<PAGE>
As filed with the Securities and Exchange Commission on March 31, 1999.
Registration No. 333-71595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
SANTA FE ENERGY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 36-2722169
<S> <C>
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
1616 South Voss Road
Houston, Texas 77057
(713) 507-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
David L. Hicks
Vice President--Law and General Counsel
Santa Fe Energy Resources, Inc.
1616 South Voss Road
Houston, Texas 77057
(713) 507-5000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------
copies to:
<TABLE>
<CAPTION>
<S> <C>
G. Michael O'Leary Jeffrey E. Eldredge
Andrews & Kurth L.L.P. Vinson & Elkins L.L.P.
600 Travis, Suite 4200 3700 Trammell Crow Center
Houston, Texas 77002 2001 Ross Avenue
(713) 220-4200 Dallas, Texas 75201
(214) 220-7700
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective and the
satisfaction or waiver of all other conditions to the merger, pursuant to the
Agreement and Plan of Merger, dated as of January 13, 1999, described in the
enclosed Joint Proxy Statement/Prospectus.
---------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 31, 1999
[LOGO OF SANTA FE ENERGY RESOURCES APPEARS HERE]
[Logo of Snyder appears here]
PROPOSED MERGER--YOUR VOTE IS IMPORTANT
The boards of directors of Santa Fe Energy Resources, Inc. and Snyder Oil
Corporation have agreed to merge the two companies. The merger is intended to
create a larger, more diversified, financially stronger and more cost efficient
enterprise.
Snyder stockholders will receive 2.05 shares of Santa Fe common stock in
exchange for each share of Snyder common stock. Snyder stockholders will own
approximately 40% of the common stock of the combined company.
Santa Fe stockholders will continue to own their existing shares of Santa Fe
common stock after the merger, which will represent approximately 60% of the
common stock of the combined company.
The Santa Fe common stock trades on the New York Stock Exchange under the
symbol "SFR" and the Snyder common stock trades on the NYSE under the symbol
"SNY." The trading symbol of the Santa Fe common stock will be changed
concurrently with the merger to "SFS." The common stock will continue to be
listed on the NYSE.
We can only complete the merger if the Snyder stockholders and the Santa Fe
stockholders approve the merger.
Additionally, we are asking the Santa Fe stockholders to approve
. the increase to 350,000,000 of the number of authorized shares of capital
stock;
. the change of the Company's name to "Santa Fe Snyder Corporation" upon
completion of the merger; and
. the election of five individuals designated by Snyder as additional
members of the Santa Fe Snyder board of directors.
We have scheduled special meetings for the Santa Fe stockholders and the
Snyder stockholders to vote on these matters.
Your Vote is Very Important. Whether or not you plan to attend your special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us.
The date, time and place of the special meetings for Snyder stockholders and
for Santa Fe stockholders are as follows:
Wednesday, May 5, 1999
10:00 a.m.
The St. Regis Hotel
(formerly The Luxury Collection)
1919 Briar Oaks Lane
Houston, Texas 77027
See "Risk Factors" beginning on page 10 for a
discussion of certain matters you should consider
before voting on the merger.
Neither the Securities and Exchange Commission nor
any state securities regulators have approved the
merger, the Santa Fe common stock to be issued in
the merger or the fairness or the merits of the
merger or have determined whether the information
contained in this document is accurate or adequate.
Any representation to the contrary is a criminal
offense.
Joint Proxy Statement/Prospectus dated , 1999, and first mailed to Santa
Fe and Snyder stockholders on , 1999.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
SNYDER OIL CORPORATION
777 Main Street, Suite 1400
Fort Worth, Texas 76102
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1999
To the Stockholders of Snyder Oil Corporation:
A special meeting of the holders of common stock of Snyder Oil Corporation,
a Delaware corporation ("Snyder"), will be held at 10:00 a.m. local time, on
Wednesday, May 5, 1999 at the St. Regis Hotel (formerly The Luxury Collection),
1919 Briar Oaks Lane, Houston, Texas 77027. At the Snyder special meeting, the
holders of common stock of Snyder will:
1. Consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of January 13, 1999, between Snyder and Santa
Fe Energy Resources, Inc., a Delaware corporation ("Santa Fe"), relating
to the merger of Snyder with and into Santa Fe, with Santa Fe surviving
the merger. In the merger, each outstanding share of Snyder common stock
will be converted to 2.05 shares of common stock of Santa Fe, and a
corresponding number of preferred stock purchase rights under the Santa
Fe Preferred Stock Purchase Rights Plan. A description of the merger and
the merger agreement is contained in the accompanying Joint Proxy
Statement/Prospectus, which includes a copy of the merger agreement; and
2. Transact such other business as may properly come before the special
meeting or any adjournments or postponements thereof.
The board of directors has fixed the close of business on March 19, 1999 as
the record date for determining which stockholders are entitled to notice of,
and to vote at, the special meeting or any adjournments or postponements
thereof. Complete lists of these stockholders will be available for examination
at the offices of Snyder during normal business hours by any holder of Snyder
common stock, for any purpose relevant to the special meeting, for a period of
ten days prior to the special meeting.
The board of directors of Snyder unanimously recommends that you vote for
the approval and adoption of the merger agreement, as they intend to do with
respect to each of their personal Snyder shareholdings. The affirmative vote of
the holders of the majority of the outstanding shares of Snyder common stock is
required to approve and adopt the merger agreement and the merger.
If you do not send in your proxy or vote at the special meeting, it will
have the same effect as if you voted against the merger.
Holders of Snyder common stock, even if they expect to be present at the
special meeting, are requested to sign, vote and date the enclosed proxy and
return it promptly in the enclosed envelope. Any stockholder giving a proxy has
the power to revoke it any time prior to the special meeting. Stockholders who
are present at the special meeting may withdraw their proxies and vote in
person.
By Order of the Board of Directors,
, 1999
John H. Karnes
Corporate Secretary
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
1616 South Voss Road
Houston, Texas 77057
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1999
To the Stockholders of Santa Fe Energy Resources, Inc.:
A special meeting of the holders of common stock of Santa Fe Energy
Resources, Inc., a Delaware corporation ("Santa Fe"), will be held at 10:00
a.m. local time, on Wednesday, May 5, 1999 at the St. Regis Hotel (formerly The
Luxury Collection), 1919 Briar Oaks Lane, Houston, Texas 77027. At the Santa Fe
special meeting, the holders of common stock of Santa Fe will:
1. Consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of January 13, 1999, between Snyder Oil
Corporation, a Delaware corporation ("Snyder"), and Santa Fe, relating
to the merger of Snyder into Santa Fe, with Santa Fe surviving the
merger, and, in connection therewith, to approve the issuance of 2.05
shares of common stock of Santa Fe and a corresponding number of
preferred stock purchase rights under the Santa Fe Preferred Stock
Purchase Rights Plan for each share of common stock of Snyder;
2. Consider and vote upon a proposal, contingent upon the passing of the
proposal described in paragraph 1., to amend Santa Fe's certificate of
incorporation to change Santa Fe's name to "Santa Fe Snyder
Corporation;"
3. Consider and vote upon a proposal, contingent upon the passing of the
proposal described in paragraph 1., to increase the number of authorized
shares of capital stock to 350,000,000;
4. Consider and vote upon a proposal to elect, subject to the consummation
of the merger, the following nominees to serve on the board of directors
of Santa Fe (resulting in an increase of the number of directors of
Santa Fe to eleven):
. James E. McCormick to serve as Class I director with a term expiring
at Santa Fe's 1999 Annual Meeting of Stockholders;
. Harold R. Logan, Jr. and Edward T. Story to serve as Class II
directors with a term expiring at Santa Fe's 2000 Annual Meeting of
Stockholders;
. John A. Hill and John C. Snyder to serve as Class III directors with
a term expiring at Santa Fe's 2001 Annual Meeting of Stockholders;
and
5. Transact such other business as may properly come before the special
meeting or any adjournments or postponements thereof.
The board of directors has fixed the close of business on March 19, 1999 as
the record date for determining which stockholders are entitled to notice of,
and to vote at, the special meeting or any adjournments or postponements
thereof. Complete lists of these stockholders will be available for examination
at the offices of Santa Fe during normal business hours by any holder of Santa
Fe's common stock, for any purpose relevant to the special meeting, for a
period of ten days prior to the special meeting.
The board of directors of Santa Fe unanimously recommends that you vote for
the approval and adoption of the merger agreement, including the related
issuance of shares of Santa Fe common stock, for the increase of the number of
shares of capital stock to 350,000,000, for the name change and for each of the
nominees for director identified above. The affirmative vote of the holders of
the majority of the outstanding shares of Santa Fe common stock is required to
approve and adopt the merger agreement and the merger, the change in Santa Fe's
name and the increase in the authorized capital stock, and the affirmative vote
of a plurality of the votes cast where a quorum is present is required to
approve the election of a director. Each member of Santa Fe's board of
directors intends to vote his or her shares of Santa Fe common stock "for" all
of these proposals.
If you do not send in your proxy or vote at the special meeting, it will
have the same effect as if you voted against the merger.
Holders of Santa Fe common stock, even if they expect to be present at the
special meeting, are requested to sign, vote and date the enclosed proxy and
return it promptly in the enclosed envelope. Any stockholder giving a proxy has
the power to revoke it any time prior to the special meeting. Stockholders who
are present at the special meeting may withdraw their proxies and vote in
person.
By Order of the Board of Directors,
, 1999
Mark A. Older
Corporate Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Questions and Answers about the Merger..................................... i
Summary.................................................................... 1
Selected Historical Consolidated Financial and Operating Data............. 5
Santa Fe................................................................. 5
Snyder................................................................... 6
Summary Unaudited Pro Forma Combined Financial Data....................... 7
Summary Oil and Gas Reserve Information................................... 8
Comparative Per Share Data................................................ 9
Risk Factors............................................................... 10
Risk Factors Relating to the Merger....................................... 10
We May Not Be Able to Successfully Integrate Santa Fe and Snyder and May
Not Realize Expected Cost Savings....................................... 10
The Value of Santa Fe Common Stock the Snyder Stockholders Will Receive
May Decrease Between Now and the Completion of the Merger............... 10
Santa Fe Snyder's Business Will Be Affected by Different Factors than
Santa Fe and Snyder Individually........................................ 10
Risk Factors Relating to the Combined Company............................. 10
A Further Decrease in Oil and Natural Gas Prices Will Adversely Affect
Our Financial Results................................................... 10
Santa Fe Synder May Incur Additional Writedowns of Properties' Carrying
Values.................................................................. 11
Snyder Stockholders May Be Exposed to International Risks After the
Merger.................................................................. 11
Our Costs to Comply with Environmental Laws are Significant.............. 12
Estimates of Proved Reserves May Change.................................. 12
Santa Fe Snyder Will Continue to Face Strong Competition................. 12
Santa Fe Snyder May Not Be Able to Replace Reserves...................... 12
Some Hazard Losses May Not Be Insured.................................... 12
Santa Fe Snyder May Not Pay Dividends.................................... 12
Forward Looking Statements................................................. 13
Business of Santa Fe Snyder Following the Merger........................... 14
The Merger................................................................. 16
General................................................................... 16
Consideration............................................................. 16
Amendments to Santa Fe's Certificate of Incorporation..................... 16
Election of New Directors and Appointment of Executive Management......... 16
Ownership of Santa Fe Snyder Following the Merger......................... 16
Background of the Merger.................................................. 16
Reasons for the Merger--Santa Fe.......................................... 21
Reasons for the Merger--Snyder............................................ 24
Opinions of Financial Advisors............................................ 25
Santa Fe's Financial Advisors............................................ 25
Chase Opinion............................................................ 26
DLJ Opinion.............................................................. 31
Snyder's Financial Advisor............................................... 40
Accounting Treatment...................................................... 51
Material U.S. Federal Income Tax Consequences............................. 51
Regulatory Matters; Certain Legal Matters................................. 53
No Appraisal Rights....................................................... 53
Federal Securities Laws Consequences; Resale Restrictions................. 53
Comparative per Share Market Price and Dividend Information................ 54
Interests of Certain Directors and Officers in the Merger.................. 55
</TABLE>
<TABLE>
<S> <C>
The Merger Agreement....................................................... 58
Structure; Effective Time................................................. 58
Conversion or Cancellation of Shares of Snyder Common Stock in the
Merger................................................................... 58
Santa Fe Snyder Board of Directors and Board Committees................... 58
Employee Stock Options.................................................... 58
Conversion of Shares...................................................... 59
Conduct of Business Prior to Merger....................................... 59
Covenants and Agreements.................................................. 60
Representations and Warranties of Snyder and Santa Fe..................... 62
Conditions to the Merger.................................................. 63
Termination of the Merger Agreement....................................... 64
Termination Expenses...................................................... 65
Amendments; No Waivers.................................................... 67
Snyder Special Meeting..................................................... 68
Time and Place; Purpose................................................... 68
Record Date; Voting Rights and Proxies.................................... 68
Solicitation of Proxies................................................... 68
Quorum.................................................................... 69
Required Vote, Failure to Vote and Broker Non-Votes....................... 69
Santa Fe Special Meeting................................................... 70
Time and Place; Purpose................................................... 70
Record Date; Voting Rights and Proxies.................................... 70
Solicitation of Proxies................................................... 71
Quorum.................................................................... 71
Required Vote, Failure to Vote and Broker Non-Votes....................... 71
Directors and Officers of Santa Fe Snyder Following the Merger............. 72
Comparison of Stockholder Rights........................................... 72
General................................................................... 72
Summary Comparison of Terms of Santa Fe Common Stock and Snyder Common
Stock.................................................................... 73
Authorized Capital Stock; Amendment of Charter.......................... 73
Board of Directors...................................................... 73
Adjournment of Stockholder Meetings..................................... 74
Notice of Stockholder Nominations....................................... 75
Notice of Stockholder Proposals......................................... 75
Special Meetings of Stockholders........................................ 75
Stockholder Consent in Lieu of Meeting.................................. 75
Amendment of Corporate Charter and Bylaws............................... 76
Removal of Officers..................................................... 76
Snyder Rights Plan........................................................ 76
Santa Fe Rights Plan...................................................... 77
Material Terms of Charter and Bylaws Concerning Santa Fe Capital Stock..... 79
Authorized Capital Stock.................................................. 79
Common Stock.............................................................. 79
Preferred Stock........................................................... 79
Transfer Agent and Registrar.............................................. 80
Stock Exchange Listing; Delisting and Deregistration of Snyder Common
Stock.................................................................... 80
Election of Directors...................................................... 80
Legal Matters.............................................................. 82
Experts.................................................................... 82
Future Stockholder Proposals............................................... 83
Where You Can Find More Information........................................ 83
Commonly Used Oil and Gas Terms............................................ G-1
Index To Financial Statements.............................................. F-1
Annex A--Agreement and Plan of Merger
Annex B--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
Annex C--Opinion of Chase Securities Inc.
Annex D--Opinion of Petrie Parkman & Co., Inc.
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: How do I vote?
A: After reading this document, please fill out and sign your proxy card. Then
mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares will be represented at your special meeting.
Q: What happens if I do not return a proxy card?
A: The failure to return your proxy card will have the same effect as voting
against the merger.
Q: May I vote in person?
A: Yes. You may attend your special meeting and vote your shares in person,
rather than signing and mailing your proxy card.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote at any time before your proxy is voted at the
special meeting by following the instructions on pages 68 and 70. You then
may either change your vote by sending in a new proxy or attending a special
meeting and voting in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
directions provided by your broker.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed we will send Snyder stockholders written
instructions for exchanging their stock certificates. Santa Fe stockholders
will keep their certificates.
Q: Am I entitled to appraisal rights?
A. No. Snyder and Santa Fe stockholders will not have any appraisal rights in
connection with the merger.
Q: Will Santa Fe stockholders receive any shares in the merger?
A: No. Santa Fe stockholders will continue to hold the Santa Fe common stock
they own at the time of the merger. Santa Fe stockholders do not need to
take any action with respect to their stock certificates.
Q: What happens to my future dividends?
A: Currently Snyder is paying quarterly dividends in the amount of $.065 per
share, while Santa Fe is not paying dividends. The dividend policy for Santa
Fe Snyder following the merger has not yet been established. The amount of
dividends, if any, paid by Santa Fe Snyder in the future will depend on
business conditions, its financial condition and earnings, and other
factors.
Q: Who can help answer my questions?
A: If you have any questions about the merger, please call Snyder Investor
Relations, at (817) 882-5937 or Santa Fe Investor Relations, at
(713) 507-5315.
<PAGE>
SUMMARY
This summary, together with the preceding questions and answers section,
highlights selected information from this document and may not contain all of
the information that is important to you. To understand the merger fully and
for a more detailed description of the legal terms of the merger, you should
read carefully this entire document and the documents referred to in "Where You
Can Find More Information" on page 83.
The merger agreement is included as Annex A to this document. It is the
legal document that governs the merger. We have included page references
parenthetically to direct you to a more complete description of the topics
presented in this summary.
For definitions of oil and gas terms used in this document, see "Commonly
Used Oil and Gas Terms" on page G-1.
The Companies
Snyder Oil Corporation
777 Main Street, Suite 1400
Fort Worth, Texas 76102
(817) 338-4043
Snyder is engaged in the production, development, acquisition and
exploration of domestic oil and gas properties, primarily in the Gulf of
Mexico, the Rocky Mountains and northern Louisiana. Snyder also has investments
in two international exploration and production companies, SOCO International
plc and Cairn Energy plc.
For the year ended December 31, 1998, Snyder had a net loss of $24.7
million, or $0.74 per share. Snyder generated EBITDAX, or earnings before
interest, taxes, depreciation, depletion, amortization, exploration charges and
non-cash impairments, of $79.8 million for the year ended December 31, 1998.
At December 31, 1998, Snyder had estimated proved net reserves of oil and
natural gas totaling 100.3 MMBOE, or million barrels of oil equivalent, of
which approximately 82% were natural gas. Average daily production by Snyder
during 1998 was 30.9 MBOE, or thousand barrels of oil equivalent, per day, of
which 83% was gas.
Natural gas prices realized by Snyder in 1998 averaged $2.00 per Mcf, or
thousand cubic feet of natural gas, including a $0.13 per Mcf hedging benefit,
compared with an average of $2.33 per Mcf, including a $0.05 per Mcf hedging
benefit, in 1997. Crude oil prices realized in 1998 averaged $11.02 per barrel,
including no per barrel hedging benefit, compared with $18.24 per barrel,
including a $0.41 per barrel hedging benefit, in 1997.
Santa Fe Energy Resources, Inc.
1616 South Voss Road, Suite 1000
Houston, Texas 77057
(713) 507-5000
Santa Fe is a worldwide oil and gas exploration and development company with
domestic operations in the Permian basin of West Texas and Southeast New
Mexico, the Gulf of Mexico and international activities in Indonesia,
Argentina, Gabon, China, Brazil, Cote d'Ivoire, Malaysia, Thailand and Ghana.
For the year ended December 31, 1998, Santa Fe had a net loss of $98.7
million, or $0.96 per share, including a pre-tax charge of $87.8 million for
property impairments, or $57.1 million on an after-tax basis. The impairment
charge relates primarily to properties located in the Gulf of Mexico and was
required principally due to lower commodity price expectations. Santa Fe
generated EBITDAX of $142.5 million for the year ended December 31, 1998.
At December 31, 1998, Santa Fe had estimated worldwide proved net reserves
of oil and natural gas totaling 214.9 MMBOE, consisting of approximately 168.6
million barrels of oil, which represented 78% of total reserves, and
approximately 278.1 Bcf, or billion cubic feet of natural gas, which
represented 22% of total reserves. Approximately 53% of Santa Fe's total
reserves were international and 47% were domestic. Average daily production by
Santa Fe during 1998 was approximately 70.3 MBOE per day, of which 58% was oil.
<PAGE>
Crude oil prices realized by Santa Fe in 1998 averaged $11.74 per barrel,
including a $0.16 per barrel hedging benefit, compared with $16.56 per barrel,
including a $0.10 per barrel hedging benefit, in 1997. Natural gas prices
realized in 1998 averaged $1.91 per Mcf, compared with an average of $2.23 per
Mcf in 1997.
Our Recommendations to Stockholders
(See pages 21-25)
Snyder Stockholders.
The Snyder board believes that the merger is fair to you and in your best
interests and unanimously recommends that you vote "for" approval of the merger
and the related merger agreement.
Santa Fe Stockholders.
The Santa Fe board believes that the merger is fair to you and in your best
interests and unanimously recommends that you vote "for"
. approval of the merger, the related merger agreement and the issuance of
Santa Fe common stock in exchange for Snyder common stock;
. approval of the change in Santa Fe's name to Santa Fe Snyder Corporation;
. approval of the increase in Santa Fe's authorized capital stock to
350,000,000; and
. the election of the five Snyder nominees to the Santa Fe Snyder board of
directors.
Fairness Opinions of Financial Advisors
(See page 25)
In deciding to approve the merger, we considered opinions from our financial
advisors as to the fairness to you of the exchange ratio from a financial point
of view.
Snyder received a written opinion dated January 13, 1999 of its financial
advisor, Petrie Parkman & Co. Inc., that, as of that date, the exchange ratio
in the merger was fair, from a financial point of view, to the Snyder
stockholders.
Santa Fe received separate written opinions from its financial advisors,
Donaldson, Lufkin & Jenrette Securities Corporation and Chase Securities Inc.,
to the effect that the exchange ratio is fair to the Santa Fe stockholders,
from a financial point of view.
The full texts of these opinions describe the bases and assumptions on which
they were rendered and are attached hereto as Annexes B, C and D.
We encourage you to read these opinions carefully before voting on the
merger.
Risks Associated with the Merger (See page 10)
You should be aware of and carefully consider the risks relating to the
merger described under "Risk Factors." These risks include
. the possible difficulties in combining two companies that have previously
operated independently; and
. that the exchange ratio at which Snyder common stock will be exchanged for
Santa Fe common stock in the merger is fixed and will not be adjusted for
changes in the stock price of either company before the merger is completed.
Material U.S. Federal Income Tax Consequences
(See page 51)
We have structured the merger so that you will not recognize any gain or
loss for U.S. federal income tax purposes as a result of the merger, except for
taxes payable by each Snyder stockholder
on the difference, if any, between cash received for fractional shares and the
stockholder's adjusted tax basis in the stockholder's fractional share
interest.
As a condition to the merger, both Santa Fe and Snyder must receive an
opinion from their respective tax counsels that the merger will be tax-free
unless these conditions are waived. Neither Santa Fe nor Snyder intends to
waive these conditions.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should seek tax advice
for a full understanding of the particular tax consequences of the merger to
you.
2
<PAGE>
Record Date; Voting Power
Snyder. You may vote at the Snyder special meeting if you owned Snyder
common stock as of the close of business on March 19, 1999, the Snyder record
date. You may cast one vote for each share you own.
Santa Fe. You may vote at the Santa Fe special meeting if you owned Santa Fe
common stock as of the close of business on March 19, 1999, the Santa Fe record
date. You may cast one vote for each share you own.
Stockholder Vote Required to Approve the Merger
Snyder. Approval of the merger and the related merger agreement requires the
favorable vote of the holders of a majority of the outstanding shares of Snyder
common stock.
Santa Fe. A majority of the holders of outstanding shares of Santa Fe common
stock is required to approve:
. the merger, the related merger agreement and the issuance of Santa Fe
common stock in exchange for Snyder common stock;
. the increase to 350,000,000 of the number of authorized shares of capital
stock; and
. the name change to "Santa Fe Snyder Corporation."
Those nominees receiving the most votes at the Santa Fe meeting will be
elected to the Santa Fe Snyder board of directors.
Share Ownership of Management
Snyder. As of the record date for the Snyder special meeting, Snyder
directors and executive officers owned approximately 7.62% of the outstanding
shares of Snyder common stock. Each of them has advised Snyder that he plans to
vote his shares "for" approval of the merger and the related merger agreement.
Santa Fe. As of the record date for the Santa Fe special meeting, Santa Fe
directors and executive officers owned approximately 6% of the outstanding
shares of Santa Fe common stock. These shares include shares that may be deemed
owned by a partnership of which one of the directors is a partner. Each of them
has advised Santa Fe that he or she plans to vote his or her shares "for"
approval of the merger and the related merger agreement and the election of the
five Snyder nominees to the board of Santa Fe Snyder.
Directors and Officers of Santa Fe Snyder
Following the Merger (See page 72)
In connection with the merger, Santa Fe stockholders will be asked to elect
five director nominees to serve on the Santa Fe Snyder board of directors. The
Snyder board of directors designated these individuals. The persons nominated
to serve as these directors are John C. Snyder, John A. Hill, Harold R. Logan,
Jr., James E. McCormick and Edward T. Story. Mr. Snyder will become the
Chairman of the Board.
After the merger, the management of Santa Fe Snyder will include the
following executive officers:
<TABLE>
<CAPTION>
Position with
Current Santa Fe
Name Position Snyder
- ---- ------------- --------------
<S> <C> <C>
John C. Snyder Chairman of Chairman of
the Board and the Board
Chief
Executive
Officer of
Snyder
James L. Payne Chairman of Chief
the Board and Executive
Chief Officer
Executive
Officer of
Santa Fe
Hugh L. Boyt President and President--
Chief International
Operating
Officer of
Santa Fe
William G. Hargett President, President--
Chief North America
Operating
Officer and
Director of
Snyder
Duane C. Radtke Senior Vice Executive Vice
President-- President--
Production of Production
Santa Fe
Tim S. Parker Senior Vice Executive Vice
President-- President--
Exploration Exploration
of Santa Fe
Mark A. Jackson Senior Vice Executive Vice
President and President and
Chief Chief
Financial Financial
Officer of Officer
Snyder
Janet F. Clark Senior Vice Executive Vice
President, President--
Chief Corporate
Financial Development
Officer and and
Treasurer of Administration
Santa Fe
David L. Hicks Vice Vice
President-- President--Law
Law and and General
General Counsel
Counsel of
Santa Fe
</TABLE>
3
<PAGE>
Interests of Officers and Directors
in the Merger that Differ from Your Interests
(See pages 55-57)
You should be aware that some of our officers and directors have
agreements, stock options and other benefit plans that may provide them with
interests in the merger that are different from yours. Generally, the merger
would result in the acceleration of severance and payment rights under these
agreements, options and plans. Our boards were aware of these interests and
considered them in approving the merger.
In addition, Melvyn N. Klein, a director of Santa Fe, is also the sole
stockholder of a general partner of GKH Partners, L.P. Santa Fe has agreed to
pay to GKH Partners, L.P. a financial advisory fee in the amount of $500,000
upon consummation of the merger.
Conditions to the Merger (See page 63)
We will complete the merger only if the conditions of the merger agreement
are satisfied or, if permitted, waived. These conditions include:
. the adoption and approval of the merger agreement by the stockholders of
Santa Fe and Snyder;
. the approval for listing on the New York Stock Exchange of the shares of
Santa Fe common stock to be issued in the merger; and
. the absence of any law or court order that prohibits the merger.
Either of us may choose to complete the merger even though a condition has
not been satisfied if the stockholders have approved the merger and the law
allows us to do so.
Termination of the Merger Agreement (See page 64)
We may jointly agree to terminate the merger agreement at any time, even
after stockholder approval. In addition, either of us can terminate the merger
agreement in other circumstances, including the following:
. the merger is not completed by June 30, 1999;
. the stockholders of either company fail to approve the merger; or
. either of our boards of directors accepts a merger or business combination
with or acquisition by another company after concluding that the action is
necessary for the board to act in a manner consistent with its fiduciary
duties.
Termination Fee (See page 66)
Each of Santa Fe and Snyder must pay the other party a $25 million
termination fee and reimburse the other party's expenses, if:
. it accepts a merger or business combination with or acquisition by another
company;
. its board of directors withdraws or modifies its recommendation of the
merger; or
. its stockholders fail to approve the merger or it materially breaches any
covenant or agreement in the merger agreement, and it accepts a merger or
business combination with or acquisition by another company within nine
months.
Comparative Per Share Market Price
Information (See page 54)
Snyder. On January 13, 1999, the last full trading day before the public
announcement of the proposed merger, Snyder common stock closed at $13 7/16
per share. On March 29, 1999, Snyder common stock closed at $15 1/4 per share.
Santa Fe. On January 13, 1999, the last full trading day before the public
announcement of the proposed merger, Santa Fe common stock closed at $6 9/16
per share. On March 29, 1999, Santa Fe common stock closed at $7 3/8 per
share.
Stockholder Litigation
On January 15, 1999, Phyllis Freiman, a stockholder of Snyder, filed a
putative class action complaint in the Delaware Court of Chancery, No. 16900-
NC, seeking to enjoin the merger on the proposed terms and seeking damages.
Defendants named in the complaint are Snyder, each of its directors and Santa
Fe. The plaintiff alleges numerous breaches of the duties of care and loyalty
owed by Snyder and its directors to the purported class in connection with
entering into the merger agreement with Santa Fe. The plaintiff further
alleges that Santa Fe aided and abetted Snyder and its directors in their
alleged breaches of fiduciary duty. The defendants believe the complaint is
without merit and intend to vigorously defend the action.
4
<PAGE>
Selected Historical Consolidated Financial and Operating Data
Santa Fe Energy Resources, Inc.
The following table sets forth selected financial information of Santa Fe
for the five years ended December 31, 1998. This financial information was
derived from the consolidated financial statements of Santa Fe. This data
should be read in conjunction with the consolidated financial statements of
Santa Fe and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the reports incorporated by reference in
this document.
On July 25, 1997, Santa Fe completed the spin-off of Monterey Resources,
Inc., which comprised substantially all of the assets and properties of Santa
Fe's western division. The consolidated financial statements for the year ended
December 31, 1997 include seven months of Monterey's results.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996 1995 1994
------- ------- -------- -------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Selected
Financial Data
Income Statement Data
Revenues.................. $ 291.0 $ 514.7 $ 583.3 $ 449.4 $ 404.2
Production and operating
expenses................. 112.5 180.9 209.2 162.3 162.8
Exploration expenses...... 71.1 49.1 34.5 23.4 20.4
General and
administrative........... 19.7 28.1 30.1 26.9 27.3
Depreciation, depletion
and amortization ........ 136.1 127.8 148.2 133.2 121.3
Impairments............... 87.8 -- 57.4 30.2 --
Income (loss) from
operations............... (154.0) 110.8 89.5 53.9 48.2
Interest expense, net..... 14.8 17.1 32.4 26.7 23.9
Income (loss) before
extraordinary item....... (98.7) 54.7 42.4 26.6 17.1
Extraordinary item........ -- -- (6.0) -- --
Net income (loss)......... (98.7) 54.7 36.4 26.6 17.1
Earnings (loss)
attributable to
common shares............ (98.7) 42.7 (10.8) 11.8 5.4
Basic and diluted per
share data
Before extraordinary
item.................... $ (0.96) $ 0.43 $ (0.05) $ 0.13 $ 0.06
Extraordinary item--debt
extinguishment.......... -- -- (0.07) -- --
Per common share......... $ (0.96) $ 0.43 $ (0.12) $ 0.13 $ 0.06
Weighted average number of
shares outstanding....... 102.6 98.6 90.6 90.2 89.9
Statement of Cash Flows
Data
Net cash provided by
operating activities..... 115.1 254.6 228.1 174.5 124.5
Net cash provided by (used
in) investing
activities............... (307.5) (375.6) (206.8) (160.8) (57.7)
Net cash provided by (used
in) financing
activities............... 198.9 112.0 (49.3) (24.8) (17.9)
Balance Sheet Data (at
period end)
Properties and equipment,
net...................... $ 718.3 $ 649.7 $ 909.8 $ 889.5 $ 843.0
Total assets.............. 859.0 788.9 1,129.1 1,073.8 1,081.0
Long-term debt............ 330.6 121.7 278.5 344.4 350.4
Convertible preferred
stock.................... -- -- 19.7 80.0 80.0
Stockholders' equity...... 348.4 454.7 526.8 437.7 423.3
</TABLE>
5
<PAGE>
Snyder Oil Corporation
The following table sets forth selected financial information of Snyder for
the five years ended December 31, 1998 . This financial information was derived
from the consolidated financial statements of Snyder. This data should be read
in conjunction with the consolidated financial statements of Snyder and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the reports incorporated by reference in this document.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(in millions, except per share
data)
<S> <C> <C> <C> <C> <C>
Consolidated Selected Financial Data
Income Statement Data
Revenues............................. $141.1 $255.7 $285.1 $197.3 $262.3
Production and operating expenses.... 41.8 55.2 64.7 81.9 140.4
Exploration expenses................. 48.3 17.0 4.2 8.0 6.5
General and administrative........... 16.4 20.4 17.1 17.7 12.9
Depreciation, depletion and
amortization........................ 54.0 79.9 84.5 76.4 70.8
Impairments.......................... 5.5 7.3 2.8 27.4 5.8
Interest expense, net................ 15.7 25.5 23.6 21.7 10.3
Income (loss) before extraordinary
item................................ (24.7) 35.5 63.0 (39.8) 12.4
Extraordinary item................... -- (2.8) -- -- --
Net income (loss).................... (24.7) 32.6 63.0 (39.8) 12.4
Earnings (loss) attributable to
common shares....................... (24.7) 26.6 56.7 (46.0) 1.6
Per share data before extraordinary
item
Basic.............................. $(0.74) $ 0.96 $ 1.81 $(1.53) $ 0.07
Diluted............................ (0.74) 0.95 1.72 (1.53) 0.07
Extraordinary item................. -- (0.09) -- -- --
Per common share
Basic.............................. (0.74) 0.87 1.81 (1.53) 0.07
Diluted............................ (0.74) 0.86 1.72 (1.53) 0.07
Weighted average number of shares
outstanding......................... 33.4 30.6 31.3 30.2 23.7
Statement of Cash Flows Data
Net cash provided by operating
activities.......................... 75.2 122.0 101.7 69.1 86.4
Net cash provided by (used in)
investing activities................ (188.3) 31.8 (62.4) 32.4 (245.5)
Net cash provided by (used in)
financing activities................ 29.8 (92.3) (38.7) (96.0) 169.9
Balance Sheet Data (at period end)
Properties and equipment, net........ $374.3 $289.1 $651.7 $454.0 $557.5
Total assets......................... 433.9 546.1 879.5 555.5 673.3
Long-term debt....................... 212.8 173.6 372.1 234.1 300.0
Convertible preferred stock.......... -- -- 10.0 10.0 10.0
Stockholders' equity................. 128.4 263.8 294.7 235.4 274.1
Cash dividends declared per common
share............................... $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.25
</TABLE>
6
<PAGE>
Summary Unaudited Pro Forma Combined Financial Data
The following table sets forth summary unaudited pro forma combined
financial data that is presented to give effect to the merger. The information
was prepared based on the following assumptions:
. The merger will be accounted for as a purchase business combination
under generally accepted accounting principles.
. The income statement data is presented as if the merger had been
consummated on January 1, 1998.
. The balance sheet data is presented as if the merger had been
consummated on December 31, 1998.
You should consider the following:
. The unaudited pro forma combined financial data are not necessarily
indicative of the results of operations or the financial position that
would have occurred had the merger been consummated on January 1, 1998,
nor are they necessarily indicative of future results of operations or
financial position.
. The unaudited pro forma combined revenue and expense data exclude the
cost savings expected to be realized through the consolidation of the
corporate headquarters of the two companies and the elimination of
duplicate staff and expenses.
The unaudited pro forma combined financial statements should be read
together with the historical consolidated financial statements of Santa Fe and
Snyder incorporated by reference in this document and the unaudited pro forma
condensed combined financial statements contained elsewhere in this document.
With respect to future dividends, See "Questions and Answers About the Merger--
What Happens to My Future Dividends?" See also "Where You Can Find More
Information" on page 83.
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
--------------------
(in millions, except
per share data)
<S> <C>
Income Statement Data
Revenues.................................................. $ 429.0
Production and operating expenses......................... 146.8
Exploration expenses...................................... 119.4
General and administrative................................ 36.1
Depreciation, depletion, and amortization................. 215.9
Impairments............................................... 93.3
Income (loss) from operations............................. (204.5)
Interest expense, net..................................... 30.5
Net income (loss)......................................... (140.2)
Net income (loss) per common share, basic and diluted..... $ (0.82)
Weighted average number of shares outstanding............. 171.1
Balance Sheet Data (at December 31, 1998)
Properties and equipment, net............................. $1,474.7
Total assets.............................................. 1,661.5
Long-term debt............................................ 540.7
Stockholders' equity...................................... 771.9
</TABLE>
7
<PAGE>
Summary Oil and Gas Reserve Information
The following table sets forth summary information on Santa Fe's and
Snyder's proved oil and gas reserves at December 31, 1998, and the summary pro
forma combined information on proved oil and gas reserves, assuming the merger
had taken place on December 31, 1998. Snyder and Santa Fe's historical, and
Santa Fe Snyder's pro forma combined, proved oil and gas reserve information
set forth below and incorporated by reference in this document are only
estimates based primarily on reports prepared by independent petroleum
engineers as of December 31, 1998. The reserve information as of December 31,
1998 is based on the prices of oil and gas as of that time. The discounted
future net cash flows set forth or incorporated by reference in this document
should not be considered as the current market value of the estimated oil and
gas reserves attributable to Snyder's or Santa Fe's properties. Under the
applicable requirements of the Securities and Exchange Commission, the
estimated discounted future net cash flows from proved reserves are generally
based on prices and costs as of the date of the estimate, while actual future
prices and costs may be materially higher or lower. In addition, the 10%
discount factor, which is required by the Securities and Exchange Commission to
be used to calculate discounted future net cash flows for reporting purposes,
is not necessarily the most appropriate discount factor based on interest rates
periodically in effect and risks associated with Santa Fe, Snyder or the oil
and gas industry in general.
Summary Historical and Pro Forma Oil and Gas Reserve Information
<TABLE>
<CAPTION>
Crude Barrels of
Oil Natural Equivalents
(MMBbls) Gas (Bcf) (MMBOE)
Net Proved Reserves (Historical): -------- --------- -----------
<S> <C> <C> <C>
Santa Fe:
Developed.................................. 110.1 229.8 148.4
Undeveloped................................ 58.5 48.3 66.5
----- ----- ------
Total.................................... 168.6 278.1 214.9
===== ===== ======
Snyder:
Developed.................................. 17.4 392.0 82.7
Undeveloped................................ 1.2 98.8 17.6
----- ----- ------
Total.................................... 18.6 490.8 100.3
===== ===== ======
Net Proved Reserves (Pro Forma Combined):
Developed.................................. 127.5 621.8 231.1
Undeveloped................................ 59.7 147.1 84.1
----- ----- ------
Total.................................... 187.2 768.9 315.2
===== ===== ======
Reserve Valuation Information (in millions):
Santa Fe:
Estimated Future Net Cash Flows (before
income taxes)............................. $869.8
Present Value of Future Net Cash Flows
(before income taxes) discounted at 10%... $518.5
Standardized Measure of Discounted
Future Net Cash Flows..................... $482.0
Snyder:
Estimated Future Net Cash Flows (before
income taxes)............................. $663.5
Present Value of Future Net Cash Flows
(before income taxes) discounted at 10%... $365.6
Standardized Measure of Discounted
Future Net Cash Flows..................... $322.2
</TABLE>
8
<PAGE>
Comparative Per Share Data
(Unaudited)
The following table summarizes the per share information for Snyder and
Santa Fe on a historical, pro forma combined and equivalent basis. The pro
forma information gives effect to the merger accounted for by Santa Fe as a
purchase business combination. You should read this information together with
the historical financial statements included in the annual reports on Form 10-K
and other information that each of Santa Fe and Snyder has filed with the
Securities and Exchange Commission. See "Where You Can Find More Information"
on page 83. With respect to future dividends, see "Questions and Answers About
the Merger--What Happens to My Future Dividends" and "Risk Factors--Santa Fe
Snyder May Not Pay Dividends" on page 12. You should not rely on the pro forma
combined information as being indicative of the results that would have been
achieved had the companies been combined or the future results that the
combined company will experience after the merger.
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Historical--Santa Fe:
Net income (loss) Per Share, basic and diluted................... $(0.96)
Book Value Per Share............................................. 3.41
Cash Dividends Per Common Share.................................. --
Historical--Snyder:
Net income (loss) Per Share, basic and diluted................... $(0.74)
Book Value Per Share............................................. 3.85
Cash Dividends Per Common Share.................................. $ 0.26
Equivalent Pro Forma Combined Per Snyder Common Share:
Net income (loss) Per Share, basic and diluted................... $(1.68)
Book Value Per Share............................................. 9.27
Pro Forma Combined--Santa Fe Snyder:
Net income (loss) Per Share, basic and diluted................... $(0.82)
Book Value Per Share............................................. 4.52
</TABLE>
9
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors in determining
whether to vote to approve the merger and the related merger agreement and, in
the case of Santa Fe stockholders, the issuance of the shares of Santa Fe
common stock in exchange for Snyder common stock and the election of the Snyder
nominees to the Santa Fe board of directors.
Risk Factors Relating to the Merger
We May Not Be Able to Successfully Integrate Santa Fe and Snyder and May Not
Realize Expected Cost Savings.
We may encounter difficulties in integrating the previously separate
organizations and operations of Santa Fe and Snyder. The management of the
combined company will have to devote substantial attention and resources to the
integration of the two companies. The diversion of management's attention and
any difficulties they encounter in the transition and integration processes
could have an adverse effect on the revenues, levels of expenses and operating
results of Santa Fe Snyder. Santa Fe Snyder may also experience operational
interruptions or the loss of key employees, customers or suppliers. As a
result, we may not realize any of the anticipated benefits of the merger,
including the expected cost savings of approximately $20 million per year.
The Value of Santa Fe Common Stock the Snyder Stockholders Will Receive May
Decrease Between Now and the Completion of the Merger.
The number of shares of Santa Fe common stock to be received in the merger
for each share of Snyder common stock is fixed. Therefore, because the market
price of Santa Fe common stock is subject to fluctuation, the value at the time
of the merger of the consideration to be received by the Snyder stockholders
will depend on the market price of Santa Fe common stock at that time and may
be lower than the market price of Santa Fe common stock on the day the merger
was announced. For historical and current market prices of Santa Fe common
stock, see "Comparative Per Share Market Price and Dividend Information" on
page 54.
Santa Fe Snyder's Business Will Be Affected By Different Factors than Santa Fe
and Snyder Individually.
Santa Fe's production and reserves are heavily weighted towards oil, while
Snyder's are predominantly gas, Santa Fe has substantial international
exposure, while Snyder is wholly domestic. Santa Fe Snyder's more balanced
reserve and production profile may expose Snyder stockholders to the additional
risks resulting from oil price volatility and international operations, while
Santa Fe stockholders will be more exposed to risks associated with the
volatility of natural gas prices.
Risk Factors Relating to the Combined Company
A Further Decrease in Oil and Natural Gas Prices Will Adversely Affect Our
Financial Results
Prices of oil and natural gas have historically been volatile and have
recently decreased significantly. As a result, both Santa Fe and Snyder have
incurred substantial losses. Further decreases in oil and natural gas prices
will adversely affect Santa Fe Snyder's revenues, results of operations, cash
flows and proved reserves.
If the industry experiences significant prolonged future price decreases,
Santa Fe Snyder may be unable to generate sufficient cash flow from operations
to make planned capital expenditures.
10
<PAGE>
Santa Fe Snyder May Incur Additional Writedowns of Properties' Carrying Values
Accounting rules require that Santa Fe Snyder periodically review the
carrying value of its oil and gas properties for possible impairment. Based on
specific market factors and circumstances at the time of prospective impairment
reviews, and the continuing evaluation of development plans, production data,
economics and other factors, as appropriate, Santa Fe Snyder may be required to
write down the carrying value of its oil and gas properties. A writedown
constitutes a charge to earnings which does not impact Santa Fe Snyder's cash
flow from operating activities. However, a writedown does impact the amount of
Santa Fe Snyder's stockholders' equity. For example, at year-end 1998, an $87.8
million and a $5.5 million writedown of oil and gas properties was recorded by
Santa Fe and Snyder, respectively.
If oil and natural gas prices remain depressed, we may be required to
further write down the carrying value of our oil and natural gas properties. If
after the merger management's long-term outlook for future commodities prices
within the United States is reflective of current NYMEX gas prices of
approximately $2.00 per Mcfe, an impairment would be necessary to the carrying
value of Santa Fe Snyder's oil and gas properties. On such basis, impairments
could range from approximately $150 million to $200 million, on a pre-tax
basis, pursuant to the provisions of the Statement of Financial Accounting
Standards No. 121. Any future writedown would likely have a material adverse
effect on Santa Fe Snyder's net income in the period taken, but would not
affect its cash flows.
Snyder Stockholders May Be Exposed to International Risks After the Merger
General. Unlike Snyder which operates only in the United States and offshore
in the Gulf of Mexico, Santa Fe Snyder will have substantial international
operations which may be adversely affected by local political and economic
developments, including, among others:
. the risk of war, revolution, civil unrest, border disputes,
expropriation, renegotiation or modification of existing contracts,
import, export and transportation regulations and tariffs;
. taxation policies, including royalty and tax increases and retroactive
tax claims;
. exchange controls, currency fluctuations and other uncertainties arising
out of foreign government sovereignty over our international operations;
. laws and policies of the United States affecting foreign trade, taxation
and investment; and
. the possibility of having to be subject to the exclusive jurisdiction of
foreign courts in connection with legal disputes and the possible
inability to subject foreign persons to the jurisdiction of courts in the
United States.
Indonesia. Approximately 20% of Santa Fe Snyder's pro forma combined year
end 1998 reserves are located in Indonesia. The political, economic and social
stability of Indonesia could, therefore, have a material impact on the
operations and financial results of the company after the merger. During the
last two years, Indonesia experienced significant devaluations of its currency
and other severe economic difficulties, which have resulted in disruptions and
uncertainties in financial markets, and political and social instability.
President Suharto resigned in May 1998 after 32 years in office. Although
Indonesia has a well-established history of honoring its contractual
commitments and concession terms, it is uncertain which political party will
take control over Indonesia's government in elections scheduled this summer or
whether the new government will seek reforms in, or take other actions with
respect to, governmental concessions and production sharing contracts. Santa Fe
Snyder's production sharing contracts could be adversely affected by currently
pending Indonesian legislation.
One effect of the currency devaluation has been to reduce certain operating
and administrative costs incurred by Santa Fe in its Indonesian operations,
thus reducing the number of equivalent barrels of oil that it retains in
reimbursement of costs and expenses incurred, and to reduce the value of
receivables and payables that are denominated in the local currency, the
rupiah. In addition, Santa Fe has experienced delays in collecting some
receivables. Santa Fe has experienced disruptions in the delivery of some
services and goods which has led to delays in certain operations and associated
production. Further political, economic and social
11
<PAGE>
instability in Indonesia could have a material adverse effect on the operations
and future financial performance of Santa Fe Snyder.
Our Costs to Comply With Environmental Laws Are Significant
Environmental and other governmental regulations have increased the costs to
plan, design, drill, install, operate and abandon oil and natural gas wells and
other facilities of Santa Fe Snyder. Santa Fe and Snyder have expended and
Santa Fe Snyder will expend significant resources, both financial and
managerial, to comply with environmental regulations and permitting
requirements. Increasingly strict environmental laws, regulations and
enforcement policies, and claims for damages to property, employees, other
persons and the environment resulting from our operations, could cause Santa Fe
Snyder to incur substantial costs and liabilities in the future.
Estimates of Proved Reserves May Change
The calculations of proved reserves of crude oil and natural gas included in
this document are only estimates. The accuracy of any reserve estimate is a
function of the quality of available data and engineering and geological
interpretation and judgment and the assumptions used regarding quantities of
recoverable oil and natural gas reserves and prices for crude oil, natural gas
liquids and natural gas. Actual prices, production, development expenditures,
operating expenses and quantities of recoverable oil and natural gas reserves
will vary from those assumed in our estimates, and such variances may be
significant. Any significant variance from the assumptions used could result in
the actual quantity of Santa Fe Snyder's reserves and future net cash flow
being materially different from the estimates in our reserve reports. In
addition, results of drilling, testing and production and changes in crude oil,
natural gas liquids and natural gas prices after the date of the estimate may
result in substantial upward or downward revisions.
Santa Fe Snyder Will Continue to Face Strong Competition
There is strong competition relating to all aspects of the oil and natural
gas industry, and in particular in the exploration and development of new oil
and natural gas reserves. Santa Fe Snyder must compete with a substantial
number of other oil and natural gas companies, many of which have greater
resources.
Santa Fe Snyder May Not Be Able to Replace Reserves
Without successful exploration, development or acquisition activities, Santa
Fe Snyder's reserves and revenues will decline over time. Exploration, the
continuing development of reserves and acquisition activities will require
significant expenditures. If Santa Fe Snyder's cash flow from operations is not
sufficient for this purpose, we may not be able to obtain the necessary funds.
The inability to replace reserves could reduce the amount of credit available
to Santa Fe Snyder since the maximum amount of borrowing capacity available
under its revolving credit facility will be based, at least in part, on the
estimated quantities of its proved reserves.
