obligations.
"Seller Indemnified Persons" shall be as defined in Section 15.1.
"Seller Source" shall be as defined in Section 14.1.
"Seller Uninsured Liabilities" shall mean, subject to the limitations
contained herein, the amount, if any, by which:
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(a) all costs, damages, settlements, expenses, penalties, fines,
prejudgment and post-judgment interest, court costs and attorneys' fees
incurred by or imposed against the Company to the extent arising out of
any Action or written notice by any third Person (excluding Buyer and any
Affiliate of Buyer or the Company) alleging potential liability of the
Company arising out of or resulting from any personal injury to or death
of any natural person occurring prior to the Closing arising out of any
business or operations of the Company or the Company's ownership, use,
construction, maintenance or operation of any properties, exceed
(b) the sum of:
(i) all deductible amounts required to be borne or paid by Seller
or any Affiliate of Seller under the terms of any applicable insurance
policies or insurance contracts providing insurance coverage to the
Company for such personal injury or death (but excluding (x) any
portion of any individual insurance policy or insurance contract
deductible amount with respect to a claim to the extent such
individual deductible amount with respect to such claim exceeds US
$250,000 and (y) all deductibles with respect to Actions or claims
pending or asserted prior to the Effective Time), plus
(ii) all costs, damages, settlements, expenses, penalties, fines,
prejudgment and post-judgment interest, court costs and attorneys'
fees referenced in clause (a) above for which the Company is insured
or indemnified against under a policy or contract of insurance and
other compensatory proceeds owed to or received by the Company as a
result of such Actions or claims;
provided, however, that;
(1) the Company shall bear all costs, expenses and risks of managing,
pursuing, handling and collecting claims under any such policy or contract
of insurance;
(2) Seller Uninsured Liabilities shall not include any costs, damages,
settlements, expenses, penalties, fines, prejudgment and post-judgment
interest, court costs and attorneys' fees incurred by or imposed against
the Company to the extent arising out of any Action or written notice by
any third Person alleging potential liability of the Company arising out
of or resulting from any Environmental Condition; and
(3) to the extent Seller pays any Seller Uninsured Liabilities, Seller
shall be subrogated, to the maximum extent permitted by Law, to all
rights, claims and causes of action of the Company against third Persons
arising out of or attributable to such Actions or claims, but in each case
subject and subordinate to all subrogation rights of insurers and
indemnitors under any such policy or contract of insurance.
Appendix A, Page 15
<PAGE> 83
"Settlement Price" shall be as defined in Section 3.2.
"Settlement Statement" shall be as defined in Section 3.4.
"Shared Risk Contracts" shall mean the following Shared Risk
Contracts:
(i) Shared Risk Contract No. 06/97 with an Effective Date of July 29,
1996, by and between YPFB and Tesoro Bolivia Petroleum Company (as "Title
Holder"), covering Block XVIII, Department of Tarija, Bolivia (the "Block
XVIII Property");
(ii) Shared Risk Contract No. 07/97 with an Effective Date of July 29,
1996, by and between YPFB and Tesoro Bolivia Petroleum Company (as "Title
Holder"), covering Block XX, Los Suris Field, Department of Tarija,
Bolivia (the "Los Suris Property");
(iii) Shared Risk Contract No. 09/97 with an Effective Date of July
29, 1996, by and between YPFB and Tesoro Bolivia Petroleum Company (as
"Title Holder"), covering Block XX Este, Department of Tarija, Bolivia
(the "Block XX East Property");
(iv) Shared Risk Contract No. 08/97 with an Effective Date of July 29,
1996, by and between YPFB and Tesoro Bolivia Petroleum Company (as "Title
Holder"), covering Block XX West, Department of Tarija, Bolivia (the
"Block XX West Property"); and
(v) Shared Risk Contract No. 2.367/98 dated December 16, 1998 by and
between TOTAL Exploration Production Bolivie S.A. and Tesoro Bolivia
Petroleum Company (collectively, as "Title Holder(s)") and YPFB, covering
the Bereti Block, Department of Tarija, Bolivia (the "Bereti Block
Property").
"Subsidiary" shall mean any corporation at least a majority of the
voting shares (i.e. shares entitled to vote for the election of directors, but
excluding shares entitled so to vote only upon the happening of some
contingency unless such contingency will have occurred) of which are owned
directly or indirectly by the Company.
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, parking, employment, excise, severance, stamp,
occupation, premium, windfall profits, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax, or
other tax of any kind whatsoever, together with all interest, fines, penalties
and additions thereto.
Appendix A, Page 16
<PAGE> 84
"Tax Return" shall be as defined in Section 4.1(q).
"Title Survival Period" shall be as defined in Section 6.1(a).
"Transfer Requirement" shall mean any consent, approval, authorization
or permit of, or filing with or notification to, any Person which is required
to be obtained, made or complied with for or in connection with any sale,
assignment, transfer or encumbrance of any Asset or any interest therein.
"Working Capital Adjustment" shall mean, the positive or negative
amount obtained by subtracting (a) the Effective Date Working Capital from (b)
the Closing Date Working Capital; all as computed in accordance with GAAP,
consistent with the Company's past practice, and calculated in a manner
substantially consistent with the calculation of such items in the Balance
Sheet.
"YPFB" shall mean YPF Sociedad Anonima.
"YPFB" shall mean Yacimientos Petroliferos Fiscales Bolivianos.
Appendix A, Page 17