Some Hazard Losses May Not Be Insured
Santa Fe Snyder will carry insurance against some, but not all, of the
hazards associated with its business. This is standard practice for both Santa
Fe and Snyder and we believe this is standard practice in our industry. Because
of this practice, however, Santa Fe Snyder may be subject to liability or
losses that could be substantial due to events that are not insured.
Santa Fe Snyder May Not Pay Dividends
Snyder paid dividends on its common stock at a yearly rate of $0.26, while
Santa Fe has not paid dividends on its common stock since 1994. Santa Fe Snyder
has not yet determined whether it will pay
12
<PAGE>
dividends and, if so, at what rate. The determination of the amount of future
cash dividends, if any, to be declared and paid is in the sole discretion of
Santa Fe Snyder's board of directors and will depend on the following factors:
. Santa Fe Snyder's financial condition;
. earnings and funds from operations;
. the level of Santa Fe Snyder's capital and exploration expenditures;
. dividend restrictions in Santa Fe Snyder's financing agreements;
. Santa Fe Snyder's future business prospects; and
. other matters that Santa Fe Snyder's board of directors deems relevant.
Santa Fe Snyder's credit agreements limit the payment of dividends to the
holders of its capital stock, including the Santa Fe Snyder common stock.
FORWARD LOOKING STATEMENTS
This document includes "forward looking statements" as defined by the
Securities and Exchange Commission. These statements concern the companies'
plans, expectations and objectives for future operations. All statements, other
than statements of historical facts, included in this document that address
activities, events or developments that the companies expect, believe or
anticipate will or may occur in the future are forward looking statements and
include the following:
.completion of the proposed merger;
.reserve estimates;
.future production of oil and gas; and
.future financial performance.
These forward looking statements are based on assumptions, which the
companies believe are reasonable, but which are open to a wide range of
uncertainties and business risks. Factors that could cause actual results to
differ materially from those anticipated are discussed in both companies'
periodic filings with the Securities and Exchange Commission, including their
Annual Reports on Form 10-K for the year ended December 31, 1998.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: Statements in this document regarding each company's business which
are not historical facts are "forward looking statements" that involve risks
and uncertainties. For a discussion of these risks and uncertainties, which
could cause actual results to differ from those contained in the forward
looking statements, see "Risk Factors" on page 10 of this document.
13
<PAGE>
BUSINESS OF SANTA FE SNYDER FOLLOWING THE MERGER
The combination of Santa Fe and Snyder is intended to create a larger, more
diversified, financially stronger and more cost efficient enterprise. On a pro
forma combined basis, Santa Fe Snyder will have estimated proved reserves of
315 million barrels of oil equivalent at year end 1998 and estimated production
of 110,000 BOEPD, or barrels of oil equivalent per day, in 1999. Of this
production, approximately 55% will be gas and approximately 70% will be derived
from domestic properties. We believe that the larger size and scale of the
combined company will allow Santa Fe Snyder:
. to capitalize on a wider range of opportunities;
. to develop and operate larger exploration and development projects than
either Santa Fe or Snyder could individually;
. to operate more competitively in the current low commodity price
environment; and
. to make opportunistic acquisitions larger than either Santa Fe or Snyder
could individually.
Domestic and international assets will comprise Santa Fe Snyder's asset
base. Combined, Santa Fe and Snyder will have interests in the following areas:
Domestic International
Permian basin of West Texas
and Southwest New Mexico
Gulf of Mexico Indonesia
Rocky Mountains Argentina
Northern Louisiana Gabon
China
Brazil
Cote d'Ivoire
Malaysia
Thailand
Ghana
Santa Fe and Snyder believe that the stable cash flow generated from their
existing North American production will allow Santa Fe Snyder to fund and
develop its combined portfolio of domestic and international exploration and
development projects.
Santa Fe and Snyder are developing plans to integrate their operations
immediately after the merger to take full advantage of the benefits that the
merger will create. Those benefits include:
.increased financial strength and flexibility;
.more efficient allocation of capital;
.a balanced asset base;
.substantial cost savings; and
.an increased ability to pursue acquisitions.
Increased Financial Strength and Flexibility. Santa Fe Snyder's larger
capitalization should enhance its access to capital to explore and exploit the
prospects and projects available to the combined company. Pro forma for the
merger, Santa Fe Snyder would have had EBITDAX of approximately $220.0 million
for the year ended December 31, 1998 and a long-term debt-to-book
capitalization ratio of approximately 40% as of December 31, 1998. Santa Fe
Snyder's increased size should make available additional forms of cost
effective financing to allow Santa Fe Snyder to manage capital costs and to
pursue further growth opportunities.
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More Efficient Allocation of Capital. The combination will also allow Santa
Fe Snyder the opportunity to select the best opportunities contained in the two
companies' combined exploration project inventories and to focus on those
exploitation projects with the highest predicted rates of return. As a result,
Santa Fe Snyder plans to enhance its expected return on investment by
allocating capital more efficiently than either Snyder or Santa Fe alone. Santa
Fe Snyder's increased geographic diversity will additionally enable the company
to match domestic and international cash flow requirements and sources,
facilitating improved cash management efficiency.
Balanced Asset Base. Santa Fe Snyder's reserves will be diversified
geographically, with approximately 65% of its estimated pro forma combined year
end 1998 proved reserves being domestic and 35% international. The companies
believe that the balance between domestic and international properties will
lower the overall risk profile of current production by further diversifying
the revenue and cash flow sources for Santa Fe Snyder. In addition, the
combined companies' balance of oil and natural gas investment opportunities
will allow Santa Fe Snyder to adjust its capital program in response to
relative changes in commodity prices.
Cost Savings. After the merger, we will restructure Santa Fe Snyder,
including the consolidation of the two companies' corporate offices and Gulf of
Mexico operations. Santa Fe and Snyder believe that this operational and
organizational consolidation will allow for substantial overhead cost savings
through the consolidation of duplicative corporate and field offices and staff.
Santa Fe and Snyder estimate that they will realize approximately $20 million
of annualized cost savings as a result of the merger. We expect to complete the
restructuring by the end of the third quarter of 1999 but will begin to realize
some of the savings as soon as the merger is completed. Based on these cost
savings, we expect the merger to be accretive on a cash flow basis to Santa Fe
and Snyder stockholders in 1999.
Santa Fe Snyder intends to aggressively work toward reducing total per
barrel costs to achieve higher operating margins. In addition to the
approximately $20 million of anticipated cost savings, the effort will involve
focusing on:
. production growth;
. reducing lease operating expense and interest expense; and
. ongoing asset portfolio rationalization aimed at selling lower growth
and/or higher cost properties.
We believe that these steps will better position Santa Fe Snyder to operate
more competitively in a low commodity price environment and to achieve greater
cash flow and reinvestment benefits in higher price environments.
Increased Ability to Pursue Acquisitions. We expect the combination of Santa
Fe and Snyder to position Santa Fe Snyder to participate in further
consolidation among independent exploration and production companies. Santa Fe
Snyder's strategy in the current commodity market will include actively
pursuing domestic and international acquisition opportunities that enhance its
reserve and production base or allow for further cost savings. Santa Fe and
Snyder believe that Santa Fe Snyder's enhanced financial position and stature
in the industry will allow it to pursue acquisitions on a more effective basis
than either of the companies could have on an individual basis.
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THE MERGER
General
The merger agreement provides that following the satisfaction or waiver of
the conditions contained in the merger agreement, Snyder will be merged into
Santa Fe. In this document, we refer to the common stock to be issued to Snyder
common stockholders in the merger and the common stock to remain outstanding
with Santa Fe stockholders following the merger as Santa Fe common stock. We
refer to the combined company as Santa Fe Snyder.
Consideration
When the merger is completed, each outstanding share of Snyder common stock
automatically converts into 2.05 shares of Santa Fe common stock. In addition,
each outstanding option to purchase shares of Snyder common stock will be
canceled. Santa Fe Snyder will grant each holder of a canceled Snyder option,
except for holders receiving severance packages, an option to purchase Santa Fe
common stock on substantially the same terms, except that the number of shares
to be issued upon exercise of a new option will be 2.05 times the number of
shares to be issued upon exercise of a Snyder option and the exercise price
will be the former exercise price divided by 2.05.
Amendments to Santa Fe's Certificate of Incorporation
The merger agreement provides that upon the effective time of the merger,
Santa Fe's certificate of incorporation will be amended to
. increase the number of authorized shares of Santa Fe capital stock to
350,000,000; and
. change the name of Santa Fe to "Santa Fe Snyder Corporation."
These amendments will occur automatically if they are approved by the requisite
vote of Santa Fe Snyder's stockholders and if the merger is completed. If the
merger is not completed, the certificate of incorporation will not be amended.
In addition, promptly after the effective time, Santa Fe Snyder's board of
directors will amend the certificate of designations for Santa Fe's Series A
Junior Participating Preferred Stock to increase to 3,000,000 the number of
shares of preferred stock reserved for designation.
Election of New Directors and Appointment of Executive Management
The merger agreement provides for the Santa Fe board to be increased to 11
members, five of whom have been designated for nomination by the Snyder board.
In addition, the merger agreement designates the persons who are to serve as
the executive officers of Santa Fe Snyder beginning immediately after the
merger. See "Directors and Officers of Santa Fe Snyder Following the Merger" on
page 72.
Ownership of Santa Fe Snyder Following the Merger
The shares of Santa Fe common stock to be issued to holders of Snyder common
stock in the merger will constitute approximately 40% of all of the issued and
outstanding Santa Fe common stock immediately after the merger. The existing
stockholders of Santa Fe will hold approximately 60% of all of the issued and
outstanding Santa Fe common stock immediately after the merger.
Background of the Merger
General--Snyder. In March 1997, Snyder engaged the investment banking firm
of Petrie Parkman & Co., Inc. to assist Snyder in developing an acquisition
strategy directed toward public corporations and in conducting a review of
numerous corporate acquisition candidates within its industry. Through this
effort, Snyder hoped to identify one or more peer companies with complementary
assets which could be acquired for a rational price. During the first quarter
of 1998, Snyder held exploratory meetings with numerous companies to discuss
the feasibility of a merger with or sale to Snyder, including a meeting with
Santa Fe in March 1998. These meetings involved no exchange of data, no formal
negotiation of fundamental issues, such as value or
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structure, and none of the meetings resulted in Snyder making or receiving any
formal proposal. Snyder's discussions with one company continued over a period
of several months during which time the companies explored three possible
transaction structures on a preliminary basis. Initially, Snyder approached
this other company to determine the other company's interest in being acquired
by Snyder. During the course of the companies' discussions they also had very
preliminary dialogue concerning this other company's interest in acquiring
Snyder, which would potentially have yielded Snyder's stockholders an effective
premium for their stock. Snyder's board chose not to pursue further discussions
relating to this other company's interest in acquiring Snyder because the
Snyder board resolved that Snyder was not for sale and would remain
independent. The last structure which the companies discussed was a merger,
which potentially could have resulted in either a premium or discount for
Snyder stockholders depending on which company was the survivor and the assumed
exchange ratio. These discussions did not evolve into formal negotiations
because of the companies' differing views on strategic issues such as senior
management, headquarter location and the company name. The companies did not
discuss specific exchange ratios and did not quantify the amount of any premium
or discount. Throughout this period, Snyder remained open to preliminary
discussions about its willingness to be acquired. None of these discussions
resulted in a determination by Snyder's board to put the Company up for sale
because none of these discussions implicated a range of values comparable to
those Snyder believed to be attainable through the continued execution of its
long-term strategic plan involving independent internal and acquisitive growth,
and Snyder received no formal acquisition proposals.
To complement Snyder's exploration of acquisition transactions, Snyder also
explored the possibility of engaging in a "merger of equals" transaction with a
company that possessed complementary asset holdings, in terms of quality,
nature and location, and with a compatible or complementary strategy,
capitalization, management and culture. A merger of equals transaction is one
where constituent companies merge without a significant premium being paid by
either party, and where the stockholders of the constituent corporations retain
their proportionate ownership in the resulting entity. During the second and
third quarters of 1998, Snyder had exploratory meetings with a number of
exploration and production companies to discuss the merits of a merger of
equals, but the companies with which Snyder met generally failed one or more of
Snyder's strategic criteria relating to financial strength, operational focus,
executive leadership or strategic direction. As a result, none of these
meetings resulted in Snyder making or receiving any formal proposal.
General--Santa Fe. During the prior two years, members of Santa Fe's board
of directors and senior management have internally reviewed and evaluated
merger, acquisition and other combination opportunities in the oil and gas
exploration and production industry. In September 1997, Santa Fe engaged DLJ
and Chase, to assist it, when requested, in evaluating strategic opportunities,
including, without limitation, possible strategic combinations with other
companies. In addition to the referenced meeting with Snyder in March 1998,
exploratory and, in some cases, more extensive discussions were held by Santa
Fe with numerous publicly traded and private domestic and international
companies over the two-year period. These discussions included strategic
combinations, mergers, acquisitions, joint ventures and other combination
structures with larger and smaller independent oil and gas companies. None of
these discussions resulted in a proposal that was determined by Santa Fe's
board of directors or management to be in the best interests of Santa Fe and
its stockholders.
Recent Discussions and Due Diligence Evaluations Leading to Combination
Proposal. On December 3, 1998, Petrie Parkman contacted James L. Payne, chief
executive officer of Santa Fe, regarding Mr. Payne's interest in meeting with
John C. Snyder, chief executive officer of Snyder, to discuss the possibility
of Santa Fe and Snyder collaborating on acquiring additional oil and gas
assets. On December 9, 1998, Mr. Snyder, accompanied by a representative of
Petrie Parkman, met with Mr. Payne to discuss a potential joint acquisition
strategy relating to an acquisition candidate previously identified by Mr.
Snyder. During the course of the meeting, each of Mr. Snyder and Mr. Payne
briefly summarized their respective operations, management and organization. As
the meeting evolved, the conversation digressed from the joint acquisition
opportunity to the merits of a strategic combination of Snyder and Santa Fe,
and the men discussed the two companies' complementary asset bases, strong
balance sheets and similar growth strategies. In addition, other acquisition
candidates of mutual interest were discussed. At the conclusion of the meeting,
the two men agreed to reflect on the idea of a merger for a few days. On
December 11, 1998, the two chief executives agreed to meet on December 14, 1998
to continue their discussion regarding the merits of a strategic combination of
the two companies.
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On December 13, 1998, Santa Fe requested that DLJ and Chase assist Santa Fe
in evaluating a possible strategic combination with Snyder.
On December 14, 1998, Mr. Snyder, Mark A. Jackson, Chief Financial Officer
of Snyder, Mr. Payne, Janet F. Clark, Chief Financial Officer of Santa Fe,
representatives of Petrie Parkman and representatives of DLJ met primarily to
discuss the merits of a strategic combination between Snyder and Santa Fe. At
this meeting, the two chief executive officers discussed the potential social
issues attendant in any strategic combination of the companies, including
organizational issues and issues relating to relocating one of the companies'
headquarters. They also discussed in very preliminary terms the basis for
determining an appropriate exchange ratio in any strategic combination of the
companies. Fundamentally, the two men agreed that any transaction in which the
companies engaged would be a merger of equals, combining the two companies'
assets and management teams into a combined entity owned proportionately by the
two stockholder groups. In this regard, they agreed that neither company's
stockholders should receive a premium over the historic market price for their
shares in any transaction between the companies and that any exchange ratio
should generally reflect the ratio of the two companies' trading prices over an
appropriate period of time. Mr. Snyder urged that the ratio should reflect the
two companies' recent relative trading prices, yielding an exchange ratio of
between 2.1 and 2.2 Santa Fe shares to each share of Snyder. Mr. Payne took the
position that the ratio should be consistent with the companies' relative
trading prices over the preceding three months, resulting in a ratio of
approximately 1.9 Santa Fe shares to each share of Snyder. The two men agreed
to defer further discussion of the exchange ratio to a later date pending
further review of the merits of the combination. They also discussed the
feasibility of independently financing a sizable joint acquisition.
On December 22, 1998, Messrs. Payne and Snyder and their respective senior
management, financial advisors and counsel met at Santa Fe's offices to discuss
. organizational, financial and structural issues with respect to a
possible strategic combination;
. the relative strengths of the two companies;
. the advantages of a combined entity; and
. various due diligence matters.
During this day-long meeting, each company made a lengthy presentation on its
operations, organization, financial position and growth strategy. The purpose
of this meeting was
. to enable the management of each company to thoroughly understand the
other company;
. to evaluate the merits of combining the companies through a merger; and
. to identify integration issues and cost savings opportunities.
At the conclusion of the meeting, management of both companies agreed to meet
the following day to continue exploring the merits of a strategic combination.
On December 23, 1998, the senior management of both companies and their
financial advisors met at the offices of Petrie Parkman for further discussions
regarding the proposed strategic combination. During this meeting, Mr. Snyder
and Mr. Payne agreed that the apparent merits of a strategic combination
between the two companies warranted focusing the companies' efforts towards the
combination discussions as a higher priority than any further pursuit of
potential joint acquisition strategies at that time, and that discussion of
future acquisitions could be postponed until a later date. Both men agreed on a
process and schedule for performing operational, financial and legal reviews of
each other as a condition for continued combination discussions. Mr. Snyder and
Mr. Payne instructed their respective management teams to begin negotiating
draft merger documentation based on a stock-for-stock merger with a fixed
exchange ratio to be determined, contingent on the companies' agreement on
material terms and approval by their respective boards of directors. Before
adjourning the meeting, the two men and their financial advisors engaged in an
active discussion concerning an appropriate exchange ratio to apply in any
strategic combination between the companies. The two men narrowed the range of
exchange ratios being considered to between 2.0 to 1 and 2.1 to 1, and agreed
to discuss a more exact ratio over the next several days in light of any
changes in either company's stock price.
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Negotiation of Definitive Agreement. During the period from December 24,
1998 to January 11, 1999, Santa Fe's outside counsel prepared drafts of the
merger agreement and delivered it to Snyder's outside counsel. Each party
provided several rounds of comments and Santa Fe's counsel prepared and
delivered several revised drafts. Various issues remained unresolved, including
. the amount of the termination fee and the circumstances under which the
termination fee would be payable;
. board composition and executive management of the combined company; and
. conditions to closing of the merger.
During the same period, representatives of the two companies, including their
respective financial advisers, counsel and accountants, held numerous due
diligence meetings covering the following matters:
. properties and prospects;
. engineering;
. financial;
. legal;
. tax; and
. accounting.
Additional meetings were held so that Santa Fe and Snyder could
. complete their respective factual investigations;
. resolve open issues; and
. finalize the documentation relating to the merger.
On January 8, 1999, Messrs. Snyder and Payne met to discuss details of the
potential strategic combination as well as issues raised as a result of the
companies' operational and financial reviews. During this meeting, both men
confirmed that they would recommend to their respective boards of directors an
exchange ratio of 2.05 Santa Fe shares to each Snyder share, provided that the
relative trading values did not change substantially during the following days.
Review and Approval by Snyder's and Santa Fe's Board of Directors. On
January 11, 1999, Snyder's board of directors met to receive a report on the
status of the strategic combination with Santa Fe. During the weeks preceding
the meeting, Mr. Snyder had
. discussed the merits of the proposed strategic combination with each
member of the Snyder board;
. provided them with substantial financial and operational information
relating to Santa Fe; and
. kept them apprised of developments in the discussions.
At this meeting, the board received a memorandum outlining the due diligence
process and certain due diligence matters, and reviewed certain pro forma
financial information prepared giving effect to the combination. The board was
provided copies of the draft merger agreement, which was still being
negotiated, and was briefed on its salient terms. Management informed the board
that the managements of the two companies had negotiated an exchange ratio of
2.05 to 1, subject to board approvals. Management informed the board that this
ratio was intended to approximate the companies' relative historic stock
prices. The board received a report from representatives of Petrie Parkman
regarding its valuation of Snyder and Santa Fe and certain analyses of a
combined entity. See "--Opinions of Financial Advisors--Snyder's Financial
Advisor." Petrie Parkman advised the Snyder board that it was prepared to
deliver an opinion as to the fairness of the exchange ratio to Snyder's
stockholders from a financial point of view, assuming the final exchange ratio
was consistent with the levels of 2.0 to 2.1 discussed during the meeting.
After extensive discussion, the board
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directed management to continue the discussions with Santa Fe and scheduled a
meeting for January 13 to allow time for the members to reflect on the
information provided.
On January 12, 1999, the Santa Fe board held a special meeting at which all
members were present. At various times during the three-week period before the
meeting, Mr. Payne had orally discussed the merits of the proposed strategic
combination with each member of Santa Fe's board of directors, provided them
with financial and operational information relating to Snyder and kept them
apprised of developments in the discussions. At this meeting, members of the
Santa Fe board were provided with reports prepared by Chase and DLJ that
included the analyses supporting DLJ's and Chase's opinions to the Santa Fe
board of directors as summarized under "--Opinions of Financial Advisors--Santa
Fe's Financial Advisors." Senior management also presented a detailed
discussion regarding financial and operational results and the terms and
structure of the proposed merger and related transactions. Both Chase and DLJ
made a presentation regarding
. the proposed merger;
. the strategic benefits to Santa Fe and its stockholders of a
combination with Snyder; and
. the financial attributes of the combined company.
Chase and DLJ advised the board that they were prepared to deliver opinions as
to the fairness of the exchange ratio to Santa Fe's stockholders from a
financial point of view, assuming the final exchange ratio was consistent with
levels discussed during the meeting. The Santa Fe board discussed the
advantages and benefits of a strategic combination of the two companies. The
Santa Fe board then directed management to continue to pursue a combination
with Snyder and to finalize the merger agreement and scheduled a meeting for
January 13 to resume consideration of the combination with Snyder after the
board members had reflected on the information provided at the meeting.
On January 13, 1999, Snyder's board of directors held a telephonic meeting
to receive a report on the status of the transaction and to consider the
proposed strategic combination with Santa Fe. As a preliminary matter, the
board was updated on certain due diligence matters and changes negotiated to
the draft merger agreement since the January 11 meeting. Management informed
the board that, subject to approval of the respective boards of directors,
management of Santa Fe and Snyder had agreed on an exchange ratio of 2.05
shares of Santa Fe common stock per share of Snyder common stock. The board
discussed the proposed exchange ratio and determined that it was consistent
with the board's view of the merger as a strategic combination in which neither
party was seeking a premium. A representative of Petrie Parkman then delivered
the firm's oral opinion that, as of January 13, 1999 and based on the matters
reviewed with Snyder's board of directors, an exchange ratio of 2.05 shares of
Santa Fe common stock per share of Snyder common stock was fair to the
stockholders of Snyder from a financial point of view. This opinion was
subsequently confirmed in writing. The board of Snyder then voted and
unanimously
. approved the merger, the terms of the merger agreement and the
transactions contemplated by the merger agreement; and
. agreed to call the Snyder special meeting and recommended that all
Snyder stockholders vote their shares "for" approval of the merger
agreement.
In addition, each board member expressed his intention to vote his personal
holdings in Snyder stock "for" approval and adoption of the merger and the
merger agreement.
On January 13, 1999, the Santa Fe board held a telephonic special meeting to
discuss the strategic combination with Snyder. At this meeting, Santa Fe's
senior management advised Santa Fe's board of directors that the negotiations
on the merger agreement were finalized. Management advised Santa Fe's board of
directors that it recommended an exchange ratio of 2.05 shares of Santa Fe
common stock for each outstanding share of Snyder common stock. Management
further advised the Santa Fe board of directors that they continued to believe
that the benefits of a strategic combination with Snyder identified during the
previous meeting could be achieved. Further, each of DLJ and Chase delivered
its oral opinion to the Santa Fe board to the effect that as of January 13,
1999 and based on the matters stated in the opinion, the exchange ratio is fair
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to Santa Fe's stockholders from a financial point of view. These opinions were
subsequently confirmed in writing as of January 13, 1999. After the
presentations and a discussion and consideration of the factors described under
"--Reasons for the Merger--Santa Fe," the Santa Fe board unanimously
. approved the proposed strategic combination and authorized the Santa Fe
officers to execute the merger agreement and related documents using an
exchange ratio of 2.05 shares of Santa Fe for each outstanding Snyder
share;
. approved the issuance of Santa Fe common stock in connection with the
proposed merger;
. agreed to call the Santa Fe special meeting; and
. recommended that all Santa Fe stockholders vote their shares "for"
approval of
--the merger agreement and the related issuance of Santa Fe common
stock,
--the increase to 350,000,000 of the number of authorized shares of
capital stock,
--the change of the name of Santa Fe to "Santa Fe Snyder Corporation,"
and
-- the election of 5 additional directors.
In addition, each board member expressed an intention to vote his or her
shares of Santa Fe stock "for" approval and adoption of the merger and the
merger agreement, including the issuance of shares of Santa Fe common stock in
the merger, and the other transactions contemplated by the merger agreement.
Execution of Definitive Agreement and Public Announcement. Following the
January 13, 1999 special meetings of the Santa Fe and Snyder boards of
directors, Santa Fe and Snyder executed the merger agreement. On the same day,
the parties publicly announced in a joint press release that they had entered
into the merger agreement.
Reasons for the Merger--Santa Fe
At its meeting held on January 13, 1999, the Santa Fe board of directors by
unanimous vote of its members, who were all present and acting throughout the
meeting, approved the merger, the merger agreement and the transactions
contemplated by the merger agreement, and recommended that the Santa Fe
stockholders approve and adopt same. The Santa Fe board of directors believes
that the merger agreement and the terms of the merger are fair to, and in the
best interests of, Santa Fe and the Santa Fe stockholders and recommends that
the stockholders of Santa Fe vote "for"
. adoption of the merger agreement and the related issuance of Santa Fe
common stock;
. the increase to 350,000,000 of the number of authorized shares of capital
stock; and
. the change of the name of Santa Fe to "Santa Fe Snyder Corporation."
The Santa Fe board also recommends that the stockholders of Santa Fe vote
"for" the election of each of the five Snyder nominees to the Santa Fe Snyder
board of directors.
In reaching its determination, the Santa Fe board of directors consulted
with Santa Fe's management, as well as its financial and legal advisors, and
considered the following material factors:
. that the merger would increase the percentage of Santa Fe's gas
production from approximately 42% on a stand-alone basis to approximately
55% on a pro forma combined company basis, reducing Santa Fe's exposure
to oil price changes and providing a more balanced ratio of gas to oil
reserves;
. that the combined company will have a much improved balance of domestic
to international reserves, with approximately 65% of Santa Fe Snyder's
proved reserves located in North America and the remaining 35% located
internationally compared to Santa Fe's balance of domestic to
international reserves of 53% and 47%;
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. that Santa Fe Snyder would be a larger company with an improved balance
sheet, debt and cash flow levels consistent with investment grade
companies and greater financial flexibility and access to capital than
Santa Fe alone, which Santa Fe management believes will result in
-- improved liquidity and lower cost of funding than Santa Fe had
alone, and an improved ability to withstand the current low pricing
environment,
-- an improved ability to grow reserves through exploration and
development using internally generated funds, and
-- an improved ability to be an active participant in continued
industry consolidation;
. the opportunity to realize approximately $20 million in annualized cost
savings through the merger, including the consolidation of the corporate
headquarters of the two companies and the elimination of duplicative
staff and expenses;
. that the merger is expected to be accretive on a cash flow basis to the
Santa Fe stockholders in 1999 and 2000, taking into effect the cost
savings referred to above;
. the ability to optimize capital allocations among an increased number of
projects and enhanced flexibility to allocate capital among gas or oil
projects and domestic or international projects as the combined company
determines appropriate under the circumstances;
. the ability to enhance Santa Fe's Gulf of Mexico operations by allocating
capital and personnel to those projects of the combined company with the
highest return at acceptable risk levels;
. the structure of the merger, in which Santa Fe will be the surviving
corporation in a tax-free merger and, immediately after the merger, its
stockholders will own approximately 60% of Santa Fe Snyder's outstanding
common stock;
. the continued involvement in the management of the combined company of
key members of Santa Fe management, including
-- James L. Payne as Chief Executive Officer,
-- Hugh L. Boyt as President--International,
-- Janet F. Clark as Executive Vice President--Corporate Development
and Administration,
-- Duane C. Radtke as Executive Vice President--Production, and
-- Tim S. Parker as Executive Vice President--Exploration;
and key members of Snyder's management, including
-- John C. Snyder as Chairman of the Board,
-- William G. Hargett as President--North America, and
-- Mark A. Jackson as Executive Vice President and Chief Financial
Officer,
and that members of Santa Fe's board of directors would constitute a
majority of the members of the Santa Fe Snyder board of directors;
. the opinions of Chase and DLJ to the Santa Fe board of directors to the
effect that as of that date and based on the matters stated in the
opinions, the exchange ratio was fair to the Santa Fe stockholders from a
financial point of view; and
. the strategic combination with Snyder will not foreclose the Santa Fe
stockholders from the opportunity to receive a premium for their shares
in any "change of control" transaction that may be proposed with respect
to the combined company in the future.
In reaching the determination that the merger, the merger agreement and the
transactions contemplated by the merger agreement are advisable and fair to and
in the best interests of Santa Fe and its stockholders, the Santa Fe board of
directors also considered a number of additional factors, including
. its discussions with Santa Fe's management concerning the results of
Santa Fe's investigation of Snyder;
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. the strategic, operational and financial opportunities available to
Santa Fe in the normal course of its business compared to those that
might be available following the merger;
. the historical and current market prices of Santa Fe common stock and
Snyder common stock; and
. the proposed structure of the transaction and the other terms of the
merger agreement and related agreements.
The Santa Fe board of directors also considered certain risks and potential
disadvantages associated with the merger, including
. the risk that the operations of the two companies may not be
successfully integrated;
. the risk that anticipated cost savings may not be realized to the
degree anticipated;
. the risk that the business combination might not be completed as a
result of a failure to satisfy the conditions to the merger agreement;
and
. other matters described under "Risk Factors" on pages 10-13.
In the judgment of the Santa Fe board of directors, the potential benefits of
the merger outweigh these considerations.
The foregoing discussion of the information and factors that were given
weight by the Santa Fe board of directors is not intended to be exhaustive, but
it is believed to include all material factors considered by the Santa Fe board
of directors. In view of the variety of factors considered in connection with
its evaluation of the proposed merger and the terms of the merger agreement,
the Santa Fe board of directors did not deem it practical to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusion. Individual directors may have given
different weights to different factors.
After considering all these factors, at its meeting held on January 13, 1999
the Santa Fe board of directors by the unanimous vote of its members, who were
all present at the meeting and acting throughout, approved the merger, the
merger agreement, including the issuance of shares of Santa Fe common stock in
the merger, and the other transactions contemplated by the merger agreement.
The Santa Fe board of directors has by the unanimous vote of all of its
members approved the merger and the merger agreement. The Santa Fe board of
directors recommends that the stockholders of Santa Fe vote "for" each of
. approval and adoption of the merger agreement and the related issuance of
Santa Fe common stock to Snyder's stockholders;
. the increase to 350,000,000 of the number of authorized shares of capital
stock; and
. the change of Santa Fe's name to "Santa Fe Snyder Corporation."
Although the foregoing matters are being presented to Santa Fe's
stockholders as three separate proposals, none of them will be effected even if
approved unless the merger agreement is approved.
The Santa Fe board of directors by unanimous vote of all of its members also
recommends that the stockholders of Santa Fe vote "for" each of the five
nominees to the Santa Fe Snyder board. See "Election of Directors" on page 80.
In considering the recommendation of the Santa Fe board of directors, Santa
Fe stockholders should be aware that certain officers and directors of Santa Fe
have interests in the proposed merger that are different from and in addition
to the interests of Santa Fe stockholders generally. The Santa Fe board of
directors was aware of these conflicts of interest and considered them in
approving the merger and merger agreement. For a description of these
interests, see "Interests of Certain Directors and Officers in the Merger" that
begins on page 56 of this document.
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Reasons for the Merger--Snyder
The Snyder board of directors has determined that the merger is fair to, and
in the best interest of, Snyder and its stockholders. Accordingly, the Snyder
board has unanimously approved the merger and recommends that the Snyder
stockholders vote "for" approval and adoption of the merger and the merger
agreement.
The merger is intended to achieve several important financial, operational
and organizational objectives designed to:
. ensure Snyder's continued strong financial position, enabling the company
to continue to grow its reserves through internal drilling and through
acquisitions despite the prospect for continued depressed commodity
prices;
. diversify Snyder's reserves and production, both geographically and as to
the mix of oil and gas;
. expose Snyder's stockholders to additional opportunities to participate
in long-term reserve and production growth, with a mix of exploitation
opportunities and high impact exploratory plays;
. enhance Snyder's competitive position, both in the short term, in light
of prevailing low product prices, and over the long term if prices
improve;
. position Snyder stockholders to benefit from larger, high-impact
acquisition opportunities than Snyder could prudently pursue alone; and
. improve stockholder liquidity and Snyder's appeal to large institutional
investors.
The principal reasons for the merger considered by Snyder's board of
directors are as follows:
. The merger is intended to result in a combined company with a more robust
financial structure, enjoying greater access to capital, lower cost of
capital, increased flexibility in capital allocation and added resilience
against fluctuations in commodity prices;
. The merger is intended to result in a combined company with greater
discretionary cash flow and debt capacity than either Snyder or Santa Fe
alone. This will increase the combined company's ability to grow reserves
through exploration and development using internally generated funds and
will position the resulting company to more aggressively pursue large,
high impact domestic and international transactions without excessive
risk to the company's balance sheet;
. The merger will result in a combined company with a very competitive cost
structure, able to compete more effectively over the long term given the
pessimistic outlook for commodity prices and the increasing trend toward
consolidation in the exploration and production industry. The merger is
expected to yield an annualized cost savings of approximately $20
million;
. Operationally, the merger is intended to result in a combined company
having a well balanced asset and cash flow base with significant
predictable internal production growth and numerous high impact
exploration opportunities. The combined company's estimated 1999
production will consist of a more geographically diverse mix of 55% gas
and 45% oil, mitigating Snyder's vulnerability to regional pricing
disparities. The addition of significant amounts of oil production will
expose Snyder's stockholders to significant upside potential in any oil
price recovery, but increase their exposure to the risk that oil prices
remain depressed. Combining Snyder and Santa Fe's Gulf of Mexico assets
should allow the combined companies to achieve a critical mass in the
Gulf, creating increased operational efficiencies and lower general and
administrative costs. Combining the two companies should also result in a
much larger, more diverse inventory of exploration and exploitation
projects, facilitating more effective management of the combined
company's risk profile. The combined company will possess a breadth of
lower risk exploration and development opportunities in the Rocky
Mountains, Permian Basin, Gulf of Mexico, Brazil and Argentina, against
which to offset the risk associated with higher impact exploratory plays
in Indonesia, West Africa, China and North Louisiana;
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<PAGE>
. Organizationally, the merger will result in a combined company whose
personnel will be chosen from a substantially larger executive and
technical talent pool than is available to Snyder alone. By combining the
two companies through the merger, Snyder stockholders will additionally
benefit from Santa Fe's international managerial infrastructure;
. The merger is intended to result in a combined company whose common stock
will trade on the New York Stock Exchange in substantially greater dollar
volumes than that of Snyder alone, providing greater liquidity for Snyder
stockholders and for new institutional investors;
. The ratio at which shares of Snyder common stock will be exchanged for
shares of Santa Fe common stock in the merger was determined to be fair
to holders of Snyder common stock from a financial point of view by
management and Snyder's financial advisor, Petrie Parkman; and
. The merger will not foreclose the Snyder stockholders' opportunity to
receive a premium for their shares in any "change of control" transaction
that may be proposed with respect to the combined company in the future.
In reaching its determination with respect to the merger, the Snyder board
considered a number of factors, including the reasons for the merger set forth
above and the matters described under "Risk Factors" on pages 10-13. In view of
the numerous factors taken into consideration, the Snyder board did not
consider it practical to, and did not attempt to, quantify or assign relative
weights to the factors considered by it in reaching its decision.
In considering the recommendations of the Snyder board, Snyder stockholders
should be aware that certain officers and directors of Snyder have interests in
the proposed merger that are different from and in addition to the interests of
Snyder stockholders generally. The Snyder board was aware of these conflicts of
interests and considered them in approving the merger and merger agreement. See
"Interests of Certain Directors and Officers in the Merger" that begins on page
55 of this document.
Opinions of Financial Advisors
Santa Fe's Financial Advisors.
Santa Fe engaged Chase and DLJ as its financial advisors based on Chase's
and DLJ's experience and expertise. Chase and DLJ are internationally
recognized investment banking firms that have substantial experience in
transactions similar to the merger. The Santa Fe financial advisors, as part of
their investment banking businesses, are continuously engaged in
. the valuation of businesses and securities in connection with mergers
and acquisitions;
. negotiated underwritings;
. competitive biddings;
. secondary distributions of listed and unlisted securities;
. private placements; and
. valuations for corporate and other purposes.
At the January 13, 1999 meeting of the Santa Fe board of directors, Chase
and DLJ delivered their oral opinions, which were subsequently confirmed
separately by each in writing, stating that, as of the date thereof, and
subject to certain matters set forth therein, the exchange ratio of 2.05 shares
of Santa Fe common stock for each share of Snyder common stock was fair to the
stockholders of Santa Fe from a financial point of view.
The full text of the Chase opinion, which sets forth the assumptions made,
matters considered and qualifications and limitations on the review undertaken
by Chase, is attached as Annex C to this document, and is incorporated by
reference in this document. The full text of the DLJ opinion, which
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<PAGE>
sets forth the assumptions made, matters considered and qualifications and
limitations on the review undertaken by DLJ, is attached as Annex B to this
document, and is incorporated by reference in this document. The summary of the
Santa Fe financial advisors opinions set forth in this document, which sets
forth all of the material provisions of such fairness opinions, is qualified in
its entirety by reference to the full text of the Chase opinion and of the DLJ
opinion, as applicable. Santa Fe stockholders are urged to read carefully each
of the Santa Fe financial advisors opinions in their entirety. The Santa Fe
financial advisors opinions were provided to the Santa Fe board for its
information and are directed only to the fairness, from a financial point of
view, of the exchange ratio to the stockholders of Santa Fe. The Santa Fe
financial advisors opinions did not constitute a recommendation to the Santa Fe
board in connection with the merger and do not address the merits of the
underlying decision by Santa Fe to engage in the merger or the price or range
of prices at which shares of Santa Fe common stock may trade subsequent to the
announcement or consummation of the merger. The Santa Fe financial advisors
opinions also do not constitute a recommendation to any Santa Fe stockholder as
to how such stockholder should vote on the Santa Fe proposal, or any matter
related to the merger.
Although the Santa Fe financial advisors each evaluated the fairness, from a
financial point of view, of the exchange ratio of 2.05 shares of Santa Fe
common stock for each share of Snyder common stock to the Santa Fe
stockholders, the exchange ratio of 2.05 shares of Santa Fe common stock for
each share of Snyder stock itself was determined by Santa Fe and Snyder through
arm's-length negotiations. The Santa Fe financial advisors provided advice to
Santa Fe during the course of such negotiations. Santa Fe did not provide
specific instructions to, or place any limitation on, the Santa Fe financial
advisors with respect to the procedures to be followed or factors to be
considered by the Santa Fe financial advisors in performing their analyses or
providing their opinions. The Santa Fe financial advisors were not requested
to, and did not, solicit offers from third parties to acquire all or part of
Santa Fe.
Chase Opinion
In connection with the Chase opinion, Chase:
. reviewed the merger agreement;
. reviewed certain publicly available business and financial information
that Chase deemed relevant relating to Santa Fe and Snyder and the
industry in which they operate;
. reviewed certain internal non-public financial and operating data
provided to it by or on behalf of the managements of Snyder and Santa Fe
relating to such businesses, including certain information as to the
future financial results of such businesses, as well as the amount and
timing of the cost savings and related expenses and synergies expected to
result from the merger (the "Expected Synergies");
. discussed with members of the senior management and representatives of
Santa Fe and Snyder the operations, historical financial statements and
future prospects before and after giving effect to the merger of Santa Fe
and Snyder, as well as their views of the business, operational and
strategic benefits and other implications of the merger, including the
Expected Synergies and such other matters as Chase deemed necessary or
appropriate;
. compared the financial and operational performance of Snyder and Santa Fe
with publicly available information concerning certain other companies
Chase deemed relevant and reviewed the relevant historical stock prices
and trading volumes of the Santa Fe common stock, the Snyder common stock
and certain publicly traded securities of such other companies;
. reviewed the financial terms of certain recent business combinations and
acquisition transactions Chase deemed relevant to the merger and
otherwise relevant to Chase's inquiry; and
. made such other analyses and examinations as Chase deemed necessary or
appropriate.
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<PAGE>
Chase assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for it, or publicly
available, for purposes of the Chase opinion. Chase relied upon the assurances
of management of Santa Fe and Snyder that they were not aware of any facts that
would make such information inaccurate or misleading. Chase neither made nor
obtained any independent evaluations or appraisals of the reserves or other
assets or liabilities of Santa Fe or Snyder, nor did it conduct a physical
inspection of the properties and facilities of Santa Fe or Snyder. With respect
to the oil and natural gas reserves of Santa Fe and Snyder, Chase relied upon
and assumed the accuracy of the reserve information provided to Chase by
management of Santa Fe and Snyder. Chase assumed that the non-historical
financial information and the Expected Synergies provided to or discussed with
it were reasonably determined on bases reflecting the best currently available
estimates and judgments of the managements of Santa Fe and Snyder as to the
future financial performance of Santa Fe and Snyder, as the case may be, and
the Expected Synergies. Chase further assumed that, in all material respects,
such future results and Expected Synergies will be realized in the amounts and
times indicated by the opinion. Chase expressed no view as to such non-
historical information or the assumptions on which they were based.
For purposes of rendering the Chase opinion, Chase assumed, in all respects
material to its analysis, that the representations and warranties of each party
contained in the merger agreement were true and correct, that each party will
perform all of the covenants and agreements required to be performed by it
under the merger agreement and that all conditions to the consummation of the
merger will be satisfied without waiver by either party of any covenant,
agreement or condition to the merger. Chase also assumed that all material
governmental, regulatory or other consents and approvals will be obtained and
that, in the course of obtaining any necessary governmental, regulatory or
other consents and approvals, or any amendments, modifications, or waivers to
any documents to which either Santa Fe or Snyder is a party, no restrictions
will be imposed or amendments, modifications or waivers made that would have
any material adverse effect on the contemplated benefits to Snyder and Santa Fe
of the merger. In addition, Chase assumed that the merger will qualify as a
tax-free reorganization for U.S. federal income tax purposes.
The following summarizes the material analyses performed by Chase and
reviewed with the Santa Fe board at its meeting on January 12, 1999 in
connection with Chase's presentation and its opinion to the Santa Fe board
delivered at a meeting held on January 13, 1999.
Net Asset Value Based on Discounted Cash Flow Analysis. Using a discounted
cash flow methodology based in part on information provided by Santa Fe and
Snyder, Chase calculated a range of net asset values of Santa Fe and Snyder and
a range of implied exchange ratios. In the analysis, Chase assumed two
alternative sets of prevailing prices at which oil and natural gas would sell:
$13.00 per Bbl of oil increasing by 3% per year and $1.90 per MMBtu of natural
gas increasing by 3% per year (the "Base Case") and $15.00 per Bbl of oil
increasing by 3% per year and $2.10 per MMBtu of natural gas increasing by 3%
per year (the "Alternative Case"). Chase also assumed a discount rate of 10%
for all domestic divisions and the Argentina division of Santa Fe, and a
discount rate of 15% for all other international divisions. In calculating the
values of proved reserves, probable and possible reserves, and exploration
potential, Chase assumed that proved reserves were equal to 100% of present
value, that probable reserves were equal to 35% to 70% of present value, that
possible reserves were equal to 10% to 25% of present value and that
exploration potential was equal to 5% to 10% of present value. Based on such
analysis, Chase calculated an implied exchange ratio of 2.13 for the
Alternative Case and 2.52 for the Base Case.
Contribution Analysis. Chase analyzed the relative contributions of Santa Fe
and Snyder to the pro forma combined Santa Fe Snyder based in part on
information provided by Santa Fe and Snyder. The analysis indicated that Santa
Fe would contribute approximately 59% of the market value of equity plus total
debt and preferred stock, if any, less cash, or "firm value," 69.4% of
estimated 1998 reserves and 59% of equity market value. The analysis also
indicated that the expected contributions of Santa Fe for 1998, 1999 and 2000
would be 62.4%, 59.2% and 62.1%, respectively, for EBITDAX, 71.8%, 70.1% and
68.2%, respectively, for
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<PAGE>
production and 66.2%, 60.7% and 62.7%, respectively, for discretionary cash
flow ("DCF"). DCF is equal to net income plus depreciation, depletion and
amortization, taxes and exploration expense and any extraordinary items. Based
on such analysis Chase calculated an implied exchange ratio range of 1.21 to
2.15.
Accretion/Dilution Analysis. Chase analyzed the expected pro forma impact of
the merger on earnings per share, cash flow per share and net asset value per
share for Santa Fe and Snyder for 1999, 2000 and 2001. The analysis assumed $20
million in synergies per year and was based on the diluted shares outstanding
and the proposed exchange ratio of 2.05. The pro forma results were calculated
based in part on information provided by Santa Fe and Snyder. Chase noted that
the merger would be accretive to Santa Fe's earnings per share and cash flow
per share in each of 1999, 2000 and 2001. Chase also noted that the merger
would be accretive to the net asset value per share of Santa Fe.
Comparable Company Public Market Valuation. Chase compared certain financial
ratios for Santa Fe and Snyder to those for selected groups of companies. Such
comparisons were based in part on information provided by Santa Fe and Snyder
to Chase and on pro forma estimates for the selected companies which were based
on available public consensus estimates. Santa Fe was compared to the following
five companies (the "Santa Fe Group"):
. Apache Corporation
. Devon Energy Corporation
. Noble Affiliates, Inc.
. Pogo Producing Company
. Vintage Petroleum, Inc.
Snyder was compared to the following seven companies (the "Snyder Group"):
. Barrett Resources Corporation
. Cabot Oil & Gas Corporation
. Cross Timbers Oil Company
. Louis Dreyfus Natural Gas Corp.
. Newfield Exploration Company
. The Houston Exploration Company
. Tom Brown, Inc.
Chase noted that firm equity value as a multiple of estimated EBITDAX ranged
from 5.4x to 9.1x for 1998 and 4.2x to 6.5x for 1999 for the Santa Fe Group,
and from 5.1x to 8.4x for 1998 and 4.3x to 5.7x for 1999 for the Snyder Group.
Using the multiples for the Santa Fe Group, Chase calculated an implied firm
value for Santa Fe of $942.5 million to $1,087.0 million based on 1998
estimated EBITDAX, and of $836.7 million to $1,004.0 million based on 1999
estimated EBITDAX. Using the multiples for the Snyder Group, Chase calculated
an implied firm value for Snyder of $517.5 million to $603.7 million based on
1998 estimated EBITDAX, and of $546.8 million to $656.2 million based on 1999
estimated EBITDAX. Using the multiples for the Santa Fe Group, Chase calculated
an implied share price for Santa Fe of $6.29 to $7.70 based on 1998 estimated
EBITDAX, and of $5.27 to $6.89 based on 1999 estimated EBITDAX. Using the
multiples for the Snyder Group, Chase calculated an implied share price for
Snyder of $11.15 to $13.73 based on 1998 estimated EBITDAX, and of $12.03 to
$15.30 based on 1999 estimated EBITDAX.
Chase also examined equity values as multiples of 1998 and 1999 estimated
DCF and noted that equity values as a multiple of estimated DCF ranged from
4.0x to 8.7x for 1998 and 4.4x to 7.3x for 1999 for the Santa Fe Group, and
from 4.3x to 7.9x for 1998 and 3.2x to 6.7x for 1999 for the Snyder Group.
Using the multiples for the Santa Fe Group, Chase calculated an implied firm
value for Santa Fe of $1,002.4 million to $1,144.4 million based on 1998
estimated DCF, and of $932.7 million to $1,075.0 million based on 1999
estimated DCF. Using the multiples for the Snyder Group, Chase calculated an
implied firm value for Snyder of $529.7 million to $602.1 million based on 1998
estimated DCF, and of $577.3 million to $668.4 million based on 1999 estimated
DCF. Using the multiples for the Santa Fe Group, Chase calculated an implied
share
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price for Santa Fe of $6.87 to $8.25 based on 1998 estimated DCF, and of $6.20
to $7.58 based on 1999 estimated DCF. Using the multiples for the Snyder Group,
Chase calculated an implied share price for Snyder of $11.51 to $13.68 based on
1998 estimated DCF, and of $12.94 to $15.66 based on 1999 estimated DCF
including $0.67 per share attributable to current market values of certain
equity investments of Snyder.
Based on such analysis, Chase calculated an average implied firm value
ranging from $928.6 million to $1,077.7 million for Santa Fe and from $542.8
million to $632.6 million for Snyder. The average implied share price was
calculated to range from $6.16 to $7.60 for Santa Fe and from $11.91 to $14.59
for Snyder. Based on such analyses, Chase calculated an implied exchange ratio
range of 1.57 to 2.37.
None of the selected companies reviewed were identical to Santa Fe or
Snyder, and, accordingly, an analysis of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operational characteristics of the companies involved and other factors that
could affect the companies compared to Santa Fe and Snyder.
Precedent Transaction Public Market Valuation. Chase analyzed the purchase
price and transaction value multiples of 17 selected transactions in the oil
and gas industry that were announced in 1997 and 1998. Such analyses were based
on publicly available information for the exchange ratios in the relevant
transactions and the information for Santa Fe and Snyder provided to Chase.
Chase noted that firm values as a multiple of 1998 estimated EBITDAX ranged
from 4.2x to 12.8x, that firm values per 1998 proved BOE ranged from $4.95 to
$14.66, and that firm values as a multiple of 1998 estimated after tax present
value of proved reserves ranged from 0.9x to 2.4x. Based upon these
comparisons, Chase calculated an average implied firm value ranging from
$1,052.3 million to $1,225.7 million for Santa Fe and from $610.9 million to
$712.2 million for Snyder, and an average implied share price ranging from
$7.05 to $8.73 for Santa Fe and from $13.36 to $16.39 for Snyder. Based on such
analysis Chase calculated an implied exchange ratio range from 1.53 to 2.32.
None of the selected transactions reviewed were identical to the merger,
and, accordingly, an analysis of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and
operational characteristics of the companies involved in the selected
transactions and other factors that could affect the acquisition of the
transactions selected compared to the merger.
Premiums Paid Analysis. Using publicly available information, Chase analyzed
stock premiums paid in 15 selected completed or pending transactions that were
not limited to the oil and gas industry that were announced as mergers of
equals between January 1, 1995 and January 11, 1999 with transaction values
between $1 billion and $3 billion. Chase examined the premiums over the trading
prices based upon stock prices one day, one week and four weeks prior to the
announcement of the selected transactions. The average premiums for the
selected transactions over the trading prices one day, one week and four weeks
prior to the announcement dates were 5.3%, 7.0% and 10.6%, respectively. The
high premiums for the selected transactions over the trading prices based on
stock prices one day, one week and four weeks prior to the announcement dates
were 34.0%, 31.8% and 35.7%, respectively, and the low premiums were -16.1%, -
9.8% and -10.6%, respectively. Using the January 11, 1999 stock prices of
$14.25 for Snyder and $6.63 for Santa Fe, the premiums paid analysis led to an
implied exchange ratio range of 1.80 to 2.88.
Chase also examined the premiums over the trading prices based on Santa Fe
and Snyder stock prices one day, one week and four weeks prior to the
announcement of the merger after the close of trading on January 13, 1999.
Using the exchange ratio of 2.05, the premiums to the Snyder stockholders for
the merger over the trading prices one day, one week and four weeks prior to
the announcement date were -0.12%, -4.22% and 5.23%, respectively.
None of the selected transactions reviewed were identical to the merger,
and, accordingly, an analysis of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and
operational characteristics of the companies involved in the selected merger of
equals transactions and other factors that could affect the acquisition of the
transactions selected compared to the merger.
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The following is a summary of implied exchange ratio ranges derived from
Chase's net asset value based on discounted cash flow analysis, contribution
analysis, comparable public market valuation, precedent transaction public
market valuation, and premiums paid analysis, all as described above.
<TABLE>
<CAPTION>
Implied
Exchange
Method of Analysis Ratio Range
------------------ -----------
<S> <C>
Net Asset Value Based on Discounted Cash Flow Analysis.............. 2.13x-2.52x
Contribution Analysis............................................... 1.21x-2.15x
Comparable Public Market Valuation.................................. 1.57x-2.37x
Precedent Transaction Public Market Valuation....................... 1.53x-2.32x
Premiums Paid Analysis.............................................. 1.80x-2.88x
</TABLE>
Relative Equity Performance Analysis. Chase compared the stock prices of the
Santa Fe common stock and the Snyder common stock for the period from August 1,
1997 to January 11, 1999 against the average stock prices for the following 12
publicly traded companies:
. Apache Corporation
. Barrett Resources Corporation
. Cabot Oil & Gas Corporation
. Cross Timbers Oil Company
. Devon Energy Corporation
. Louis Dreyfus Natural Gas Corp.
. Newfield Exploration Company
. Noble Affiliates, Inc.
. Pogo Producing Company
. The Houston Exploration Company
. Tom Brown, Inc.
. Vintage Petroleum, Inc.
This comparison showed that during such period Santa Fe's share price fell
by 20%, Snyder's share price fell by 23% and the share prices for the 12
subject companies fell by an average of 30%.
Historical Exchange Ratio Analysis. Chase reviewed the historical trading
price of Snyder common stock relative to Santa Fe common stock based on closing
sale prices during the period from July 8, 1998 to January 11, 1999. This
analysis indicated an average ratio of 2.051 to one for the five trading days
ending on January 11, 1999, 1.971 to one for the 10 trading days ending on
January 11, 1999, 2.010 to one for the 20 trading days ending on January 11,
1999, 1.959 to one for the 30 trading days ending on January 11, 1999, 1.909 to
one for the 60 trading days ending on January 11, 1999, 1.926 to one for the 90
trading days ending on January 11, 1999, and 1.940 to one for the six months
ending on January 11, 1999.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is, therefore, not readily
susceptible to partial analysis or summary description and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the opinion of Chase, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Chase opinion.
Chase did not form an opinion as to whether any individual analysis, considered
in isolation, supported or failed to support the Chase opinion. In arriving at
its opinion, Chase considered the results of all such analyses and did not
attribute particular weight to any one analysis or factor considered by it. The
analyses performed by Chase, particularly those based on forecasts, are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Chase's analysis of the fairness, from
a financial point of view, to the stockholders of Santa Fe, other than Snyder
and its affiliates, of the exchange ratio in the merger.
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<PAGE>
Chase, as part of its financial advisory business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions and valuations for estate, corporate and other purposes. The Chase
Manhattan Corporation and its affiliates, including Chase, in the ordinary
course of business, have, from time to time, provided, and in the future may
continue to provide, commercial and/or investment banking services to Santa Fe
and Snyder, including serving as agent bank under Santa Fe's senior credit
facility. In the ordinary course of business, Chase or its affiliates may trade
in the debt and equity securities of Santa Fe and Snyder for its own accounts
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
During 1997, Chase participated in an underwriting syndicate related to
Snyder's offering of $175 million principal amount of 8.75% Senior Subordinated
Notes for which Chase received customary commissions and fees. Chase is also
one of the lending banks under Snyder's credit facility. Neither Santa Fe nor
Chase believe this prior dealing created any risk of a meaningful conflict
precluding Chase's objective representation of Santa Fe for purposes of opining
on the fairness to Santa Fe stockholders of the exchange ratio in the merger
from a financial point of view.
The terms of the engagement of Chase by Santa Fe are set forth in a letter
agreement, dated January 11, 1999, between Chase and Santa Fe (the "Engagement
Letter"). Pursuant to the terms of the Engagement Letter, a fee of $500,000 was
payable to Chase upon the date on which Chase advised the Santa Fe board that
it was prepared to render an opinion. Chase will receive an additional
$1,500,000 upon consummation of the merger, and in the alternative, a fee if
the merger transaction fails to occur and Santa Fe receives a termination fee
from Snyder. In addition, Santa Fe has agreed to reimburse Chase for its
reasonable out-of-pocket expenses, including reasonable fees and disbursements
of its counsel and reasonable travel and other out-of-pocket expenses, and to
indemnify Chase against certain liabilities relating to or arising out of its
engagement. To the extent that such indemnification includes liabilities
arising under the federal securities laws, it may not be enforceable as it may
be determined to be against public policy.
DLJ Opinion
In arriving at its opinion, DLJ
. reviewed the merger agreement;
. reviewed certain publicly available business and financial information
relating to Santa Fe and Snyder, including, among other things,
--the Annual Report on Form 10-K and related audited financial
statements for the fiscal year ended December 31, 1997,
--the Quarterly Report on Form 10-Q and related unaudited financial
statements for the fiscal quarters ended March 31, 1998, June 30, 1998
and September 30, 1998,
--the Prospectus dated May 21, 1997 of Snyder related to the offering
of the 8 3/4% Senior Subordinated Notes Due 2007,
--the Prospectus dated May 18, 1994 of Santa Fe related to the offering
of the 11% Senior Subordinated Debentures Due 2004,
--the Proxy Statement on Schedule 14A dated March 20, 1998 of Santa Fe,
and
--the Proxy Statement on Schedule 14A dated April 16, 1998 of Snyder;
. reviewed certain business and financial information, including certain
information as to future financial results, relating to Santa Fe and
Snyder, prepared by the respective managements based on, among other
things,
--certain estimates of proved and non-proved reserves,
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-- projected annual production of such reserves in certain domestic and
international areas, and
-- amounts and timing of the cost savings and operating synergies
expected to result from a combination of the businesses of Santa Fe
and Snyder;
. discussed the historical operating and financial data and performance of
Santa Fe and Snyder with management and operating personnel of each
company;
. discussed operating and other information prepared by the respective
managements of Santa Fe and Snyder with management and operating
personnel of Santa Fe and Snyder as well as their views of the business,
operating and strategic benefits of the merger, including the amount and
timing of cost savings and operating synergies expected to result from
the merger;
. compared certain financial, operating and securities data of Santa Fe and
Snyder with various other companies that DLJ deemed relevant;
. reviewed the historical stock prices and trading volumes of the Santa Fe
common stock and the Snyder common stock;
. compared financial terms of the merger with the financial terms of
certain other transactions that DLJ deemed relevant; and
. conducted such other financial studies, analyses and investigations as
DLJ deemed necessary and appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to it from public sources and that was provided to DLJ by Santa Fe and Snyder
or their respective representatives. In particular, DLJ relied upon the
estimates of the managements of Santa Fe and Snyder of the operating synergies
achievable as a result of the merger and its discussion of such synergies with
the managements of Santa Fe and Snyder. With respect to the non-historical
financial information supplied to DLJ, DLJ assumed that such information was
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the managements of Santa Fe and Snyder as to the
future operating and financial performance of each company, respectively. DLJ
did not assume any responsibility for making any independent evaluation of
Santa Fe's and Snyder's assets or liabilities or for making any independent
verification of any of the information reviewed by DLJ.
In addition, DLJ assumed, in all respects material to its analysis, that the
representations and warranties of each party contained in the merger agreement
were true and correct, that each party will perform all of the covenants and
agreements required to be performed by it under the merger agreement and that
all conditions to the consummation of the merger will be satisfied without
waiver thereof. DLJ also assumed that all material governmental, regulatory or
other consents and approvals will be obtained and that, in the course of
obtaining any necessary governmental, regulatory or other consents and
approvals, or any amendments, modifications, or waivers to any documents to
which either Santa Fe or Snyder is a party, no restrictions will be imposed or
amendments, modifications or waivers made that would have any material adverse
effect on the contemplated benefits to Santa Fe and Snyder of the merger. In
addition, DLJ assumed that the merger will qualify as a tax-free reorganization
for U.S. federal income tax purposes.
The following summarizes the material analysis performed by DLJ and reviewed
with the Santa Fe board at its meeting on January 12, 1999 in connection with
DLJ's presentation and its opinion to the Santa Fe board at a meeting held on
January 13, 1999.
The DLJ opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
it as of, the date of the DLJ opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any
obligation to update, revise or reaffirm the DLJ opinion. The DLJ opinion does
not address the relative merits of the proposed merger or other business
strategies being considered by the Santa Fe board, nor does it address the
Santa Fe board's decision to proceed with the proposed merger.
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<PAGE>
Set forth below is a summary of the material analyses performed by DLJ in
connection with the preparation of the DLJ opinion and included in the
presentation made by DLJ to the Santa Fe board on January 12, 1999. The
following table should be read in conjunction with the more detailed
descriptions set forth below.
<TABLE>
<CAPTION>
Implied
Santa Fe/Snyder
Exchange Ratio
Analysis Range
-------- ---------------
<S> <C>
Net Asset Value Based on Discounted Cash Flow Analysis...... 1.98x to 2.33x
Contribution Analysis....................................... 1.21x to 2.21x
Analysis of Certain Other Publicly Traded Companies......... 1.55x to 2.79x
Comparable Transactions Analysis............................ 1.28x to 2.47x
Historical Exchange Ratio Analysis.......................... 1.88x to 2.21x
Proposed Santa Fe/Snyder Exchange Ratio..................... 2.05x
</TABLE>
Net Asset Value Based on Discounted Cash Flow Analysis. DLJ estimated, at a
range of discount rates and risk factors and under two oil and gas price
scenarios, the present value of the future cash flows that Santa Fe could be
expected to generate from its proved, probable and possible reserves as of
January 1, 1999 based on reserve, production and production cost estimates
provided by Santa Fe management. DLJ also estimated a range of present values
for cash flows from identified potential exploration prospects. DLJ arrived at
a range of present values of future cash flows by using the price scenarios,
discount rates and risk factors described below.
The range of discount rates used was chosen by DLJ and based on an analysis
of the weighted average cost of capital of Santa Fe, as well as various
industry benchmarks and assumptions provided by and discussed with Santa Fe
management. The range of risk factors used was chosen by DLJ and based on
various industry benchmarks and assumptions provided by and discussed with
Santa Fe management. DLJ added to such estimated values for proved, probable
and possible reserves and potential exploration prospects assessments of the
value of certain other assets and liabilities of Santa Fe, including other land
and acreage, working capital and debt to arrive at a net asset value ("NAV")
for Santa Fe. These assessments were made by DLJ based on information provided
by Santa Fe's management and on various industry benchmarks and assumptions
provided by and discussed with Santa Fe management.
DLJ estimated, at a range of discount rates and risk factors and under two
oil and gas price scenarios, the present value of the future cash flows that
Snyder could be expected to generate from its proved, probable and possible
reserves as of January 1, 1999 based on reserve, production and production cost
estimates provided by Snyder management. DLJ also estimated a range of present
values for cash flows from identified potential exploration prospects. DLJ
arrived at a present value of future cash flows by using the price scenarios,
discount rates and risk factors described below.
The range of discount rates used was chosen by DLJ and based on an analysis
of the weighted average cost of capital of Snyder, as well as various industry
benchmarks and assumptions provided by and discussed with the managements of
Snyder and Santa Fe. The range of risk factors used was chosen by DLJ and based
on various industry benchmarks and assumptions provided by and discussed with
Santa Fe management. DLJ added to such estimated values for proved, probable
and possible reserves and potential exploration prospects assessments of the
value of certain other assets and liabilities of Snyder, including other land
and acreage, working capital and debt to arrive at an NAV for Snyder. These
assessments were made by DLJ based on information provided by the managements
of Snyder and Santa Fe and on various industry benchmarks and assumptions
provided by and discussed with Santa Fe management.
The NAV analysis was performed utilizing two pricing scenarios. The base
case assumed NYMEX West Texas Intermediate oil prices of $13.00/barrel with 3%
annual escalation and NYMEX Henry Hub natural gas prices of $1.80/MMBtu with 3%
annual escalation. The alternative case used $15.00/barrel and $2.00/MMBtu for
oil and natural gas prices, respectively, with 3% annual escalation. Discount
rates and risk factors were
33
<PAGE>
assigned based upon domestic and international determination. Domestic
operations were assigned discount rates between 8% and 10% while international
operations were assigned discount rates of between 10% and 20%. Reserve
category risks were assigned weightings as follows: proved reserves, 90% to
100% of present value; probable reserves, 50% to 70% of present value and
possible reserves, 20% of present value. Potential exploration prospects were
assigned 0% to 10% of estimated present value, valued at $1.00 to $2.00 per
barrel of oil equivalent risked reserve potential.
The exchange ratio of Santa Fe shares per Snyder share implied from this
analysis ranged from a high of 2.33x to a low of 1.98x. Because the proposed
exchange ratio of 2.05x was within this range, this analysis supported the DLJ
opinion.
Net Asset Value Summary
(in millions, except per share amounts and ratios)
<TABLE>
<CAPTION>
Santa Fe Snyder
----------------------- --------------------------
Pricing Case Base Alternative Base Alternative
- ------------ ----------- ----------- ------------ -------------
Low High Low High Low High Low High
----- ----- ----- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value............. $ 455 $ 553 $ 602 $ 830 $ 317 $ 374 $ 456 $ 535
Shares Outstanding.......... 102.6 102.6 102.6 102.6 33.4 33.4 33.4 33.4
NAV/Share................... $4.43 $5.39 $5.87 $8.09 $9.48 $11.21 $13.66 $16.01
Implied Exchange Ratio...... 2.14x 2.08x 2.33x 1.98x
</TABLE>
Contribution Analysis. Based in part upon information provided by Santa Fe
and Snyder, DLJ analyzed the relative contributions of each company to the pro
forma combined company for the years 1999 through 2000. DLJ analyzed the
respective contributions of each company's EBITDAX and net income plus deferred
taxes, depreciation, amortization, exploration expense and other non-cash
charges ("After-Tax Cash Flow") for the last twelve-month reporting period
before the announcement ended on September 30, 1998 ("LTM"), and for the
estimated twelve-month periods ending December 31 of 1998 ("1998E"), 1999
("1999E") and 2000 ("2000E"). DLJ also analyzed the respective contributions of
each company's 1998E, 1999E and 2000E production as well as 1998E proved
reserves.
Based upon this analysis, DLJ determined that Santa Fe would contribute
EBITDAX on a pro forma basis as follows: 66.6% of LTM; 62.6% of 1998E; 60.5% of
1999E and 62.5% of 2000E. Therefore, adjusting for different levels of leverage
at the two companies, the implied percentage of equity value contributed by
Santa Fe based on pro forma EBITDAX was as follows: 68.0% of LTM; 62.3% of
1998E; 59.2% of 1999E and 62.1% of 2000E.
Based upon this analysis, Santa Fe would contribute After-Tax Cash Flow on a
pro forma basis as follows: 71.4% of LTM; 66.2% of 1998E; 60.7% of 1999E and
62.8% of 2000E. The implied percentage of equity contributed by Santa Fe's
After-Tax Cash Flow on a pro forma basis was equivalent to the above
percentages.
Based upon this analysis, Santa Fe would contribute total production on a
pro forma basis as follows: 69.2% of 1998E; 68.1% of 1999E; 66.7% of 2000E. The
implied percentage of equity value contributed by Santa Fe based on a pro forma
production was as follows: 71.7% of 1998E; 70.1% of 1999E; 68.2% of 2000E.
In addition, DLJ reviewed 1998E proved reserves contributions of each
company on an MMBOE basis and concluded that Santa Fe would contribute 67.6% of
pro forma reserves which implies 69.3% of equity value.
The contribution analysis as performed using EBITDAX, production and proved
reserves relates to respective contributions to pro forma combined Enterprise
Value. Therefore, the contribution analysis based on
34
<PAGE>
these measures was adjusted for leverage at Santa Fe and Snyder. The implied
percent of equity value denotes each respective company's share of pro forma
equity based on its contribution to Enterprise Value, accounting for the debt
contributed by each of Santa Fe and Snyder, respectively.
Contribution Analysis Summary
<TABLE>
<CAPTION>
Santa Fe Snyder
Implied Implied
% of % of Implied
Equity Equity Exchange
Value Value Ratio
-------- ------- --------
<S> <C> <C> <C>
EBITDAX
LTM................................................... 68.0% 32.0% 1.45x
1998E................................................. 62.3 37.7 1.86
1999E................................................. 59.2 40.8 2.12
2000E................................................. 62.1 37.9 1.87
Cash Flow from Operations
LTM................................................... 71.4% 28.6% 1.23x
1998E................................................. 66.2 33.8 1.57
1999E................................................. 60.7 39.3 1.99
2000E................................................. 62.8 37.2 1.82
Production (MMBOE)
1998E................................................. 71.7% 28.3% 1.21x
1999E................................................. 70.1 29.9 1.31
2000E................................................. 68.2 31.8 1.44
1998E Proved Reserves (MMBOE)......................... 69.3% 30.7% 1.36x
- --------------------------------------------------------------------------------
Average............................................... 65.8% 34.2% 1.62x
Medium................................................ 66.2 33.8 1.57
High.................................................. 71.7 40.8 2.12
Low................................................... 59.2 28.3 1.21
</TABLE>
The exchange ratio of Santa Fe shares per Snyder share implied from this
analysis ranged from a high of 2.12x to a low of 1.21x. Because the proposed
exchange ratio of 2.05x was within this range, this analysis supported the DLJ
opinion.
Comparable Company Analysis. To provide contextual data and comparative
market information, DLJ compared selected share price, earnings and operating
and financial ratios for Santa Fe and Snyder to the corresponding data and
ratios of two separate groups of companies whose securities are publicly
traded. Although no company used in the comparable company analysis is
identical to either Santa Fe or Snyder, DLJ believes the selected groups of
companies to be appropriate comparisons to the respective companies. Santa Fe
was compared to the following companies:
. Apache Corporation;
. Enron Oil & Gas Company;
. Noble Affiliates, Inc.;
. Nuevo Energy Company;
. Pogo Producing Company; and
. Vintage Petroleum, Inc.
Snyder was compared to the following companies:
.Barrett Resources Corporation;
35
<PAGE>
. Cross Timbers Oil Company;
. Devon Energy Corporation;
. Tom Brown, Inc.;
. Burlington Resources Inc.; and
. Louis Dreyfus Natural Gas Corp.
Such data and ratios included measures of value defined by market
capitalization of common stock ("Equity Value") plus total debt, preferred
stock and minority interest less cash and cash equivalents of the comparable
companies ("Enterprise Value") as a multiple of LTM EBITDAX, 1998E EBITDAX,
1999E EBITDAX, 1997 proved reserves and 1997 pre-tax SEC Value, or standardized
measure of discounted future net cash flows. In addition, ratios included
Equity Value as a multiple of LTM After-Tax Cash Flow, 1998E After-Tax Cash
Flow and 1999E After-Tax Cash Flow. The comparable company analysis was
conducted based upon closing share prices on January 8, 1999.
DLJ analyzed Enterprise Value as a multiple of estimated EBITDAX for both
companies. In the analysis of the Santa Fe group, this ranged from 4.2x to 6.8x
for LTM, 4.9x to 10.7x for 1998E and 4.9x to 8.3x for 1999E. Based upon these
multiples, implied Santa Fe per share values were between $3.81 and $8.12 for
LTM, $3.74 and $11.91 for 1998E and $4.83 and $10.37 for 1999E. In the analysis
of the Snyder group, the Enterprise Value multiples ranged from 6.2x to 8.7x
for LTM, 6.5x to 11.2x for 1998E and 5.5x to 8.5x for 1999E. Based upon these
multiples, implied Snyder per share values were between $10.24 and $16.62 for
LTM, $11.19 and $23.32 for 1998E and $12.42 and $22.24 for 1999E.
DLJ also analyzed Equity Value as a multiple of estimated After-Tax Cash
Flow for both companies. In the analysis of the Santa Fe group, this ranged
from 3.1x to 5.4x for LTM, 3.6x to 6.0x for 1998E and 3.7x to 5.1x for 1999E.
Based upon these multiples, implied Santa Fe per share values were between
$4.87 and $8.48 for LTM, $4.97 and $8.28 for 1998E and $5.10 and $7.02 for
1999E. In the analysis of the Snyder group, the After-Tax Cash Flow multiples
ranged from 3.9x to 9.0x for LTM, 3.9x to 8.3x for 1998E and 3.2x to 7.4x for
1999E. Based upon these multiples, implied Snyder per share values were between
$7.53 and $17.37 for LTM, $8.46 and $18.00 for 1998E and $8.72 and $20.17 for
1999E.
DLJ also analyzed Enterprise Value per BOE of year-end 1997 Reserves for
both companies. In the analysis of the Santa Fe group, this ranged from $2.27
to $6.47 per BOE. Based upon these values, implied Santa Fe per share values
were between $0.63 and $7.63. In the analysis of the Snyder group, the reserve
values ranged from $5.40 to $6.71 per BOE. Based upon these values, implied
Snyder per share values were between $6.90 and $9.93.
DLJ also analyzed Enterprise Value as a percent of year-end 1997 pre-tax SEC
Value for both companies. In the analysis of the Santa Fe group, this ranged
from 53% to 175%. Based upon these values, implied Santa Fe per share values
were between $0.77 and $9.80. In the analysis of the Snyder group, the pre-tax
SEC PV-10 percentage ranged from 97% to 146%. Based upon these values, implied
Snyder per share values were between $5.30 and $10.81.
36
<PAGE>
Comparable Publicly Traded Companies--Valuation
<TABLE>
<CAPTION>
Implied Share
Comparable Average Valuation
SNYDER ------------------ --------------------
Valuation Measure Low Median High Low Median High
----------------- ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Enterprise Value/
EBITDAX
LTM................................ 6.2x 7.1x 8.7x $10.24 $12.53 $16.62
1998E.............................. 6.5x 7.6x 11.2x 11.19 14.03 23.32
1999E.............................. 5.5x 7.9x 8.5x 12.42 20.28 22.24
Reserves--MMBOE (YE 1997)............ $5.40 $6.07 $6.71 6.90 8.45 9.93
Pre-Tax PV-10 (YE 1997).............. 97% 128% 146% 5.30 8.78 10.81
Price/Cash Flow per Share
LTM................................ 3.9x 6.7x 9.0x $ 7.53 $12.93 $17.37
1998E.............................. 3.9x 6.8x 8.3x 8.46 14.74 18.00
1999E.............................. 3.2x 6.0x 7.4x 8.72 16.35 20.17
<CAPTION>
Comparable Average Implied Valuation
SANTA FE ------------------ --------------------
Valuation Measure Low Median High Low Median High
----------------- ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Enterprise Value/
EBITDAX
LTM................................ 4.2x 6.3x 6.8x $3.81 $7.29 $ 8.12
1998E.............................. 4.9x 7.9x 10.7x 3.74 7.97 11.91
1999E.............................. 4.9x 6.4x 8.3x 4.83 7.28 10.37
Reserves--MMBOE (YE 1997)............ $2.27 $5.17 $6.47 0.63 5.46 7.63
Pre-Tax PV-10 (YE 1997).............. 53% 110% 175% 0.77 4.99 9.80
Price/Cash Flow per Share
LTM................................ 3.1x 4.6x 5.4x $4.87 $7.22 $ 8.48
1998E.............................. 3.6x 5.8x 6.0x 4.97 8.00 8.28
1999E.............................. 3.7x 4.6x 5.1x 5.10 6.33 7.02
</TABLE>
The implied exchange ratio of Santa Fe shares per Snyder share was
calculated by taking the ratio of implied Santa Fe per share values to implied
Snyder per share values from this analysis. These ratios ranged from a high of
2.79x to a low of 1.55x. Because the proposed exchange ratio of 2.05x was
within this range, this analysis supported the DLJ opinion.
Comparable Transactions Analysis. DLJ reviewed publicly available
information for a number of selected transactions involving the combination of
exploration and production companies completed since January 1, 1997. The
transactions selected were not intended to represent a complete list of
exploration and production company transactions that have occurred during the
last two years. Rather, they include transactions involving combinations of
companies with operating characteristics, size or geographical focus that DLJ
believed to be comparable to such characteristics of Santa Fe or of Snyder.
Santa Fe and Snyder valuations were compared to the valuations of the following
transactions, respectively:
Comparable Transactions
<TABLE>
<CAPTION>
Santa Fe Snyder
-------- ------
<S> <C>
TPG Partners II L.P./Belden & Blake
Mesa, Inc./Greenhill Petroleum Corporation Corporation
Mesa, Inc./Parker & Parsley Forcenergy, Inc./Edisto Resources
Petroleum Company Corporation
Louis Dreyfus Natural Gas Corp./American
Burlington Resources Inc./The Louisiana Land Exploration
and Exploration Company Company
Belco Oil & Gas Corp./Coda Energy, Inc. Chesapeake Energy Corporation/Hugoton
Energy Corporation
Ocean Energy, Inc./United Meridian Sonat Inc./Zilkha Energy Company
Corporation
Atlantic Richfield Company/Union Texas
Petroleum Holdings, Inc.
</TABLE>
37
<PAGE>
Although these transactions were used for comparison purposes, none of such
transactions is directly comparable to the merger. An analysis of comparable
transactions is not purely mathematical, rather it involves complex
considerations and judgments concerning similarities and differences in
financial, operational and other characteristics of potentially comparable
transactions. DLJ reviewed the consideration paid in such comparable
transactions in terms of valuation parameters commonly used in the valuation of
exploration and production companies in the oil and gas industry.
DLJ reviewed the consideration paid in such comparable transactions in terms
of Enterprise Value as a multiple of LTM EBITDAX for both groups of comparable
transactions. In the analysis of the Santa Fe group, this ranged from multiples
of 5.6x to 8.3x which implied Santa Fe per share values of between $6.09 and
$10.57. In the analysis of the Snyder group, this ranged from multiples of 6.1x
to 9.1x which implied Snyder per share values of between $10.05 and $17.73.
DLJ reviewed the consideration paid in such comparable transactions in terms
of Enterprise Value per BOE based upon year end 1997 reserves for both groups
of comparable transactions. In the analysis of the Santa Fe group, this ranged
from values of $5.76 to $10.98 per BOE which implied Santa Fe per share values
of between $6.46 and $15.16. In the analysis of the Snyder group, this ranged
from values of $7.32 to $12.64 per BOE which implied Snyder per share values of
between $11.33 and $23.64.
DLJ reviewed the consideration paid in such comparable transactions in terms
of Enterprise Value to 1997 pre-tax SEC Value for both groups of comparable
transactions. In the analysis of the Santa Fe group, this ranged from values of
61% to 221% which implied Santa Fe per share values of between $1.33 and
$13.22. In the analysis of the Snyder group, this ranged from values of 87% to
293% which implied Snyder per share values of between $4.15 and $27.35.
DLJ also reviewed the consideration paid in such comparable transactions in
terms of Equity Value to LTM After-Tax Cash Flow for both groups of comparable
transactions. In the analysis of the Santa Fe group, this ranged from multiples
of 5.8x to 9.8x which implied Santa Fe per share values of between $9.07 and
$15.31. In the analysis of the Snyder group, this ranged from multiples of 5.6x
to 8.8x which implied Snyder per share values of between $10.83 and $17.07.
Comparable M&A Transactions
($ in millions, except per share)
<TABLE>
<CAPTION>
Comparable Average Implied Valuation
------------------- --------------------
Valuation Measure Low Median High Low Median High
----------------- ----- ------ ------ ------ ------ ------
SNYDER
<S> <C> <C> <C> <C> <C> <C>
Enterprise Value/
LTM EBITDAX........................... 6.1x 6.6x 9.1x $10.05 $11.35 $17.73
Reserves--MMBOE (YE 1997)............. $7.32 $7.62 $12.64 11.33 12.03 23.64
Pre-Tax SEC Value (YE 1997)........... 87% 121% 293% 4.15 7.95 27.35
Price/LTM CFPS........................ 5.6x 7.3x 8.8x 10.83 14.08 17.07
<CAPTION>
SANTA FE
<S> <C> <C> <C> <C> <C> <C>
Enterprise Value/
LTM EBITDAX........................... 5.6x 7.3x 8.3x $ 6.09 $ 8.89 $10.57
Reserves--MMBOE (YE 1997)............. $5.76 $7.48 $10.98 6.46 9.31 15.16
Pre-Tax SEC Value (YE 1997)........... 61% 86% 221% 1.33 3.22 13.22
Price/LTM CFPS........................ 5.8x 6.1x 9.8x 9.07 10.54 15.31
</TABLE>
The implied exchange ratio of Santa Fe shares per Snyder share calculated by
taking the ratio of implied Santa Fe per share values to implied Snyder per
share values from this analysis ranged from a high 2.47x to a low of 1.28x.
Because the proposed exchange ratio of 2.05x was within this range, this
analysis supported the DLJ opinion.
38
<PAGE>
Historical Exchange Ratio Analysis. DLJ reviewed the relative valuation of
common stock between Santa Fe and Snyder for the six month period ending
January 8, 1999. DLJ determined that as of the close of trading on January 8,
the exchange ratio was 2.21x Santa Fe common shares per Snyder common share.
DLJ also determined that for the five trading days ending on January 8, 1999
the average exchange ratio was 1.98x, for the month prior to January 8, 1999
the average exchange ratio was 2.01x, for the 60 days prior thereto the
average exchange ratio was 1.88x, for the 90 days prior thereto the average
exchange ratio was 1.91x and for the six months prior thereto the average
exchange ratio was 1.94x. Because the proposed exchange ratio of 2.05x was
within the range of historical exchange ratios, this analysis supported the
DLJ opinion.
Pro Forma Merger Analysis. DLJ also performed a pro forma merger analysis
for the years ending December 31, 1999, 2000 and 2001 based in part on
information provided by the management of Santa Fe and Snyder to determine the
impact of the merger on Santa Fe's net income per share ("EPS") and After-Tax
Cash Flow per share. DLJ determined, based upon various assumptions, including
estimation of future realized prices of oil and gas, that the merger would be
accretive to Santa Fe EPS for the years ending December 31, 1999, 2000 and
2001. In addition, DLJ determined that the merger would be accretive to After-
Tax Cash Flow per share in the years ended December 31, 1999, 2000 and 2001.
DLJ included synergies related to the elimination of $20.0 million in pro
forma general and administrative, operating and exploration expenses in its
analysis. Because this analysis indicates the merger will be accretive to
Santa Fe shareholders on both an EPS and an After-Tax Cash Flow basis, this
analysis supported the DLJ opinion.
The summary set forth above, which sets forth all of the material
provisions of such fairness opinions, does not purport to be a complete
description of the analyses performed by DLJ. The preparation of a fairness
opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the merger and add
to the total mix of information available. DLJ did not form a conclusion as to
whether any individual analysis, considered in isolation, supported or failed
to support an opinion as to fairness. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
did not place particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination. Accordingly, notwithstanding the separate factors summarized
above, DLJ believes that its analyses must be considered as a whole and that
selecting portions of its analysis and the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the evaluation process underlying its opinion. In performing its
analyses, DLJ made numerous assumptions with respect to industry performance,
business and economic conditions and other matters. The analyses performed by
DLJ are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Pursuant to terms of an engagement letter agreement, dated January 11,
1998, between DLJ and Santa Fe,
(1) a fee of $500,000 was payable to DLJ upon the date on which DLJ
advised the board that it was prepared to render an opinion and
(2) Santa Fe has agreed to pay an additional fee of $1.5 million to DLJ
upon the successful completion of the merger, and, in the alternative, a
fee if the merger transaction fails to occur and Santa Fe receives a
termination fee from Snyder. Santa Fe has also agreed to reimburse DLJ for
its reasonable expenses including, without limitation, professional and
legal fees and disbursements incurred in connection with its engagement,
and to indemnify DLJ and related persons against certain liabilities in
connection with its engagement, including certain liabilities that may
arise under the federal securities laws. This indemnification may be
unenforceable as it may be determined to be against public policy. DLJ has
previously rendered financial advisory and investment banking services to
Santa Fe, for which it has received customary compensation.
39
<PAGE>
In the ordinary course of business, DLJ may actively trade the securities of
Santa Fe and Snyder for its own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
Snyder's Financial Advisor.
Snyder engaged Petrie Parkman as its financial advisor in March 1997 to
provide advisory and investment banking services with respect to advancing
Snyder's strategic objectives. On January 8, 1999, Snyder entered into an
amended engagement with Petrie Parkman in connection with a potential
combination between Snyder and Santa Fe. On January 13, 1999, Petrie Parkman
rendered to the Snyder board its oral opinion, which was subsequently confirmed
in writing, that, as of such date and based upon and subject to the matters set
forth in the opinion, the exchange ratio of 2.05 shares of Santa Fe common
stock for each share of Snyder common stock was fair from a financial point of
view to the holders of Snyder common stock. Based on the closing price of the
Santa Fe common stock on January 12, 1999, the last trading day before the
delivery of Petrie Parkman's opinion, such exchange ratio implies a value for
the merger consideration of $12.81. No limitations were imposed by Snyder upon
Petrie Parkman with respect to the investigations made or procedures followed
by Petrie Parkman in rendering its opinion.
Set forth below is a summary of Petrie Parkman's opinion, which summary
discloses all of the material provisions of such opinion. The full text of
Petrie Parkman's opinion dated January 13, 1999, which contains a description
of the assumptions made, the matters considered by Petrie Parkman and the
limits of its review, is attached hereto as Annex D and is incorporated by
reference into this document. Snyder stockholders are encouraged to read the
opinion carefully in its entirety. Petrie Parkman's opinion was provided to the
Snyder board for its information and is directed to the fairness from a
financial point of view, to the holders of the Snyder common stock, of the
exchange ratio of 2.05 shares of Santa Fe common stock for each share of Snyder
common stock. Petrie Parkman's opinion does not constitute a recommendation to
any holder of Snyder common stock as to how such holder should vote at the
Snyder special meeting. Petrie Parkman's opinion and its presentation to the
Snyder board on January 11, 1999 were among many factors taken into
consideration by the Snyder board in making its determination to approve and
recommend the merger as contemplated in the merger agreement.
In arriving at its opinion, Petrie Parkman, among other things:
. reviewed certain publicly available business and financial information
relating to Snyder and Santa Fe, including:
(a) the Annual Report on Form 10-K and related audited financial
statements for the fiscal year ended December 31, 1997;
(b) the unaudited financial statements for the fiscal quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998;
(c) the unaudited financial statements of Snyder for the year to date
period ended October 31, 1998, which includes an income statement
for the month of October 1998, prepared by the management of
Snyder;
(d) a projection dated December 14, 1998 of the balance sheet of Snyder
as of December 31, 1998 and the related income statement for the
year ended December 31, 1998, prepared by the management of Snyder;
(e) a projection dated December 16, 1998 of the balance sheet of Santa
Fe as of December 31, 1998, prepared by the management of Santa Fe;
and
(f) a projection dated December 16, 1998 of the income statement for
the fiscal quarter ended December 31, 1998, prepared by the
management of Santa Fe;
40
<PAGE>
. reviewed certain estimates of Snyder's reserves, including:
(a) estimates of proved oil and gas reserves prepared by Netherland,
Sewell & Associates, Inc. as of December 31, 1997;
(b) unaudited proved, probable, possible and other oil and gas reserves
prepared by the management and staff of Snyder as of June 30, 1998;
and
(c) preliminary estimates of proved, probable, possible and other oil
and gas reserves prepared by the management and staff of Snyder as
of December 31, 1998;
. reviewed certain estimates of Santa Fe's reserves, including:
(a) preliminary estimates of proved, probable and possible oil and gas
reserves of Santa Fe in the United States offshore Gulf of Mexico,
onshore United States Gulf Coast and Argentina prepared by Ryder
Scott Petroleum Engineers as of January 1, 1999;
(b) preliminary estimates of proved, probable and possible oil and gas
reserves of Santa Fe in the Jabung field in Indonesia prepared by
DeGolyer and MacNaughton as of October 31, 1998; and
(c) preliminary estimates of proved, probable, possible and other oil
and gas reserves of Santa Fe prepared by the management and staff
of Santa Fe as of January 1, 1999;
. analyzed certain historical and other financial and operating data of
Snyder and Santa Fe prepared by the management of Snyder and Santa Fe,
respectively;
. discussed the current and projected operations and prospects of Snyder
and Santa Fe with the management and operating staffs of Snyder and
Santa Fe;
. reviewed the historical trading history of the Snyder common stock and
the Santa Fe common stock;
. compared recent stock market capitalization indicators for Snyder and
Santa Fe with the recent stock market capitalization indicators for
certain other publicly traded independent energy companies;
. compared the financial terms of the merger with the financial terms of
certain other transactions that they deemed to be relevant;
. reviewed the merger agreement; and
. reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as they
deemed necessary or appropriate.
In rendering its opinion, Petrie Parkman assumed and relied upon, without
assuming any responsibility for verification, the accuracy and completeness of
any information supplied or otherwise made available to it by Snyder and Santa
Fe. Petrie Parkman further relied upon the assurances of the management of
Snyder and Santa Fe that they were unaware of any facts that would make the
information provided to Petrie Parkman incomplete or misleading in any material
respect. With respect to non-historical financial and operating data, Petrie
Parkman assumed that they had been reasonably prepared on bases reflecting the
best currently available estimates and judgment of the management of Snyder and
Santa Fe, respectively, relating to the future financial and operational
performance of Snyder and Santa Fe. With respect to the estimates of oil and
gas reserves, Petrie Parkman assumed that they had been reasonably prepared on
bases reflecting the best available estimates and judgments of Snyder and Santa
Fe or their respective engineering consultants relating to the oil and gas
properties of Snyder and Santa Fe. Petrie Parkman did not make an independent
evaluation or appraisal of the assets or liabilities of Snyder or Santa Fe nor,
except for the estimates of oil and gas reserves referred to above, was Petrie
Parkman furnished with such an evaluation or appraisal. Consistent with the
merger agreement, Petrie Parkman assumed that the merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986.
41
<PAGE>
The following is a summary of certain analyses performed by Petrie Parkman
in connection with the preparation of its opinion dated January 13, 1999 and
reviewed with the Snyder board on January 11, 1999.
Discounted Cash Flow Analysis--Snyder. Petrie Parkman conducted a discounted
cash flow analysis for the purpose of determining the equity reference value
range per share of Snyder common stock. Petrie Parkman calculated the net
present value of estimates of future after-tax cash flows for Snyder's oil and
gas reserve assets based on the reserve estimates referred to above and for its
non-reserve assets utilizing information provided by Snyder.
Petrie Parkman evaluated three scenarios in which the principal variables
were oil and gas prices. The three pricing scenarios were based on benchmarks
for spot sales of West Texas Intermediate crude oil and for spot sales of Henry
Hub gas ("Pricing Case I," "Pricing Case II" and "Pricing Case III," and
collectively "Pricing Cases I, II, and III"). Petrie Parkman applied
appropriate quality and transportation adjustments to these benchmarks.
Benchmark oil prices for Pricing Cases I, II and III were projected to be
$13.00, $15.00 and $17.00 per barrel, respectively, for 1999 and were escalated
annually thereafter at the rates of 3.0%, 3.0% and 4.0%, respectively; oil
prices in each pricing case were capped at $60.00 per barrel. Benchmark gas
prices for Pricing Cases I, II and III were projected to be $2.00, $2.20 and
$2.40 per MMBtu, respectively, for 1999 and were escalated annually thereafter
at the rates of 3.0%, 3.0% and 4.0%, respectively; gas prices in each pricing
case were capped at $6.00 per MMBtu. Operating and capital costs were escalated
at 3.0% per year.
Assuming a carry-over of Snyder's existing tax positions, and applying
after-tax discount rates ranging from 10.0% to 40.0% to the after tax cash
flows, depending on reserve category, the discounted cash flow analysis
indicated asset reference value ranges of $465.8 million to $568.5 million for
Pricing Case I, $548.6 million to $668.5 million for Pricing Case II and $677.8
million to $827.1 million for Pricing Case III. After deducting long-term
obligations of Snyder of $214.7 million from the asset reference value ranges
and dividing by the number of shares of Snyder common stock outstanding, the
indicated equity reference value ranges per share of Snyder common stock
outstanding were $7.53 to $10.61 for Pricing Case I, $10.02 to $13.61 for
Pricing Case II and $13.89 to $18.37 for Pricing Case III.
Comparable Transactions Analysis--Snyder. Petrie Parkman reviewed certain
publicly available information on 135 oil and gas property acquisition
transactions involving Rocky Mountain, Gulf of Mexico and East Texas / Gulf
Coast assets that took place between January 1996 and December 1998 (and four
such transactions for which Petrie Parkman had non-public information). Petrie
Parkman calculated purchase price multiples of equivalent reserves for the
acquired assets in each transaction. The highest, average and lowest multiples
of equivalent reserves for the Rocky Mountain transactions were $2.91, $0.74
and $0.22 per Mcfe cubic feet equivalent using a 6.0 Mcf to one barrel of oil
conversion ratio ("Mcfe6"), respectively. The highest, average and lowest
multiples of Mcfe6 for the Gulf of Mexico transactions were $1.49, $1.08 and
$0.59, respectively. The highest, average and lowest multiples of Mcfe6 for the
East Texas / Gulf Coast transactions were $4.37, $0.95 and $0.33, respectively.
Petrie Parkman determined that, with respect to Snyder, the appropriate
benchmark multiples for equivalent proved reserves for the Rocky Mountain, Gulf
of Mexico and East Texas / Gulf Coast assets were in the ranges of $0.80 to
$0.95 per Mcfe6, $1.00 to $1.25 per Mcfe6, and $0.70 to $1.00 per Mcfe6,
respectively. Petrie Parkman applied the benchmarks to Snyder's corresponding
proved reserve figures for each of the geographic regions to yield asset
reference value ranges for Snyder's reserves. Following adjustments for
Snyder's non-reserve assets, Petrie Parkman determined from the asset reference
value ranges implied by these multiples a composite asset reference value range
of $600.0 million to $725.0 million. After deducting long-term obligations of
Snyder of $214.7 million from the composite asset reference value range and
dividing by the number of shares of Snyder common stock outstanding, the
resulting composite equity reference value range per share of Snyder common
stock outstanding was $11.56 to $15.31.
42
<PAGE>
In addition, Petrie Parkman reviewed certain publicly available information
on the following 41 company acquisition transactions and offers for control in
the oil and gas exploration and production industry that took place between
January 1996 and December 1998:
<TABLE>
<CAPTION>
Acquiror or Bidder for Date of
Control Target Announcement
- ---------------------- ------ -----------------
<S> <C> <C>
Chevron Corp. Rutherford-Moran Oil Corp. December 23, 1998
Exxon Corp. Mobil Corp. December 1, 1998
Seagull Energy Corp. Ocean Energy, Inc. November 25, 1998
Kerr-McGee Corp. Oryx Energy Company October 15, 1998
British Petroleum Co. Amoco Corp. August 11, 1998
Devon Energy Corp. Northstar Energy June 29, 1998
USX-Marathon Group Tarragon Oil & Gas Ltd. May 30, 1998
Pogo Producing Company Arch Petroleum Inc. May 29, 1998
Lomak Petroleum, Inc. Domain Energy Corp. May 12, 1998
Atlantic Richfield
Company Union Texas Petroleum Holdings, Inc. May 4, 1998
Seneca Resources Corp. Harcor Energy, Inc. March 31, 1998
Dominion Energy, Inc. Archer Resources, Ltd. March 11, 1998
Union Pacific Resources
Group, Inc. Norcen Energy Resources, Inc. January 26, 1998
Ocean Energy, Inc. United Meridian Corp. December 23, 1997
Sonat, Inc. Zilkha Energy Company November 24, 1997
Chesapeake Energy Corp. Hugoton Energy Corp. November 13, 1997
Belco Oil & Gas Corp. Coda Energy, Inc. November 3, 1997
Titan Exploration, Inc. Offshore Energy Development Corp. September 9, 1997
Pioneer Natural
Resources Company Chauvco Resources Ltd. September 3, 1997
Texaco Inc. Monterey Resources, Inc. August 18, 1997
Burlington Resources
Inc. Louisiana Land & Exploration Company July 17, 1997
The Meridian Resource
Corporation Cairn Energy USA, Inc. July 8, 1997
Crestar Energy Inc. Grad & Walker Energy Corp. July 2, 1997
Louis Dreyfus Natural
Gas Corp. American Exploration Company June 24, 1997
Union Pacific Resources
Group Inc. Pennzoil Company June 23, 1997
Forcenergy Inc Convest Energy Corporation June 20, 1997
Monterey Resources, Inc. McFarland Energy, Inc. June 17, 1997
The Columbia Gas System
Inc. Alamco, Inc. May 27, 1997
Mesa Inc. Parker & Parsley Petroleum Company April 7, 1997
Texas Pacific Group Belden & Blake Corp. March 31, 1997
Northstar Energy Corp. Morrison Petroleum Ltd. February 13, 1997
Forcenergy Inc Great Western Resources Inc. December 12, 1996
KCS Energy, Inc. InterCoast Oil and Gas October 17, 1996
Tom Brown, Inc. Presidio Oil Company August 5, 1996
Seagull Energy
Corporation Global Natural Resources Inc. July 22, 1996
Kaiser Francis Oil
Company Petrocorp Incorporated June 17, 1996
Enron Capital & Trade
Resources Corp. Clinton Gas Systems, Inc. May 24, 1996
Apache Corporation The Phoenix Resource Companies, Inc. March 28, 1996
Mobil Corporation Ampolex Limited February 28, 1996
HS Resources, Inc. Tide West Oil Company February 26, 1996
Snyder Oil Corporation Gerrity Oil and Gas Corporation January 17, 1996
</TABLE>
Using publicly available information, Petrie Parkman calculated total
investment multiples of gross pre-tax cash flow for the target company in each
transaction. Petrie Parkman defined total investment for the purposes of this
analysis as purchase price of equity plus net obligations assumed. For these 41
transactions, the highest, average and lowest multiples of gross pre-tax cash
flow were 29.8x, 7.9x and 2.8x, respectively. Petrie
43
<PAGE>
Parkman also calculated purchase price multiples of discretionary cash flow and
implied purchase price multiples of equivalent proved reserves and SEC Value
for the target company in each transaction. Petrie Parkman defined implied
purchase price for the purposes of this analysis as total investment less
estimated values of non-reserve assets. The highest, average and lowest
multiples of discretionary cash flow were 24.6x, 7.5x and 3.1x, respectively.
The highest, average and lowest multiples of equivalent proved reserves were
$3.99, $1.31 and $0.54 per Mcfe6, respectively. The highest, average and lowest
multiples of SEC Value for 33 of the 41 transactions for which data was
available were 5.8x, 1.3x and 0.6x, respectively. Petrie Parkman determined
that, with respect to Snyder, the appropriate benchmark multiples for gross
pre-tax cash flow, discretionary cash flow, equivalent proved reserves and SEC
Value were in the ranges of 7.0 to 10.0x, 6.0 to 9.0x, $0.80 to $1.50 per Mcfe6
and 1.7 to 2.5x, respectively. Petrie Parkman applied these benchmark multiples
to Snyder's historical gross pre-tax cash flow, discretionary cash flow,
equivalent proved reserves and SEC Value.
Petrie Parkman also performed a premium analysis, which compared the offer
price per target company share with the target company's share price for the
periods of one day, 30 days and 60 days prior to public announcement of the
offer. The highest, average and lowest premiums were 86.6%, 22.5% and -9.8% for
one day prior, respectively, 75.6%, 30.1% and-7.5% for 30 days prior,
respectively, and 86.6%, 24.7% and -55.2% for 60 days prior, respectively.
Petrie Parkman defined premiums for the purposes of this analysis as excess of
offer price over target company's price stated as a percentage above the target
company's share price. Petrie Parkman determined that, with respect to Snyder,
the appropriate benchmarks for premium to target company's price one day prior,
30 days prior, and 60 days prior were in the ranges of 5% to 25%, 10% to 30%,
and 10% to 35%, respectively. Petrie Parkman applied these premium benchmarks
to the corresponding stock prices of Snyder. Petrie Parkman determined from the
asset reference value ranges implied by these multiples a composite asset
reference value range of $650.0 million to $800.0 million. After deducting
long-term obligations of Snyder of $214.7 million from the composite asset
reference value range and dividing by the number of shares of Snyder common
stock outstanding, the resulting composite equity reference value range per
share of Snyder common stock outstanding was $13.06 to $17.56.
Common Stock Comparison--Snyder. Using publicly available information,
Petrie Parkman calculated adjusted capitalization multiples of historical
financial criteria for EBITDAX, operating cash flow and SEC Value and of
equivalent proved reserves for 103 publicly traded independent oil and gas
companies. Petrie Parkman also calculated market capitalization multiples of
historical financial criteria for discretionary cash flow for such companies.
Petrie Parkman defined market capitalization for purposes of this analysis as
market value of common equity. The adjusted capitalization of each company was
obtained by adding the sum of its long-term and short-term debt to the sum of
the market value of its common equity, the market value of its preferred stock
or, if not publicly traded, liquidation or book value and the book value of its
minority interest in other companies and subtracting its cash.
Petrie Parkman determined that 11 companies were relevant to an evaluation
of Snyder in the context of reserve location, reserve mix, and reserve life.
Accordingly, Petrie Parkman examined in greater detail the following companies:
. Barrett Resources Corporation
. Cabot Oil and Gas Corporation
. Cross Timbers Oil Company
. Devon Energy Corporation
. Forest Oil Corporation
. HS Resources, Inc.
. KCS Energy, Inc.
. Kelley Oil and Gas Corporation
. Louis Dreyfus Natural Gas Corporation
. Newfield Exploration Company
. Tom Brown, Inc.
44
<PAGE>
For these 11 companies, the highest, average and lowest adjusted
capitalization multiples of LTM EBITDAX were 21.1x, 7.7x and 4.2x,
respectively. The highest, average and lowest adjusted capitalization multiples
of 1998 estimated EBITDAX were 13.7x, 7.4x and 5.6x, respectively. The highest,
average and lowest adjusted capitalization multiples of LTM operating cash flow
were 14.9x, 6.3x and 3.8x, respectively. The highest, average and lowest
adjusted capitalization multiples of equivalent proved reserves were $2.36,
$1.09 and $0.57 per Mcfe6, respectively. The highest, average and lowest
adjusted capitalization multiples of SEC Value were 2.0x, 1.5x and 1.0x,
respectively. The highest, average and lowest market capitalization multiples
of LTM discretionary cash flow were 6.4x, 4.1x and 1.4x, respectively. The
highest, average and lowest market capitalization multiples of 1998 estimated
discretionary cash flow were 8.2x, 4.7x and 1.7x, respectively. The highest,
average and lowest market capitalization multiples of 1999 estimated
discretionary cash flow were 7.2x, 4.1x and 1.6x, respectively. Petrie Parkman
determined that, with respect to Snyder, the appropriate benchmarks for
adjusted capitalization multiples for LTM EBITDAX, 1998 estimated EBITDAX, LTM
operating cash flow, equivalent proved reserves and SEC Value were in the
ranges of 7.0 to 9.0x, 7.0 to 9.0x, 6.0 to 7.5x, $1.00 to $1.20 per Mcfe6 and
1.7 to 2.1x, respectively, and that the appropriate benchmark market
capitalization multiples for LTM discretionary cash flow, 1998 estimated
discretionary cash flow, and 1999 estimated discretionary cash flow were in the
range of 5.0 to 6.5x, 5.5 to 7.5x, and 5.0 to 7.0x, respectively. Petrie
Parkman applied these benchmark multiples to Snyder's LTM and 1998 estimated
EBITDAX, LTM operating cash flow, SEC Value, LTM, 1998 estimated and 1999
estimated discretionary cash flow and equivalent proved reserves based on the
reserve estimates referred to above. From the asset reference value ranges
implied by these multiples, Petrie Parkman determined a composite asset
reference value range under this method of $600.0 million to $750.0 million.
After subtracting long-term obligations of Snyder of $214.7 million and
dividing by the number of shares of Snyder common stock outstanding, the
composite equity reference value range per share of Snyder common stock
outstanding was $11.56 to $16.06.
Going Concern Analysis--Snyder. Petrie Parkman projected the potential
financial performance of Snyder without giving effect to the merger for the
five year period beginning on January 1, 1999 using Pricing Cases I, II and
III. Petrie Parkman prepared these projections utilizing information prepared
or provided by Snyder management and two capital cases. The first case (the
"$0.75/Mcfe6 Finding and Development Cost Case") was based on Snyder's internal
company plan dated December 14, 1998 with capital in excess of that provided
for in the company plan reinvested for reserve additions at $0.75/Mcfe6. The
second case (the "$1.00/Mcfe6 Finding and Development Cost Case") employed the
same assumptions as the $0.75/Mcfe6 Finding and Development Cost Case but
assumed reinvestment for reserve additions based on a finding and development
cost of $1.00/Mcfe6. Capital expenditure levels were based on Snyder's
estimated capital budget plus an additional $75 million, $100 million, and $100
million in 2001, 2002, and 2003, respectively, when using Pricing Case II and
Pricing Case III. Petrie Parkman calculated a range of terminal equity values
by applying terminal multiples of 5.0x, 6.0x and 7.0x to projected 2003
discretionary cash flow. It applied discount rates of 15.0% to 17.5% to
terminal equity values. Throughout its analysis, it utilized Snyder's existing
tax position.
A terminal multiple of 5.0x projected 2003 discretionary cash flow yielded
equity reference values per share of Snyder common stock outstanding under the
$0.75/Mcfe6 Finding and Development Cost ("$0.75/Mcfe6 Finding and Development
Costs") Case of $7.21 to $7.86 using Pricing Case I, $12.23 to $13.33 using
Pricing Case II and $16.51 to $17.99 using Pricing Case III, and under the
$1.00/Mcfe6 Finding and Development Cost ("$1.00/Mcfe6 Finding and Development
Costs") Case of $7.21 to $7.86 using Pricing Case I, $11.22 to $12.23 using
Pricing Case II and $14.91 to $16.25 using Pricing Case III. A terminal
multiple of 6.0x projected 2003 discretionary cash flow yielded equity
reference values per share of Snyder common stock outstanding under the
$0.75/Mcfe6 Finding and Development Cost Case of $8.56 to $9.53 using Pricing
Case I, $14.71 to $16.03 using Pricing Case II and $19.56 to $21.31 using
Pricing Case III, and under the $1.00/Mcfe6 Finding and Development Cost Case
of $8.56 to $9.53 using Pricing Case I, $13.50 to $14.71 using Pricing Case II
and $17.22 to $19.31 using Pricing Case III. A terminal multiple of 7.0x
projected 2003 discretionary cash flow yielded equity reference values per
share of Snyder common stock outstanding under the $0.75/Mcfe6 Finding and
Development Cost Case of $9.91 to $10.80 using Pricing Case I, $17.19 to $18.73
using Pricing Case II and $22.60 to $24.63 using Pricing Case III, and under
the $1.00/Mcfe6 Finding
45
<PAGE>
and Development Cost Case of $9.91 to $10.80 using Pricing Case I, $15.78 to
$17.79 using Pricing Case II and $20.53 to $22.37 using Pricing Case III. From
these equity reference value ranges, Petrie Parkman determined a composite
equity reference value range per share of Snyder common stock outstanding of
$18.00 to $23.50 for the $0.75/Mcfe6 Finding and Development Cost Case and
$14.00 to $18.50 for the $1.00/Mcfe6 Finding and Development Cost Case.
The following is a summary of Snyder's implied reference ranges of asset and
equity values derived from Petrie Parkman's discounted cash flow analysis,
comparable transaction analysis, capital market comparison and going-concern
analysis. The following table should be read together with the more detailed
descriptions set forth above.
<TABLE>
<CAPTION>
Asset
Reference Equity
Value Range Reference
($ in Value Range
Method of Analysis millions) ($/Sh.)
------------------ ------------- -------------
<S> <C> <C>
Discounted Cash Flow
Pricing Case I................................ $465.8-$568.5 $7.53-$10.61
Pricing Case II............................... $548.6-$668.5 $10.02-$13.61
Pricing Case III.............................. $677.8-$827.1 $13.89-$18.37
Comparable Transactions
Property Transactions......................... $600.0-$725.0 $11.56-$15.31
Company Transactions.......................... $650.0-$800.0 $13.06-$17.56
Capital Market Comparison
Peer Multiples................................ $600.0-$750.0 $11.56-$16.06
Going Concern Analysis
$0.75/Mcfe6 F&D Costs......................... $814.7-$998.1 $18.00-$23.50
$1.00/Mcfe6 F&D Costs......................... $681.4-$831.4 $14.00-$18.50
</TABLE>
Discounted Cash Flow Analysis--Santa Fe. Petrie Parkman conducted a
discounted cash flow analysis for the purpose of determining the equity
reference value range per share of Santa Fe common stock. Petrie Parkman
calculated the net present value of estimates of future after-tax cash flows
for Santa Fe's oil and gas reserve assets based on the reserve estimates
referred to above and its non-reserve assets utilizing information provided by
Santa Fe under Pricing Cases I, II and III described above. Assuming a carry-
over of Santa Fe's existing tax position and applying after-tax discount rates
ranging from 10.0% to 30.0%, depending on reserve category, to the after tax
cash flow, the discounted cash flow analysis indicated asset reference value
ranges of $619.7 million to $805.3 million for Pricing Case I, $838.4 million
to $1,070.2 million for Pricing Case II and $1,130.9 million to $1,427.4
million for Pricing Case III. After deducting long-term obligations of Santa Fe
of $332.0 million from the asset reference value ranges and dividing by the
number of shares of Santa Fe common stock outstanding, the indicated equity
reference value ranges per share of Santa Fe common stock outstanding are $2.81
to $4.63 for Pricing Case I, $4.95 to $7.22 for Pricing Case II and $7.82 to
$10.72 for Pricing Case III.
Comparable Transactions Analysis--Santa Fe. Petrie Parkman reviewed certain
publicly available information on 68 oil and gas property acquisition
transactions involving Permian, Gulf of Mexico/Gulf Coast and international
assets that took place between January 1996 and December 1998 and one such
transaction for which Petrie Parkman had non-public information. Petrie Parkman
calculated purchase price multiples of equivalent reserves for the acquired
assets in each transaction. The highest, average and lowest multiples of
equivalent reserves for the Permian transactions were $11.33, $4.66 and $1.39
per barrel of oil equivalent using a 6.0 Mcf to one barrel of oil conversion
ratio ("Boe6"), respectively. The highest, average and lowest multiples of Boe6
for the Gulf of Mexico/Gulf Coast transactions were $8.96, $6.51 and $3.69,
respectively. The highest, average and lowest multiples of Boe6 for the
international transactions were $9.76, $4.96 and $0.64, respectively. Petrie
Parkman determined that, with respect to Santa Fe, the appropriate benchmark
multiples for equivalent proved reserves for the Permian, Gulf of Mexico/Gulf
Coast and International assets were in the ranges of $3.75 to $4.75 per Boe6,
$6.00 to $7.50 per Boe6, and $4.50 to $6.50 per Boe6,
46
<PAGE>
respectively. Petrie Parkman applied the benchmarks to Santa Fe's corresponding
proved reserve figures for each of the geographic regions to yield asset
reference value ranges for Santa Fe's reserves. Following adjustments for Santa
Fe's non-reserve assets, Petrie Parkman determined from the asset reference
value ranges implied by these multiples a composite asset reference value range
of $950.0 million to $1.3 billion. After deducting long-term obligations of
Santa Fe of $332.0 million from the composite asset reference value range and
dividing by the number of shares of Santa Fe common stock outstanding, the
resulting composite equity reference value range per share of Santa Fe common
stock outstanding was $6.05 to $9.47.
In addition, Petrie Parkman reviewed certain publicly available information
on the 41 company acquisition transactions and offers for control described
above. Petrie Parkman determined that, with respect to Santa Fe, the
appropriate benchmark multiples for gross pre-tax cash flow, discretionary cash
flow, equivalent proved reserves and SEC Value were in the ranges of 5.0 to
8.0x, 4.0 to 7.5x, $4.50 to $7.00 per Boe6 and 1.5 to 2.0x, respectively.
Petrie Parkman applied these benchmark multiples to Santa Fe's historical gross
pre-tax cash flow, discretionary cash flow, equivalent proved reserves and SEC
Value. Petrie Parkman also performed a premium analysis as described above.
Petrie Parkman determined that, with respect to Santa Fe, the appropriate
benchmarks for premium to target company's price one day prior, 30 days prior,
and 60 days prior were in the ranges of 5% to 25%, 10% to 30%, and 10% to 35%,
respectively. Petrie Parkman applied these premium benchmarks to the
corresponding stock prices of Santa Fe. Petrie Parkman determined from the
asset reference value ranges implied by these multiples a composite asset
reference value range under this method of $1.0 billion to $1.3 billion. After
deducting long-term obligations of Santa Fe of $332.0 million from the
composite asset reference value range and dividing by the number of shares of
Santa Fe common stock outstanding, the resulting composite equity reference
value range per share of Santa Fe common stock outstanding was $6.53 to $9.47.
Common Stock Comparisons--Santa Fe. Using publicly available information,
Petrie Parkman calculated adjusted capitalization multiples of historical
financial criteria for EBITDAX, operating cash flow and SEC Value and of
equivalent proved reserves for 103 publicly traded independent oil and gas
companies. Petrie Parkman also calculated market capitalization multiples of
historical financial criteria for discretionary cash flow for such companies.
Petrie Parkman determined that 13 companies were relevant to an evaluation
of Santa Fe in the context of reserve location, reserve mix and reserve life.
Accordingly, Petrie Parkman examined in greater detail the following companies:
. Anadarko Petroleum Corporation
. Apache Corporation
. EEX Corporation
. Enron Oil & Gas Company
. Kerr-McGee Corporation
. Ocean Energy, Inc.
. Oryx Energy Company
. PennzEnergy Company
. Pioneer Natural Resources Company
. Pogo Producing Company
. Seagull Energy Corporation
. Triton Energy Limited
. Vintage Petroleum, Inc.
For these 13 companies, the highest, average and lowest adjusted
capitalization multiples of LTM EBITDAX were 15.1x, 6.7x and 3.1x,
respectively. The highest, average and lowest adjusted capitalization multiples
of 1998 estimated EBITDAX were 18.3x, 7.0x and 3.9x, respectively. The highest,
average and lowest adjusted capitalization multiples of LTM operating cash flow
were 12.0x, 5.3x and 3.1x, respectively. The highest, average and lowest
adjusted capitalization multiples of equivalent proved reserves were $8.04,
47
<PAGE>
$5.35 and $2.09 per Boe6, respectively. The highest, average and lowest
adjusted capitalization multiples of SEC Value were 2.5x, 1.6x and 0.7x,
respectively. The highest, average and lowest market capitalization multiples
of LTM discretionary cash flow were 13.2x, 4.0x and 1.6x, respectively. The
highest, average and lowest market capitalization multiples of 1998 estimated
discretionary cash flow were 46.7x, 8.3x and 1.7x, respectively. The highest,
average and lowest market capitalization multiples of 1999 estimated
discretionary cash flow were 16.7x, 5.5x and 1.4x, respectively. Petrie Parkman
determined that, with respect to Santa Fe, the appropriate benchmarks for
adjusted capitalization multiples for LTM EBITDAX, 1998 estimated EBITDAX, LTM
operating cash flow, equivalent proved reserves and SEC Value were in the
ranges of 4.5 to 6.5x, 5.5 to 7.0x, 4.0 to 6.0x, $4.00 to $5.25 per Boe6 and
1.0 to 1.5x, respectively, and that the appropriate benchmark market
capitalization multiples for LTM discretionary cash flow, 1998 estimated
discretionary cash flow and 1999 estimated discretionary cash flow were in the
range of 3.5 to 5.0x, 4.0 to 6.0x and 3.0 to 5.0x, respectively. Petrie Parkman
applied these benchmark multiples to Santa Fe's LTM and 1998 estimated EBITDAX,
LTM operating cash flow, SEC Value, LTM, 1998 estimated and 1999 estimated
discretionary cash flow and equivalent proved reserves based on the reserve
estimates referred to above. From the asset reference value ranges implied by
these multiples, Petrie Parkman determined a composite asset reference value
range under this method of $900.0 million to $1.2 billion. After subtracting
long-term obligations of Santa Fe of $332.0 million and dividing by the number
of shares of Santa Fe common stock outstanding, the composite equity reference
value range per share of Santa Fe common stock outstanding was $5.56 to $8.49.
Going Concern Analysis--Santa Fe. Petrie Parkman projected the potential
financial performance of Santa Fe without giving effect to the merger for the
five year period beginning on January 1, 1999 using Pricing Cases I, II and
III. Petrie Parkman prepared these projections utilizing information prepared
or provided by Santa Fe management and two capital cases. The first case (the
"$4.50/Boe6 Finding and Development Cost Case") was based on Santa Fe's
internal company plan dated December 16, 1998 with capital in excess of the
company plan reinvested for reserve additions at $4.50/Boe6. The second case
(the "$6.00/Boe6 Finding and Development Cost Case") employed the same
assumptions as the $4.50/Boe6 Finding and Development Cost Case but assumed
reinvestment for reserve additions based on a finding and development cost of
$6.00/Boe6. Capital expenditure levels were based on Santa Fe's estimated
capital budget plus an additional $200 million and $250 million in 2002 and
2003, respectively, when using Pricing Cases II and III. Petrie Parkman
calculated a range of terminal equity values by applying terminal multiples of
4.0x, 5.0x and 6.0x to projected 2003 discretionary cash flow. It applied
discount rates of 15.0% to 17.5% to terminal equity values. Throughout its
analysis, it utilized Santa Fe's existing tax position.
A terminal multiple of 4.0x projected 2003 discretionary cash flow yielded
equity reference values per share of Santa Fe common stock outstanding under
the $4.50/Boe6 Finding and Development Cost ("$4.50/Boe6 Finding and
Development Costs") Case of $5.22 to $5.69 using Pricing Case I, $8.31 to $9.05
using Pricing Case II and $10.76 to $11.72 using Pricing Case III, and under
the $6.00/Boe6 Finding and Development Cost ("$6.00/Boe6 Finding & Development
Costs") Case of $5.22 to $5.69 using Pricing Case I, $7.91 to $8.62 using
Pricing Case II and $10.45 to $11.39 using Pricing Case III. A terminal
multiple of 5.0x projected 2003 discretionary cash flow yielded equity
reference values per share of Santa Fe common stock outstanding under the
$4.50/Boe6 Finding and Development Cost Case of $6.53 to $7.11 using Pricing
Case I, $10.38 to $11.31 using Pricing Case II and $13.45 to $14.66 using
Pricing Case III, and under the $6.00/Boe6 Finding and Development Cost Case of
$6.53 to $7.11 using Pricing Case I, $9.89 to $10.77 using Pricing Case II and
$13.07 to $14.24 using Pricing Case III. A terminal multiple of 6.0x projected
2003 discretionary cash flow yielded equity reference values per share of Santa
Fe common stock outstanding under the $4.50/Boe6 Finding and Development Cost
Case of $7.83 to $8.54 using Pricing Case I, $12.46 to $13.58 using Pricing
Case II and $16.14 to $17.59 using Pricing Case III, and under the $6.00/Boe6
Finding and Development Cost Case of $7.83 to $8.54 using Pricing Case I,
$11.86 to $12.93 using Pricing Case II and $15.68 to $17.09 using Pricing Case
III. From these equity reference value ranges, Petrie Parkman determined a
composite equity reference value range per share of Santa Fe common stock
outstanding of $8.25 to $13.00 for the $4.50/Boe6 Finding and Development Cost
Case and $6.75 to $10.25 for the $6.00/Boe6 Finding and Development Cost Case.
48
<PAGE>
The following is a summary of Santa Fe's implied reference ranges of asset
and equity values derived from Petrie Parkman's discounted cash flow analysis,
comparable transaction analysis, capital market comparison and going-concern
analysis.
<TABLE>
<CAPTION>
Equity
Asset Reference Reference
Value Range Value Range
Method of Analysis ($ in millions) ($/Sh.)
------------------ ----------------- ------------
<S> <C> <C>
Discounted Cash Flow
Pricing Case I............................. $619.7-$805.3 $2.81-$4.63
Pricing Case II............................ $838.4-$1,070.2 $4.95-$7.22
Pricing Case III........................... $1,130.9-$1,427.4 $7.82-$10.72
Comparable Transactions
Property Transactions...................... $950.0-$1,300.0 $6.05-$9.47
Company Transactions....................... $1,000.0-$1,300.0 $6.53-$9.47
Capital Market Comparison
Peer Multiples............................. $900.0-$1,200.0 $5.56-$8.49
Going Concern Analysis
$4.50/Boe6 F&D Costs....................... $1,175.3-$1,660.9 $8.25-$13.00
$6.00/Boe6 F&D Costs....................... $1,022.0-$1,379.8 $6.75-$10.25
</TABLE>
Contribution Analysis. Petrie Parkman analyzed certain historical and
projected financial and operational effects of the merger for the three-year
period beginning January 1, 1997. Petrie Parkman calculated relative
contributions of year-end reserves, daily production, sales revenues, EBITDAX,
discretionary cash flow, book asset value, shareholders equity, net debt,
market value and enterprise value. The analysis was based on historical
measures and management forecasts for each of Snyder and Santa Fe. The
following table sets forth the contribution Snyder would make to combined
financial position results and operations of Santa Fe Snyder.
<TABLE>
<CAPTION>
Year
Ending Year Ending Year Ending
12/31/97 12/31/98 12/31/99
Measure (Actual) (Estimated) (Estimated)
------- -------- ----------- -----------
<S> <C> <C> <C>
Reserves................................. 31% 32% 32%
Production............................... 29% 30% 32%
Sales Revenue............................ 35% 33% 34%
EBITDAX.................................. 28% 36% 38%
Discretionary Cash Flow.................. 22% 33% 37%
Book Asset Value......................... 39% 35% 33%
Shareholders' Equity..................... 34% 32% 34%
Net Debt................................. n.a. 36% 32%
Market Value............................. 33% 37% n.a.
Enterprise Value......................... 37% 38% n.a.
</TABLE>
Pro Forma Merger Analysis. Petrie Parkman analyzed certain pro forma
financial effects of the merger for the three-year period beginning January 1,
1999 using Pricing Cases I, II and III as described above. In connection with
such analysis, Petrie Parkman assessed the past performance of the managements
of Snyder and Santa Fe, reviewed certain historical and other financial and
operating data prepared or provided by the managements of Snyder and Santa Fe
and had discussions with members of the management of Snyder and Santa Fe,
respectively, with respect to the current operations and the future financial
and operating performance of Santa Fe on a stand-alone basis and after giving
effect to the merger. In its analysis, Petrie Parkman utilized the exchange
ratio of 2.05 shares of Santa Fe common stock for each share of Snyder common
stock as set forth in the merger agreement and made certain assumptions about
cost savings and depreciation, depletion and amortization expenses. This
analysis indicated that the merger would be accretive to projected Santa Fe
earnings per share over the three-year period ending December 31, 2001 using
Pricing Case I, neutral to accretive over the three-year period using Pricing
Case II, and dilutive for the fiscal years ending December 31,
49
<PAGE>
1999 and 2000 and slightly accretive for the fiscal year ending December 31,
2001 using Pricing Case III. The analysis indicated that the merger would be
slightly accretive to Santa Fe's discretionary cash flow per share over the
three-year period ending December 31, 2001 using Pricing Case I and slightly
dilutive to neutral over the three-year period using Pricing Case II and
Pricing Case III. The analysis also indicated that the merger would result in
lower total debt to total book capitalization ratios than projected for Santa
Fe on a stand-alone basis for the three-year period ending December 31, 2001
using Pricing Cases I, II and III. The analysis also indicated that for the
same three-year period, and using Pricing Cases I, II and III, the merger would
result in improved debt coverage, specifically, the debt to cash flow ratio,
than projected for Santa Fe on a stand-alone basis.
The description set forth above constitutes a summary of the analyses
employed by Petrie Parkman in rendering its opinion to the Snyder board. Petrie
Parkman believes that its analyses must be considered as a whole and that
selecting portions of its analyses considered by it, without considering all
analyses and factors, could create an incomplete view of the process underlying
its opinion. The preparation of a fairness opinion is a complex, analytical
process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Petrie Parkman did
not attribute any particular weight to any analysis considered by it, but
rather made qualitative judgements as to the significance and relevance of each
analysis. Any estimates resulting from its analyses are not necessarily
indicative of actual values, which may be significantly more or less favorable
than as set forth in this document. In addition, analyses based on forecasts of
future results are not necessarily indicative of future results, which may be
significantly more or less favorable than suggested by such analyses. Estimates
of reference values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies may actually be sold. Because such
estimates are inherently subject to uncertainty and based upon numerous factors
or events beyond the control of the parties or their respective advisors, no
assurances can be given that such estimates will prove to be accurate.
No company used in the analysis of other publicly traded companies nor any
transaction used in the analyses of comparable transactions summarized above is
identical to Snyder, Santa Fe or the merger. Accordingly, such analyses must
take into account differences in the financial and operating characteristics of
the selected companies and the companies in the selected transactions and other
factors that would affect the public trading value and acquisition value of the
selected companies and the selected transactions, respectively.
Petrie Parkman, as part of its investment banking business, is continually
engaged in the evaluation of energy-related businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Snyder selected Petrie Parkman as
its financial advisor because it is a nationally recognized investment banking
firm that has substantial experience in transactions similar to the merger.
Petrie Parkman has in the past provided financial advisory services to
Snyder and Santa Fe and has received customary fees for such services. In
particular, Petrie Parkman advised Santa Fe in connection with Santa Fe's
initial public offering of shares of, and the 1997 spin-off of its remaining
shares of, its subsidiary, Monterey. Additionally, a representative of Petrie
Parkman actively involved in advising Snyder in the merger negotiation and
preparation of the fairness opinion previously served as a senior executive of
Santa Fe and subsequently Monterey. None of Snyder, Santa Fe or Petrie Parkman
believe that this prior advisory or employment relationship created any risk of
a meaningful conflict precluding Petrie Parkman's objective representation of
Snyder for purposes of opining on the fairness of the exchange ratio to holders
of Snyder common stock.
Pursuant to the terms of the engagement letter between Petrie Parkman and
Snyder dated March 26, 1997, as amended on January 8, 1999, Snyder has agreed
to pay Petrie Parkman a transaction fee, contingent and payable upon the
consummation of the merger of Santa Fe and Snyder, in an amount of $3 million.
Whether or
50
<PAGE>
not the merger is consummated, Snyder has also agreed to reimburse Petrie
Parkman for its out-of-pocket expenses, including reasonable fees and expenses
of counsel, and to indemnify Petrie Parkman and certain related persons against
certain liabilities relating to or arising out of its engagement, including
certain liabilities under federal securities laws. To the extent that such
indemnification includes liabilities arising under the federal securities laws,
it may not be enforceable as it may be determined to be against public policy.
Accounting Treatment
Santa Fe Snyder intends to account for the merger as a purchase under
generally accepted accounting principles. Under those rules, Santa Fe Snyder
will record the assets and liabilities of Snyder on its books at their
estimated fair market values. See the "Notes to Unaudited Pro Forma Condensed
Combined Financial Statements" included elsewhere in this document.
Material U.S. Federal Income Tax Consequences
The following sets forth the opinions of Andrews & Kurth L.L.P. and Vinson &
Elkins L.L.P. as to the material federal income tax consequences that are
expected to result from the merger. These opinions do not intend to deal with
all aspects of federal income taxation that may affect particular Snyder
stockholders in light of their individual circumstances and do not consider the
effect of any applicable state, local or foreign tax laws. Further, these
opinions only apply to Snyder stockholders who hold shares of Snyder common
stock as capital assets and do not deal with special classes of investors, such
as:
. insurance companies;
. tax-exempt organizations;
. financial institutions;
. broker-dealers;
. foreign persons or entities; or
. persons who acquired shares of Snyder common stock upon the exercise of
employee options or otherwise as compensation.
Accordingly, Snyder stockholders should seek tax advice as to their particular
circumstances.
The following opinions are based upon current law. Future legislative,
judicial or administrative changes or interpretations could alter or modify the
following statements and conclusions, and any of these changes or
interpretations could be retroactive and could affect the tax consequences to
the Snyder stockholders.
Tax Opinions Regarding the Merger. Completion of the merger is conditioned
upon the receipt by Santa Fe of an opinion of Andrews & Kurth L.L.P. in form
and substance satisfactory to Santa Fe, and the receipt by Snyder of an opinion
of Vinson & Elkins L.L.P. in form and substance satisfactory to Snyder. These
opinions, dated the effective time of the merger, will be based on the facts,
representations and assumptions set forth in the opinions, and will state that
the merger will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and that Santa Fe and Snyder will
each be a "party to a reorganization" as this phrase is described in Section
368(b) of the Internal Revenue Code.
Completion of the merger is also conditioned upon receipt by Snyder of an
opinion of Vinson & Elkins L.L.P. stating that, except for the federal income
tax consequences described below under "--Cash in Lieu of Fractional Shares,"
Snyder stockholders will recognize no gain or loss by reason of the merger upon
the exchange of shares of Snyder common stock for shares of Santa Fe common
stock.
Both Santa Fe and Snyder may waive the receipt of these opinions of counsel.
If either Santa Fe or Snyder waives this condition, we will circulate a new
proxy advising the stockholders that the condition to receive the
51
<PAGE>
required tax opinion prior to the merger has been waived and we will give the
stockholders of the company who waived the condition an opportunity to
reconsider their vote.
Andrews & Kurth L.L.P. and Vinson & Elkins L.L.P. cannot assure that the
Internal Revenue Service will not take a contrary view, and neither Santa Fe
nor Snyder will seek a ruling from the IRS concerning the federal income tax
consequences of the merger. The opinions are not guarantees that the merger
will be tax-
free and are not binding on the IRS or the courts. In rendering these opinions,
Andrews & Kurth L.L.P. and Vinson & Elkins L.L.P. have assumed that the merger
will be consummated as contemplated by this document. Each firm has received
customary representations of facts from Santa Fe and Snyder upon which they
have relied.
Treatment of Santa Fe and Snyder. It is the opinion of Andrews & Kurth
L.L.P. and Vinson & Elkins L.L.P. that Santa Fe and Snyder will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code and that for federal income tax purposes, Snyder will not
recognize any gain or loss with respect to the exchange of Santa Fe common
stock and Snyder common stock as a result of the merger. It is also the opinion
of Andrews & Kurth L.L.P. that for federal income tax purposes, Santa Fe will
not recognize any gain or loss with respect to the exchange of Santa Fe common
stock and Snyder common stock as a result of the merger.
Treatment of Holders of Snyder Common Stock. It is the opinion of Vinson &
Elkins L.L.P. that, except for the federal income tax consequences described
below under "--Cash in Lieu of Fractional Shares," a Snyder stockholder who,
under the merger, exchanges Snyder common stock for Santa Fe common stock
generally will not recognize any gain or loss upon the exchange. A Snyder
stockholder's aggregate tax basis in Santa Fe common stock received in the
merger will equal the holder's aggregate tax basis in Snyder common stock
surrendered in the exchange, reduced by any tax basis allocable to fractional
shares exchanged for cash. The holding period of the shares of Santa Fe common
stock received by a Snyder stockholder in the merger will include the holding
period of the Snyder common stock surrendered in the exchange.
Cash in Lieu of Fractional Shares. We will not issue any fractional shares
of Santa Fe common stock in the merger. A Snyder stockholder who receives cash
instead of fractional shares of Santa Fe common stock will be treated as having
received fractional shares in the merger and then as having received cash for
these fractional shares in a redemption by Santa Fe. Any gain or loss
attributable to these fractional shares generally will be capital gain or loss.
The amount of this gain or loss will equal the difference between the holder's
tax basis of Snyder common stock surrendered in the merger that is allocated to
fractional shares and the cash received instead of fractional shares. Any
capital gain or loss will be treated as long-term capital gain or loss if a
Snyder stockholder has held the Snyder common stock for more than one year at
the effective time. Capital gain on assets held for more than one year by a
non-corporate stockholder is generally subject to federal income tax at a
maximum 20% capital gains rate.
Backup Withholding. Unless an exemption applies under the applicable law and
regulations, the exchange agent may be required to withhold, and, if required,
will withhold, 31% of any cash payments to a Snyder stockholder in the merger
unless the holder provides the appropriate form. Unless an applicable exemption
exists and is proved in a manner satisfactory to the exchange agent, a holder
should complete and sign the Substitute Form W-9 enclosed with the letter of
transmittal sent by the exchange agent. This completed form provides the
information, including the holder's taxpayer identification number, and
certification necessary to avoid backup withholding.
The foregoing opinions do not address the particular facts and circumstances
of any particular holder of Snyder common stock. In addition, the foregoing
opinions do not address any non-income tax or any foreign, state or local tax
consequences of the merger nor do they address the tax consequences of any
transactions other than the merger or any aspect of the merger not involving
the exchange of Snyder common stock. Snyder stockholders should seek tax advice
to determine their particular United States federal, state, local or foreign
income or other tax consequences.
52
<PAGE>
Regulatory Matters; Certain Legal Matters
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
rules promulgated by the Federal Trade Commission, the merger may not be
consummated until the following steps have been taken:
. Premerger Notification and Report Forms have been submitted and certain
information has been furnished to the FTC and the Antitrust Division of
the United States Department of Justice; and
. required waiting periods have expired or terminated.
On February 16, 1999 and February 24, 1999, notifications required under the
Hart-Scott-Rodino Antitrust Improvements Act were filed with the FTC and the
Antitrust Division. On February 25, 1999, early termination of the statutory
waiting period related to the February 16 filings was granted. On March 9,
1999, early termination of the statutory waiting period related to the February
24 filings was granted.
At any time before or after the consummation of the merger and
notwithstanding the expiration or termination of the Hart-Scott-Rodino
Antitrust Improvements Act waiting period, any federal or state antitrust
authority could take action under the antitrust laws as they deem necessary or
desirable in the public interest. Such action could include seeking to enjoin
the consummation of the merger or seeking divestiture of all or part of the
assets of Santa Fe or Snyder. Private parties may also seek to take legal
action under the antitrust laws, if circumstances permit.
If the Antitrust Division, or any federal or state antitrust authority, were
to challenge the merger, the consummation of the merger could be postponed
beyond June 30, 1999, in which event, either Santa Fe or Snyder may terminate
the merger agreement, pursuant to its terms, at any time thereafter. See "The
Merger Agreement--Termination of the Merger Agreement" on page 64.
No Appraisal Rights
Under the laws of the state of Delaware, which is the state of incorporation
of both Snyder and Santa Fe, the common stockholders of Snyder and Santa Fe are
not entitled to appraisal rights with respect to the merger.
Federal Securities Laws Consequences; Resale Restrictions
This document does not cover resales of the Santa Fe common stock to be
received by the stockholders of Snyder upon consummation of the merger, and no
person is authorized to make any use of this document in connection with those
resales.
All shares of Santa Fe common stock received by Snyder stockholders in the
merger will be freely transferable, except that shares of Santa Fe common stock
received by persons who are deemed to be "affiliates" as defined under the
Securities Act of 1933 of Snyder may be resold by them only in transactions
permitted by the resale provisions of Rule 145 or Rule 144 in the case of such
persons who become affiliates of Santa Fe or as otherwise permitted under the
Securities Act of 1933. Persons who may be deemed to be affiliates of Snyder or
Santa Fe generally include individuals or entities that control, are controlled
by, or are under common control with, those persons and may include officers
and directors of Snyder or Santa Fe as well as significant stockholders. The
merger agreement requires Snyder to use its reasonable efforts to cause each of
its affiliates to execute a written agreement to the effect that the affiliate
will not offer or sell or otherwise dispose of any of the shares of Santa Fe
common stock issued to them in the merger in violation of the Securities Act of
1933 or the rules and regulations promulgated by the Securities and Exchange
Commission.
53
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The table below sets forth, for the calendar quarters indicated, the
reported high and low closing prices of Santa Fe common stock and Snyder common
stock as reported on the NYSE Composite Transaction Tape, in each case based on
published financial sources, and the dividends declared on the stock.
On July 25, 1997 Santa Fe distributed pro rata to its common stockholders
all of the shares of Monterey Resources, Inc. that it owned by means of a tax-
free distribution. The market price of Santa Fe's common stock declined to
reflect the distribution of 0.44 common shares of Monterey for each common
share of Santa Fe. Between the distribution date and November 4, 1997, the date
that Monterey's common shares were exchanged for shares of Texaco, Inc. under
the merger agreement between the two companies, the market price of Monterey's
common shares ranged from a low of $13.875 to a high of $21.1875 in the third
quarter of 1997 and ranged from a low of $19.9375 to a high of $21.5625 in the
fourth quarter of 1997.
<TABLE>
<CAPTION>
Snyder Common Stock Santa Fe Common Stock
------------------------------- ------------------------------------
Market Price Cash Market Price Cash
----------------- Dividends -------------------- Dividends
High Low Declared High Low Declared
------ ------ --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter......... $ 19 1/8 $ 14 5/8 $0.065 $ 15 7/8 $ 12 1/2 --
Second Quarter........ 19 15 1/4 0.065 15 3/4 12 5/8 --
Third Quarter......... 23 5/8 18 3/16 0.065 15 1/2 8 1/16 --
Fourth Quarter........ 24 7/8 16 3/4 0.065 14 1/16 9 7/8 --
1998
First Quarter......... 21 7/16 15 0.065 11 11/16 8 13/16 --
Second Quarter........ 22 1/2 17 3/8 0.065 11 9/16 9 3/8 --
Third Quarter......... 21 1/4 14 9/16 0.065 11 6 27/32 --
Fourth Quarter........ 17 5/16 11 1/4 0.065 9 3/16 5 3/8 --
1999
First Quarter (through
March 29, 1999)...... 15 1/4 9 7/16 0.065 7 7/8 4 3/4 --
</TABLE>
Snyder and Santa Fe stockholders are urged to obtain current market
quotations prior to making any decision with respect to the merger.
54
<PAGE>
INTERESTS OF CERTAIN DIRECTORS AND OFFICERS IN THE MERGER
Snyder
Snyder stockholders should note that a number of directors and executive
officers of Snyder have interests in the merger as employees and directors that
are different from, or in addition to, those of the Snyder stockholders, as
described below.
Snyder Employment Agreement. Snyder and William A. Hargett have entered into
an employment agreement, which will be replaced at the effective time with a
Santa Fe Snyder employment agreement. If within a period of two years after the
effective time, Santa Fe Snyder terminates Mr. Hargett's employment other than
for misconduct or Mr. Hargett terminates his employment for good reason, he
would be entitled to receive two years' compensation under his Santa Fe Snyder
employment agreement. For a description of the Santa Fe Snyder employment
agreement, see "--Santa Fe" beginning on page 56.
Snyder Option Agreements. Stock options issued under Snyder's 1990 Stock
Plan for Non-Employee Directors and Amended and Restated 1989 Stock Option Plan
for employees would become fully vested and exercisable immediately prior to
the merger, but would be canceled upon consummation of the merger. As of March
19, 1999, officers and directors of Snyder held stock options to purchase a
total of 1,226,850 shares of Snyder common stock under these Snyder stock
option plans. The weighted average exercise price of these stock options is
$16.16 per share of Snyder common stock. The merger agreement provides that at
the effective time each Snyder stock option held by officers continuing their
employment with Santa Fe Snyder and by Snyder directors would be replaced with
options to purchase shares of Santa Fe Snyder common stock at a number and
exercise price based on the exchange ratio. The Santa Fe Snyder stock options
would be exercisable on the same terms and conditions stated in the canceled
Snyder stock options, except that the Santa Fe Snyder stock options would be
fully exercisable upon their grant.
Snyder Change in Control Severance Agreements. Except for William G. Hargett
whose employment agreement is discussed above, Snyder has entered into change
in control severance agreements with each of its officers. The merger will
constitute a change in control under the change in control severance
agreements. Any officer not offered employment with Santa Fe Snyder or who
terminates his employment because of a change in duties will be entitled to
receive severance benefits equal to two years' salary under his Snyder
agreement.
Notwithstanding the foregoing, the merger agreement provides that any
officer of Snyder who is offered employment with Santa Fe Snyder shall
surrender his Snyder change in control severance agreement in exchange for an
employment agreement with Santa Fe Snyder. The Santa Fe Snyder employment
agreement will contain severance and other terms except as to title and
compensation available to similarly situated employees within Santa Fe Snyder.
For purposes of all the Santa Fe Snyder employment agreements, the merger would
constitute a change in control. However, no employee would be entitled to
compensation and benefits under his Santa Fe employment agreement unless within
a period of two years after the effective time either Santa Fe terminates the
employee's employment other than for misconduct or the employee terminates his
employment for good reason. For a description of the Santa Fe Snyder employment
agreement, see "--Santa Fe" beginning on page 56.
Other Snyder Employee Benefit Plans. Several of the executive officers and
directors of Snyder participate in the Snyder Oil Corporation Deferred
Compensation Plan for Select Employees and the Snyder Oil Corporation Directors
Deferral Plan. For purposes of the Employee Deferral Plan, the merger would
constitute a change in control and employee benefits under the plan would
become immediately vested. The aggregate amount of deferred compensation
benefits accelerating for the benefit of all directors participating in the
Employee Deferral Plan is approximately $86,000. All benefits are vested under
the Director Deferral Plan and no acceleration of benefits accrues to Snyder
directors under the plan as a result of the merger.
55
<PAGE>
Santa Fe
Thirteen of Santa Fe's executives have employment agreements with Santa Fe
for which the merger will begin a two-year period during which the executive
will be entitled to receive severance benefits if his employment is terminated
either by Santa Fe for any reason other than for misconduct or by the executive
for a good reason.
Under the Santa Fe employment agreements, on a qualifying termination the
executive will be entitled to receive a lump sum payment equal to the sum of
. two times the executive's annual base salary; and
. the maximum bonus payable to the executive that year under the annual
bonus plan. However, Mr. Payne will be entitled to receive three times
and Messrs. Boyt and Radtke two times the sum of their annual base salary
and the greater of
--their target bonus for that year, and
--their average bonus for the three preceding years.
In addition, Santa Fe will provide the executive with
. continued welfare benefits in the form of life, health, accident and
disability insurance for two years, and three years in the case of Mr.
Payne;
. outplacement services; and
. payment of a cash amount equal to the "spread" or fair market value of
the award, as applicable, to cancel all stock-based awards granted to the
executive after the merger.
If any payments to these executives other than Mr. Payne, whether under
their employment agreement or otherwise, results in the "golden parachute"
excise tax imposed by Section 4999 of the Internal Revenue Code, the amount
payable pursuant to the employment agreement will be reduced automatically if
the reduction will avoid "golden parachute" tax consequences and result in a
greater net after-tax benefit to the executive than if no reduction were made.
If a golden parachute excise tax will be imposed on any payment made to Mr.
Payne, he will be entitled to receive an additional cash payment sufficient to
make him "whole" on a net after-tax basis for the excise tax, all other taxes
and any interest or penalties on the "make-whole" payment.
If all executives with Santa Fe employment agreements were to be terminated
by Santa Fe other than for misconduct or were to resign with good reason on the
effective time, Santa Fe's aggregate additional liability under the Santa Fe
employment agreements based on December 31, 1998 compensation levels without
giving effect to the limitations described above is estimated to be
approximately $9.3 million.
The merger will constitute a "change in control" for purposes of Santa Fe's
stock compensation plans, annual bonus plans and severance plan. As a result,
at the effective time:
. Santa Fe employees and directors may exercise any stock options they
hold;
. all restrictions on shares of restricted stock held by Santa Fe employees
and directors will lapse;
. all goals associated with phantom stock awards held by Santa Fe employees
will be considered met and these awards will become payable in cash; and
. each participant in Santa Fe's incentive compensation plans who remains
employed at year-end will be entitled to receive a cash bonus at the end
of 1999 equal to the maximum bonus that would have been payable to the
participant if all performance goals for 1999 had been met in full. The
1999 bonus will be prorated for participants who terminate prior to year-
end and is not payable to any executive who receives payments under his
employment agreement for a qualifying termination in 1999.
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<PAGE>
As of March 19, 1999, there were a total of
. 1,596,475 shares of Santa Fe common stock reserved for purchase under
stock options of officers that will become fully exercisable upon
consummation of the merger, the weighted average exercise price of which
is $9.26 per share;
. 115,507 shares of restricted stock held by officers, the restrictions on
which will lapse upon consummation of the merger; and
. 713,899 phantom units held by officers which will be paid upon
consummation of the merger in cash in an amount equal to the aggregate
value of the same number shares of Santa Fe common stock.
Also, the Santa Fe board of directors has agreed to pay GKH Partners, L.P. a
fee for financial advisory services provided to Santa Fe in connection with the
merger in the amount of $500,000 upon consummation of the merger. Melvyn N.
Klein, a director of Santa Fe, is the sole stockholder of a general partner of
GKH Partners, L.P. An affiliate of GKH Partners, L.P. owns approximately 5.1%
of Santa Fe's common stock and is party to a registration rights agreement with
Santa Fe.
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THE MERGER AGREEMENT
The following describes the material terms of the merger agreement. The full
text of the merger agreement is attached as Annex A to this document and is
incorporated by reference in this document. We encourage you to read the entire
merger agreement.
Structure; Effective Time
The merger agreement provides for the merger of Snyder with and into Santa
Fe, with Santa Fe surviving the merger. The merger will become effective at the
time of the filing of a certificate of merger with the Secretary of State of
the State of Delaware or at a later time as agreed in writing by the parties
and specified in the certificate of merger, which is expected to occur as soon
as practicable after the last condition precedent to the merger set forth in
the merger agreement has been satisfied or waived.
Conversion or Cancellation of Shares of Snyder Common Stock in the Merger
Except as described in the following sentence, under the merger agreement
each share of Snyder common stock outstanding immediately prior to the
effective time will, at the effective time, automatically convert into 2.05
shares of Santa Fe common stock. See also "The Merger--Consideration" on page
16. All shares of Snyder common stock that are owned by Snyder as treasury
stock and any shares of Snyder common stock owned by Santa Fe or any subsidiary
of Santa Fe will, at the effective time, be canceled and no payment will be
made for these shares.
Santa Fe Snyder Board of Directors and Board Committees
The merger agreement provides that immediately after the effective time
Santa Fe shall take any action as shall be required to cause the Santa Fe board
of directors to increase to 11 members, divided into three classes. Under the
merger agreement, on February 24, 1999 the Snyder board designated, and the
Santa Fe board has nominated John C. Snyder, John A. Hill, Harold R. Logan,
Jr., James E. McCormick and Edward T. Story to stand for election as directors
of Santa Fe at the Santa Fe special meeting.
The Santa Fe board of directors unanimously recommends that the Santa Fe
stockholders vote "for" each of these individuals to be members of the Santa Fe
Snyder board of directors, commencing immediately after the merger. For a
description of each nominee's background and the class of Santa Fe Snyder's
board of directors for which they have been nominated, see "Election of
Directors" on page 80. Immediately after the effective time, John C. Snyder
will be the chairman of the board of directors of Santa Fe Snyder and the
persons listed under "Directors and Officers of Santa Fe Snyder Following the
Merger" on page 72 will be named as the senior executive officers of Santa Fe
Snyder.
Under the merger agreement we have agreed that Santa Fe Snyder will have a
nominating committee consisting of Messrs. Snyder, Payne and two additional
members of the board of directors, one of which will be designated by Mr.
Snyder and the other by Mr. Payne.
Employee Stock Options
At the effective time, each option to purchase shares of Snyder common stock
outstanding under any employee stock option or compensation plan or arrangement
of Snyder, whether or not vested or exercisable, will be canceled. All holders
of Snyder options to be canceled in the merger other than Snyder employees
receiving severance will each be entitled to receive from Santa Fe replacement
options to purchase common stock of Santa Fe Snyder on terms comparable to
those of the canceled Snyder options. The number of shares of common stock of
Santa Fe Snyder to be issued upon exercise under the option and the exercise
price of the option will be computed in compliance with the requirements of
Section 424(a) of the Internal Revenue Code. Snyder has agreed that it will,
prior to the effective time, use all commercially reasonable efforts to obtain
any required consents and take any other permitted action, if any, as may be
necessary to give effect to the transactions contemplated by this paragraph.
Except as contemplated by this paragraph, Snyder has agreed that
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it will not, without the written consent of Santa Fe, amend any outstanding
options to purchase shares of Snyder common stock, including any amendment to
accelerate the vesting thereof.
Conversion of Shares
Before the effective time, Santa Fe will appoint an exchange agent for the
purpose of exchanging certificates representing shares of Snyder common stock
for shares of Santa Fe common stock. Promptly after the effective time, Santa
Fe or the exchange agent will send each holder of Snyder common stock a letter
of transmittal for use in the exchange and instructions explaining how to
surrender certificates to the exchange agent. Holders of Snyder common stock
who surrender their certificates to the exchange agent, together with a
properly completed letter of transmittal, will receive 2.05 shares of Santa Fe
common stock for each surrendered share of Snyder common stock. Holders of
unexchanged shares of Snyder common stock will not be entitled to receive any
dividends or other distributions payable by Santa Fe after the effective time
until their certificates are surrendered. Upon surrender, however, the holders
will receive accumulated dividends and distributions payable on the related
shares of Santa Fe common stock after the effective time, without interest,
together with cash in lieu of any fractional shares of Santa Fe common stock.
Holders of Snyder common stock will receive a check in the amount of their
share of the net proceeds from the sale of fractional shares of Santa Fe common
stock in the market by the exchange agent.
Conduct of Business Prior to Merger
From the date of the execution of the merger agreement until the effective
time, Snyder and its subsidiaries and Santa Fe and its subsidiaries are
required to conduct their business only in the ordinary course consistent with
past practice and oil field practices standard in the industry, to use their
reasonable best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
officers and employees. In particular, except as otherwise provided in the
merger agreement, during this period, Snyder may not, without Santa Fe's prior
written consent, and Santa Fe may not, without Snyder's prior written consent:
. settle any material tax audit, make or change any material tax election,
or file any material amended tax return;
. issue any securities or amend the terms of any of its outstanding
securities;
. incur indebtedness outside the ordinary course of business;
. fail to make a required contribution to an employee benefit plan;
. increase the compensation payable or modify the employment or severance
agreements with any executive officer or former employee;
. enter into any settlement of litigation outside the ordinary course of
business;
. change any of its accounting policies, except for any change required by
GAAP;
. take any action giving rise to a claim under the Worker Adjustment and
Retraining Notification Act or any similar state laws or regulation;
. amend any engagement letter with its financial advisor(s); or
. agree or commit to any of the foregoing.
In addition, during this period, except as provided for in the merger
agreement, neither Snyder nor any of its subsidiaries may, without Santa Fe's
prior written consent, and neither Santa Fe nor any of its subsidiaries may,
without Snyder's prior written consent:
. adopt any amendments to its organizational documents;
. enter into any mergers or consolidations exceeding $10 million
individually or $30 million in the aggregate;
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. pay dividends other than Snyder's regular dividend or intercompany
dividends;
. repurchase, redeem or otherwise acquire any of its or its subsidiaries'
outstanding stock other than intercompany acquisitions of capital stock;
. become bound to participate in any operation with respect to oil and gas
interests that will cost in excess of $10 million individually or $50
million in the aggregate, unless the operation is a currently existing
obligation of the company;
. enter into certain hedging transactions not in accordance with the
company's hedging policy;
. sell, lease or otherwise dispose of or create a lien on any of its
material assets outside its ordinary course of business, other than
pursuant to existing contracts or commitments;
. take, commit to take or fail to take any action that would cause a
representation or warranty made in the merger agreement to be inaccurate;
or
. agree or commit to any of the foregoing.
Covenants and Agreements
Special Meetings; Proxy Material. Santa Fe and Snyder have agreed to cause
the special meetings of their stockholders to be duly called and held as
promptly as practicable for the purpose of voting on the approval and adoption
of the merger agreement, and, in the case of Santa Fe, the election of
directors, as discussed in this document.
No Solicitation. The merger agreement provides that until it is terminated,
Santa Fe and Snyder and their respective subsidiaries will not, and will cause
their respective officers, directors, employees or other agents not to,
directly or indirectly, take any action to solicit, initiate or encourage any
acquisition proposal or engage in negotiations with, or disclose any nonpublic
information relating to Santa Fe or Snyder or their respective subsidiaries, or
afford access to their respective properties, books or records to any person
that has made or may be considering making an acquisition proposal. However,
Santa Fe and Snyder and their respective boards are permitted to take and
disclose a position with respect to a tender offer by a third party pursuant to
Rules 14d-9 and 14e-2(a) promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934. In addition, Santa Fe and Snyder and
their respective boards may furnish information to or enter into negotiations
with, any person or entity that has indicated its willingness to make an
unsolicited bona fide proposal to acquire Santa Fe or Snyder, as the case may
be, pursuant to a merger, consolidation, share exchange, purchase of a
substantial portion of the assets, business combination or similar transaction,
or withdraw, modify or change their recommendation of the merger agreement or
the merger or recommend an acquisition proposal which is a superior acquisition
proposal, if:
. the Santa Fe or Snyder board, as the case may be, after considering the
written advice of outside legal counsel, determines in good faith that
the action is required for the board to comply with its fiduciary duties
to stockholders imposed by applicable law;
. contemporaneously with furnishing this information to, or entering into
discussions or negotiations with, this person or entity either Santa Fe
or Snyder, as the case may be, provides written notice to the other party
to the effect that it is furnishing information to, or entering into
discussions or negotiations with, this person or entity; and
. Santa Fe or Snyder, as the case may be, uses all reasonable efforts to
keep the other party informed in all material respects of the status and
terms of any negotiations or discussions, including the identity of the
person or entity with whom the negotiations or discussions are being
held, and provides the other party with copies of the written proposals
and any amendments, revisions or correspondence regarding these
proposals.
The merger agreement defines the term "acquisition proposal" to mean any
offer or proposal for, or any indication of interest in, a merger or other
business combination directly or indirectly involving Santa Fe or
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Snyder or any of their respective subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than the transactions contemplated by the merger agreement.
The merger agreement defines the term "superior acquisition proposal" to mean a
bona fide written acquisition proposal which the board of directors concludes
in good faith after consultation with its financial advisors and legal counsel,
taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal,
. would, if consummated, result in a transaction that is more favorable to
their company's stockholders from a strategic and financial point of
view, than the transactions contemplated by the merger agreement; and
. is reasonably capable of being completed.
Reasonable Commercial Efforts. Each party has agreed to use all reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by the merger
agreement.
Employee Benefits Matters. The merger agreement provides that, as soon as
reasonably practicable on or after the effective time, Santa Fe Snyder will
establish compensation and employee benefit plan programs for the continuing
employees of Santa Fe Snyder that provide similarly situated employees with
compensation and benefits on substantially the same basis, to the extent
reasonably practicable. Until these programs are established, Santa Fe Snyder
shall provide that the continuing employees shall be eligible to continue to
participate in the respective employee benefit plans of Santa Fe and Snyder, or
shall be eligible to participate in any combination of these plans or new plans
as Santa Fe Snyder deems appropriate. The employees of Snyder shall be given
credit for their service with Snyder prior to the effective time for all
purposes under the compensation and employee benefit plans of Santa Fe Snyder,
other than the accrual of benefits under any defined benefit plan. However, any
member of the senior management of Snyder who continues employment with Santa
Fe Snyder who is receiving compensation and benefits immediately prior to the
effective time in excess of that being received at that time by similarly
situated Santa Fe employees shall continue to receive the level of compensation
and benefits, but shall not be eligible for upward compensation and benefits
adjustments until the compensation and benefits of the former member of
Snyder's senior management are in the aggregate equal to that received by a
similarly situated Santa Fe employee.
Following the effective time, most former Snyder employees who are employed
by Santa Fe Snyder will be eligible for grants commensurate with grants
provided to similarly situated Santa Fe employees under the applicable stock
option plans maintained by Santa Fe Snyder. In addition, most persons who were
employees of Snyder immediately prior to the effective time who become
employees of Santa Fe Snyder will receive an annual grant of stock options
during the summer of 1999 on terms as established by the past practices of
Santa Fe and commensurate with grants usually provided to similarly situated
Santa Fe employees dependent on the availability of shares under the applicable
stock option plans of Santa Fe Snyder.
Indemnification and Insurance of Snyder Officers and Directors. Santa Fe has
agreed that for six years after the effective time, it will indemnify and hold
harmless the present and former directors and officers of Snyder, and any
Snyder employee who acts as a fiduciary under any of the Snyder employee
benefit plans, to the extent provided by the Delaware General Corporation Law
and Snyder's certificate of incorporation and bylaws in effect at the effective
time, against certain liabilities. Santa Fe also agreed to maintain Snyder's
officers' and directors' liability insurance policy, or to purchase a "tail"
policy thereunder, for a period of at least six years after the effective time,
provided that the aggregate amount of premiums paid for the insurance during
this period shall not exceed $500,000.
Additional Mutual Covenants. The merger agreement contains certain mutual
covenants of the parties, including covenants relating to:
. not jeopardizing the intended tax treatment of the merger;
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. public announcements;
. preparation of this document;
. notification of certain matters;
. access to information;
. further assurances;
. cooperation in connection with governmental filings and in obtaining
consents and approvals;
. the listing of the Santa Fe common stock to be issued in conjunction with
the merger; and
. confidential treatment of non-public information.
Representations and Warranties of Snyder and Santa Fe
The merger agreement contains substantially reciprocal representations and
warranties of Snyder and Santa Fe as to various matters such as:
. due organization and good standing;
. corporate authorization to enter into the contemplated transactions;
. governmental approvals required in connection with the contemplated
transactions;
. absence of any breach of organizational documents and certain material
agreements as a result of the contemplated transactions;
. capitalization;
. subsidiaries;
. filings with the SEC;
. financial statements;
. absence of certain material changes, including changes which would have a
material adverse effect, since September 30, 1998;
. absence of undisclosed material liabilities;
. compliance with laws and court orders;
. litigation;
. financial advisor fees;
. tax matters;
. employee matters;
. environmental matters;
. tax treatment of the merger;
. opinions of financial advisors;
. patents and other proprietary rights;
. status and operation of oil and gas properties;
. reserve reports;
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. required stockholder votes or consents;
. hedging; and
. year 2000 issues.
In addition, the merger agreement contains representations and warranties of
Snyder and Santa Fe that neither Section 203 of the Delaware General
Corporation Law nor any other antitakeover or similar statute or regulation
applies or purports to apply to the transactions contemplated by the merger
agreement, and that both Santa Fe and Snyder have taken all action necessary to
render the rights issued pursuant to the terms of their respective rights
agreements inapplicable to the merger agreement and the transactions
contemplated in the merger agreement.
The merger agreement defines the term "material adverse effect" to mean any
event, circumstance, condition, development or occurrence causing, resulting in
or having a material adverse effect on the financial condition, business,
operations, assets, properties, prospects or results of operations of Santa Fe
or its subsidiaries, taken as a whole, or Snyder and its subsidiaries, taken as
a whole, as the case may be; provided, that the term shall not include effects
on Santa Fe or Snyder resulting from general economic conditions or from market
conditions, including, without limitation, changes in the market prices for oil
and gas then prevailing generally in the oil and gas industry. Many of the
representations and warranties in the merger agreement are qualified by the
absence of a material adverse effect.
The representations and warranties in the merger agreement do not survive
the effective time.
Conditions to the Merger
Conditions to the Obligations of Each Party. The obligations of Santa Fe and
Snyder to consummate the merger are dependent on to the satisfaction of the
following conditions:
. the merger agreement shall have been approved by the requisite vote of
the stockholders of Santa Fe and Snyder;
. any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 relating to the merger shall have expired or
been terminated;
. the absence of any statute, regulation, judgment, injunction, order or
decree that would prohibit the consummation of the merger;
. the registration statement to register the shares of Santa Fe common
stock to be issued in the merger shall have been filed by Santa Fe with
the Securities and Exchange Commission and been declared effective and no
stop order suspending the effectiveness of the registration statement
shall be in effect and no proceedings for this purpose shall be pending
before or threatened by the Securities and Exchange Commission; and
. the shares of Santa Fe common stock to be issued in the merger shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
Conditions to the Obligations of Santa Fe. The obligation of Santa Fe to
consummate the merger is further subject to the satisfaction of the following
conditions:
. Snyder shall have performed in all material respects the obligations
required to be performed by it at or prior to the effective time and each
of the representations and warranties contained in the merger agreement
that is qualified as to materiality shall be true and correct in all
respects and each of the representations not so qualified shall be true
and correct in all material respects as of the effective time as if made
at that time, except that the accuracy of representations and warranties
that by their terms speak as of a specified date other than as of the
date of the merger agreement will be determined as of the specified date,
and Santa Fe shall have received a certificate signed by an executive
officer of Snyder to the foregoing effect;
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. all proceedings to be taken by Snyder in connection with the transactions
contemplated by the merger agreement and all documents, instruments and
certificates to be delivered by Snyder in connection with the
transactions will be reasonably satisfactory in form and substance to
Santa Fe and its counsel; and
. Santa Fe shall have received an opinion from Andrews & Kurth L.L.P. that
--the merger shall constitute a reorganization under Section 368(a) of
the Internal Revenue Code,
--Santa Fe and Snyder will each be a party to that reorganization, and
--no gain or loss will be recognized by Santa Fe or Snyder by reason of
the merger.
Conditions to the Obligations of Snyder. The obligation of Snyder to
consummate the merger is further subject to the satisfaction of the following
conditions:
. Santa Fe shall have performed in all material respects the obligations
required to be performed by it at or prior to the effective time and each
of the representations and warranties contained in the merger agreement
that is qualified as to materiality shall be true and correct in all
respects and each of the representations not so qualified shall be true
and correct in all material respects as of the effective time as if made
at that time, except that the accuracy of representations and warranties
that by their terms speak as of a specified date other than as of the
date of the merger agreement will be determined as of that specified
date, and Snyder shall have received a certificate signed by an executive
officer of Santa Fe to the foregoing effect;
. all proceedings to be taken by Santa Fe in connection with the
transactions contemplated by the merger agreement and all documents,
instruments and certificates to be delivered by Santa Fe in connection
with the transactions will be reasonably satisfactory in form and
substance to Snyder and its counsel; and
. Snyder shall have received an opinion from Vinson & Elkins L.L.P. that
--the merger shall constitute a reorganization under Section 368(a) of
the Internal Revenue Code,
--Santa Fe and Snyder will each be a party to that reorganization,
--no gain or loss will be recognized by Snyder by reason of the merger,
and
--no gain or loss will be recognized by holders of Snyder common stock
by reason of the merger upon the conversion of shares of Snyder common
stock into Santa Fe common stock, except with respect to cash received
in lieu of fractional shares.
Termination of the Merger Agreement
Right to Terminate. The merger agreement may be terminated at any time prior
to the effective time, whether before or after approval by the boards of
directors or stockholders of Snyder or Santa Fe:
. by the mutual written consent of Snyder and Santa Fe;
. by either Snyder or Santa Fe if the effective time has not occurred on or
before June 30, 1999; provided, that this right to terminate the merger
agreement shall not be available to any party whose breach of any of its
covenants or agreements under the merger agreement results in the failure
of the merger to be consummated by June 30, 1999;
. by either Snyder or Santa Fe if there is any applicable law, rule or
regulation that makes consummation of the merger illegal or otherwise
prohibited or if any final and non-appealable judgment, injunction, order
or decree enjoining any party from consummating the merger is entered;
. by either Snyder or Santa Fe if the requisite stockholder approval is not
obtained by a vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof;
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. by Snyder, if Santa Fe is in material breach of the merger agreement and
the breach is not cured in all material respects within 20 business days
after notice of the breach;
. by Santa Fe, if Snyder is in material breach of the merger agreement and
the breach is not cured in all material respects within 20 business days
after notice of the breach;
. by Snyder, if the Santa Fe board withdraws, modifies or changes its
recommendation of the merger agreement or the merger in a manner adverse
to Snyder or the Santa Fe board recommends to the stockholders of Santa
Fe any acquisition proposal or resolves to do any of the foregoing or a
tender offer or exchange offer for outstanding shares of capital stock of
Santa Fe representing 50% or more of the combined power to vote generally
for the election of directors is commenced, and the Santa Fe board does
not, within the applicable period required by law, recommend that
stockholders not tender their shares into the tender or exchange offer;
. by Santa Fe, if the Snyder board withdraws, modifies or changes its
recommendation of the merger agreement or the merger in a manner adverse
to Santa Fe or the Snyder board recommends to the stockholders of Snyder
any acquisition proposal or resolves to do any of the foregoing or a
tender offer or exchange offer for outstanding shares of capital stock of
Snyder representing 50% or more of the combined power to vote generally
for the election of directors is commenced, and the Snyder board does
not, within the applicable period required by law, recommend that
stockholders not tender their shares into the tender or exchange offer;
. by Snyder or Santa Fe, if Snyder accepts a bona fide written acquisition
proposal which the board of directors of Snyder concludes in good faith
is a superior acquisition proposal and pays the applicable termination
fee to Santa Fe; or
. by Santa Fe or Snyder, if Santa Fe accepts a bona fide written
acquisition proposal which the board of directors of Santa Fe concludes
in good faith is a superior acquisition proposal and pays the applicable
termination fee to Snyder.
If the merger agreement is validly terminated, only provisions related to
the following will survive:
. confidentiality;
. termination fees and expenses;
. information supplied for use in this document;
. the right to participate in the defense of stockholder lawsuits;
. notices;
. governing law;
. jurisdiction; and
. waiver of a jury trial.
A party will only be liable for the termination of the merger agreement if
the party is in willful, reckless, or grossly negligent breach of any provision
of the merger agreement. The confidentiality agreement entered into between
Santa Fe and Snyder on December 16, 1998 will continue in effect despite
termination of the merger agreement.
Termination Expenses
The merger agreement provides that, except as provided below, all expenses
incurred by the parties to the merger agreement shall be borne solely and
entirely by the party that has incurred the expenses. If the merger agreement
is terminated for any reason, Santa Fe or Snyder will share equally in all
expenses, excluding all
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reasonable fees and expenses of counsel, accountants, investment bankers,
experts and consultants, incurred by a party related to the preparation,
printing, filing and mailing of this document, and all SEC and other regulatory
filing fees incurred in connection with the registration statement regarding
the issuance of Santa Fe common stock, this document and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
Snyder Termination Expenses. The merger agreement generally provides that
Snyder shall pay Santa Fe a termination fee of $25 million, plus Santa Fe's
reasonable out-of-pocket expenses, if the merger agreement is terminated in the
following circumstances:
. Snyder stockholder approval is not obtained;
. the Snyder board withdraws, modifies or changes its recommendation of the
merger agreement or the merger in a manner adverse to Santa Fe,
recommends to the stockholders of Snyder any acquisition proposal for
Snyder or does not recommend that the stockholders do not tender or
exchange their shares pursuant to a tender offer or exchange offer for
Snyder capital stock representing 50% or more of the power to vote
generally for the election of directors;
. Snyder accepts a superior proposal; or
. in the event of a material breach of any covenant or agreement in the
merger agreement by Snyder.
If the merger agreement is terminated in the manner set forth in the second
and third bullet points above, Snyder will be obligated to pay Santa Fe the
termination fee and Santa Fe's reasonable expenses without any further
requirements or pre-conditions to the payment obligation. If, however, the
merger agreement is terminated in the manner set forth in either the first or
fourth bullet points above, Snyder will be obligated to pay Santa Fe's
reasonable expenses, but will only be obligated to pay Santa Fe the termination
fee if within nine months after the termination Snyder accepts a written offer
with respect to, or enters into a written agreement to consummate or
consummates, a transaction which, if offered or proposed, would constitute an
acquisition proposal.
Santa Fe Termination Expenses. The merger agreement generally provides that
Santa Fe shall pay Snyder a termination fee of $25 million, plus Snyder's
reasonable out-of-pocket expenses, if the merger agreement is terminated in the
following circumstances:
. Santa Fe stockholder approval is not obtained;
. the Santa Fe board withdraws, modifies or changes its recommendation of
the merger agreement or the merger in a manner adverse to Snyder,
recommends to the stockholders of Santa Fe any acquisition proposal for
Santa Fe or does not recommend that the stockholders do not tender or
exchange their shares pursuant to a tender offer or exchange offer for
Santa Fe capital stock representing 50% or more of the power to vote
generally for the election of directors;
. Santa Fe accepts a superior proposal; or
. in the event of a material breach of any covenant or agreement in the
merger agreement by Santa Fe.
If the merger agreement is terminated in the manner set forth in the second
and third bullet points above, Santa Fe will be obligated to pay Snyder the
termination fee and Snyder's reasonable expenses without any further
requirements or pre-conditions to the payment obligation. If, however, the
merger agreement is terminated in the manner set forth in either the first or
fourth bullet points above, Santa Fe will be obligated to pay Snyder's
reasonable expenses but will only be obligated to pay Snyder the termination
fee if within nine months after the termination Santa Fe accepts a written
offer with respect to, or enters into a written agreement to consummate or
consummates, a transaction which if offered or proposed, would constitute an
acquisition proposal.
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Amendments; No Waivers
Any provision of the merger agreement may be amended or waived prior to the
effective time only if the amendment or waiver is in writing and signed, in the
case of any amendment, by Santa Fe and Snyder, or, in the case of a waiver, by
the party against whom the waiver is to be effective; provided, that
. after the approval of the merger agreement by the stockholders of Snyder,
no amendment or waiver shall, without the further approval of the Snyder
stockholders, reduce the amount or change the kind of consideration to be
received in exchange for any shares of capital stock of Snyder; and
. after the approval of the merger agreement by the stockholders of Santa
Fe, no amendment or waiver shall, without the further approval of the
Santa Fe stockholders, modify or change the exchange ratio of 2.05 shares
of Santa Fe common stock per share of Snyder common stock in a manner
adverse to the Santa Fe stockholders.
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SNYDER SPECIAL MEETING
This document is furnished in connection with the solicitation of proxies
from the holders of Snyder common stock by the Snyder board for use at the
Snyder special meeting. This document and accompanying form of proxy are first
being mailed to the stockholders of Snyder on or about , 1999.
Time and Place; Purpose
The Snyder special meeting will be held at 10:00 a.m., local time, on
Wednesday, May 5, 1999 at The St. Regis Hotel (formerly The Luxury Collection),
1919 Briar Oaks Lane, Houston, Texas 77027. At the Snyder special meeting and
any adjournment or postponement of the Snyder special meeting, the stockholders
of Snyder will be asked to consider and vote upon the approval and adoption of
the merger agreement and the merger and any other matters as may properly come
before the Snyder special meeting.
Snyder stockholder approval and adoption of the merger and the merger
agreement is required by the Delaware General Corporation Law.
The Snyder board has unanimously approved the terms of the merger agreement
and the consummation of the merger contemplated by the merger agreement,
unanimously believes that the terms of the merger and the merger agreement are
fair to, and in the best interests of, Snyder and its stockholders, and
unanimously recommends that holders of Snyder common stock vote "for" approval
and adoption of the merger and the merger agreement.
One or more representatives of Petrie Parkman are expected to be present at
the special meeting to answer appropriate questions of stockholders of Snyder
and to make a statement if so desired.
Record Date; Voting Rights and Proxies
Only holders of record of Snyder common stock at the close of business on
March 19, 1999 are entitled to notice of and to vote at the Snyder special
meeting. As of the record date, there were 33,376,997 shares of Snyder common
stock outstanding, each of which entitled its holder to one vote. There were
approximately 2,100 holders of record on the record date.
All shares of Snyder common stock represented by properly executed proxies
will, unless these proxies have been previously revoked, be voted in accordance
with the instructions indicated in these proxies. If no instructions are
indicated, these shares of Snyder common stock will be voted "for" approval and
adoption of the merger and the merger agreement. Snyder does not know of any
matters other than the approval of the merger and the merger agreement that are
to come before the Snyder special meeting. If any other matter or matters are
properly presented for action at the Snyder special meeting, the persons named
in the enclosed form of proxy and acting under the proxy will have the
discretion to vote on those matters in accordance with their best judgment. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of revocation to Snyder by signing and
returning a later dated proxy, or by voting in person at the Snyder special
meeting. Votes cast by proxy or in person at the Snyder special meeting will be
tabulated by the inspector of election appointed for the meeting.
Solicitation of Proxies
Proxies are being solicited by and on behalf of the Snyder board. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Snyder in person or by telephone, telegram
or other means of communication. Those directors, officers and employees will
not be additionally compensated, but may be reimbursed for out-of-pocket
expenses incurred in connection with the solicitation. Arrangements have also
been made with brokerage firms, banks, custodians, nominees and fiduciaries for
the forwarding of proxy solicitation materials to owners of Snyder common stock
held of record by those persons and these firms will be reimbursed for
reasonable expenses incurred in forwarding those materials. Snyder and
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Santa Fe have retained Corporate Investor Communications to assist in the
solicitation of proxies from Snyder's and Santa Fe's stockholders. The total
fees and expenses of Corporate Investor Communications are estimated to
aggregate $10,000 and will be shared by Snyder and Santa Fe.
Snyder stockholders should not send any certificates representing Snyder
common stock with their proxy cards. Following the effective time, Snyder
stockholders will receive instructions for the surrender and exchange of their
stock certificates.
Quorum
The presence in person or by properly executed proxy of a majority of the
issued and outstanding shares of Snyder common stock entitled to vote is
necessary to constitute a quorum at the Snyder special meeting.
Required Vote, Failure to Vote and Broker Non-Votes
Approval and adoption of the merger and the merger agreement requires the
affirmative vote of a majority of the outstanding shares of Snyder common
stock. On March 19, 1999, Snyder directors and executive officers owned and
were entitled to vote 2,542,480 shares of Snyder common stock, or approximately
7.62% of the shares of Snyder common stock outstanding on that date. The Snyder
directors and executive officers have agreed to vote their shares of Snyder
common stock "for" approval of the merger agreement.
Any failure to vote, or a vote to abstain, will have the effect of a vote
against the merger and the merger agreement.
Under NYSE rules, brokers who hold shares in street name for customers have
the authority to vote on certain "routine" proposals when they have not
received instructions from beneficial owners. However, these brokers are
precluded from exercising their voting discretion with respect to the approval
and adoption of non-routine matters such as the merger and the merger agreement
and, thus, absent specific instructions from the beneficial owner of the
shares, brokers are not empowered to vote the shares with respect to the merger
and the merger agreement. These "broker non-votes" will have the effect of a
vote against the merger and the merger agreement.
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SANTA FE SPECIAL MEETING
This document is furnished in connection with the solicitation of proxies
from the holders of Santa Fe common stock by the Santa Fe board for use at the
Santa Fe special meeting. This document and accompanying form of proxy are
first being mailed to the stockholders of Santa Fe on or about , 1999.
Time and Place; Purpose
The Santa Fe special meeting will be held at 10:00 a.m., local time, on
Wednesday, May 5, 1999 at The St. Regis Hotel (formerly The Luxury Collection),
1919 Briar Oaks Lane, Houston, Texas 77027. At the Santa Fe special meeting and
any adjournment or postponement of the Santa Fe special meeting, the
stockholders of Santa Fe will be asked to consider and vote upon:
. the approval and adoption of the merger agreement and the merger,
including the issuance of Santa Fe common stock in the merger, the change
in the company's name to "Santa Fe Snyder Corporation" and the increase
in the authorized shares of capital stock to 350,000,000 shares of common
stock of Santa Fe Snyder;
. subject to the consummation of the merger, the election of John C.
Snyder, John A. Hill, Harold R. Logan, Jr., James E. McCormick and Edward
T. Story to serve as additional directors of Santa Fe Snyder commencing
immediately after the merger; and
. any other matters as may properly come before the Santa Fe special
meeting.
Santa Fe stockholder approval and adoption of the merger and the merger
agreement and the related issuance of shares of Santa Fe common stock is
required by the Delaware General Corporation Law and the rules of the NYSE.
The Santa Fe board has unanimously approved the terms of the merger
agreement, the consummation of the merger contemplated by the merger agreement
and the issuance of Santa Fe common stock, unanimously believes that the terms
of the merger and the merger agreement are fair to, and in the best interests
of, Santa Fe and its stockholders, and unanimously recommends that holders of
Santa Fe common stock vote "for"
. approval and adoption of the merger, the merger agreement and the related
issuance of Santa Fe common stock;
. the increase of the number of authorized shares of capital stock to
350,000,000; and
. to change Santa Fe's name to "Santa Fe Snyder Corporation" upon
completion of the merger.
The Santa Fe board also unanimously recommends that the holders of Santa Fe
common stock vote, subject to the completion of the merger, "for" the election
of John C. Snyder, John A. Hill, Harold R. Logan, Jr., James E. McCormick, and
Edward T. Story to Santa Fe Snyder's board of directors.
One or more representatives of each of DLJ and Chase are expected to be
present at the special meeting to answer appropriate questions of stockholders
of Santa Fe and to make a statement if so desired.
Record Date; Voting Rights and Proxies
Only holders of record of Santa Fe common stock at the close of business on
March 19, 1999 are entitled to notice of and to vote at the Santa Fe special
meeting. As of the record date, there were 102,188,145 shares of Santa Fe
common stock outstanding, each of which entitled its holder to one vote. There
were approximately 29,190 holders of record on the record date.
All shares of Santa Fe common stock represented by properly executed proxies
will, unless these proxies have been previously revoked, be voted in accordance
with the instructions indicated in these proxies. If no
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instructions are indicated, these shares of Santa Fe common stock will be voted
"for" approval and adoption of the merger and the merger agreement and the
issuance of Santa Fe common stock in the merger and "for" approval of each of
the five nominees to Santa Fe Snyder's board of directors. Santa Fe does not
know of any matters other than the approval of the merger and the merger
agreement, the issuance of Santa Fe common stock in the merger and the election
of directors to fill the vacancies on Santa Fe Snyder's board of directors that
are to come before the Santa Fe special meeting. If any other matter or matters
are properly presented for action at the Santa Fe special meeting, the persons
named in the enclosed form of proxy and acting under the proxy will have the
discretion to vote on those matters in accordance with their best judgment. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of revocation to Santa Fe by signing and
returning a later dated proxy, or by voting in person at the Santa Fe special
meeting. Votes cast by proxy or in person at the Santa Fe special meeting will
be tabulated by the inspector of election appointed for the meeting.
Solicitation of Proxies
Proxies are being solicited by and on behalf of the Santa Fe board. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Santa Fe in person or by telephone,
telegram or other means of communication. Those directors, officers and
employees will not be additionally compensated, but may be reimbursed for out-
of-pocket expenses incurred in connection with the solicitation. Arrangements
have also been made with brokerage firms, banks, custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to owners of
Santa Fe common stock held of record by those persons and such firms will be
reimbursed for reasonable expenses incurred in forwarding those materials.
Santa Fe and Snyder have retained Corporate Investor Communications to assist
in the solicitation of proxies from Santa Fe's and Snyder's stockholders. The
total fees and expenses of Corporate Investor Communications are estimated to
aggregate $10,000 and will be shared by Santa Fe and Snyder.
Quorum
The presence in person or by properly executed proxy of a majority of the
issued and outstanding shares of Santa Fe common stock entitled to vote is
necessary to constitute a quorum at the Santa Fe special meeting.
Required Vote, Failure to Vote and Broker Non-Votes
Approval and adoption of the merger and the merger agreement and the
issuance of Santa Fe common stock in the merger requires the affirmative vote
of a majority of the outstanding shares of Santa Fe common stock. The election
of each of the five Snyder nominees requires a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present. On March 19, 1999, Santa Fe directors and executive officers owned and
were entitled to vote 6,164,124 shares of Santa Fe common stock, or
approximately 6% of the shares of Santa Fe common stock outstanding on that
date. The Santa Fe directors and executive officers have agreed to vote their
shares of Santa Fe common stock "for" approval of the merger agreement and the
issuance of Santa Fe common stock in the merger and "for" each of the five
nominees as directors of Santa Fe Snyder.
Any failure to vote, or a vote to abstain, will have the effect of a vote
against the merger and the merger agreement.
Under NYSE rules, brokers who hold shares in street name for customers have
the authority to vote on certain "routine" proposals when they have not
received instructions from beneficial owners. However, these brokers are
precluded from exercising their voting discretion with respect to the approval
and adoption of non-routine matters such as the merger and the merger agreement
and, thus, absent specific instructions from the beneficial owner of the
shares, brokers are not empowered to vote the shares with respect to the merger
and the merger agreement. These "broker non-votes" will have the effect of a
vote against the merger and the merger agreement.
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DIRECTORS AND OFFICERS OF SANTA FE SNYDER FOLLOWING THE MERGER
The board of directors and the executive officers of Santa Fe will change as
a result of the merger. The names of the persons who will be the directors and
officers of Santa Fe Snyder following the merger are:
Directors
John C. Snyder--Chairman
William E. Greehey
Melvyn N. Klein
Allan V. Martini
James L. Payne
Reuben F. Richards
Kathryn D. Wriston
John A. Hill
Harold R. Logan, Jr.
James E. McCormick
Edward T. Story
Executive Officers
James L. Payne, Chief Executive Officer
Hugh L. Boyt, President--International
William G. Hargett, President--North America
Duane C. Radtke, Executive Vice President--Production
Tim S. Parker, Executive Vice President--Exploration
Mark A. Jackson, Executive Vice President and Chief Financial Officer
Janet F. Clark, Executive Vice President--Corporate Development and
Administration
David L. Hicks, Vice President--Law and General Counsel
COMPARISON OF STOCKHOLDER RIGHTS
General
The rights of Santa Fe stockholders are currently governed by the Delaware
General Corporation Law and the certificate of incorporation and bylaws of
Santa Fe. The rights of Snyder stockholders are currently governed by the
Delaware General Corporation Law and the certificate of incorporation and
bylaws of Snyder. Accordingly, on completion of the merger, the rights of Santa
Fe stockholders and of Snyder stockholders who become Santa Fe stockholders in
the merger will be governed by the Delaware General Corporation Law, the Santa
Fe charter and the Santa Fe bylaws. The following is a summary of the principal
differences between the current rights of Snyder stockholders and those of
Santa Fe Snyder stockholders following the merger.
The following summary of the material differences between the Santa Fe
charter, the Santa Fe bylaws, the Snyder charter and the Snyder bylaws may not
contain all the information that is important to you. To review all provisions
and differences of such documents in full detail, please read the full text of
these documents and the Delaware General Corporation Law. Copies of the Snyder
charter, Snyder bylaws, Santa Fe charter and Santa Fe bylaws will be sent to
holders of shares of Santa Fe common stock and Snyder common stock upon
request. For information on how these documents may be obtained, see "Where You
Can Find More Information" on page 83.
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We will not amend the Snyder and Santa Fe bylaws in conjunction with the
merger. The Santa Fe charter is being amended to increase the number of
authorized shares of capital stock, as discussed below.
A summary of the terms of the Snyder and Santa Fe rights plans follows the
summary comparison of terms of Santa Fe and Snyder common stock.
Summary Comparison of Terms of Santa Fe Common Stock and Snyder Common Stock
Authorized Capital Stock; Amendment of Charter
Snyder
Santa Fe
The authorized capital stock of Concurrently with consummation
Snyder consists of 75,000,000 of the merger, the Santa Fe charter
shares of Snyder common stock and will be amended to
10,000,000 shares of preferred
stock.
. increase Santa Fe's
authorized capital stock to
The Snyder charter is not being
amended in conjunction with the -300,000,000 shares of Santa
merger. Fe common stock; and
-50,000,000 shares of Santa
Fe preferred stock; and
. change the corporate name to
"Santa Fe Snyder
Corporation."
Promptly after the merger, the
Santa Fe Snyder board of directors
will amend the certificate of
designation for the Series A Junior
Participating Preferred Stock to
increase the number of shares of
designated preferred stock to
3,000,000. See "Material Terms of
Charter and Bylaws Concerning Santa
Fe Capital Stock--Authorized
Capital Stock" on page 79.
Board of Directors
Snyder
Santa Fe
Number of Directors. The Snyder Number of Directors. The Santa Fe
bylaws provide that Snyder shall bylaws provide that the number of
have at least one director, with directors shall be not fewer than 3
the exact number to be determined nor greater than 15 persons, with the
by the Snyder board of directors. exact number to be determined by a
resolution of a majority of the Santa
Fe board of directors.
Snyder currently has 9
directors.
Santa Fe currently has 6
directors.
Classification. The Snyder Classification. The Santa Fe board
bylaws do not provide for a is divided into three classes, with
classified board; all directors are directors of each class serving until
elected annually. the third annual meeting of
stockholders after the annual meeting
at which that class was elected.
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Snyder Santa Fe
Quorum. A quorum consisting of Quorum. A quorum consisting of a
one-third of the total number of majority of the Santa Fe directors
Snyder directors then in office, holding office is required for the
but not less than two if the number transaction of business at a meeting
of directors is greater than one, of the Santa Fe board.
is required for the transaction of
business at a meeting of the Snyder
board.
No Cumulative Voting. Neither No Cumulative Voting. Neither the
the Snyder charter nor the Snyder Santa Fe charter nor the Santa Fe
bylaws provide for cumulative bylaws provide for cumulative voting
voting for the election of for election of directors.
directors.
Nominations. The Snyder board or Nominations. The Santa Fe board or
any Snyder stockholder who follows any Santa Fe stockholder who follows
the procedures described in the the procedures described in the Santa
Snyder bylaws may nominate a person Fe bylaws may nominate a person for
for election to the board. election to the board.
Vacancies. A majority of Vacancies. A majority of the
stockholders, by vote or by written remaining Santa Fe board may fill a
consent, or a majority of the vacancy in the Santa Fe board, and
Snyder board, by vote or by written any director so appointed will hold
consent, may fill a vacancy in the office for the remaining term of the
Snyder Board, and any director so class to which the directorship is
appointed will hold office until assigned, or until his resignation or
the next annual election of removal.
directors or his death, resignation
or removal.
Removal of Directors. A majority Removal of Directors. A majority
of the stockholders entitled to of the stockholders entitled to vote
vote at an election of directors, in the election of directors may
by vote at a meeting or by written remove any director, but only for
consent, may remove a director, cause.
with or without cause.
Santa Fe Snyder will have a
nominating committee consisting of
Messrs. Snyder, Payne and two
additional members of the board of
directors, one of which will be
designated by Mr. Snyder and the
other by Mr. Payne.
Adjournment of Stockholder Meetings
Snyder Santa Fe
If a quorum is not present at a The Santa Fe bylaws provide that if
meeting of the Snyder stockholders, a quorum, consisting of a majority,
no action may be taken at the is not present, in person or by
meeting. A quorum for a meeting of proxy, at any meeting of the
the stockholders consists of a stockholders, the Santa Fe Chairman
majority of the shares entitled to or the stockholders entitled to vote
vote, present in person or by who are present, in person or by
proxy. proxy, may adjourn the meeting unless
the adjournment is for more than 30
days. If after the adjournment a new
record date is fixed for the
adjourned meeting, a notice of the
adjourned meeting shall be given to
each stockholder of record entitled
to vote at the adjourned meeting.
<TABLE>
<S> <C>
</TABLE>
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Notice of Stockholder Nominations
Snyder Santa Fe
Notice of proposed stockholder
Notice of proposed stockholder nominations for the election of
nominations for the election of directors must be in writing and
directors must be in writing and received by Santa Fe
received by Snyder
--at least 90 days prior to the --not less than 90 days nor more
anniversary date of the than 120 days prior to the
immediately preceding annual meeting, or
meeting of stockholders or
--no later than the close of
business on the 10th day
following the day on which notice
of the date of the meeting was
mailed or made public if Santa Fe
gives less than 100 days' notice
of the date of the meeting.
--no later than 10 days
following the day on which
notice of a special meeting of
the stockholders was mailed or
made public.
Notice of Stockholder Proposals
Snyder Santa Fe
A Snyder stockholder must deliver A Santa Fe stockholder must deliver
notice of a proposed matter to be notice of a proposed matter to be
brought before the annual meeting brought before the annual meeting to
to Snyder not less than 120 days Santa Fe not less than 120 days from
prior to the anniversary date of the date of the release of Santa Fe's
the proxy statement for the proxy statement relating to the prior
preceding annual meeting of the year's annual meeting of
stockholders of Snyder. The stockholders. If no annual meeting
stockholder's notice must conform was held in the prior year or if the
to the Snyder bylaws. current year's annual meeting shall
be held more than 30 days prior to or
after the date of the previous year's
annual meeting, a stockholder's
notice must be received by Santa Fe
not later than 10 days following the
date on which notice of the date of
Santa Fe's annual meeting was mailed
or made public. The stockholder's
notice must conform to the Santa Fe
bylaws.
Special Meetings of Stockholders
Snyder Santa Fe
The Snyder bylaws provide that The Santa Fe bylaws provide that
special meetings of the special meetings of stockholders may
stockholders may be called by the be called by the Santa Fe board.
Snyder board, by Snyder's Chairman, Santa Fe stockholders may not call a
Vice Chairman, President or special meeting.
Secretary, or by the record holders
of a majority of the shares of
outstanding Snyder common stock.
Stockholder Consent in Lieu of Meeting
Snyder Santa Fe
Stockholder action required or Stockholders may not take any
permitted to be taken at an annual action except at an annual or special
or at a special meeting of the meeting of such stockholders.
stockholders may be taken by Stockholders of Santa Fe may not act
written consent if such consent is by written consent.
signed by the holders of
outstanding stock having not less
than the minimum number of votes
that would be required to authorize
or take such action at a meeting at
which all shares entitled to vote
on such action were present and
voted.
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Amendment of Corporate Charter and Bylaws
Snyder Santa Fe
Charter. A charter amendment Charter. An amendment to charter
requires the approval of a majority provisions relating to:
of Snyder's board of directors and
the approval of the holders of a
majority of the voting power of the
then outstanding capital stock of
Snyder.
--the composition and
classification of the Santa Fe
board,
--amendment of the Santa Fe
bylaws,
--issuance of rights to purchase
Santa Fe capital stock, and
--limitations on the liability
of directors
requires the vote of at least 80% of
the stockholders entitled to vote in
an election of directors, voting
together as a single class. Any
other charter amendment requires the
approval of a majority of Santa Fe's
board of directors and the approval
of the holders of a majority of the
voting power of the then outstanding
capital stock of Santa Fe.
Bylaws. Snyder bylaws may be Bylaws. The Santa Fe stockholders
amended or repealed by the Snyder may amend the Santa Fe bylaws with a
board, by the directors' written vote of at least 80% of all
consent, by the vote or written stockholders entitled to vote in the
consent of holders of a majority of election of directors, voting as a
the shares then entitled to vote at single class.
an election of directors.
A majority of the entire Santa Fe
board may make, repeal, alter, amend
or rescind any of the Santa Fe
bylaws.
Removal of Officers
Snyder Santa Fe
The Snyder bylaws permit the The Santa Fe bylaws permit the
removal of any officer at any time removal of any officer elected by
with or without cause by the Snyder the board at any time with or
board or the Snyder stockholders. without cause by the Santa Fe board.
Snyder Rights Plan
Snyder has entered into a rights agreement with ChaseMellon Shareholder
Services, L.L.C., as rights agent. Pursuant to the Snyder rights agreement,
rights attach to each share of Snyder common stock outstanding and entitle the
registered holder to purchase from Snyder one one-thousandth of a share of
Junior Participating Preferred Stock, par value $.01 per share, of Snyder at a
purchase price of $70 which is subject to adjustment as described in the Snyder
rights agreement. Each share of Snyder common stock outstanding has attached
thereto one Snyder right.
The Snyder rights will separate from the Snyder common stock upon the
earlier of
. 10 business days following a public announcement that a person or group
of affiliated or associated persons, also referred to as a Snyder
acquiring person, has acquired or obtained the right to acquire
beneficial ownership of 20% or more of the outstanding shares of Snyder
common stock; and
. 10 business days or such later date as may be fixed by the Snyder board
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 20% or more of such
outstanding shares of Snyder common stock.
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The date of any such event is referred to as the Snyder distribution date.
Until the Snyder distribution date,
. the Snyder rights will be evidenced by Snyder common stock certificates
and will be transferred with and only with Snyder common stock
certificates;
. new Snyder common stock certificates will contain a notation
incorporating the Snyder rights agreement by reference; and
. the transfer of any certificates representing outstanding Snyder common
stock will also constitute the transfer of the Snyder rights associated
with the Snyder common stock represented by such certificate.
If Snyder is acquired in a merger or other business combination transaction
or 50% or more of its consolidated assets or earning power are sold after a
person or group has become a Snyder acquiring person, each holder of a Snyder
right will then have the right to receive, upon the exercise of the right at
the current exercise price of the Snyder right, that number of shares of common
stock of the acquiring company which at the time of the transaction will have a
market value of two times the exercise price of the Snyder right. In the event
that any person or group of affiliated or associated persons becomes a Snyder
acquiring person, each holder of a Snyder right, other than Snyder rights
beneficially owned by the Snyder acquiring person which will then be void, will
then have the right to receive upon exercise that number of shares of Snyder
common stock having a market value of two times the exercise price of the
Snyder right.
At any time after any person or group becomes a Snyder acquiring person and
prior to the acquisition by that person or group of 50% or more of the
outstanding Snyder common stock, the Snyder board may exchange the Snyder
rights other than Snyder rights owned by that person or group, which will have
become void, in whole or in part, generally at an exchange ratio of one share
of Snyder common stock, or one one-thousandth of a share of Snyder Junior
Participating Preferred Stock, for each two shares of Snyder common stock for
which each Snyder right is then exercisable.
The Snyder rights are not exercisable until the Snyder distribution date and
will expire at the close of business on May 21, 2007 unless earlier redeemed by
Snyder as further described in the Snyder rights agreement. At no time will the
holder of the Snyder rights have any voting power or any rights as a
stockholder due to his position as a holder of Snyder rights. Subject to
certain exceptions, any of the provisions of the Snyder rights agreement may be
amended by the Snyder board prior to the Snyder distribution date.
Pursuant to the merger agreement, Snyder has amended the Snyder rights
agreement so as to render the Snyder rights inapplicable to the merger and the
other transactions contemplated by the merger agreement. See "The Merger
Agreement--Representations and Warranties of Snyder and Santa Fe" on page 62.
The above summary of the Snyder rights agreement may not contain all the
information that is important to you. For a more detailed description of the
Snyder rights, you should read the Snyder rights agreement, which is
incorporated by reference into this document. See "Where You Can Find More
Information" on page 83.
Santa Fe Rights Plan
Santa Fe has entered into a rights agreement with First Chicago Trust
Company of New York as rights agent. Pursuant to the Santa Fe rights agreement,
rights attach to each share of Santa Fe common stock outstanding and entitle
the registered holder to purchase from Santa Fe one one-hundredth of a share of
Series A Junior Participating Preferred Stock at a purchase price of $42, also
referred to as the Santa Fe purchase price, which is subject to adjustment as
described in the Santa Fe rights agreement. Each share of Santa Fe common stock
outstanding has one Santa Fe right attached to it.
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The Santa Fe rights will separate from the Santa Fe common stock upon the
earlier of:
. 10 business days following a public announcement that, subject to certain
exceptions, a person or group of affiliated or associated persons, also
referred to as a Santa Fe acquiring person, has acquired or obtained the
right to acquire beneficial ownership of 15% or more of the outstanding
shares of Santa Fe common stock, with the date of this event referred to
as the Santa Fe stock acquisition date; or
. 10 business days or a later date as may be fixed by the Santa Fe board
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of the outstanding shares of Santa Fe
common stock.
The date of this event is referred to as the Santa Fe distribution date.
Until the Santa Fe distribution date:
. the Santa Fe rights will be evidenced by Santa Fe common stock
certificates with a copy of a summary of the terms of the Santa Fe rights
attached and will be transferred with and only with Santa Fe common stock
certificates;
. new Santa Fe common stock certificates will contain a notation
incorporating the Santa Fe rights agreement by reference; and
. the transfer of any certificates representing outstanding Santa Fe common
stock will also constitute the transfer of the Santa Fe rights associated
with Santa Fe common stock represented by the certificate.
The Santa Fe rights will not be exercisable until the Santa Fe distribution
date and will cease to be exercisable at the close of business on July 25,
1999, unless this date is extended or unless the Santa Fe rights are earlier
redeemed or exchanged by Santa Fe, as described below.
If Santa Fe is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold
after a person or group has become a Santa Fe acquiring person, each holder of
a Santa Fe right, other than Santa Fe rights beneficially owned by a Santa Fe
acquiring person which will be void, will have the right to receive, upon the
exercise of the right at the current exercise price of the Santa Fe right, that
number of shares of common stock of the Santa Fe acquiring person which at the
time of such transaction will have a market value of two times the exercise
price of the Santa Fe right. In the event that any person or group of
affiliated or associated persons becomes a Santa Fe acquiring person, each
holder of a Santa Fe right, other than Santa Fe rights beneficially owned by
the Santa Fe acquiring person which will then be void, will have the right to
receive upon exercise that number of shares of Santa Fe common stock having a
market value of two times the exercise price of the Santa Fe right.
In general, Santa Fe may redeem the Santa Fe rights in whole, but not in
part, at any time until 10 days following the Santa Fe stock acquisition date,
which period may be extended at any time while the Santa Fe rights are still
redeemable, at a price of $.01 per Santa Fe right, payable in cash, Santa Fe
common stock or other consideration deemed appropriate by the Santa Fe board.
Immediately upon the action of the Santa Fe board ordering redemption of the
Santa Fe rights, the Santa Fe rights will terminate and the only right of the
holders of Santa Fe rights will be to receive the $.01 per Santa Fe right
redemption price.
Until a Santa Fe right is exercised, the holder of a Santa Fe right will
have no rights as a stockholder of Santa Fe, including the right to vote or to
receive dividends, due to his status as a holder of a Santa Fe right.
Other than reducing the Santa Fe purchase price of the Santa Fe rights, any
of the provisions of the Santa Fe rights agreement may be amended by the Santa
Fe board prior to the Santa Fe distribution date, without the consent of the
holders of the Santa Fe rights, to shorten or lengthen any time period or
otherwise. After the Santa Fe distribution date, the provisions of the Santa Fe
rights agreement may be amended by the Santa Fe board, without the consent of
the holders of the Santa Fe rights, except that:
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. no amendment can be made to reduce the Santa Fe purchase price;
. no amendment may adversely affect the interests of the holders of the
Santa Fe rights; and
. the redemption right cannot be reinstated.
The Santa Fe rights agreement is inapplicable to the merger and the other
transactions contemplated by the merger agreement. See "The Merger Agreement--
Representations and Warranties of Snyder and Santa Fe" on page 62.
The above summary of the Santa Fe rights agreement may not contain all the
information that is important to you. For a more detailed description of the
Santa Fe rights, you should read the Santa Fe rights agreement, which is
incorporated by reference into this document. See "Where You Can Find More
Information" on page 83.
MATERIAL TERMS OF CHARTER AND BYLAWS
CONCERNING SANTA FE CAPITAL STOCK
The following is a summary of the material terms of the charter and bylaws
concerning capital stock of Santa Fe. Copies of the Santa Fe Charter and Santa
Fe Bylaws will be sent to holders of shares of Santa Fe common stock and Snyder
common stock upon request. See "Where You Can Find More Information" on page
83. For a comparison of certain provisions of the Santa Fe Charter and the
Snyder Charter, see "Comparison of Stockholder Rights" on page 72.
Authorized Capital Stock
Under the Santa Fe Charter, Santa Fe's authorized capital stock consists of
200,000,000 shares of Santa Fe common stock, par value $.01 per share, and
50,000,000 shares of Santa Fe preferred stock, par value $.01 per share. In
connection with the merger, the Santa Fe Charter is being amended to increase
Santa Fe's authorized capital stock to 300,000,000 shares of Santa Fe common
stock and 50,000,000 shares of Santa Fe preferred stock.
Common Stock
The holders of Santa Fe common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding Santa Fe preferred stock,
holders of Santa Fe common stock are entitled to receive ratably dividends as
they may be declared by the Santa Fe board out of funds legally available for
dividends. In the event of a liquidation or dissolution of Santa Fe, holders of
Santa Fe common stock are entitled to share ratably in all assets remaining
after payment of liabilities and the liquidation preference of any outstanding
Santa Fe preferred stock.
Holders of Santa Fe common stock have no preemptive rights and have no
rights to convert their Santa Fe common stock into any other securities. All of
the outstanding shares of Santa Fe common stock are, and the shares of Santa Fe
common stock issued pursuant to the merger will be, duly authorized, validly
issued, fully paid and nonassessable.
Preferred Stock
The Santa Fe board is authorized to designate any series of Santa Fe
preferred stock and the powers, preferences and rights of the shares of such
series and the qualifications, limitations or restrictions thereof without
further action by the holders of the Santa Fe common stock. There are 2,000,000
shares designated as Series A Junior Participating Preferred Stock, which
designation is expected to be increased to 3,000,000 shares after the merger.
As of February 1, 1999, there were no shares of Series A Junior Participating
Preferred Stock outstanding.
79
<PAGE>
Transfer Agent and Registrar
First Chicago is the transfer agent and registrar for the Santa Fe common
stock.
Stock Exchange Listing; Delisting and Deregistration of Snyder Common Stock
It is a condition of the merger that the shares of Santa Fe common stock
issuable in the merger be approved for listing on the NYSE on or prior to the
effective time, subject to official notice of issuance. If the merger is
consummated, Snyder common stock will cease to be listed on the NYSE.
ELECTION OF DIRECTORS
The Santa Fe stockholders will vote on the election of five directors to the
Santa Fe Snyder board at the Santa Fe special meeting, subject to the
consummation of the merger. Santa Fe's bylaws provide for a classified board of
directors. The Santa Fe board of directors is divided into Classes I, II and
III, the terms of which are currently scheduled to expire respectively on the
dates of Santa Fe's Annual Meeting of Stockholders in 1999, 2000 and 2001.
Pursuant to the terms of the merger agreement, at the effective time, the size
of Santa Fe Snyder's board of directors will be increased from Santa Fe's
current number of six directors to eleven directors and five individuals
identified below, each of which was designated by the Snyder board of directors
in accordance with the merger agreement and whose nomination has been
unanimously approved by the Santa Fe board of directors, will, subject to
consummation of the merger, be elected to serve on the Santa Fe Snyder board of
directors. Of these individuals, one will be a Class I director of Santa Fe
Snyder, two will be Class II directors and two will be Class III directors.
The terms of the directors elected at the Santa Fe special meeting will
expire at the Santa Fe Snyder annual meeting of stockholders in the year
indicated above applicable to their class and until their respective successors
shall have been elected and qualified. Each of the individuals designated by
Snyder currently serves as a director of Snyder.
A plurality of the votes cast in person or by proxy at the Santa Fe special
meeting by the holders of Santa Fe common stock is required to elect a
director. Accordingly, under Delaware law and Santa Fe's charter and bylaws,
abstentions and broker non-votes will have no effect on the election of
directors. Stockholders may not cumulate their votes in the election of
directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted "for" the election of the nominees to the Santa Fe
Snyder board of directors listed in the table below. Although the Santa Fe
board does not contemplate that any of the nominees will be unable to serve, if
such a situation arises prior to the Santa Fe special meeting, the persons
named in the enclosed proxy will vote for the election of other person(s) as
may be designated by the Snyder board of directors, in accordance with the
terms of the merger agreement.
Nominees
The following sets forth information regarding the names, ages, principal
occupations and directorships in other companies held by the nominees for
director, whose terms will commence immediately after the merger:
Class I Nominee--Term Expires at 1999 Annual Meeting
James E. McCormick (71), director of Snyder since 1992, served as President,
Chief Operating Officer and a director of Oryx Energy Company from its
inception in November 1988 until his retirement in March 1992. Prior to his
service with Oryx, Mr. McCormick served from 1953 in a number of positions with
the Sun organization, most recently serving as President, Chief Executive
Officer and a director of Sun Exploration and Production Company. Mr. McCormick
serves as a director of Lone Star Technologies, Inc., BJ Services, Inc., an
oilfield service company, TESCO Corporation, a manufacturer of oil field
drilling systems, and the Dallas National Bank.
80
<PAGE>
Class II Nominees--Term Expires at 2000 Annual Meeting
Harold R. Logan, Jr. (54), director of Snyder since 1997, is Executive Vice
President/Finance and a director of TransMontaigne Inc., a holding company
engaged in providing logistical services; i.e. transportation, terminaling and
marketing, to the manufacturers and end-users of refined petroleum products.
Mr. Logan is also a director of Suburban Propane Partners, L.P. and a director
of Union Bank Shares, Ltd., Denver, Colorado. From 1984 to 1994, Mr. Logan was
Senior Vice President/Finance and a director of Associated Natural Gas
Corporation. Prior to joining Associated Natural Gas Corporation, Mr. Logan was
with Dillon, Read & Co. Inc. and Rothschild, Inc.
Edward T. Story (55), director of Snyder since 1996, is President of SOCO
International plc, an independent international oil and gas company traded on
the London Stock Exchange. From 1991 until the formation of SOCO International
plc in 1997 through the consolidation of international interests of Snyder and
various third parties, Mr. Story was Vice President--International of Snyder
and President of SOCO International, Inc. From 1990 to 1991, Mr. Story was
Chairman of the Board of a jointly owned Thai/US company, Thaitex Petroleum
Company. Mr. Story was co-founder, Vice Chairman of the Board and Chief
Financial Officer of Conquest Exploration Company from 1981 to 1990. He served
as Vice President, Finance and Chief Financial Officer of Superior Oil Company
from 1979 to 1981. Mr. Story held the positions of Exploration and Production
Controller and Refining Controller with Exxon Co., USA from 1975 to 1979. He
held various positions in Esso Standard's international companies from 1966 to
1975. Mr. Story serves as a director of Cairn Energy plc, an independent
international oil and gas company traded on the London Stock Exchange, First
BankAmerica, Inc., a bank holding company listed on the New York Stock
Exchange, Hallwood Realty Corporation, the general partner of Hallwood Realty
Partners, L.P., an American Stock Exchange-listed real estate limited
partnership, and Sen Hong Resources Limited, an oil and gas company listed on
the Hong Kong Stock Exchange.
Class III Nominees--Term Expires at 2001 Annual Meeting
John C. Snyder (57), Chairman and a director of Snyder, founded a
predecessor of Snyder in 1978. From 1973 to 1977, Mr. Snyder was an independent
oil operator in Texas and Oklahoma. Previously, he was a director and the
Executive Vice President of May Petroleum Inc. where he served from 1971 to
1973. From 1969 to 1971, Mr. Snyder was with Canadian-American Resources Fund,
Inc., which he founded. From 1964 to 1966, Mr. Snyder was employed by Humble
Oil and Refining Company (currently Exxon Co., USA) as a petroleum engineer. He
received his Bachelor of Science Degree in Petroleum Engineering from the
University of Oklahoma and his Masters Degree in Business Administration from
the Harvard University Graduate School of Business Administration. In 1995, Mr.
Snyder was named Wildcatter of the Year by the Independent Petroleum
Association of Mountain States. Mr. Snyder is a director of SOCO International
plc, an international oil and gas company listed on the London Stock Exchange;
a director of the Community Enrichment Center of Fort Worth; a director of
Texas Capital Bancshares, Inc.; and is a member of the National Petroleum
Council.
John A. Hill (57), director of Snyder since 1981, is Vice Chairman and
Managing Director of First Reserve Corporation, an oil and gas investment
management company. Prior to joining First Reserve, Mr. Hill was President,
Chief Executive Officer and Director of Marsh & McLennan Asset Management
Company, the money management subsidiary of Marsh & McLennan Companies, Inc.
From 1979 to 1980, Mr. Hill served as President and Chief Executive Officer of
Eberstadt Asset Management Company, the asset management division of F.
Eberstadt & Co., Inc. Prior to 1976, Mr. Hill held several senior positions in
the federal government including Deputy Administrator of the Federal Energy
Administration from 1975 to 1976 and Deputy Associate Director of the Office of
Management and Budget from 1973 to 1974. Mr. Hill received his Bachelors Degree
in Economics from Southern Methodist University and pursued graduate studies
there as a Woodrow Wilson Fellow. Mr. Hill is Vice Chairman and a trustee of
the Putnam Funds in Boston and a director of Transmontaigne Oil Company, a
refined products distribution company.
The Santa Fe board recommends that Santa Fe Stockholders vote "for" the
election of each of the above-named nominees.
81
<PAGE>
LEGAL MATTERS
The validity of the Santa Fe common stock to be issued to Snyder
stockholders pursuant to the merger will be passed upon by Andrews & Kurth
L.L.P., counsel to Santa Fe. It is a condition to the consummation of the
merger that Snyder receive an opinion from Vinson & Elkins L.L.P. stating that
the merger is tax-free to Snyder and the Snyder stockholders except, with
respect to the Snyder stockholders, to the extent they receive cash in lieu of
fractional shares. It is also a condition to the consummation of the merger
that Santa Fe receive an opinion from Andrews & Kurth L.L.P. stating that the
merger is tax free to each company. See "The Merger--Material U.S. Federal
Income Tax Consequences" and "The Merger Agreement--Conditions to the Merger"
on pages 51 and 63, respectively.
EXPERTS
The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K/A of Santa
Fe Energy Resources, Inc. for the year ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on their authority as experts in auditing and
accounting.
The consolidated financial statements of Snyder for the year ended December
31, 1998, incorporated by reference in this document have been audited by
Arthur Andersen LLP, independent accountants, as indicated in their report, and
are incorporated in this document in reliance on their report given upon their
authority as experts in accounting and auditing in giving such reports.
82
<PAGE>
FUTURE STOCKHOLDER PROPOSALS
Santa Fe has announced that its 1999 annual meeting will not be held on May
11, 1999, as announced previously. We will announce the date of the Santa Fe
1999 annual meeting as soon as it is determined by our board of directors.
Pursuant to Santa Fe's bylaws and the applicable securities laws, stockholder
proposals submitted for consideration at Santa Fe's 1999 annual meeting of
stockholders should have been submitted to the Secretary of Santa Fe by
November 20, 1998. If our board of directors schedules the 1999 annual meeting
for a date later than June 10, 1999, stockholders must submit their proposals
within 10 days following the date on which we mail notice or publicly disclose
the date of our 1999 annual meeting. If timely notice of a stockholder proposal
is not given, the proposal may not be brought before the annual meeting. If
timely notice is given but is not accompanied by a written statement to the
extent required by applicable securities laws, Santa Fe may exercise
discretionary voting authority over proxies with respect to such proposal if
presented at Santa Fe's 1999 annual meeting of stockholders.
Snyder expects to hold an annual meeting of stockholders in the second
calendar quarter of 1999 unless the merger is completed prior to that time.
Pursuant to Snyder's bylaws and the applicable securities laws, stockholder
proposals submitted for consideration at Snyder's 1999 annual meeting of
stockholders, if one should occur, should have been submitted to the Secretary
of Snyder by December 17, 1998. If such timely notice of a stockholder proposal
was not given, the proposal may not be brought before the annual meeting. If
timely notice was given but was not accompanied by a written statement to the
extent required by applicable securities laws, Snyder may exercise
discretionary voting authority over proxies with respect to such proposal if
presented at Snyder's 1999 annual meeting of stockholders.
Securities and Exchange Commission rules set forth standards as to what
stockholder proposals are required to be included in a proxy statement for an
annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Santa Fe and Snyder file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the Commission's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549, or at the Commission's public reference rooms in New York, New York
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Our filings with the Commission are
also available to the public from commercial document retrieval services and at
the web site maintained by the Commission at http://www.sec.gov.
Santa Fe filed a registration statement on Form S-4 to register with the
Securities and Exchange Commission Santa Fe common stock to be issued to Snyder
stockholders in the merger. The registration statement on Form S-4 also covers
Santa Fe common stock that may be issued upon exercise of Snyder stock options
assumed by Santa Fe in the merger. This document is a part of that registration
statement and constitutes a prospectus of Santa Fe in addition to being a proxy
statement of each of Snyder and Santa Fe. As allowed by Securities and Exchange
Commission rules, this document does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The Securities and Exchange Commission allows Santa Fe and Snyder to
"incorporate by reference" information into this document, which means that
they can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is deemed to be part of this document, except for any information
superseded by information in this document. This document incorporates by
reference the documents set forth below that Santa Fe and Snyder have
previously filed with the Commission. These documents contain important
information about Santa Fe and Snyder and their finances.
83
<PAGE>
<TABLE>
<CAPTION>
Santa Fe Securities and Exchange
Commission Filings (File No. 1-07667) Period
------------------------------------- ------
<C> <S>
Annual Report on Form 10-K/A Year Ended December 31, 1998
Proxy Statement on Schedule 14A for Filed March 20, 1998
1998 Annual Meeting
Current Reports on Form 8-K Filed January 20, 1999, January 29,
1999 and February 24, 1999
<CAPTION>
Snyder Securities and Exchange
Commission Filings (File No. 1-10509) Period
------------------------------------- ------
<C> <S>
Annual Report on Form 10-K/A Year Ended December 31, 1998
Proxy Statement on Schedule 14A for Filed April 16, 1998
1998 Annual Meeting
</TABLE>
Santa Fe and Snyder are also incorporating by reference additional documents
that they file with the Securities and Exchange Commission between the date of
this document and the date of the special meeting.
Santa Fe has supplied all information contained or incorporated by reference
in this document relating to Santa Fe, and Snyder has supplied all the
information relating to Snyder.
If you are a stockholder, Santa Fe and Snyder may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Santa Fe, Snyder or the Securities and Exchange Commission. Documents
incorporated by reference are available from Santa Fe and Snyder without
charge. Exhibits to the documents will not be sent, however, unless those
exhibits have specifically been incorporated by reference as exhibits in this
document. Stockholders may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the appropriate
party at the following addresses:
Santa Fe Energy Resources, Inc. Snyder Oil Corporation
1616 South Voss Road 777 Main Street, Suite 1400
Houston, Texas 77057 Fort Worth, Texas 76102
(713) 507-5000 (817) 338-4043
Attention: Investor Relations Attention: Investor Relations
If you would like to request documents from Santa Fe or Snyder, please do so
by , 1999 to receive them before the special meeting.
You should rely only on the information contained or incorporated by
reference in this document to vote on the merger. We have not authorized anyone
to give any information that is different from what is contained in this
document. Neither the delivery of this document nor the issuance of Santa Fe
common stock in the merger shall create an implication that there has been no
change in the affairs of Santa Fe or Snyder since the date of this document or
that the information in this document is correct as of any time after the date
of this document.
84
<PAGE>
COMMONLY USED OIL AND GAS TERMS
The following are abbreviations and definitions of terms commonly used in
the oil and gas industry and this document. Unless otherwise indicated in this
document, natural gas volumes are stated at the legal pressure base of the
state or area in which the reserves are located and at 60 degrees Fahrenheit.
"Bbl" means a barrel of 42 U.S. gallons of oil.
"Bcf" means billion cubic feet of natural gas.
"BOE" means barrels of oil equivalent. BOEs are determined using the ratio of
six Mcf of natural gas to one Bbl of oil.
"BOEPD" means barrels of oil equivalent per day.
"Btu" or "British Thermal Unit" means the quantity of heat required to raise
the temperature of one pound of water by one degree Fahrenheit.
"MBbls" means thousand barrels of oil.
"MBOE" means thousand barrels of oil equivalent.
"Mcf" means thousand cubic feet of natural gas.
"Mcfe" means a thousand cubic feet equivalent, which is determined using the
ratio of one barrel of oil, condensate or natural gas liquids to six Mcf of
natural gas.
"MMBbls" means million barrels of oil.
"MMBOE" means million barrels of oil equivalent.
"MMBtu" means million British Thermal Units.
"MMcf" means million cubic feet of natural gas.
"Present Value of Future Net Revenues" or "Present Value of Proved Reserves"
means the present value of estimated future revenues to be generated from the
production of proved reserves calculated in accordance with Securities and
Exchange Commission guidelines, net of estimated production and future
development costs, using prices and costs as of the date of estimation without
future escalation, without giving effect to non-property related expenses such
as general and administrative expenses, debt service, future income tax expense
and depreciation, depletion and amortization, and discounted using an annual
discount rate of 10%.
"Standardized Measure of Discounted Future Net Cash Flows" means the Present
Value of Future Net Revenues after income taxes discounted at 10%.
G-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Santa Fe Energy Resources, Inc.
Unaudited Pro Forma Combined Financial Statements--Basis of
Presentation........................................................... F-2
Unaudited Pro Forma Condensed Combined Balance Sheet.................... F-3
Unaudited Pro Forma Condensed Combined Statement of Operations.......... F-4
Notes to Unaudited Pro Forma Condensed Combined Financial Statements.... F-5
</TABLE>
F-1
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements of Santa Fe
Energy Resources, Inc. ("Santa Fe"), and related notes thereto, illustrate the
effects of the proposed merger of Snyder Oil Corporation ("Snyder") into Santa
Fe.
Under the terms of the Merger Agreement, upon consummation of the merger,
each share of Snyder common stock issued and outstanding immediately prior to
the effective time, other than shares owned directly or indirectly by Snyder or
any of its subsidiaries, will be automatically converted into 2.05 shares of
Santa Fe common stock. In addition, each outstanding option of Snyder to
purchase shares of Snyder common stock will be canceled at the effective time
of the merger and, with certain exceptions as described in the Merger
Agreement, Santa Fe Snyder will grant the holder of such former Snyder option
an option to purchase Santa Fe common stock. The number of shares subject to
such Santa Fe option will equal the product of 2.05 times the number of shares
subject to the Snyder option and the exercise price will equal the former
exercise price divided by 2.05.
The merger has been accounted for in the Pro Forma Statements using the
purchase method of accounting. Consequently, the unaudited pro forma condensed
combined balance sheet (the "Pro Forma Balance Sheet") as of December 31, 1998
reflects the recording of assets acquired and liabilities assumed of Snyder at
estimated fair value as if the merger had occurred on that date. The pro forma
combined statement of operations is prepared for the year ended December 31,
1998 and illustrates the effects of the merger as if it had occurred on January
1, 1998.
Based on the closing price of Santa Fe stock on the date of the merger
agreement, management believes that the resulting purchase price allocation
could cause the carrying value of Snyder's historical assets to significantly
exceed future amounts realizable from the assets, creating the likelihood of a
material post-merger writedown of the assets in future periods unless commodity
prices increase above their current levels or other future developments
substantiate the recoverability of the new, higher carrying value of Snyder's
assets. The amount and timing of any writedowns will be determined in the
future by management in accordance with applicable accounting rules based upon
circumstances existing at the time of the review. For example, if after the
merger management's long-term outlook for future commodities prices is
reflective of current NYMEX gas prices of approximately $2.00 per Mcfe, an
impairment would be necessary to the carrying value of Santa Fe Snyder's oil
and gas properties. On such basis, impairments could range from approximately
$150 million to $200 million, on a pre-tax basis, pursuant to the provisions of
the Statement of Financial Accounting Standards No. 121. Any future writedown
would likely have a material adverse effect on Santa Fe Snyder's net income in
the period(s) taken, but would not affect the company's cash flows.
The Pro Forma Statements should be read in conjunction with the historical
consolidated financial statements of Santa Fe and Snyder, including the notes
thereto, incorporated herein by reference. The management of Santa Fe believes
that the assumptions utilized provide a reasonable basis for presenting the
significant effects of the merger and that the pro forma adjustments give
appropriate effect to those assumptions and are properly applied in the pro
forma financial information. The Pro Forma Statements do not purport to be
indicative of the financial position or results of operations of Santa Fe had
the merger occurred on the dates mentioned above, nor are the Pro Forma
Statements necessarily indicative of the future financial position or results
of operations of Santa Fe.
F-2
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In Millions)
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------
Pro Forma
Combining Pro Forma
Santa Fe Snyder Adjustments Combined
ASSETS --------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets..................... $ 116.0 $ 35.6 $ -- $ 151.6
Investments........................ -- 24.0 -- 24.0
(573.9)(a)
Property, plant and equipment, at
cost.............................. 1,977.0 573.9 674.3 (b) 2,733.4
82.1 (b)
Accumulated depletion,
depreciation, amortization
and impairment.................... (1,258.7) (199.6) 199.6 (a) (1,258.7)
--------- ------- ------ ---------
Property, plant and equipment,
net............................... 718.3 374.3 382.1 1,474.7
Other assets....................... 24.7 -- (13.5)(d) 11.2
--------- ------- ------ ---------
Total Assets................... $ 859.0 $ 433.9 $368.6 $ 1,661.5
========= ======= ====== =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
EQUITY
<S> <C> <C> <C> <C>
Current liabilities................ $ 139.2 $ 73.3 $ 8.1 (b) $ 220.6
Long-term debt..................... 330.6 212.8 (2.7)(a) 540.7
Deferred revenues and other
liabilities....................... 40.8 19.4 -- 60.2
Deferred income taxes.............. -- -- 82.1 (b) 68.1
(0.5)(c)
(13.5)(d)
Shareholders' equity
Common stock..................... 1.0 0.4 (0.4)(a) 1.8
0.8 (b)
Paid-in capital.................. 728.2 238.7 (238.7)(a) 1,150.4
422.2 (b)
(10.9)(a)
Retained earnings (deficit)...... (372.5) 10.9 (1.0)(c) (373.5)
Treasury stock................... (6.8) (46.2) 46.2 (a) (6.8)
Unamortized restricted stock
awards.......................... (1.5) -- 1.5 (c) --
Unrealized gain or loss on
investments..................... -- (75.4) 75.4 (a) --
--------- ------- ------ ---------
Total Liabilities and
Shareholders' Equity.......... $ 859.0 $ 433.9 $368.6 $ 1,661.5
========= ======= ====== =========
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
combined financial statements.
F-3
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------------------
Pro Forma
Combining Pro Forma
Santa Fe Snyder Adjustments Combined
-------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Sales of crude oil, liquids and
natural gas....................... $290.4 $133.2 $ -- $ 423.6
Gas transportation, processing and
marketing......................... -- 4.6 -- 4.6
Other.............................. 0.6 0.2 -- 0.8
------ ------ ------ -------
Total revenues................... 291.0 138.0 -- 429.0
------ ------ ------ -------
Costs and expenses:
Production and operating........... 112.5 31.0 -- 143.5
Cost of gas and transportation..... -- 3.3 -- 3.3
Exploration, including dry hole
costs............................. 71.1 48.3 -- 119.4
Depletion, depreciation and
amortization...................... 136.1 54.0 25.8 (a) 215.9
Impairment of oil and gas
properties........................ 87.8 5.5 -- 93.3
General and administrative......... 19.7 16.4 -- 36.1
Taxes other than income............ 16.3 7.5 -- 23.8
Loss (gain) on disposition of
assets............................ 1.5 (3.3) -- (1.8)
------ ------ ------ -------
Total costs and expenses......... 445.0 162.7 25.8 633.5
------ ------ ------ -------
Income (loss) from operations........ (154.0) (24.7) (25.8) (204.5)
Interest income.................... 6.2 2.4 -- 8.6
Interest expense................... (22.0) (15.7) -- (37.7)
Interest capitalized............... 7.2 -- -- 7.2
Other income (expense)............. (0.3) -- -- (0.3)
------ ------ ------ -------
Income (loss) before income taxes.... (162.9) (38.0) (25.8) (226.7)
Current income tax (expense)
benefit........................... 11.4 -- -- 11.4
Deferred income tax (expense)
benefit........................... 52.8 13.3 9.0 (b) 75.1
------ ------ ------ -------
Net income (loss).................... $(98.7) $(24.7) $(16.8) $(140.2)
====== ====== ====== =======
Net income (loss) per common share,
basic and diluted................... $(0.96) $(0.74) $ (0.82)
====== ====== =======
Weighted average number of shares
outstanding......................... 102.6 33.4 171.1
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
combined financial statements.
F-4
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The Pro Forma Condensed Combined Balance Sheet is presented assuming the
merger of Snyder into Santa Fe occurred on December 31, 1998. The Pro Forma
Condensed Combined Statement of Operations has been prepared as if the merger
had been consummated as of January 1, 1998.
The merger of Snyder has been accounted for in the Pro Forma Statements
using the purchase method of accounting. The total value to be allocated
between the net assets of Snyder was determined based on the estimated fair
value of the Santa Fe common stock offered to the Snyder stockholders and the
estimated fair value of replacement options to be issued, as increased to
reflect the incremental cash expenses incurred to effect the merger. The fair
value of Santa Fe common stock utilized in the purchase price allocation was
$6.09375, which represents the average market prices prior to and after the
public announcement of the proposed merger.
Note 2. Pro Forma Adjustments
Pro Forma Balance Sheet
(a) To reverse Snyder's historical property, plant and equipment,
accumulated depletion, depreciation and amortization and shareholders'
equity as a result of the application of purchase accounting and to
adjust long-term debt to fair market value.
(b) To record the preliminary pro forma allocation of the purchase price of
the merger of Snyder to property, plant and equipment using the purchase
method of accounting. The total of the value of the 68.4 million shares
issued ($416.8 million), the fair value of the net liabilities assumed
($243.2 million, which is the remainder of liabilities assumed minus
assets acquired), the estimated fair value of 3.5 million Santa Fe
Snyder replacement options to be issued ($6.2 million) and the value of
certain liabilities incurred as a result of the merger has been
allocated to property, plant and equipment as follows:
<TABLE>
<CAPTION>
In Millions
-----------
<S> <C>
Common stock issued........................................... $416.8
Fair value of replacement options............................. 6.2
Other accrued merger costs.................................... 5.6
------
Sub-total................................................. 428.6
Liabilities assumed:
Current liabilities......................................... 75.8
Long-term debt at fair value................................ 210.1
Other long-term obligations................................. 19.4
Assets acquired:
Current assets.............................................. (35.6)
Investments................................................. (24.0)
------
Allocated to property, plant and equipment.................... $674.3
======
</TABLE>
Other accrued merger costs include those capitalizable costs incurred
to consummate the transaction, consisting primarily of professional
fees. These costs, along with the write off of certain lease
obligations ($2.5 million) are reflected in current liabilities on the
pro forma balance sheet.
The purchase price allocation is preliminary principally due to the
fact that management is in the process of assessing and formulating its
integration plans, which are expected to include employee separations,
employee relocations, elimination of duplicative facilities and other
restructuring actions. These restructuring costs are anticipated to
qualify as assumed liabilities in the merger upon finalization of these
plans. In addition, the Company is in the process of finalizing
business and capital spending plans which will impact the ultimate
purchase price allocation to oil and gas properties. Such amounts
cannot be estimated at this time.
F-5
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS--
(Continued)
In addition, Santa Fe has recorded an $82.1 million deferred tax
liability related to the difference between the book basis and the tax
basis in the oil and gas properties acquired. Such amount is allocated
to property, plant and equipment.
(c) As a result of the merger, certain restricted stock and phantom unit
awards of Santa Fe will vest, resulting in a charge to earnings, net of
tax, of the unrecognized portion of such awards.
(d) Included in Santa Fe's "Other Assets" line item at December 31, 1998 is
a net deferred tax asset of $13.5 million. As a result of a deferred tax
liability arising from the merger, this amount has been reclassed to
"Deferred income taxes" for pro forma purposes.
Pro Forma Statement of Operations
Certain reclassification adjustments to line items were made to the Snyder
statement of operations to conform to Santa Fe's presentation. The material
adjustment made was a reclassification of production taxes ($7.5 million for
the year ended December 31, 1998) from production and operating expense to
taxes other than income taxes. These adjustments do not affect net income and
are not presented on the pro forma statements.
(a) To record the additional depletion, depreciation and amortization expense
of $25.8 million related to the excess of the estimated fair value over the
historical basis of the property, plant and equipment for the year ended
December 31, 1998.
(b) To record income taxes at an effective rate of 35%.
F-6
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
January 13, 1999
between
SNYDER OIL CORPORATION
and
SANTA FE ENERGY RESOURCES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
The Merger
<S> <C>
Section 1.01 The Merger.................................................... 1
Section 1.02 Tax Treatment................................................. 1
Section 1.03 Accounting Treatment.......................................... 1
Section 1.04 Conversion of Shares.......................................... 2
Section 1.05 Surrender and Payment......................................... 2
Section 1.06 Stock Options................................................. 3
Section 1.07 Fractional Shares............................................. 4
Section 1.08 Withholding Rights............................................ 4
Section 1.09 Lost Certificates............................................. 4
Section 1.10 Closing....................................................... 5
ARTICLE II
The Surviving Corporation
Section 2.01 Certificate of Incorporation.................................. 5
Section 2.02 Bylaws........................................................ 5
Section 2.03 Directors and Officers........................................ 5
ARTICLE III
Representations and Warranties of SOCO
Section 3.01 Corporate Existence and Power................................. 5
Section 3.02 Corporate Authorization....................................... 6
Section 3.03 Governmental Authorization.................................... 6
Section 3.04 Non-contravention............................................. 6
Section 3.05 Capitalization................................................ 7
Section 3.06 Subsidiaries.................................................. 7
Section 3.07 SEC Filings................................................... 8
Section 3.08 Financial Statements.......................................... 8
Section 3.09 Absence of Certain Changes.................................... 9
Section 3.10 No Undisclosed Material Liabilities........................... 10
Section 3.11 Compliance with Laws and Court Orders......................... 10
Section 3.12 Litigation.................................................... 10
Section 3.13 Advisor's Fees................................................ 10
Section 3.14 Taxes......................................................... 11
Section 3.15 Employee Benefit Plans........................................ 11
Section 3.16 Environmental Matters......................................... 12
Section 3.17 Tax Treatment................................................. 13
Section 3.18 Opinion of Financial Advisor.................................. 14
Section 3.19 Patents and Other Proprietary Rights.......................... 14
Section 3.20 Status and Operation of Oil and Gas Properties ............... 14
Section 3.21 Reserve Reports............................................... 15
Section 3.22 Antitakeover Statutes and Rights Agreement.................... 16
Section 3.23 Required Stockholder Vote or Consent.......................... 16
Section 3.24 Hedging....................................................... 16
Section 3.25 Year 2000 Issues.............................................. 16
</TABLE>
i
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<TABLE>
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ARTICLE IV
Representations and Warranties of Santa Fe
<S> <C>
Section 4.01 Corporate Existence and Power............................... 16
Section 4.02 Corporate Authorization..................................... 16
Section 4.03 Governmental Authorization.................................. 17
Section 4.04 Non-contravention........................................... 17
Section 4.05 Capitalization.............................................. 17
Section 4.06 Subsidiaries................................................ 18
Section 4.07 SEC Filings................................................. 19
Section 4.08 Financial Statements........................................ 19
Section 4.09 Absence of Certain Changes.................................. 19
Section 4.10 No Undisclosed Material Liabilities......................... 20
Section 4.11 Compliance with Laws and Court Orders....................... 20
Section 4.12 Litigation.................................................. 21
Section 4.13 Advisors' Fees.............................................. 21
Section 4.14 Taxes....................................................... 21
Section 4.15 Employee Benefit Plans...................................... 22
Section 4.16 Environmental Matters....................................... 23
Section 4.17 Tax Treatment............................................... 23
Section 4.18 Opinion of Financial Advisor................................ 24
Section 4.19 Patents and Other Proprietary Rights........................ 24
Section 4.20 Status and Operation of Oil and Gas Properties.............. 24
Section 4.21 Reserve Reports............................................. 25
Section 4.22 Antitakeover Statutes and Rights Agreement.................. 25
Section 4.23 Required Stockholder Vote or Consent........................ 25
Section 4.24 Hedging..................................................... 25
Section 4.25 Year 2000 Issues............................................ 25
ARTICLE V
Conduct of Business Pending Merger
Section 5.01 Conduct of SOCO ............................................ 26
Section 5.02 Conduct of Santa Fe......................................... 27
ARTICLE VI
Additional Agreements
Section 6.01 Access and Information...................................... 28
Section 6.02 Acquisition Proposals....................................... 28
Section 6.03 Directors' and Officers' Indemnification and Insurance...... 30
Section 6.04 Fees and Expenses........................................... 31
Section 6.05 Cooperation................................................. 32
Section 6.06 Filings..................................................... 32
Section 6.07 Consents.................................................... 32
Section 6.08 Board, Committees and Executive Officers.................... 32
Section 6.09 Stockholder Meetings........................................ 33
Section 6.10 Preparation of the Proxy Statement/Prospectus and
Registration Statement ................................................. 33
Section 6.11 Stock Exchange Listing...................................... 35
</TABLE>
ii
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<TABLE>
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<S> <C>
Section 6.12 Employee Benefits............................................. 35
Section 6.13 Reasonable Commercial Efforts................................. 36
Section 6.14 Certain Filings............................................... 36
Section 6.15 Public Announcements.......................................... 36
Section 6.16 Further Assurances............................................ 36
Section 6.17 Notices of Certain Events..................................... 36
Section 6.18 Tax-free Reorganization....................................... 37
Section 6.19 Affiliates.................................................... 37
Section 6.20 Stockholder Litigation........................................ 37
Section 6.21 Indenture Matters............................................. 37
ARTICLE VII
Conditions to the Merger
Section 7.01 Conditions to the Obligations of Each Party................... 37
Section 7.02 Conditions to the Obligations of Santa Fe..................... 37
Section 7.03 Conditions to the Obligations of SOCO......................... 38
ARTICLE VIII
Termination
Section 8.01 Termination................................................... 38
Section 8.02 Effect of Termination......................................... 40
ARTICLE IX
Miscellaneous
Section 9.01 Notices....................................................... 40
Section 9.02 Survival of Representations and Warranties.................... 41
Section 9.03 Amendments; No Waivers........................................ 41
Section 9.04 Successors and Assigns........................................ 41
Section 9.05 Governing Law................................................. 41
Section 9.06 Jurisdiction.................................................. 42
Section 9.07 Waiver of Jury Trial.......................................... 42
Section 9.08 Attorneys' Fees............................................... 42
Section 9.09 No Third Party Beneficiaries.................................. 42
Section 9.10 Disclosure Schedule........................................... 42
Section 9.11 Counterparts; Effectiveness................................... 42
Section 9.12 Entire Agreement.............................................. 42
Section 9.13 Captions...................................................... 42
Section 9.14 Severability.................................................. 42
Section 9.15 Definitions and Usage......................................... 43
</TABLE>
EXHIBITS
Exhibit A--Form of Affiliate Letter
Exhibit 6.08(b)--Surviving Corporation Executive Officers
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 13, 1999
("Agreement"), is by and between Snyder Oil Corporation, a Delaware corporation
("SOCO"), and Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa
Fe").
R E C I T A L S:
WHEREAS, the respective Board of Directors of SOCO and Santa Fe deem it
advisable and in the best interests of their respective stockholders that on
the terms and subject to the conditions set forth herein, SOCO and Santa Fe
effect a strategic combination of their companies, such combination to be
effected by a merger of SOCO with and into Santa Fe (the "Merger"), and such
Boards of Directors have approved the Merger and recommended that their
respective stockholders approve and adopt this Agreement; and
WHEREAS, for federal income tax purposes, SOCO and Santa Fe intend that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
The Merger
Section 1.01 The Merger. (a) Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined herein), SOCO shall merge with and
into Santa Fe in accordance with the General Corporation Law of the State of
Delaware ("DGCL"), whereupon the separate existence of SOCO shall cease, and
Santa Fe shall be the surviving corporation (the "Surviving Corporation"). The
Merger shall have the effects set forth in Section 259 of the DGCL, including,
without limitation, the Surviving Corporation's succession to and assumption of
all rights and obligations of SOCO.
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth herein Santa Fe
will file a certificate of merger (the "Certificate of Merger") with the
Delaware Secretary of State and make all other filings or recordings required
by Delaware Law in connection with the Merger. The Merger shall become
effective at such time (the "Effective Time") as the Certificate of Merger is
duly filed with the Delaware Secretary of State (or at such later time as may
be agreed in writing by the parties hereto and specified in the Certificate of
Merger).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, assets, powers, privileges and franchises and be
subject to all of the obligations, liabilities, restrictions and disabilities
of Santa Fe and SOCO, all as provided under the DGCL.
Section 1.02 Tax Treatment. It is intended that the Merger shall constitute
a reorganization under Section 368(a) of the Code (a "368 Reorganization").
Section 1.03 Accounting Treatment. It is intended that the Merger shall be
accounted for as a purchase transaction for financial accounting purposes.
A-1
<PAGE>
Section 1.04 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any capital stock
described below:
(a) Each share of common stock, par value $0.01 per share, of SOCO,
including, without limitation, all of the associated preferred stock
purchase rights (the "SOCO Common Stock"), issued and outstanding
immediately prior to the Effective Time shall (except as otherwise provided
in this Section 1.04 and Section 1.07) be converted into the right to
receive 2.05 shares (the "Exchange Ratio") of common stock, par value $0.01
per share, and a corresponding number of preferred stock purchase rights
issued under the Santa Fe Plan (as defined in the Santa Fe Plan) of Santa
Fe (collectively "Santa Fe Common Stock"). All such SOCO Common Stock, when
so converted, shall cease to be outstanding and shall automatically be
canceled and retired and shall cease to exist, and the holder of a
certificate ("SOCO Stock Certificate") that, immediately prior to the
Effective Time, represented outstanding shares of SOCO Common Stock shall
cease to have any rights with respect thereto, except the right to receive,
upon the surrender of such SOCO Stock Certificate, the Santa Fe Common
Stock (the "Merger Consideration") to which such holder is entitled
pursuant to this Section 1.04(a), without interest. Until surrendered as
contemplated by Section 1.05, each SOCO Stock Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive
upon such surrender the Merger Consideration as contemplated by this
Section 1.04.
(b) Each share of SOCO Common Stock held by SOCO as treasury stock or
owned by Santa Fe or any of its subsidiaries immediately prior to the
Effective Time shall be canceled, and no payment shall be made with respect
thereto.
(c) Each share of Santa Fe Common Stock issued and outstanding
immediately prior to the Effective Time shall not be affected by the
Merger.
Section 1.05 Surrender and Payment. (a) Prior to the Effective Time, Santa
Fe shall appoint an agent, which shall be Santa Fe's Transfer Agent or such
other person or persons reasonably satisfactory to SOCO (the "Exchange Agent"),
for the purpose of exchanging SOCO Stock Certificates for the Merger
Consideration. As of the Effective Time, Santa Fe will make available to the
Exchange Agent, as needed, the Merger Consideration to be paid in respect of
shares of SOCO Common Stock for exchange in accordance with this Section 1.05
through the Exchange Agent. Promptly after the Effective Time, but in any event
not later than five business days thereafter, Santa Fe will send, or will cause
the Exchange Agent to send, to each holder of shares of SOCO Common Stock at
the Effective Time a letter of transmittal and instructions for use in
effecting such exchange (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the SOCO Stock Certificates to the Exchange Agent). Provision also shall be
made for holders of SOCO Stock Certificates to procure in person immediately
after the Effective Time a letter of transmittal and instructions and to
deliver in person immediately after the Effective Time such letter of
transmittal and SOCO Stock Certificates in exchange for the Merger
Consideration.
(b) Each holder of shares of SOCO Common Stock that have been converted into
the right to receive the Merger Consideration will be entitled to receive, upon
surrender to the Exchange Agent of a SOCO Stock Certificate, together with a
properly completed letter of transmittal and pursuant to irrevocable
instructions, the Merger Consideration in respect of the SOCO Common Stock
represented by such certificate.
(c) If any portion of the Merger Consideration is to be paid to a person (as
defined in Section 9.15) other than the person in whose name the SOCO Stock
Certificate is registered, it shall be a condition to such payment that the
SOCO Stock Certificate so surrendered shall be properly endorsed or otherwise
be in proper form for transfer and that the person requesting such payment
shall pay to the Exchange Agent any transfer or other taxes required as a
result of such payment to a person other than the registered holder of such
SOCO Stock Certificate or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
A-2
<PAGE>
(d) After the Effective Time, the stock transfer books of SOCO shall be
closed and there shall be no further registration of transfers of shares of
SOCO Common Stock outstanding prior to the Effective Time. If, after the
Effective Time, SOCO Stock Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the consideration
provided for, and in accordance with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.05(a) that remains unclaimed by the holders of
shares of SOCO Common Stock six months after the Effective Time shall be
returned to Santa Fe, upon demand, and any such holder who has not exchanged
shares of SOCO Common Stock for the Merger Consideration in accordance with
this Section prior to that time shall thereafter look only to Santa Fe for
payment of the Merger Consideration in respect of such shares of SOCO Common
Stock. Notwithstanding the foregoing, Santa Fe shall not be liable to any
holder of shares of SOCO Common Stock for any amount paid to a public official
pursuant to applicable abandoned property laws. Any amounts remaining unclaimed
by holders of shares of SOCO Common Stock six years after the Effective Time
(or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of Santa Fe free
and clear of any claims or interest of any person previously entitled thereto.
(f) No dividends or other distributions with respect to securities of Santa
Fe constituting part of the Merger Consideration shall be paid to the holder of
any unsurrendered SOCO Stock Certificates until such SOCO Stock Certificates
are surrendered as provided in this Section 1.05. Upon such surrender, there
shall be paid, without interest, to the person in whose name the securities of
Santa Fe have been registered, all dividends and other distributions payable in
respect of such securities on a date subsequent to, and in respect of a record
date after, the Effective Time.
Section 1.06 Stock Options. (a) At the Effective Time, automatically and
without any action on the part of the holder thereof, each option to purchase
shares of SOCO Common Stock outstanding under any stock option or compensation
plan or other arrangement of SOCO, whether or not exercisable, and whether or
not vested ("SOCO Stock Options"), shall be canceled pursuant to its terms.
With respect to SOCO Stock Options so canceled at the Effective Time that were
held by (i) employees or directors of SOCO who continue with the Surviving
Corporation after the Effective Time or (ii) former employees of SOCO with
severance or employment agreements that provide for an extended period to
exercise such SOCO Stock Option or non-employee directors of SOCO who do not
continue in office with the Surviving Corporation, Santa Fe shall grant such
holder an option immediately following the Effective Time to purchase that
number of shares of Santa Fe Common Stock ("Santa Fe Stock Options") equal to
the product of the number of shares of SOCO Common Stock subject to issuance
upon exercise of such option times the Exchange Ratio and with an exercise
price equal to the exercise price per share of such SOCO Stock Option divided
by the Exchange Ratio, and otherwise upon the same terms and conditions as are
set forth in such SOCO Stock Option or severance agreement, including, but not
limited to, the existing terms of such SOCO Stock Option; provided, however,
that (i) the exercise price, the number of shares of Santa Fe Common Stock
purchasable upon exercise of such Santa Fe Stock Option and the terms and
conditions of exercise of such option shall comply with Section 424(a) of the
Code, without regard to whether Section 421 of the Code applied to such
canceled SOCO Stock Option, and (ii) each such Santa Fe Stock Option shall be
fully exercisable on its grant. Notwithstanding the foregoing, any SOCO
employee who receives a Santa Fe Agreement pursuant to Section 6.12(c) and
whose employment terminates with the Surviving Corporation during the two-year
period following the Effective Time for any reason other than such employment
being involuntarily terminated pursuant to a written notice of termination by
the Surviving Corporation shall be entitled either to receive in cash the
positive spread (if any) between the then current market price of the Common
Stock of the Surviving Corporation and the exercise price of such option, or to
elect to exercise such option for a period of up to 90 days following such
termination or the remaining term of such option, whichever is shorter. Any
option that is unexercised or is not cashed out following such period shall be
canceled. For purposes of such option "Good Reason" termination, as defined in
the Santa Fe change in control agreement shall be deemed to be a voluntary
termination. If, and
A-3
<PAGE>
only if, such a former SOCO employee is involuntarily terminated during the
two-year period following the Effective Time, pursuant to a written notice of
termination by the Surviving Corporation, such employee shall have a period of
three years following such involuntary termination or the period of time of the
remaining term of such option, whichever is shorter, in which to exercise such
option. To the extent reasonably practicable, with respect to a canceled SOCO
Stock Option that was an incentive stock option for purposes of Section 422 of
the Code, the replacement Santa Fe Stock Option shall be designed to constitute
an incentive stock option. Prior to the Effective Time, SOCO will use all
commercially reasonable efforts to obtain such consents, if any, as may be
necessary to give effect to the transactions contemplated by this Section 1.06.
In addition, prior to the Effective Time, SOCO will, to the extent commercially
reasonable and permitted by the relevant stock option agreements, make any
amendments to the terms of such stock option or compensation plans or
arrangements that are necessary to give effect to the transactions contemplated
by this Section 1.06. Except as contemplated by this Section 1.06, SOCO will
not, after the date hereof, without the written consent of Santa Fe, grant any
new options or amend any outstanding options to purchase shares of SOCO Common
Stock (including accelerating the vesting).
(b) Santa Fe shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Santa Fe Common Stock for delivery
upon exercise of the Santa Fe Stock Options granted by Santa Fe pursuant to
Section 1.06(a) above. As promptly as practicable after the Effective Time,
Santa Fe shall file a Registration Statement on Form S-8 (or any successor or
other appropriate forms) with respect to the shares of Santa Fe Common Stock
subject to such Santa Fe Stock Options and shall use all reasonable commercial
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
Section 1.07 Fractional Shares. No fractional shares of Santa Fe Common
Stock shall be issued in the Merger, but in lieu thereof each holder of SOCO
Common Stock otherwise entitled to a fractional share of Santa Fe Common Stock
will be entitled to receive, from the Exchange Agent in accordance with the
provisions of this Section 1.07, a cash payment in lieu of such fractional
shares of Santa Fe Common Stock representing such holder's proportionate
interest, if any, in the net proceeds from the sale by the Exchange Agent in
one or more transactions (which sale transactions shall be made at such times,
in such manner and on such terms as the Exchange Agent shall determine in its
reasonable discretion) on behalf of all such holders of the aggregate of the
fractional shares of Santa Fe Common Stock which would otherwise have been
issued (the "Excess Shares"). The sale of the Excess Shares by the Exchange
Agent shall be executed on the New York Stock Exchange ("NYSE") through one or
more member firms of the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been distributed
to the holders of SOCO Common Stock, the Exchange Agent will hold such proceeds
in trust for the holders of SOCO Common Stock. Santa Fe shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs,
including, without limitation, the expenses and compensation of the Exchange
Agent, incurred in connection with such sale or sales. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
SOCO Common Stock in lieu of any fractional shares of Santa Fe Common Stock,
the Exchange Agent shall make available such amounts to such holders, without
interest.
Section 1.08 Withholding Rights. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable to any person
pursuant to this Article I such amounts as it is required to deduct and
withhold with respect to the making of such payment under any provision of
federal, state, local or foreign tax law. To the extent that amounts are so
withheld by the Surviving Corporation, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of SOCO Common Stock in respect of which such deduction and withholding
was made by the Surviving Corporation.
Section 1.09 Lost Certificates. If any SOCO Stock Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such SOCO Stock Certificate to be lost,
A-4
<PAGE>
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond, in such reasonable amount as the Surviving
Corporation may direct, as indemnity against any claim that may be made against
it with respect to such SOCO Stock Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed SOCO Stock Certificate the
Merger Consideration to be paid in respect of the shares of SOCO Common Stock
represented by such SOCO Stock Certificates as contemplated by this Article I.
Section 1.10 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Andrews & Kurth
L.L.P., 600 Travis, Suite 4200, Houston, Texas 77002 at 10:00 a.m., local time,
on the first business day immediately following the date on which all of the
conditions set forth in Article VII hereof are satisfied or waived, or at such
other date and time as Santa Fe and SOCO shall otherwise agree (the "Closing
Date").
ARTICLE II
The Surviving Corporation
Section 2.01 Certificate of Incorporation. The certificate of incorporation
of Santa Fe, as amended and in effect immediately prior to the Effective Time
(the "Charter"), shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law, provided that, as
of the Effective Time, such Charter shall be amended as follows:
(a) Article FIRST of the Charter shall be amended to read in its
entirety as follows:
"FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is Santa Fe Snyder Corporation."
(b) The first paragraph of Article FOURTH of the Charter shall be
amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 350,000,000, of
which 50,000,000 shares shall be Preferred Stock, par value $.01 per
share, and 300,000,000 shares shall be Common Stock, par value $.01 per
share."
(c) The certificate of designations for Santa Fe's Series A Junior
Participating Preferred Stock shall be amended to increase to 3,000,000 the
number of shares of Junior Preferred Stock subject to such designation.
Section 2.02 Bylaws. The bylaws of Santa Fe in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
Section 2.03 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's certificate of incorporation and bylaws, the directors and
executive officers of the Surviving Corporation shall be as set forth in
Section 6.08.
ARTICLE III
Representations and Warranties of SOCO
SOCO represents and warrants to Santa Fe that, except as disclosed in the
SOCO Schedule of Exceptions (the "SOCO Schedule"), as of the date hereof:
Section 3.01 Corporate Existence and Power. SOCO is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now
A-5
<PAGE>
conducted, except for those licenses, authorizations, permits, consents and
approvals the absence of which would not, individually or in the aggregate,
have a SOCO Material Adverse Effect (as defined in Section 3.06). SOCO is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction specified in Section 3.01 of the SOCO Schedule, which are the
only jurisdictions where such qualification is necessary or appropriate, except
for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a SOCO Material Adverse Effect. SOCO has
heretofore delivered to Santa Fe true and complete copies of the certificate of
incorporation and bylaws of SOCO as currently in effect, and SOCO's certificate
of incorporation and bylaws as so delivered are in full force and effect. SOCO
is not in default in any respect in the performance, observation or fulfillment
of any provision of its certificate of incorporation or bylaws.
Section 3.02 Corporate Authorization. (a) The execution, delivery and
performance by SOCO of this Agreement and the consummation of the transactions
contemplated hereby are within SOCO's corporate powers and, except for the
required approval of SOCO's stockholders in connection with the consummation of
the Merger, have been duly authorized by all necessary corporate action. The
affirmative vote of the holders of a majority of the outstanding shares of SOCO
Common Stock is the only vote of the holders of any of SOCO's capital stock
necessary in connection with the consummation of the Merger. No other vote of
the holders of SOCO's capital stock is necessary in connection with this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by SOCO and
constitutes a valid and binding agreement of SOCO.
(b) SOCO's Board of Directors, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions contemplated hereby
(including, without limitation, the Merger) are fair to and in the best
interests of SOCO's stockholders, (ii) approved and adopted this Agreement and
the transactions contemplated hereby (including, without limitation, the
Merger), and (iii) recommended approval and adoption of this Agreement by its
stockholders.
Section 3.03 Governmental Authorization. The execution, delivery and
performance by SOCO of this Agreement and the consummation by SOCO of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
(a) the filing of a certificate of merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), the Securities Act of 1933 ("1933 Act"),
the Securities Exchange Act of 1934 ("1934 Act"), state laws relating to
takeovers, if applicable, and foreign or state securities or Blue Sky laws, and
(c) any other filings, approvals or authorizations which are ministerial in
nature and are customarily obtained from governmental authorities after the
effective time in connection with transactions of the same nature as are
contemplated hereby ("Customary Post Closing Consents") or which, if not
obtained, would not, individually or in the aggregate, have a SOCO Material
Adverse Effect or materially impair the ability of SOCO to consummate the
transactions contemplated by this Agreement.
Section 3.04 Non-contravention. The execution, delivery and performance by
SOCO of this Agreement and the consummation by SOCO of the transactions
contemplated hereby do not and will not (i) subject to obtaining the SOCO
Stockholders' Approval (as defined in Section 3.23), violate the certificate of
incorporation or bylaws of SOCO, or the certificate of incorporation or bylaws
(or similar organizational documents) of any of SOCO's subsidiaries, (ii)
assuming compliance with the matters referred to in Section 3.03, violate any
applicable law, rule, regulation, judgment, writ, injunction, order or decree,
(iii) require any consent or other action by any person under, give rise to any
right of first refusal or similar right of any third party under, constitute a
default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of SOCO or any of its subsidiaries or
to guaranteed payments or a loss of any benefit to which SOCO or any of its
subsidiaries is entitled under any provision of any agreement or other
instrument binding upon SOCO or any of its subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of SOCO or any of
its subsidiaries, (iv) result in the creation or imposition of any Lien on any
shares of capital stock or any material properties or
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assets of SOCO or any of its subsidiaries, or (v) result in any holder of any
securities of SOCO being entitled to appraisal, dissenters' or similar rights,
except, in the case of clauses (ii), (iii) and (iv), for such matters as would
not, individually or in the aggregate, have a SOCO Material Adverse Effect or
materially impair the ability of SOCO to consummate the transactions
contemplated by this Agreement. "Lien" means, with respect to any property or
asset, any mortgage, lien, pledge, charge, security interest, encumbrance or
other adverse claim of any kind in respect of such property or asset.
Section 3.05 Capitalization. The authorized capital stock of SOCO consists
of a total of 85,000,000 shares, of which 75,000,000 shares are SOCO Common
Stock and 10,000,000 shares are preferred stock, par value $0.01 per share, of
SOCO ("SOCO Preferred Stock"). No shares of SOCO Preferred Stock are issued or
outstanding, although a series of SOCO Preferred Stock consisting of 75,000
shares has been designated as Junior Participating Preferred Stock and is
subject to issuance under SOCO's Preferred Stock Purchase Rights Plan, dated as
of May 27, 1997 (the "SOCO Plan"). As of January 11, 1999, there were
33,364,567 shares of SOCO Common Stock issued and outstanding and options to
purchase an aggregate of 2,584,320 shares of SOCO Common Stock at an average
exercise price of $15.86 per share (of which 1,184,248 were exercisable). All
outstanding shares of capital stock of SOCO have been duly authorized and
validly issued and are fully paid and non-assessable. Except as set forth in
this Section 3.05 or in the SOCO Plan and except for changes since January 11,
1999 resulting from the exercise of employee or non-employee director stock
options outstanding on such date, there are no outstanding (i) shares of
capital stock or voting securities of SOCO, (ii) securities of SOCO convertible
into or exchangeable for shares of capital stock or voting securities of SOCO
or (iii) options or other rights to acquire from SOCO or other obligation of
SOCO to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of SOCO. There are
no outstanding obligations of SOCO or any of its subsidiaries to repurchase,
redeem or otherwise acquire any securities referred to in clauses (i), (ii) or
(iii) above. Except for any amendments filed with the SOCO SEC Filings (as
defined below) made prior to the date hereof, the SOCO Plan has not been
amended except to provide that the SOCO Plan is inapplicable to the execution
and delivery of this Agreement and the transactions contemplated hereby and any
other agreements executed and delivered in connection herewith. A "Distribution
Date" has not occurred within the meaning of the SOCO Plan, and the
consummation of the transactions contemplated hereby will not result in the
occurrence of a Distribution Date.
Section 3.06 Subsidiaries. (a) SOCO has previously furnished Santa Fe with a
list of the name and jurisdiction of organization of each subsidiary (as
defined in Section 9.15) of SOCO, which list is true and correct. Each such
subsidiary is a corporation duly incorporated or an entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, has all corporate,
partnership or other entity derived powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, have a SOCO Material Adverse Effect. Each subsidiary of SOCO is duly
qualified to do business as a foreign corporation or entity, as the case may
be, and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified
would not, individually or in the aggregate, have a SOCO Material Adverse
Effect. SOCO has made available to Santa Fe a complete and correct copy of the
certificate of incorporation and bylaws (or similar organizational documents)
of each of SOCO's subsidiaries, each as amended to date, and the certificate of
incorporation and bylaws (or similar organizational documents) as so delivered
are in full force and effect. No SOCO subsidiary is in default in any respect
in the performance, observation or fulfillment of any provision of its
certificate of incorporation or bylaws (or similar organizational documents).
Other than SOCO's subsidiaries, its ownership of (i) 7,822,000 ordinary shares
of SOCO International plc ("International") (representing approximately 15.8%
of International's outstanding shares as reported as of June 30, 1998); (ii)
11,731,000 ordinary shares of Cairn Energy plc ("Cairn") (representing
approximately 6.9% of Cairn's outstanding shares as reported as of June 30,
1998); and (iii) 27% of Great Divide Gas Services, LLC, a Colorado limited
liability company; SOCO does not beneficially own or control, directly or
indirectly, 5% or more of any class of equity or similar securities of any
corporation or other organization, whether incorporated or unincorporated. For
purposes of this Agreement
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a "SOCO Material Adverse Effect" shall mean any event, circumstance, condition,
development or occurrence causing, resulting in or having a material adverse
effect on the financial condition, business, assets, properties, prospects or
results of operations of SOCO and its subsidiaries, taken as a whole, provided
that such term shall not include effects on SOCO resulting from general
economic conditions or from market conditions (including, without limitation,
changes in the market prices for oil and gas) then prevailing generally in the
oil and gas industry.
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each subsidiary of SOCO is owned by SOCO, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including, without limitation, any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests), other than any restrictions imposed under
the 1933 Act. Except as set forth in this Section 3.06, there are no
outstanding (i) shares of capital stock or other voting securities or ownership
interests in any of SOCO's subsidiaries, (ii) securities of SOCO or any of its
subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any of SOCO's subsidiaries or
(iii) options or other rights to acquire from SOCO or any of its subsidiaries,
or other obligation of SOCO or any of its subsidiaries to issue, any capital
stock or other voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or ownership interests in, any of SOCO's subsidiaries. There are no
outstanding obligations of SOCO or any of its subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clauses (i),
(ii) or (iii) of this Section 3.06(b).
Section 3.07 SEC Filings. (a) SOCO has filed with the Securities and
Exchange Commission (the "SEC"), and has heretofore made available to Santa Fe
true and complete copies of, each form, registration statement, report,
schedule, proxy or information statement and other document (including, without
limitation, exhibits and amendments thereto), including, without limitation,
its Annual Reports to Stockholders incorporated by reference in certain of such
reports, required to be filed by it or its predecessors with the SEC since
December 31, 1995 under the 1933 Act or the 1934 Act (collectively, the "SOCO
SEC Filings").
(b) As of its respective filing date (or, if any SOCO SEC Filing was
amended, as of the date such amendment was filed), each SOCO SEC Filing,
including, without limitation, any financial statements or schedules included
therein, complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act.
(c) As of its filing date (or, if any SOCO SEC Filing was amended, as of the
date such amendment was filed), each SOCO SEC Filing filed pursuant to the 1934
Act did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed by SOCO pursuant to the 1933 Act and constituting a SOCO SEC
Filing did not, as of the date such statement or amendment became effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 3.08 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of SOCO
included in the SOCO SEC Filings fairly present, in conformity with United
States generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of SOCO and its subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments and the absence of
financial footnotes in the case of any unaudited interim financial statements).
For purposes of this Agreement, "SOCO Balance Sheet" means the consolidated
balance sheet of SOCO as of September 30, 1998 set forth in the SOCO quarterly
report on Form 10-Q for the quarter ended September 30, 1998 and "SOCO Balance
Sheet Date" means September 30, 1998.
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Section 3.09 Absence of Certain Changes. Except as disclosed in the SOCO SEC
Filings made prior to the date hereof or as contemplated by this Agreement or
with respect to any of the actions referred to in any of clauses (b) through
(f) or (h) through (l) below to which Santa Fe has given its consent as
contemplated by Section 5.01, since the SOCO Balance Sheet Date, the business
of SOCO and its subsidiaries has been conducted in all material respects in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which has had, individually or in the aggregate, a SOCO Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of SOCO or any of
its subsidiaries (other than dividends paid by direct or indirect wholly
owned subsidiaries), or any repurchase, redemption or other acquisition by
SOCO or any of its subsidiaries of any outstanding shares of capital stock
or other securities of, or other ownership interests in, SOCO or any of its
subsidiaries;
(c) except for amendments to the SOCO Plan contemplated by Section 3.22,
any amendment of any material term of any outstanding security of SOCO or
any of its subsidiaries;
(d) any incurrence, assumption or guarantee by SOCO or any of its
subsidiaries of any material indebtedness for borrowed money other than
trade debt incurred in the ordinary course and debt incurred pursuant to
existing credit facilities and arrangements;
(e) any creation or other incurrence by SOCO or any of its subsidiaries
of any Lien on any material asset other than in the ordinary course
consistent with past practices;
(f) any making of any material loan, advance or capital contributions to
or investment in any person other than loans, advances or capital
contributions to or investments in wholly-owned subsidiaries of SOCO made
in the ordinary course consistent with past practices;
(g) any damage, destruction or other casualty loss affecting the
business or assets of SOCO or any of its subsidiaries which, without
considering the effect of any insurance, would, individually or in the
aggregate, have a SOCO Material Adverse Effect;
(h) except for sales of Hydrocarbons (as defined in Section 3.20)
produced by SOCO and its subsidiaries in the ordinary course of business,
any transaction or commitment made, or any contract or agreement entered
into, by SOCO or any of its subsidiaries relating to its assets or business
(including, without limitation, the acquisition or disposition of any
assets) or any relinquishment by SOCO or any of its subsidiaries of any
contract or other right, in either case, in excess of $10 million
individually;
(i) any change in any method of financial accounting or tax accounting
or any accounting practice by SOCO or any of its subsidiaries, except for
any such change required by reason of a change in GAAP or Regulation S-X
promulgated under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (x) any
employee of SOCO or any of its subsidiaries (other than officers (as
defined in Section 9.15) or directors) other than ordinary course grants in
amounts consistent with past practices or (y) any director or officer of
SOCO or any of its subsidiaries, (ii) increase in benefits payable under
any existing severance or termination pay policies or employment
agreements, (iii) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of SOCO or any of its subsidiaries,
(iv) establishment, adoption or amendment (except as required by applicable
law) of any collective bargaining, bonus, profit sharing, thrift, pension,
retirement, deferred compensation, compensation, stock option, restricted
stock or other benefit plan or arrangement covering any director, officer,
employee or former employee of SOCO or any of its subsidiaries, or (v)
increase in compensation, bonus or other benefits payable to directors or
officers other than ordinary course increases implemented prior to the date
hereof consistent with past practices;
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(k) any material labor dispute, other than routine individual
grievances, or, to the knowledge of SOCO, any activity or proceeding by a
labor union or representative thereof to organize any material number of
employees of SOCO or any of its subsidiaries, which employees were not
subject to a collective bargaining agreement at the SOCO Balance Sheet
Date, or any material lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to such employees; or
(l) any tax election, other than those consistent with past practice,
not required by law or any settlement or compromise of any tax liability in
either case that is material to SOCO and its subsidiaries, taken as a
whole.
Section 3.10 No Undisclosed Material Liabilities. There are no liabilities
of SOCO or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities or obligations disclosed in the SOCO SEC Filings made
prior to the date hereof or provided for in the SOCO Balance Sheet or
disclosed in the notes thereto;
(b) liabilities or obligations which would not, individually or in the
aggregate, have a SOCO Material Adverse Effect; and
(c) liabilities or obligations under this Agreement.
Section 3.11 Compliance with Laws and Court Orders. SOCO and each of its
subsidiaries hold all approvals, licenses, permits, certificates, consents,
entitlements, plans, surveys, registrations and similar type authorizations
("Permits") necessary for the lawful conduct of its respective businesses, as
now conducted, except for Permits the lack of which, individually or in the
aggregate, would not have a SOCO Material Adverse Effect. Except as set forth
in the SOCO SEC Filings made prior to the date hereof, SOCO and each of its
subsidiaries is and has been in compliance with, and to the knowledge (as
defined in Section 9.15) of SOCO, is not under investigation with respect to
and has not been threatened to be charged with or given notice of any violation
of, any applicable law, rule, regulation, judgment, injunction, order or
decree, except for such matters as would not, individually or in the aggregate,
have a SOCO Material Adverse Effect; provided, however, notwithstanding the
foregoing, no representation or warranty in this Section 3.11 is made with
respect to Environmental Laws or Environmental Permits, which are covered
exclusively by the provisions set forth in Section 3.16.
Section 3.12 Litigation. Except as set forth in the SOCO SEC Filings made
prior to the date hereof, there is no action, suit, investigation, audit or
proceeding pending against, or to the knowledge of SOCO threatened against or
affecting, SOCO or any of its subsidiaries or any of their respective
properties or any of the directors or officers of SOCO or any of its
subsidiaries in their capacity as such before any court or arbitrator or any
governmental body, agency or official which would, individually or in the
aggregate, have a SOCO Material Adverse Effect. Neither SOCO nor any of its
subsidiaries, nor any director or employee of SOCO or any of its subsidiaries,
has been permanently or temporarily enjoined by any order, judgment or decree
of any court or any other governmental authority from engaging in or continuing
any conduct or practice in connection with the business, assets or properties
of SOCO or such subsidiary nor, to the knowledge of SOCO, is SOCO, any
subsidiary or any officer, director or employee of SOCO or its subsidiaries
under investigation by any governmental authority. Except as disclosed in the
SOCO SEC Filings made prior to the date hereof, there is not in existence any
order, judgment or decree of any court or other tribunal or other agency
enjoining or requiring SOCO or any of its subsidiaries to take any action of
any kind with respect to its business, assets or properties, which would,
individually or in the aggregate, have a SOCO Material Adverse Effect.
Notwithstanding the foregoing, no representation or warranty in this Section
3.12 is made with respect to Environmental Laws, which are covered exclusively
by the provisions set forth in Section 3.16.
Section 3.13 Advisor's Fees. Except for Petrie Parkman & Co., copies of
whose engagement agreements have been provided to Santa Fe, there is no
investment banker, broker, finder or other intermediary which has
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been retained by or is authorized to act on behalf of SOCO or any of its
subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 3.14 Taxes. (a) Except as set forth in the SOCO Balance Sheet
(including, without limitation, the notes thereto) and except as would not,
individually or in the aggregate, have a SOCO Material Adverse Effect, (i) all
tax returns, statements, reports and forms (collectively, the "SOCO Returns")
required to be filed with any taxing authority by, or with respect to, SOCO and
its subsidiaries and any partnerships of which SOCO or its subsidiaries is a
partner have been duly and timely filed in accordance with all applicable laws;
(ii) SOCO and its subsidiaries have timely paid all taxes due and payable,
whether or not shown on any SOCO Return, and the SOCO Returns correctly and
completely reflect the income, business, assets, operations, activities and the
status of SOCO and its subsidiaries (other than taxes which are being contested
in good faith and for which adequate reserves are reflected on the SOCO Balance
Sheet); (iii) SOCO and its subsidiaries have made provision for all taxes
payable by SOCO and its subsidiaries for which no SOCO Return has yet been
filed; (iv) SOCO and its subsidiaries have duly withheld and paid all taxes
required by applicable law to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor, or
other third party; (v) there are no Liens for taxes upon any property or asset
of SOCO or any of its subsidiaries, except for Liens for taxes not yet due or
with respect to matters being contested by SOCO in good faith and for which
adequate reserves are reflected on the SOCO Balance Sheet; (vi) the charges,
accruals and reserves for taxes with respect to SOCO and its subsidiaries
reflected on the SOCO Balance Sheet are adequate under GAAP to cover the tax
liabilities accruing through the date thereof; (vii) there is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
SOCO or any of its subsidiaries in respect of any tax where there is a
reasonable possibility of an adverse determination; and (viii) neither SOCO nor
any of its subsidiaries has been a member of an affiliated, consolidated,
combined or unitary group other than one of which SOCO was the common parent.
(b) Neither SOCO nor any of its subsidiaries has given or been requested to
give any waiver of the statute of limitations relating to the payment of taxes
or have executed powers of attorney with respect to tax matters, in either case
that will be outstanding as of the Effective Time. There are no issues of law
or fact which, to the knowledge of SOCO, exist or which arise out of a formal
or informal notice of deficiency, proposed deficiency or assessment or request
for information from the Internal Revenue Service or any other governmental
taxing authority with respect to taxes of SOCO or any of its subsidiaries.
There are no outstanding rulings of, or requests for rulings with, any tax
authority addressed that are, or if issued would be, binding on SOCO and its
subsidiaries.
(c) Prior to the date hereof, SOCO has provided or made available true and
correct copies of all material tax sharing, tax indemnity or similar agreements
to which SOCO or any of its subsidiaries is a party, is bound by or has any
obligation or liability for taxes. Neither SOCO nor any of its subsidiaries is
a party to any agreement providing for the allocation or sharing of taxes with
any entity that is not, directly or indirectly, a wholly-owned subsidiary of
SOCO. No consent under Section 341(f) of the Code has been filed with respect
to SOCO or any of its subsidiaries.
(d) No "foreign person" held more than 5% of the SOCO Common Stock during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Section 3.15 Employee Benefit Plans. (a) SOCO has provided Santa Fe with a
list identifying each material "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), each
employment, severance or similar contract, plan, arrangement or policy
applicable to any director, officer or employee of SOCO or any of its
subsidiaries and each material plan or arrangement (written or oral) providing
for compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including, without limitation, any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and post-
employment or retirement benefits (including, without limitation, compensation,
pension, health, medical or life insurance benefits) which
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is maintained, administered or contributed to by SOCO or any of its affiliates
(as defined in Section 9.15) and covers any employee or former employee of SOCO
or any of its affiliates, or under which SOCO or any of its affiliates has any
liability (secondary, contingent or otherwise), including, without limitation,
any such plan, program or arrangement that has been terminated. Such plans are
referred to collectively herein as the "SOCO Employee Plans." Copies of all
such SOCO Employee Plans (and, if applicable, related trust agreements or
insurance contracts) and all amendments thereto and written interpretations
thereof have been furnished to Santa Fe together with the most recent annual
report (Form 5500 including, without limitation, if applicable, Schedule B
thereto) prepared in connection with any such SOCO Employee Plan.
(b) Each SOCO Employee Plan has been funded and maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations (including, without limitation, but not limited
to ERISA and the Code) which are applicable to such plan, except where failure
to so comply would not, individually or in the aggregate, have a SOCO Material
Adverse Effect.
(c) No SOCO Employee Plan is subject to Title IV of ERISA.
(d) Each SOCO Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code.
(e) No director or officer or, to the knowledge of SOCO, other employee of
SOCO or any of its subsidiaries will become entitled to any retirement,
severance or similar benefit or enhanced or accelerated benefit solely as a
result of the transactions contemplated hereby. Without limiting the generality
of the foregoing, no amount required to be paid or payable to or with respect
to any employee of SOCO or any of its subsidiaries in connection with the
transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(f) Since the SOCO Balance Sheet Date, there has been no adoption of or
amendment to, written interpretation or announcement (whether or not written)
by SOCO or any of its affiliates relating to, or change in employee
participation or coverage under, any SOCO Employee Plan which would increase
materially the annual expense of maintaining such SOCO Employee Plan above the
level of the expense incurred in respect thereof for the 12 months ended on the
SOCO Balance Sheet Date.
(g) Except for defined benefit plans (if applicable), the SOCO Employee
Plans may be terminated on a prospective basis without any continuing liability
for benefits other than benefits accrued to the date of such termination.
(h) No SOCO Employee Plan is a "multiemployer plan" (as defined in Section
4001(a) (3) of ERISA) or a "multiple employer plan" (within the meaning of
Section 413(c) of the Code).
(i) There are no actions, suits or claims pending (other than routine claims
for benefits) or, to the knowledge of SOCO, threatened against, or with respect
to, any of the SOCO Employee Plans or their assets.
(j) To the knowledge of SOCO, there is no matter pending (other than routine
qualification determination filings) with respect to any of the SOCO Employee
Plans before the Internal Revenue Service, the Department of Labor or the
Pension Benefit Guaranty Corporation.
Section 3.16 Environmental Matters. Except as set forth in the SOCO SEC
Filings made prior to the date hereof and except as would not, individually or
in the aggregate, have a SOCO Material Adverse Effect:
(i) the businesses of SOCO and its subsidiaries have been and are
operated in material compliance with all Environmental Laws and
Environmental Permits;
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(ii) neither SOCO nor any of its subsidiaries has caused or allowed the
generation, treatment, manufacture, processing, distribution, use, storage,
discharge, release, disposal, transport or handling of any chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum, petroleum products or any substance regulated under any
Environmental Law ("Hazardous Substances") at any properties or facilities
owned, leased or operated by SOCO or any of its subsidiaries, except in
material compliance with all Environmental Laws;
(iii) there are no pending, or to the knowledge of SOCO, threatened,
claims, suits, actions, proceedings or investigations with respect to the
businesses or operations of SOCO or any of its subsidiaries alleging or
concerning any material violation of or responsibility or liability under
any Environmental Law that, if adversely determined, could reasonably be
expected to have a SOCO Material Adverse Effect, nor does SOCO have any
knowledge of any fact or condition that could give rise to such a claim,
suit, action, proceeding or investigation;
(iv) SOCO and its subsidiaries are in possession of or have timely filed
for all material Environmental Permits with respect to the operation of the
businesses of SOCO and its subsidiaries; there are no pending or, to the
knowledge of SOCO, threatened, actions, proceedings or investigations
seeking to restrict, revoke or deny renewal of any of such Environmental
Permits; and SOCO does not have knowledge of any fact or condition that is
reasonably likely to give rise to any action, proceeding or investigation
to restrict, revoke or deny renewal of any of such Environmental Permits;
(v) no notice, notification, demand, request for information, citation,
summons or order has been received, no complaint has been filed, no penalty
has been assessed, and no investigation, action, claim, suit, proceeding or
review is pending or, to the knowledge of SOCO, is threatened by any
governmental entity or other person relating to or arising out of any
Environmental Law; and
(vi) there are no liabilities of or relating to SOCO or any of its
subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise arising under or relating to any
Environmental Law and SOCO does not have knowledge of any facts,
conditions, situations or set of circumstances which could reasonably be
expected to result in or be the basis for any such liability.
(b) Neither SOCO nor any of its subsidiaries owns, leases or directly or
indirectly controls or has owned, leased or directly or indirectly controlled
any real property in New Jersey or Connecticut.
(c) The following terms shall have the meaning set forth below:
"SOCO" and "its subsidiaries" shall, solely for purposes of this Section
3.16, include any entity which is, in whole or in part, a corporate predecessor
of SOCO or any of its subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, relating to human health and safety or the environment and
arising from the use, presence, disposal, discharge or release of Hazardous
Substances.
"Environmental Permits" means, with respect to any person, all permits,
licenses, registrations, approvals and other similar authorizations of
governmental authorities relating to or required by Environmental Laws and
affecting, or relating in any way to, the business of such person as currently
conducted.
Section 3.17 Tax Treatment. Neither SOCO nor any of its affiliates has taken
or agreed to take any action that would prevent the Merger from qualifying as a
368 Reorganization. Without limiting the generality of the foregoing:
(a) Prior to and in connection with the Merger, (i) none of the SOCO
Common Stock will be redeemed, (ii) no extraordinary distribution will be
made with respect to SOCO Common Stock, and (iii)
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none of the SOCO Common Stock will be acquired by any person related (as
defined in Treas. Reg. (S) 1.368-1(e)(3) without regard to (S) 1.368-
1(e)(3)(i)(A)) to SOCO.
(b) No assets of SOCO have been sold, transferred or otherwise disposed
of which would prevent Santa Fe from continuing the historic business of
SOCO or from using a significant portion of SOCO's historic business assets
in a business following the Merger, and SOCO intends to continue its
historic business or use a significant portion of its historic business
assets in a business.
(c) SOCO and the stockholders of SOCO will each pay their respective
expenses, if any, incurred in connection with the Merger.
(d) There is no intercorporate indebtedness existing between SOCO and
Santa Fe that was issued, acquired, or will be settled at a discount.
(e) SOCO is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) SOCO is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
(g) The liabilities of SOCO were incurred by SOCO in the ordinary course
of its business.
Section 3.18 Opinion of Financial Advisor. SOCO's Board of Directors has
received the opinion of Petrie Parkman & Co., financial advisor to SOCO, to
the effect that, as of the date of this Agreement, the Exchange Ratio is fair,
from a financial point of view, to the holders of SOCO Common Stock.
Section 3.19 Patents and Other Proprietary Rights. SOCO and its
subsidiaries have rights to use, whether through ownership, licensing or
otherwise, all patents, trademarks, service marks, trade names, copyrights,
trade secrets, and other proprietary rights and processes of which SOCO is
aware that are material to its business as now conducted (collectively the
"SOCO Intellectual Property Rights"). Except for such matters as would not,
individually or in the aggregate, have a SOCO Material Adverse Effect, (a)
SOCO and its subsidiaries have not assigned, hypothecated or otherwise
encumbered any of the SOCO Intellectual Property Rights and (b) none of the
licenses included in the SOCO Intellectual Property Rights purports to grant
sole or exclusive licenses to another person including, without limitation,
sole or exclusive licenses limited to specific fields of use. To SOCO's
knowledge, the patents owned by SOCO and its subsidiaries are valid and
enforceable and any patent issuing from patent applications of SOCO and its
subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, have a SOCO
Material Adverse Effect. SOCO has no knowledge of any infringement by any
other person of any of the SOCO Intellectual Property Rights, and SOCO and its
subsidiaries have not, to SOCO's knowledge, entered into any agreement to
indemnify any other party against any charge of infringement of any of the
SOCO Intellectual Property Rights, except for such matters as would not,
individually or in the aggregate, have a SOCO Material Adverse Effect. To
SOCO's knowledge, SOCO and its subsidiaries have not and do not violate or
infringe any intellectual property right of any other person, and neither SOCO
nor any of its subsidiaries have received any communication alleging that it
violates or infringes the intellectual property right of any other person,
except for such matters as would not, individually or in the aggregate, have a
SOCO Material Adverse Effect. Except for such matters as would not,
individually or in the aggregate, have a SOCO Material Adverse Effect, SOCO
and its subsidiaries have not been sued for infringing any intellectual
property right of another person. None of the SOCO Intellectual Property
Rights or other know-how relating to the business of SOCO and its
subsidiaries, the value of which to SOCO is contingent upon maintenance of the
confidentiality thereof, has been disclosed by SOCO or any affiliate thereof
to any person other than those persons who are bound to hold such information
in confidence pursuant to confidentiality agreements or by operation of law.
Section 3.20 Status and Operation of Oil and Gas Properties. (a) The Leases
of SOCO and its subsidiaries are in full force and effect in accordance with
their respective terms, all obligations of SOCO under such Leases have been
fully performed (to the extent required as of the date hereof) and there are
currently pending no requests or demands for payments, adjustments of payments
or performance pursuant to
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obligations under the Leases, except where the failure of such Leases to be in
full force and effect in accordance with their terms, the failure to perform
thereunder or the pendency of such requests or demands, individually or in the
aggregate, would not have a SOCO Material Adverse Effect.
(b) The Oil and Gas Contracts of SOCO or any of its subsidiaries are in full
force and effect in accordance with their respective terms, except for any such
Oil and Gas Contracts the termination of which, individually or in the
aggregate, would not have a SOCO Material Adverse Effect.
(c) Neither SOCO nor any of its subsidiaries has (i) sold forward a material
amount of any Hydrocarbons, (ii) received any material advance, "take-or-pay"
or other similar payments under production sales contracts or otherwise that
entitle the purchasers to "make up" or otherwise receive deliveries of
Hydrocarbons without paying at such time the contract price therefor, (iii) any
commitment to deliver a minimum volume of Hydrocarbons to any person or to pay
a "make up" amount or transportation charge to such person for any shortfall,
or (iv) taken or received any material amount of Hydrocarbons under any gas
balancing agreements or any similar arrangements that permit any person
thereafter to receive any portion of the interest of SOCO or any of its
subsidiaries to "balance" any disproportionate allocation of Hydrocarbons.
(d) For purposes of this Section 3.20 and Section 4.20:
"Hydrocarbons" means oil, gas, minerals and other gaseous and liquid
hydrocarbons or any combination thereof.
"Leases" means any oil, gas and mineral leasehold or fee interest, mineral
interests, royalty interests, net profits interests, licenses, concessions,
permits and other interests in Hydrocarbons in which (with respect to this
Section 3.20) SOCO or any of its subsidiaries, or (with respect to Section
4.20) Santa Fe or any of its subsidiaries, holds an interest.
"Oil and Gas Contracts" means any lease, license, permit, assignment,
farmout, farmin, operating agreement, unit agreement, declaration or order,
joint venture or acquisition agreement, division order, production sales,
processing or transportation contract or other contract affecting the ownership
or operation of any of the properties constituting the Oil and Gas Interests or
the disposition of the Hydrocarbons produced therefrom.
"Oil and Gas Interests" means (a) the interests of (with respect to this
Section 3.20) SOCO or any of its subsidiaries, or (with respect to Section
4.20) Santa Fe or any of its subsidiaries, as the case may be, in the Leases,
together with the interests (with respect to this Section 3.20) of SOCO or any
of its subsidiaries, or (with respect to Section 4.20) Santa Fe or any of its
subsidiaries, as the case may be, in and to all property and rights incident
thereto, including, without limitation, all rights in respect of any pooled or
unitized acreage by virtue of any Lease being a part thereof, all production
from the pool or unit allocated to any such Lease and all interests in any
wells within the pool or unit associated with the Leases; and (b) the interests
(with respect to this Section 3.20) of SOCO or any of its subsidiaries, or
(with respect to Section 4.20) Santa Fe or any of its subsidiaries, as the case
may be, in and to all of the personal property, fixtures and improvements
thereon, appurtenant thereto or used, held or obtained in connection with the
Leases or the production, treatment, sale, processing, transportation or
disposal of Hydrocarbons or water or other substances produced therefrom or
attributable thereto (whether located on or off the Leases, including, without
limitation, wells, equipment, casing, tanks, boilers, generators, crude oil,
condensate or other production in storage or in pipelines, flow lines, tubing,
pumps, motors, machinery and other equipment, gathering systems and field
separators) and all other tenements, hereditaments, improvements and
appurtenances thereunto belonging.
Section 3.21 Reserve Reports. All information (including, without
limitation, the statement of the percentage of reserves from the oil and gas
wells and other interests evaluated therein to which SOCO or its subsidiaries
are entitled and the percentage of the costs and expenses related to such wells
or interests to be borne by SOCO or its subsidiaries) supplied to Netherland,
Sewell & Associates, Inc. by or on behalf of SOCO
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and its subsidiaries that was material to such firm's estimates of proved oil
and gas reserves attributable to the Oil and Gas Interests of SOCO and its
subsidiaries in connection with the preparation of the proved oil and gas
reserve report concerning the Oil and Gas Interests of SOCO and its
subsidiaries as of December 31, 1997 and prepared by such engineering firm (the
"SOCO Reserve Report") was (at the time supplied or as modified or amended
prior to the issuance of the SOCO Reserve Report) true and correct in all
material respects.
Section 3.22 Antitakeover Statutes and Rights Agreement. The Board of
Directors of SOCO has (i) approved this Agreement and the transactions
contemplated hereby and (ii) taken all action necessary to cause this Agreement
and the transactions contemplated hereby to be exempt from Section 203 of the
Delaware Law, and no other antitakeover or similar statute or regulation
applies or purports to apply to the transactions contemplated hereby. SOCO has
taken all action necessary to render the preferred share purchase rights issued
pursuant to the terms of the SOCO Plan inapplicable to the Merger, this
Agreement and the other transactions contemplated hereby.
Section 3.23 Required Stockholder Vote or Consent. The only vote of the
holders of any class or series of SOCO's capital stock that will be necessary
to consummate the Merger and the other transactions contemplated by this
Agreement is the approval and adoption of this Agreement by the holders of a
majority of the votes entitled to be cast by holders of the SOCO Common Stock,
with each share of SOCO Common Stock being entitled to one vote per share (the
"SOCO Stockholders' Approval").
Section 3.24 Hedging. As of the date of this Agreement and except as may be
implemented prior to the Effective Time in accordance with Section 5.01,
neither SOCO nor any of its subsidiaries is bound by futures, hedge, swap,
collar, put, call, floor, cap, option or other contracts that are intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of commodities, including, without limitation, Hydrocarbons, securities,
interest rates or any other matters.
Section 3.25 Year 2000 Issues. The disclosures set forth in the SOCO SEC
Filings concerning potential computer hardware and software problems associated
with the year 2000 are true and correct in all material respects.
ARTICLE IV
Representations and Warranties of Santa Fe
Santa Fe represents and warrants to SOCO that, except as disclosed in the
Santa Fe Schedule of Exceptions (the "Santa Fe Schedule"), as of the date
hereof:
Section 4.01 Corporate Existence and Power. Santa Fe is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, have a Santa Fe Material Adverse Effect (as defined in Section
4.06). Santa Fe is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where such qualification is necessary
or appropriate, except for those jurisdictions where failure to be so qualified
would not, individually or in the aggregate, have a Santa Fe Material Adverse
Effect. Santa Fe has heretofore delivered to SOCO true and complete copies of
the certificate of incorporation and bylaws of Santa Fe as currently in effect,
and Santa Fe's certificate of incorporation and bylaws as so delivered are in
full force and effect. Santa Fe is not in default in any respect in the
performance, observation or fulfillment of any provision of its certificate of
incorporation or bylaws.
Section 4.02 Corporate Authorization. (a) The execution, delivery and
performance by Santa Fe of this Agreement and the consummation of the
transactions contemplated hereby are within Santa Fe's corporate powers and,
except for the required approval of Santa Fe's stockholders in connection with
the consummation
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of the Merger, have been duly authorized by all necessary corporate action. The
affirmative vote of the holders of a majority of the outstanding shares of
Santa Fe Common Stock is the only vote of the holders of any of Santa Fe's
capital stock necessary in connection with the consummation of the Merger. No
other vote of the holders of Santa Fe's capital stock is necessary in
connection with this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Santa Fe and constitutes a valid and binding agreement of Santa
Fe.
(b) Santa Fe's Board of Directors, at a meeting duly called and held, has
(i) determined that this Agreement and the transactions contemplated hereby
(including, without limitation, the Merger) are fair to and in the best
interests of Santa Fe's stockholders, (ii) approved and adopted this Agreement
and the transactions contemplated hereby (including, without limitation, the
Merger), and (iii) recommended approval and adoption of this Agreement by its
stockholders.
Section 4.03 Governmental Authorization. The execution, delivery and
performance by Santa Fe of this Agreement and the consummation by Santa Fe of
the transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
(a) the filing of a certificate of merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the HSR Act, the 1933 Act, the
1934 Act, state laws relating to takeovers, if applicable, and foreign or state
securities or Blue Sky laws, and (c) any other filings, approvals or
authorizations which constitute Customary Post Closing Consents or which, if
not obtained, would not, individually or in the aggregate, have a Santa Fe
Material Adverse Effect or materially impair the ability of Santa Fe to
consummate the transactions contemplated by this Agreement.
Section 4.04 Non-contravention. The execution, delivery and performance by
Santa Fe of this Agreement and the consummation by Santa Fe of the transactions
contemplated hereby do not and will not (i) subject to obtaining the Santa Fe
Stockholders' Approval (as defined in Section 4.23), violate the certificate of
incorporation or bylaws of Santa Fe, or the certificate of incorporation or
bylaws (or similar organizational documents) of any of Santa Fe's subsidiaries,
(ii) assuming compliance with the matters referred to in Section 4.03, violate
any applicable law, rule, regulation, judgment, writ, injunction, order or
decree, (iii) require any consent or other action by any person under, give
rise to any right of first refusal or similar right of any third party under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Santa Fe or any of
its subsidiaries or to guaranteed payments or a loss of any benefit to which
Santa Fe or any of its subsidiaries is entitled under any provision of any
agreement or other instrument binding upon Santa Fe or any of its subsidiaries
or any license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
Santa Fe or any of its subsidiaries, (iv) result in the creation or imposition
of any Lien on any shares of capital stock or any material properties or assets
of Santa Fe or any of its subsidiaries, or (v) result in any holder of any
securities of Santa Fe being entitled to appraisal, dissenters' or similar
rights, except, in the case of clauses (ii), (iii) and (iv), for such matters
as would not, individually or in the aggregate, have a Santa Fe Material
Adverse Effect or materially impair the ability of Santa Fe to consummate the
transactions contemplated by this Agreement.
Section 4.05 Capitalization. The authorized capital stock of Santa Fe
consists of a total of 250,000,000 shares, of which 200,000,000 shares are
Santa Fe Common Stock and 50,000,000 shares are preferred stock, par value
$0.01 per share, of Santa Fe ("Santa Fe Preferred Stock"). No shares of Santa
Fe Preferred Stock are issued or outstanding, although a series of Santa Fe
Preferred Stock consisting of 2,000,000 shares has been designated as Series A
Junior Participating Preferred Stock and is subject to issuance under Santa
Fe's Preferred Stock Purchase Rights Plan, dated March 3, 1997 (the "Santa Fe
Plan"). As of January 11, 1999, there were outstanding 102,220,505 shares of
Santa Fe Common Stock and options to purchase an aggregate of 9,868,191 shares
of Santa Fe Common Stock at an average exercise price of $7.9853 per share (of
which 6,618,887 were exercisable). All outstanding shares of capital stock of
Santa Fe have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in this Section 4.05 or in the Santa Fe
Plan and except for changes since January 11, 1999 resulting from the exercise
of employee or non-employee
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director stock options outstanding on such date, there are no outstanding (i)
shares of capital stock or voting securities of Santa Fe, (ii) securities of
Santa Fe convertible into or exchangeable for shares of capital stock or voting
securities of Santa Fe or (iii) options or other rights to acquire from Santa
Fe or other obligation of Santa Fe to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Santa Fe. There are no outstanding obligations of Santa Fe
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
securities referred to in clauses (i), (ii) or (iii) above. Except for any
amendments filed with the Santa Fe SEC Filings (as defined below) made prior to
the date hereof, the Santa Fe Plan has not been amended except to provide that
the Santa Fe Plan is inapplicable to the execution and delivery of this
Agreement and the transactions contemplated hereby and any other agreements
executed and delivered in connection herewith. A Distribution Date has not
occurred within the meaning of the Santa Fe Plan, and the consummation of the
transactions contemplated hereby will not result in the occurrence of a
Distribution Date.
Section 4.06 Subsidiaries. (a) Santa Fe has previously furnished SOCO with a
list of the name and jurisdiction of organization of each subsidiary (as
defined in Section 9.15) of Santa Fe, which list is true and correct. Each such
subsidiary is a corporation duly incorporated or an entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, has all corporate,
partnership or other entity derived powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, have a Santa Fe Material Adverse Effect. Each subsidiary of Santa Fe
is duly qualified to do business as a foreign corporation or entity, as the
case may be, and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a Santa Fe
Material Adverse Effect. Santa Fe has made available to SOCO a complete and
correct copy of the certificate of incorporation and bylaws (or similar
organizational documents) of each of Santa Fe's subsidiaries, each as amended
to date, and the certificate of incorporation and bylaws (or similar
organizational documents) as so delivered are in full force and effect. No
Santa Fe subsidiary is in default in any respect in the performance,
observation or fulfillment of any provision of its articles of incorporation or
bylaws (or similar organizational documents). Other than Santa Fe's
subsidiaries, Santa Fe does not beneficially own or control, directly or
indirectly, 5% or more of any class of equity or similar securities of any
corporation or other organization, whether incorporated or unincorporated. For
purposes of this Agreement (i) a "Santa Fe Material Adverse Effect" shall mean
any event, circumstance, condition, development or occurrence causing,
resulting in or having a material adverse effect on the financial condition,
business, assets, properties, prospects or results of operations of Santa Fe
and its subsidiaries, taken as a whole, provided that such term shall not
include effects on Santa Fe resulting from general economic conditions or from
market conditions (including, without limitation, changes in the market prices
for oil and gas) then prevailing generally in the oil and gas industry.
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each subsidiary of Santa Fe is owned by Santa Fe,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including, without limitation, any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
voting securities or ownership interests), other than any restrictions imposed
under the 1933 Act. Except as set forth in this Section 4.06, there are no
outstanding (i) shares of capital stock or other voting securities or ownership
interests in any of Santa Fe's subsidiaries, (ii) securities of Santa Fe or any
of its subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any of Santa Fe's
subsidiaries or (iii) options or other rights to acquire from Santa Fe or any
of its subsidiaries, or other obligation of Santa Fe or any of its subsidiaries
to issue, any capital stock or other voting securities or ownership interests
in, or any securities convertible into or exchangeable for any capital stock or
other voting securities or ownership interests in, any of Santa Fe's
subsidiaries. There are no outstanding obligations of Santa Fe or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the securities
referred to in clauses (i), (ii) or (iii) of this Section 4.06(b).
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Section 4.07 SEC Filings. (a) Santa Fe has filed with the SEC, and has
heretofore made available to SOCO true and complete copies of, each form,
registration statement, report, schedule, proxy or information statement and
other document (including, without limitation, exhibits and amendments
thereto), including, without limitation, its Annual Reports to Stockholders
incorporated by reference in certain of such reports, required to be filed by
it or its predecessors with the SEC since December 31, 1995 under the 1933 Act
or the 1934 Act (collectively, the "Santa Fe SEC Filings").
(b) As of its respective filing date (or, if any Santa Fe SEC Filing was
amended, as of the date such amendment was filed), each Santa Fe SEC Filing,
including, without limitation, any financial statements or schedules included
therein, complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act.
(c) As of its filing date (or, if any Santa Fe SEC Filing was amended, as of
the date such amendment was filed), each Santa Fe SEC Filing filed pursuant to
the 1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed by Santa Fe pursuant to the 1933 Act and constituting a Santa
Fe SEC Filing did not, as of the date such statement or amendment became
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
Section 4.08 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Santa Fe
included in the Santa Fe SEC Filings fairly present, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Santa Fe and its subsidiaries
as of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject to normal year-end adjustments and
the absence of financial footnotes in the case of any unaudited interim
financial statements). For purposes of this Agreement, "Santa Fe Balance Sheet"
means the consolidated balance sheet of Santa Fe as of September 30, 1998 set
forth in the Santa Fe quarterly report on Form 10-Q for the quarter ended
September 30, 1998 and "Santa Fe Balance Sheet Date" means September 30, 1998.
Section 4.09 Absence of Certain Changes. Except as disclosed in the Santa Fe
SEC Filings made prior to the date hereof or as contemplated by this Agreement
or with respect to any of the actions referred to in any of clauses (b) through
(f) or (h) through (l) below to which SOCO has given its consent as
contemplated by Section 5.02, since the Santa Fe Balance Sheet Date, the
business of Santa Fe and its subsidiaries has been conducted in all material
respects in the ordinary course consistent with past practices and there has
not been:
(a) any event, occurrence, development or state of circumstances or
facts which has had, individually or in the aggregate, a Santa Fe Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Santa Fe or any
of its subsidiaries (other than dividends paid by direct or indirect wholly
owned subsidiaries), or any repurchase, redemption or other acquisition by
Santa Fe or any of its subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, Santa Fe or
any of its subsidiaries;
(c) except for amendments to the Santa Fe Plan contemplated by Section
4.22, any amendment of any material term of any outstanding security of
Santa Fe or any of its subsidiaries;
(d) any incurrence, assumption or guarantee by Santa Fe or any of its
subsidiaries of any material indebtedness for borrowed money other than
trade debt incurred in the ordinary course and debt incurred pursuant to
existing credit facilities and arrangements;
(e) any creation or other incurrence by Santa Fe or any of its
subsidiaries of any Lien on any material asset other than in the ordinary
course consistent with past practices;
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(f) any making of any material loan, advance or capital contributions to
or investment in any person other than loans, advances or capital
contributions to or investments in wholly-owned subsidiaries of Santa Fe
made in the ordinary course consistent with past practices;
(g) any damage, destruction or other casualty loss affecting the
business or assets of Santa Fe or any of its subsidiaries which, without
considering the effect of any insurance, would, individually or in the
aggregate, have a Santa Fe Material Adverse Effect;
(h) except for sales of Hydrocarbons produced by Santa Fe and its
subsidiaries in the ordinary course of business, any transaction or
commitment made, or any contract or agreement entered into, by Santa Fe or
any of its subsidiaries relating to its assets or business (including,
without limitation, the acquisition or disposition of any assets) or any
relinquishment by Santa Fe or any of its subsidiaries of any contract or
other right, in either case, in excess of $10 million individually;
(i) any change in any method of financial accounting or tax accounting
or any accounting practice by Santa Fe or any of its subsidiaries, except
for any such change required by reason of a change in GAAP or Regulation S-
X promulgated under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (x) any
employee of Santa Fe or any of its subsidiaries (other than officers (as
defined in Section 9.15) or directors) other than ordinary course grants in
amounts consistent with past practices or (y) any director or officer of
Santa Fe or any of its subsidiaries, (ii) increase in benefits payable
under any existing severance or termination pay policies or employment
agreements, (iii) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of Santa Fe or any of its
subsidiaries, (iv) establishment, adoption or amendment (except as required
by applicable law) of any collective bargaining, bonus, profit sharing,
thrift, pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan or arrangement covering any
director, officer, employee or former employee of Santa Fe or any of its
subsidiaries, or (v) increase in compensation, bonus or other benefits
payable to directors or officers other than ordinary course increases
implemented prior to the date hereof consistent with past practices;
(k) any material labor dispute, other than routine individual
grievances, or, to the knowledge of Santa Fe, any activity or proceeding by
a labor union or representative thereof to organize any material number of
employees of Santa Fe or any of its subsidiaries, which employees were not
subject to a collective bargaining agreement at the Santa Fe Balance Sheet
Date, or any material lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to such employees; or
(l) any tax election, other than those consistent with past practice,
not required by law or any settlement or compromise of any tax liability in
either case that is material to Santa Fe and its subsidiaries, taken as a
whole.
Section 4.10 No Undisclosed Material Liabilities. There are no liabilities
of Santa Fe or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities or obligations disclosed in the Santa Fe SEC Filings
made prior to the date hereof or provided for in the Santa Fe Balance Sheet
or disclosed in the notes thereto;
(b) liabilities or obligations which would not, individually or in the
aggregate, have a Santa Fe Material Adverse Effect; and
(c) liabilities or obligations under this Agreement.
Section 4.11 Compliance with Laws and Court Orders. Santa Fe and each of its
subsidiaries hold all Permits necessary for the lawful conduct of its
respective businesses, as now conducted, except for such Permits, the lack of
which, individually or in the aggregate, would not have a Santa Fe Material
Adverse
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Effect. Except as set forth in the Santa Fe SEC Filings prior to the date
hereof, Santa Fe and each of its subsidiaries is and has been in compliance
with, and to the knowledge of Santa Fe, is not under investigation with respect
to and has not been threatened to be charged with or given notice of any
violation of, any applicable law, rule, regulation, judgment, injunction, order
or decree, except for such matters as would not, individually or in the
aggregate, have a Santa Fe Material Adverse Effect; provided, however,
notwithstanding the foregoing, no representation or warranty in this Section
4.11 is made with respect to Environmental Laws or Environmental Permits, which
are covered exclusively by the provisions set forth in Section 4.16.
Section 4.12 Litigation. Except as set forth in the Santa Fe SEC Filings
prior to the date hereof, there is no action, suit, investigation, audit or
proceeding pending against, or to the knowledge of Santa Fe threatened against
or affecting, Santa Fe or any of its subsidiaries or any of their respective
properties or any of the directors or officers of Santa Fe or any of its
subsidiaries in their capacity as such before any court or arbitrator or any
governmental body, agency or official which would, individually or in the
aggregate, have a Santa Fe Material Adverse Effect. Neither Santa Fe nor any of
its subsidiaries, nor any director or employee of Santa Fe or any of its
subsidiaries, has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any other governmental authority from
engaging in or continuing any conduct or practice in connection with the
business, assets or properties of Santa Fe or such subsidiary nor, to the
knowledge of Santa Fe, is Santa Fe, any subsidiary or any officer, director or
employee of Santa Fe or its subsidiaries under investigation by any
governmental authority. Except as disclosed in the Santa Fe SEC Filings made
prior to the date hereof, there is not in existence any order, judgment or
decree of any court or other tribunal or other agency enjoining or requiring
Santa Fe or any of its subsidiaries to take any action of any kind with respect
to its business, assets or properties, which would, individually or in the
aggregate, have a Santa Fe Material Adverse Effect. Notwithstanding the
foregoing, no representation or warranty in this Section 4.12 is made with
respect to Environmental Laws, which are covered exclusively by the provisions
set forth in Section 4.16.
Section 4.13 Advisors' Fees. Except for Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation, copies of whose engagement agreements
have been provided to SOCO, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Santa Fe or any of its subsidiaries who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
Section 4.14 Taxes. (a) Except as set forth in the Santa Fe Balance Sheet
(including, without limitation, the notes thereto) and except as would not,
individually or in the aggregate, have a Santa Fe Material Adverse Effect, (i)
all tax returns, statements, reports and forms (collectively, the "Santa Fe
Returns") required to be filed with any taxing authority by, or with respect
to, Santa Fe and its subsidiaries and any partnerships of which Santa Fe or its
subsidiaries is a partner have been duly and timely filed in accordance with
all applicable laws; (ii) Santa Fe and its subsidiaries have timely paid all
taxes due and payable, whether or not shown on any Santa Fe Return, and the
Santa Fe Returns correctly and completely reflect the income, business, assets,
operations, activities and the status of Santa Fe and its subsidiaries (other
than taxes which are being contested in good faith and for which adequate
reserves are reflected on the Santa Fe Balance Sheet); (iii) Santa Fe and its
subsidiaries have made provision for all taxes payable by Santa Fe and its
subsidiaries for which no Santa Fe Return has yet been filed; (iv) Santa Fe and
its subsidiaries have duly withheld and paid all taxes required by applicable
law to have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, or other third party; (v) there
are no Liens for taxes upon any property or asset of Santa Fe or any of its
subsidiaries, except for Liens for taxes not yet due or with respect to matters
being contested by Santa Fe in good faith and for which adequate reserves are
reflected on the Santa Fe Balance Sheet; (vi) the charges, accruals and
reserves for taxes with respect to Santa Fe and its subsidiaries reflected on
the Santa Fe Balance Sheet are adequate under GAAP to cover the tax liabilities
accruing through the date thereof; (vii) there is no action, suit, proceeding,
audit or claim now proposed or pending against or with respect to Santa Fe or
any of its subsidiaries in respect of any tax where there is a reasonable
possibility of an adverse determination; and (viii) neither Santa Fe nor any of
its subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which Santa Fe was the common parent.
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Section 4.15 Employee Benefit Plans. (a) Santa Fe has provided SOCO with a
list identifying each material "employee benefit plan", as defined in Section
3(3) of ERISA, each employment, severance or similar contract, plan,
arrangement or policy applicable to any director, officer or employee of Santa
Fe or any of its subsidiaries and each material plan or arrangement (written or
oral) providing for compensation, bonuses, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance coverage (including, without
limitation, any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including,
without limitation, compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by Santa Fe or
any of its affiliates and covers any employee or former employee of Santa Fe or
any of its affiliates, or under which Santa Fe or any of its affiliates has any
liability (secondary, contingent or otherwise), including, without limitation,
any such plan, program or arrangement that has been terminated. Such plans are
referred to collectively herein as the "Santa Fe Employee Plans". Copies of all
such Santa Fe Employee Plans (and, if applicable, related trust agreements or
insurance contracts) and all amendments thereto and written interpretations
thereof have been furnished to SOCO together with the most recent annual report
(Form 5500 including, without limitation, if applicable, Schedule B thereto)
prepared in connection with any such Santa Fe Employee Plan.
(b) Each Santa Fe Employee Plan has been funded and maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations (including, without limitation, but not limited
to ERISA and the Code) which are applicable to such plan, except where failure
to so comply would not, individually or in the aggregate, have a Santa Fe
Material Adverse Effect.
(c) No Santa Fe Employee Plan is subject to Title IV of ERISA.
(d) Each Santa Fe Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code.
(e) No director or officer or, to the knowledge of Santa Fe, other employee
of Santa Fe or any of its subsidiaries will become entitled to any retirement,
severance or similar benefit or enhanced or accelerated benefit solely as a
result of the transactions contemplated hereby. Without limiting the generality
of the foregoing, no amount required to be paid or payable to or with respect
to any employee of Santa Fe or any of its subsidiaries in connection with the
transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(f) Since the Santa Fe Balance Sheet Date, there has been no adoption of or
amendment to, written interpretation or announcement (whether or not written)
by Santa Fe or any of its affiliates relating to, or change in employee
participation or coverage under, any Santa Fe Employee Plan which would
increase materially the annual expense of maintaining such Santa Fe Employee
Plan above the level of the expense incurred in respect thereof for the 12
months ended on the Santa Fe Balance Sheet Date.
(g) Except for defined benefit plans (if applicable), the Santa Fe Employee
Plans may be terminated on a prospective basis without any continuing liability
for benefits other than benefits accrued to the date of such termination.
(h) No Santa Fe Employee Plan is a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or a "multiple employer plan" (within the meaning
of Section 413(c) of the Code).
(i) There are no actions, suits or claims pending (other than routine claims
for benefits) or, to the knowledge of Santa Fe, threatened against, or with
respect to, any of the Santa Fe Employee Plans or their assets.
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(j) To the knowledge of Santa Fe, there is no matter pending (other than
routine qualification determination filings) with respect to any of the Santa
Fe Employee Plans before the Internal Revenue Service, the Department of Labor
or the Pension Benefit Guaranty Corporation.
Section 4.16 Environmental Matters. (a) Except as set forth in the Santa Fe
SEC Filings made prior to the date hereof and except as would not, individually
or in the aggregate, have a Santa Fe Material Adverse Effect:
(i) the businesses of Santa Fe and its subsidiaries have been and are
operated in material compliance with all Environmental Laws and
Environmental Permits;
(ii) neither Santa Fe or any of its subsidiaries has caused or allowed
the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of Hazardous
Substances at any properties or facilities owned, leased or operated by
Santa Fe or any of its subsidiaries, except in material compliance with all
Environmental Laws;
(iii) there are no pending, or to the knowledge of Santa Fe, threatened,
claims, suits, actions, proceedings or investigations with respect to the
businesses or operations of Santa Fe or any of its subsidiaries alleging or
concerning any material violation of or responsibility or liability under
any Environmental Law that, if adversely determined, could reasonably be
expected to have a Santa Fe Material Adverse Effect, nor does Santa Fe have
any knowledge of any fact or condition that could give rise to such a
claim, suit, action, proceeding or investigation;
(iv) Santa Fe and its subsidiaries are in the possession of or have
timely filed for all material Environmental Permits with respect to the
operation of the businesses of Santa Fe and its subsidiaries; there are no
pending or, to the knowledge of Santa Fe, threatened, actions, proceedings
or investigations seeking to restrict, revoke or deny renewal of any of
such Environmental Permits; and Santa Fe does not have knowledge of any
fact or condition that is reasonably likely to give rise to any action,
proceeding or investigation to restrict, revoke or deny renewal of any of
such Environmental Permits;
(v) no notice, notification, demand, request for information, citation,
summons or order has been received, no complaint has been filed, no penalty
has been assessed, and no investigation, action, claim, suit, proceeding or
review is pending or, to the knowledge of Santa Fe, is threatened by any
governmental entity or other person relating to or arising out of any
Environmental Law; and
(vi) there are no liabilities of or relating to Santa Fe or any of its
subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise arising under or relating to any
Environmental Law and Santa Fe does not have knowledge of any facts,
conditions, situations or set of circumstances which could reasonably be
expected to result in or be the basis for any such liability.
(b) Neither Santa Fe nor any of its subsidiaries owns, leases or directly or
indirectly controls or has owned, leased or directly or indirectly controlled
any real property in New Jersey or Connecticut.
(c) "Santa Fe" and "its subsidiaries" shall, solely for purposes of this
Section 4.16, include any entity which is, in whole or in part, a corporate
predecessor of Santa Fe or any of its subsidiaries.
Section 4.17 Tax Treatment. Neither Santa Fe nor any of its affiliates has
taken or agreed to take any action that would prevent the Merger from
qualifying as a 368 Reorganization. Without limiting the generality of the
foregoing:
(a) In connection with the Merger, none of the SOCO Common Stock will be
acquired by Santa Fe or a person related (as defined in Treas. Reg. (S)
1.368-1(e)(3)) to Santa Fe for consideration other than Santa Fe Common
Stock, respectively, except for any cash received in lieu of fractional
share interests in Santa Fe Common Stock pursuant to Section 1.07 of this
Agreement.
(b) Following the Merger, Santa Fe will continue the historic business
of SOCO or use a significant portion of its assets in a business, within
the meaning of Treas. Reg. (S) 1.368-1(d).
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(c) There is no intercorporate indebtedness existing between SOCO and
Santa Fe that was issued, acquired, or will be settled at a discount.
(d) Santa Fe will pay its own expenses incurred in connection with or as
part of the Merger or related transactions. Santa Fe has not paid and will
not pay, directly or indirectly, any expenses (including, without
limitation, transfer taxes) incurred by any holder of SOCO Common Stock in
connection with or as part of the Merger or any related transactions. Santa
Fe has not agreed to assume, nor will it directly or indirectly assume, any
expense or other liability, whether fixed or contingent, of any holder of
SOCO Common Stock.
(e) Santa Fe is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) Santa Fe has no plan or intention to sell or otherwise dispose of
any of the assets of SOCO except for dispositions made in the ordinary
course of business or transfers or successive transfers to one or more
corporations controlled (within the meaning of Section 368(c) of the Code)
in each case by the transferor corporation, or to reacquire any of the
Santa Fe Common Stock issued in the Merger.
Section 4.18 Opinion of Financial Advisor. Santa Fe's Board of Directors has
received the opinion of either or both of Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation, financial advisors to Santa Fe, to
the effect that, as of the date of this Agreement, the Exchange Ratio is fair
to Santa Fe's stockholders, from a financial point of view.
Section 4.19 Patents and Other Proprietary Rights. Santa Fe and its
subsidiaries have rights to use, whether through ownership, licensing or
otherwise, all patents, trademarks, service marks, trade names, copyrights,
trade secrets, and other proprietary rights and processes of which Santa Fe is
aware that are material to its business as now conducted (collectively the
"Santa Fe Intellectual Property Rights"). Except for such matters as would not,
individually or in the aggregate, have a Santa Fe Material Adverse Effect, (a)
Santa Fe and its subsidiaries have not assigned, hypothecated or otherwise
encumbered any of the Santa Fe Intellectual Property Rights and (b) none of the
licenses included in the Santa Fe Intellectual Property Rights purports to
grant sole or exclusive licenses to another person including, without
limitation, sole or exclusive licenses limited to specific fields of use. To
Santa Fe's knowledge, the patents owned by Santa Fe and its subsidiaries are
valid and enforceable and any patent issuing from patent applications of Santa
Fe and its subsidiaries will be valid and enforceable, except as such
invalidity or unenforceability would not, individually or in the aggregate,
have a Santa Fe Material Adverse Effect. Santa Fe has no knowledge of any
infringement by any other person of any of the Santa Fe Intellectual Property
Rights, and Santa Fe and its subsidiaries have not, to Santa Fe's knowledge,
entered into any agreement to indemnify any other party against any charge of
infringement of any of the Santa Fe Intellectual Property Rights, except for
such matters as would not, individually or in the aggregate, have a Santa Fe
Material Adverse Effect. To Santa Fe's knowledge, Santa Fe and its subsidiaries
have not and do not violate or infringe any intellectual property right of any
other person, and neither Santa Fe nor any of its subsidiaries have received
any communication alleging that it violates or infringes the intellectual
property right of any other person, except for such matters as would not,
individually or in the aggregate, have a Santa Fe Material Adverse Effect.
Except for such matters as would not, individually or in the aggregate, have a
Santa Fe Material Adverse Effect, Santa Fe and its subsidiaries have not been
sued for infringing any intellectual property right of another person. None of
the Santa Fe Intellectual Property Rights or other know-how relating to the
business of Santa Fe and its subsidiaries, the value of which to Santa Fe is
contingent upon maintenance of the confidentiality thereof, has been disclosed
by Santa Fe or any affiliate thereof to any person other than those persons who
are bound to hold such information in confidence pursuant to confidentiality
agreements or by operation of law.
Section 4.20 Status and Operation of Oil and Gas Properties. (a) The Leases
of Santa Fe and its subsidiaries are in full force and effect in accordance
with their respective terms, all obligations of Santa Fe under such Leases have
been fully performed (to the extent required as of the date hereof) and there
are currently pending no requests or demands for payments, adjustments of
payments or performance pursuant to
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obligations under the Leases, except where the failure of such Leases to be in
full force and effect in accordance with their terms, the failure to perform
thereunder or the pendency of such requests or demands, individually or in the
aggregate, would not have a Santa Fe Material Adverse Effect.
(b) Oil and Gas Contracts of Santa Fe or any of its subsidiaries are in full
force and effect in accordance with their respective terms, except for any such
Oil and Gas Contracts the termination of which, individually or in the
aggregate, would not have a Santa Fe Material Adverse Effect.
(c) Neither Santa Fe nor any of its subsidiaries has (i) sold forward a
material amount of any Hydrocarbons, (ii) received any material advance, "take-
or-pay" or other similar payments under production sales contracts or otherwise
that entitle the purchasers to "make up" or otherwise receive deliveries of
Hydrocarbons without paying at such time the contract price therefor, (iii) any
commitment to deliver a minimum volume of Hydrocarbons to any person or to pay
a "make up" amount or transportation charge to such person for any shortfall,
or (iv) taken or received any material amount of Hydrocarbons under any gas
balancing agreements or any similar arrangements that permit any person
thereafter to receive any portion of the interest of Santa Fe or any of its
subsidiaries to "balance" any disproportionate allocation of Hydrocarbons.
Section 4.21 Reserve Reports. All information (including, without
limitation, the statement of the percentage of reserves from the oil and gas
wells and other interests evaluated therein to which Santa Fe or its
subsidiaries are entitled and the percentage of the costs and expenses related
to such wells or interests to be borne by Santa Fe or its subsidiaries)
supplied to Ryder Scott Company by or on behalf of Santa Fe and its
subsidiaries that was material to such firm's estimates of proved oil and gas
reserves attributable to the Oil and Gas Interests of Santa Fe and its
subsidiaries in connection with the preparation of the proved oil and gas
reserve report concerning the Oil and Gas Interests of Santa Fe and its
subsidiaries as of December 31, 1997 and prepared by such engineering firm (the
"Santa Fe Reserve Report") was (at the time supplied or as modified or amended
prior to the issuance of the Santa Fe Reserve Report) true and correct in all
material respects.
Section 4.22 Antitakeover Statutes and Rights Agreement. The Board of
Directors of Santa Fe has (i) approved this Agreement and the transactions
contemplated hereby and (ii) taken all action necessary to cause this Agreement
and the transactions contemplated hereby to be exempt from Section 203 of the
Delaware Law, and no other antitakeover or similar statute or regulation
applies or purports to apply to the transactions contemplated hereby. Santa Fe
has taken all action necessary to render the preferred stock purchase rights
issued pursuant to the terms of the Santa Fe Plan inapplicable to the Merger,
this Agreement and the other transactions contemplated hereby.
Section 4.23 Required Stockholder Vote or Consent. The only vote of the
holders of any class or series of Santa Fe's capital stock that will be
necessary to consummate the Merger and the other transactions contemplated by
this Agreement is the approval and adoption of this Agreement by the holders of
a majority of the votes entitled to be cast by holders of the Santa Fe Common
Stock, with each share of Santa Fe Common Stock being entitled to one vote per
share (the "Santa Fe Stockholders' Approval").
Section 4.24 Hedging. As of the date of this Agreement and except as may be
implemented prior to the Effective Time in accordance with Section 5.02,
neither Santa Fe nor any of its subsidiaries is bound by futures, hedge, swap,
collar, put, call, floor, cap, option or other contracts that are intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of commodities, including, without limitation, Hydrocarbons, securities,
interest rates or any other matters.
Section 4.25 Year 2000 Issues. The disclosures set forth in the Santa Fe SEC
Filings concerning potential computer hardware and software problems associated
with the year 2000 are true and correct in all material respects.
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ARTICLE V
Conduct of Business Pending Merger
Section 5.01 Conduct of SOCO. SOCO agrees that from the date hereof until
the Effective Time, except (i) with the prior written consent of Santa Fe, (ii)
as contemplated by this Agreement and (iii) as disclosed in the SOCO Schedule,
SOCO and its subsidiaries shall conduct their business only in the ordinary
course consistent with past practice and oil field practices standard in the
industry and shall use all reasonable commercial efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without
limiting the generality of the foregoing, and except (i) with the prior written
consent of Santa Fe, (ii) as contemplated by this Agreement and (iii) as
disclosed in the SOCO Schedule, from the date hereof until the Effective Time:
(a) neither SOCO nor any of its subsidiaries will adopt or propose any
change in its certificate of incorporation or bylaws (or similar
organizational documents);
(b) SOCO will not, and will not permit any of its subsidiaries to, merge
or consolidate with any other person or acquire assets of any other person
in excess of $10 million individually or $30 million in the aggregate;
(c) SOCO will not, and will not permit any of its subsidiaries to (i)
declare, set aside or pay any dividend or other distribution with respect
to any shares of capital stock of SOCO or its subsidiaries (except for
intercompany dividends from direct or indirect wholly owned subsidiaries)
or (ii) repurchase, redeem or otherwise acquire any outstanding shares of
capital stock or other securities of, or other ownership interests in, SOCO
or any of its subsidiaries, other than intercompany acquisitions of stock
among SOCO and its wholly owned subsidiaries;
(d) SOCO will not settle any material tax audit, make or change any
material tax election or file any material amended tax return;
(e) except as otherwise permitted by this Agreement, SOCO will not issue
any securities (whether through the issuance or granting of options,
warrants, rights or otherwise and except pursuant to existing obligations
disclosed in the SOCO SEC Filings made prior to the date hereof), enter
into any amendment of any term of any outstanding security of SOCO or of
any of its subsidiaries, incur any indebtedness except trade debt in the
ordinary course of business and debt pursuant to existing credit facilities
or arrangements, fail to make any required contribution to any SOCO
Employee Plan, increase compensation, bonus or other benefits payable to,
or modify or amend any employment agreements or severance agreements with,
any director, officer or former employee or enter into any settlement or
consent with respect to any pending litigation other than settlements in
the ordinary course of business;
(f) SOCO will not change any method of accounting or accounting practice
by SOCO or any of its subsidiaries, except for any such change required by
GAAP;
(g) SOCO will not take any action that would give rise to a claim under
the WARN Act (as defined in Section 9.15) or any similar state law or
regulations because of a "plant closing" or "mass layoff" (each as defined
in the WARN Act);
(h) SOCO will not amend or otherwise change the terms of the engagement
letter with Petrie Parkman & Co.;
(i) Neither SOCO nor any of its subsidiaries will become bound or
obligated to participate in any operation, or consent to participate in any
operation, with respect to any Oil and Gas Interests that will cost in
excess of $10 million individually or $50 million in the aggregate, unless
the operation is a currently existing obligation of SOCO or any of its
subsidiaries;
(j) Neither SOCO nor any of its subsidiaries will (i) enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk
of
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fluctuations in the price of commodities, including, without limitation,
Hydrocarbons, securities, interest rates or other matters, other than
hedges with a duration of less than eight months relating to SOCO's
production of Hydrocarbons not in excess of 75% of SOCO's total daily
production of Hydrocarbons in accordance with SOCO's hedging policy as in
effect on the date hereof or (ii) enter into any commodity sales agreements
with a duration of more than three months;
(k) SOCO will not, and will not permit any of its subsidiaries to, sell,
lease, license, encumber or otherwise dispose of or create a Lien on any
material assets or property except (i) pursuant to existing contracts or
commitments or (ii) in the ordinary course consistent with past practice;
(l) SOCO will not, and will not permit any of its subsidiaries to, take,
and will not omit or agree to omit to take, any action that would make any
representation and warranty of SOCO hereunder materially inaccurate in any
respect at, or as of any time prior to, the Effective Time; and
(m) SOCO will not, and will not permit any of its subsidiaries to, agree
or commit to do any of the foregoing.
Section 5.02 Conduct of Santa Fe. Santa Fe agrees that from the date hereof
until the Effective Time, except (i) with the prior written consent of SOCO,
(ii) as contemplated in this Agreement and (iii) as described in the Santa Fe
Schedule, Santa Fe and its subsidiaries shall conduct their business only in
the ordinary course consistent with past practice and oil field practices
standard in the industry and shall use all reasonable commercial efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, and except (i)
with the prior written consent of SOCO, (ii) as contemplated in this Agreement
and (iii) as described in the Santa Fe Schedule, from the date hereof until the
Effective Time:
(a) neither Santa Fe nor any of its subsidiaries will adopt or propose
any change in its certificate of incorporation or bylaws (or similar
organizational documents);
(b) Santa Fe will not, and will not permit any of its subsidiaries to,
merge or consolidate with any other person or acquire assets of any other
person in excess of $10 million individually or $30 million in the
aggregate;
(c) Santa Fe will not, and will not permit any of its subsidiaries to
(i) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of Santa Fe or its subsidiaries
(except for intercompany dividends from direct or indirect wholly owned
subsidiaries) or (ii) repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other
ownership interests in, Santa Fe or any of its subsidiaries, other than
intercompany acquisitions of stock among Santa Fe and its wholly owned
subsidiaries;
(d) Santa Fe will not settle any material tax audit, make or change any
material tax election or file any material amended tax return;
(e) Except as otherwise permitted by this Agreement, Santa Fe will not
issue any securities (whether through the issuance or granting of options,
warrants, rights or otherwise and except pursuant to existing obligations
disclosed in the Santa Fe SEC Filings made prior to the date hereof), enter
into any amendment of any term of any outstanding security of Santa Fe or
of any of its subsidiaries, incur any indebtedness except trade debt in the
ordinary course of business and debt pursuant to existing credit facilities
or arrangements, fail to make any required contribution to any Santa Fe
Employee Plan, increase compensation, bonus or other benefits payable to,
or modify or amend any employment agreements or severance agreements with,
any director, officer or former employee or enter into any settlement or
consent with respect to any pending litigation other than settlements in
the ordinary course of business;
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(f) Santa Fe will not change any method of accounting or accounting
practice by Santa Fe or any of its subsidiaries, except for any such change
required by GAAP;
(g) Santa Fe will not take any action that would give rise to a claim
under the WARN Act or any similar state law or regulations because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(h) Santa Fe will not amend or otherwise change the terms of the
engagement letters with Chase Securities Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation;
(i) Neither Santa Fe nor any of its subsidiaries will become bound or
obligated to participate in any operation, or consent to participate in any
operation, with respect to any Oil and Gas Interests that will cost in
excess of $10 million individually or $50 million in the aggregate, unless
the operation is a currently existing obligation of Santa Fe or any of its
subsidiaries;
(j) Neither Santa Fe nor any of its subsidiaries will (i) enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk
of fluctuations in the price of commodities, including, without limitation,
Hydrocarbons, securities, interest rates or other matters, other than
hedges with a duration of less than eight months relating to Santa Fe's
production of Hydrocarbons not in excess of 75% of Santa Fe's total daily
production of Hydrocarbons in accordance with Santa Fe's hedging policy as
in effect on the date hereof or (ii) enter into any commodity sales
agreements with a duration of more than three months;
(k) Santa Fe will not, and will not permit any of its subsidiaries to,
sell, lease, license, encumber or otherwise dispose of or create a Lien on
any material assets or property except (i) pursuant to existing contracts
or commitments or (ii) in the ordinary course consistent with past
practice;
(l) Santa Fe will not, and will not permit any of its subsidiaries to,
take, and will not omit or agree to omit to take, any action that would
make any representation and warranty of Santa Fe hereunder materially
inaccurate in any respect at, or as of any time prior to, the Effective
Time; and
(m) Santa Fe will not, and will not permit any of its subsidiaries to,
agree or commit to do any of the foregoing.
ARTICLE VI
Additional Agreements
Section 6.01 Access and Information. The parties shall each afford to the
other and to the other's financial advisors, legal counsel, accountants,
consultants, financing sources, and other authorized representatives access
during normal business hours throughout the period prior to the Effective Time
to all of its books, records, properties, contracts, leases, plants and
personnel and, during such period, each shall furnish promptly to the other (a)
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities laws, and (b) all
other information as such other party reasonably may request, provided that no
investigation pursuant to this Section 6.01 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Notwithstanding the foregoing, the
Confidentiality Agreement dated December 16, 1998, between Santa Fe and SOCO
(the "Confidentiality Agreement") shall survive the execution and delivery of
this Agreement.
Section 6.02 Acquisition Proposals.
(a) From the date of this Agreement until the earlier to occur of the
termination hereof and the Effective Time, Santa Fe and its subsidiaries will
not, and will cause their respective officers, directors, employees or other
advisors and agents not to, directly or indirectly, (i) take any action to
solicit, initiate or encourage any Santa Fe Acquisition Proposal (as
hereinafter defined) or (ii) engage in negotiations with, or disclose any non-
public information relating to Santa Fe or its subsidiaries, respectively, or
afford access to their respective
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properties, books or records to any person that may be considering making, or
has made, a Santa Fe Acquisition Proposal. Nothing contained in this Section
6.02(a) shall prohibit Santa Fe and its Board of Directors from (i) taking and
disclosing a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated by the SEC under the 1934 Act, or (ii)
furnishing information, including, without limitation, non-public information
to, or entering into negotiations with, any person or entity that has made a
Santa Fe Acquisition Proposal (as defined herein), provided that the Board of
Directors of Santa Fe has determined in good faith that such Santa Fe
Acquisition Proposal could reasonably be expected to be a Superior Santa Fe
Acquisition Proposal (as defined herein), or (iii) withdrawing, modifying or
changing its recommendation of this Agreement or the Merger in a manner adverse
to SOCO or recommending to the stockholders of Santa Fe any Santa Fe
Acquisition Proposal, provided that the Board of Directors of Santa Fe has
determined in good faith that such Santa Fe Acquisition Proposal is a Superior
Santa Fe Acquisition Proposal, and with respect to clauses (ii) and (iii) of
this sentence, if, and only if (A) the Board of Directors of Santa Fe, after
duly considering the advice of outside legal counsel to Santa Fe, determines in
good faith that such action is required for the Board of Directors of Santa Fe
to comply with its fiduciary duties to stockholders imposed by applicable law,
(B) contemporaneously with taking such action Santa Fe provides written notice
to SOCO, which notice shall include the identity of the person making such
Santa Fe Acquisition Proposal, the material terms and conditions of such Santa
Fe Acquisition Proposal (including, without limitation, a copy thereof, if such
Santa Fe Acquisition Proposal is in written form or is electronically or
magnetically stored) and a description of any information requested or
furnished and any discussions or negotiations requested or conducted and (C)
Santa Fe uses all reasonable commercial efforts to keep SOCO informed in all
material respects of the status and terms of any such negotiations or
discussions (including, without limitation, the identity of the person or
entity with whom such negotiations or discussions are being held) and provides
SOCO copies of such written proposals and any amendments or revisions thereto
or correspondence related thereto, provided that SOCO agrees to execute a
confidentiality agreement, in form reasonably acceptable to it, with respect to
any such information delivered to SOCO pursuant to clauses (B) and (C) of this
Section 6.02(a), which confidentiality agreement shall be subject to SOCO's
disclosure obligations arising under applicable law or securities exchange
regulations. The term "Santa Fe Acquisition Proposal" as used herein means any
offer or proposal for, or any indication of interest in, a merger or other
business combination directly or indirectly involving Santa Fe or any material
subsidiary of Santa Fe, or the acquisition of a substantial equity interest in,
or a substantial portion of the assets of, any such party, other than the
transactions contemplated by this Agreement. For purposes of this Agreement,
"Superior Santa Fe Acquisition Proposal" means a bona fide written Santa Fe
Acquisition Proposal which the Board of Directors of Santa Fe concludes in good
faith (after consultation with its financial advisors and legal counsel),
taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, (i) would, if consummated, result
in a transaction that is more favorable to Santa Fe's stockholders from a
strategic and financial point of view, than the transactions contemplated by
this Agreement and (ii) is reasonably capable of being completed.
(b) From the date of this Agreement until the earlier to occur of the
termination hereof and the Effective Time, SOCO and its subsidiaries will not,
and will cause their respective officers, directors, employees or other
advisors or agents not to, directly or indirectly, (i) take any action to
solicit, initiate or encourage any SOCO Acquisition Proposal (as hereinafter
defined) or (ii) engage in negotiations with, or disclose any non-public
information relating to SOCO or its subsidiaries, respectively, or afford
access to their respective properties, books or records to any person that may
be considering making, or has made, a SOCO Acquisition Proposal. Nothing
contained in this Section 6.02(b) shall prohibit SOCO and its Board of
Directors from (i) taking and disclosing a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated by the
SEC under the 1934 Act, or (ii) furnishing information, including, without
limitation, non-public information to, or entering into negotiations with, any
person or entity that has made a SOCO Acquisition Proposal (as defined herein),
provided that the Board of Directors of SOCO has determined in good faith that
such SOCO Acquisition Proposal could reasonably be expected to be a Superior
SOCO Acquisition Proposal (as defined herein), or (iii) withdrawing, modifying
or changing its recommendation of this Agreement or the Merger in a manner
adverse to Santa Fe or recommending to the stockholders of SOCO any SOCO
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Acquisition Proposal, provided that the Board of Directors of SOCO has
determined in good faith that such SOCO Acquisition Proposal is a Superior SOCO
Acquisition Proposal, and, with respect to clauses (ii) and (iii) of this
sentence, if, and only if, (A) the Board of Directors of SOCO, after duly
considering the advice of outside legal counsel to SOCO, determines in good
faith that such action is required for the Board of Directors of SOCO to comply
with its fiduciary duties to stockholders imposed by applicable law, (B)
contemporaneously with taking such action SOCO provides written notice to Santa
Fe, which notice shall include the identity of the person making such SOCO
Acquisition Proposal, the material terms and conditions of such SOCO
Acquisition Proposal (including, without limitation, a copy thereof, if such
SOCO Acquisition Proposal is in written form or is electronically or
magnetically stored) and a description of any information requested or
furnished and any discussions or negotiations requested or conducted and (C)
SOCO uses all reasonable commercial efforts to keep Santa Fe informed in all
material respects of the status and terms of any such negotiations or
discussions (including, without limitation, the identity of the person or
entity with whom such negotiations or discussions are being held) and provides
Santa Fe copies of such written proposals and any amendments or revisions
thereto or correspondence related thereto, provided that Santa Fe agrees to
execute a confidentiality agreement, in form reasonably acceptable to it, with
respect to any such information delivered to Santa Fe pursuant to clauses (B)
and (C) of this Section 6.02(b), which confidentiality agreement shall be
subject to Santa Fe's disclosure obligations arising under applicable law or
securities exchange regulations. The term "SOCO Acquisition Proposal" as used
herein means any offer or proposal for, or any indication of interest in, a
merger or other business combination directly or indirectly involving SOCO or
any material subsidiary of SOCO or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, any such party, other
than the transactions contemplated by this Agreement. For purposes of this
Agreement, "Superior SOCO Acquisition Proposal" means a bona fide written SOCO
Acquisition Proposal which the Board of Directors of SOCO concludes in good
faith (after consultation with its financial advisors and legal counsel),
taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, (i) would, if consummated, result
in a transaction that is more favorable to SOCO's stockholders from a strategic
and financial point of view, than the transactions contemplated by this
Agreement and (ii) is reasonably capable of being completed.
Section 6.03 Directors' and Officers' Indemnification and Insurance.
(a) From the Effective Time and continuing for six years thereafter, Santa
Fe shall indemnify, defend and hold harmless each person who is now or has been
at any time prior to the date hereof, or who becomes prior to the Effective
Time, an officer or director of SOCO or any of its subsidiaries or an employee
of SOCO or any of its subsidiaries who acts as a fiduciary under any of the
SOCO Employee Plans (each an "Indemnified Party") against all losses, claims,
damages, liabilities, fees and expenses (including, without limitation,
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Santa Fe, which will
not be unreasonably withheld)) arising in whole or in part out of actions or
omissions in their capacity as such occurring at or prior to the Effective Time
to the full extent as set forth under the DGCL, the certificate of
incorporation or the bylaws of SOCO, in each case as in effect at the Effective
Time, including, without limitation, provisions therein relating to the
advancement of expenses incurred in the defense of any action or suit;
provided, that if any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of any and all such claims. After the six-year
period referred to in the immediately preceding sentence (as such six-year
period is affected by the proviso of such sentence), the Indemnified Parties
shall have no rights to indemnification under this Agreement, and any rights of
any Indemnified Party to indemnification for actions or omissions occurring at
or prior to the Effective Time shall thereafter be limited to such
indemnification, if any, as is mandated under the DGCL.
(b) Santa Fe shall maintain SOCO's officers' and directors' liability
insurance policy or purchase a "tail" thereunder ("D&O Insurance") for a period
of not less than six years after the Effective Time, but only to the extent
related to actions or omissions prior to the Effective Time; provided, that the
aggregate amount of
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premiums to be paid with respect to the maintenance of such D&O Insurance for
such six-year period shall not exceed $500,000.
Section 6.04 Fees and Expenses. (a) Except as provided in paragraphs (c) and
(d), all Expenses (as defined below) incurred by the parties hereto shall be
borne solely and entirely by the party that has incurred such Expenses;
provided, however, that if this Agreement is terminated for any reason, then
the allocable share of Santa Fe and SOCO for all Expenses (excluding the fees
and expenses of legal counsel, accountants, tax advisors and investment
bankers) related to preparing, printing, filing and mailing the Registration
Statement, the Proxy Statement/Prospectus and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement, Proxy
Statement/Prospectus and the HSR Act, shall be allocated one-half each.
(b) "Expenses" as used in this Agreement shall include all reasonable out-
of-pocket expenses (including, without limitation, all reasonable fees and
expenses of counsel, accountants, investment bankers, experts and consultants
to a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the preparation, printing, filing
and mailing of the Registration Statement, the Proxy Statement/Prospectus, the
solicitation of stockholder approvals, requisite HSR Act filings and all other
matters related to the consummation of the transactions contemplated hereby.
(c) SOCO shall pay Santa Fe a fee in immediately available funds (a "SOCO
Termination Fee") of $25,000,000 if this Agreement is terminated pursuant to
(i) Section 8.01(b)(iii) because the SOCO Stockholders' Approval is not
obtained, (ii) Section 8.01(e) or Section 8.01(g), or (iii) Section 8.01(d) in
respect of a breach by SOCO of a covenant or agreement that is a SOCO Breach
(as defined in Section 8.01(d)) and, in the case of clause (i) or (iii), if
within nine months of any such termination SOCO becomes a subsidiary of a
person, which person, immediately prior to SOCO becoming such a subsidiary, was
not an Affiliate of Santa Fe or SOCO, or accepts a written offer with respect
to, or enters into a written agreement to consummate or consummates, a SOCO
Acquisition Proposal. If the SOCO Termination Fee becomes payable pursuant to
this Section 6.04(c), it shall be paid prior to or at termination (and as a
condition to termination) of this Agreement in the case of clause (ii) above
and, in the case of clause (i) or (iii) above, it shall be paid upon the
acceptance of a written offer relating to, or the signing of a definitive
agreement relating to, a SOCO Acquisition Proposal or, if no such acceptance is
made or agreement is signed, then at the closing (and as a condition to
closing) of either SOCO becoming a subsidiary of a person, which person,
immediately prior to SOCO becoming such a subsidiary, was not an Affiliate of
Santa Fe or SOCO, or of such SOCO Acquisition Proposal. The SOCO Termination
Fee shall be paid by SOCO without reservation of rights or protests and SOCO,
upon making such payment, shall be deemed to have released and waived any and
all rights that it may have to recover such amounts. Santa Fe shall be entitled
to receive all Expenses incurred by it (in addition to the SOCO Termination
Fee, if payable) in immediately available funds if this Agreement is terminated
pursuant to Section 8.01(e), Section 8.01(g), Section 8.01(b)(iii) because the
SOCO Stockholders' Approval is not obtained or Section 8.01(d).
(d) Santa Fe shall pay SOCO a fee in immediately available funds (a "Santa
Fe Termination Fee") of $25,000,000 if this Agreement is terminated pursuant to
(i) Section 8.01(b)(iii) because the Santa Fe Stockholders' Approval is not
obtained, (ii) Section 8.01(f) or Section 8.01(h), or (iii) Section 8.01(c) in
respect of a breach by Santa Fe of a covenant or agreement that is, a Santa Fe
Breach (as defined in Section 8.01(c)) and, in the case of clause (i) or (iii),
if within nine months of any such termination Santa Fe becomes a subsidiary of
a person, which person, immediately prior to Santa Fe becoming such a
subsidiary, was not an Affiliate of SOCO or Santa Fe, or accepts a written
offer with respect to, or enters into a written agreement to consummate or
consummates, a Santa Fe Acquisition Proposal. If the Santa Fe Termination Fee
becomes payable pursuant to this Section 6.04(d), it shall be paid prior to or
at termination (and as a condition to termination) of this Agreement in the
case of clause (ii) above and, in the case of clause (i) or (iii) above, it
shall be paid upon the acceptance of a written offer relating to, or the
signing of a definitive agreement relating to a Santa Fe Acquisition Proposal
or, if no such acceptance is made or agreement is signed, then at the closing
(and as a condition to closing) of either Santa Fe becoming a subsidiary of a
person, which person,
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immediately prior to Santa Fe becoming such a subsidiary, was not an Affiliate
of SOCO or Santa Fe, or of such Santa Fe Acquisition Proposal. The Santa Fe
Termination Fee shall be paid by Santa Fe without reservation of rights or
protests and Santa Fe, upon making such payment, shall be deemed to have
released and waived any and all rights that it may have to recover such
amounts. SOCO shall be entitled to receive all Expenses incurred by it (in
addition to the Santa Fe Termination Fee, if payable) in immediately available
funds if this Agreement is terminated pursuant to Section 8.01(f), Section
8.01(h), Section 8.01(b)(iii) because the Santa Fe Stockholders' Approval is
not obtained or Section 8.01(c).
(e) The parties hereto agree that any amounts paid in accordance with
Section 6.04(c) or 6.04(d) above shall constitute the sole or exclusive remedy
available to a party for a breach by the other party of any representation,
warranty, covenant or agreement of such other party in this Agreement, other
than a breach arising from an intentional, reckless or grossly negligent action
by such other party.
Section 6.05 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of the parties hereto shall
confer on a regular and frequent basis with one or more representatives of the
other parties to report operational matters of materiality and the general
status of ongoing operations and shall promptly provide the other party or its
counsel with copies of all filings made by such party with any Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby.
Section 6.06 Filings. Each party hereto shall make all filings required to
be made by such party in connection herewith or desirable to achieve the
purposes contemplated hereby, and shall cooperate as needed with respect to any
such filing by any other party hereto.
Section 6.07 Consents. Each of Santa Fe and SOCO shall use all reasonable
commercial efforts to obtain all consents necessary or advisable in connection
with its obligations hereunder.
Section 6.08 Board, Committees and Executive Officers.
(a) Santa Fe shall take such action as shall be required to cause the Board
of Directors immediately after the Effective Time to increase to 11 members
that are divided into three classes, the first class consisting of directors
whose current term expires at the 1999 Annual Meeting of Stockholders ("Class
I"), the second class consisting of directors whose current term expires at the
2000 Annual Meeting of Stockholders ("Class II") and the third class consisting
of directors whose current term expires at the 2001 Annual Meeting of
Stockholders ("Class III"), which classes shall have the respective terms set
forth in Santa Fe's Charter or Bylaws. Prior to the mailing to stockholders of
the Proxy Statement/Prospectus (as defined herein), (i) the Santa Fe Board of
Directors shall nominate as directors of Santa Fe to fill the vacancies created
thereby one individual selected by the Board of Directors of SOCO as a member
of Class I, two individuals selected by the Board of Directors of SOCO as
members of Class II and two individuals selected by the Board of Directors of
SOCO as members of Class III (the "SOCO Director Nominees") to stand for
election as directors of Santa Fe at the Santa Fe Special Meeting. If an
individual so selected and nominated consents to serve as a director, Santa Fe
shall use all reasonable commercial efforts to cause such individual to be
elected to its Board of Directors by the Santa Fe stockholders at the Santa Fe
Special Meeting (as defined in Section 6.09(b)), effective as of the Effective
Time, for a term expiring at Santa Fe's next annual meeting of stockholders
following the Effective Time at which the term of the class to which such
director belongs expires, subject to being renominated as a director at the
discretion of Santa Fe's Board of Directors. If at any time prior to the
Effective Time, any SOCO Director Nominee shall be unable to serve as a
director at the Effective Time, the Board of Directors of SOCO shall designate
another individual to serve in such individual's place.
(b) Commencing immediately after the Effective Time, John C. Snyder shall be
Chairman of the Board of Directors of the Surviving Corporation for which he
shall be paid a monthly fee of $10,000 for so long as he serves in such
capacity, and those individuals set forth on Exhibit 6.08(b) hereto shall be
executive officers of Santa Fe having the titles and positions set forth
opposite their respective names on such Exhibit until the
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earlier of the resignation or removal of any such individual or until their
respective successors are duly elected and qualified, as the case may be. SOCO
and Santa Fe agree that John C. Snyder shall continue to serve as Chairman of
the Board until the first to occur of (i) the annual meeting of the
stockholders of the Surviving Corporation held in the year 2000 and (ii) his
death, resignation or removal as a director. Prior to the Effective Time, Santa
Fe and SOCO may mutually agree to designate additional individuals to serve as
executive officers of Santa Fe subsequent to the Effective Time. If any
executive officer set forth on Exhibit 6.08(b) or designated in accordance with
this Section 6.08(b) ceases to be a full-time employee of either Santa Fe or
SOCO (or otherwise declines to serve in such designated capacity) before the
Effective Time, Santa Fe and SOCO will agree upon another person to serve in
such person's stead.
(c) Prior to mailing of the definitive Proxy Statement/Prospectus to their
respective stockholders, SOCO and Santa Fe will agree upon the composition that
the various committees of the Board of Directors of the Surviving Corporation
will have upon consummation of the Merger and the definitive Proxy
Statement/Prospectus will identify such committees and their respective
members. Santa Fe and SOCO agree that the Nominating Committee of the Board of
Directors of the Surviving Corporation shall consist of John C. Snyder, James
L. Payne and two additional members of the Board of Directors of the Surviving
Corporation, of which one will be selected by Mr. Snyder and the other by Mr.
Payne. Each such member of the Nominating Committee shall continue to serve as
members of the Nominating Committee until the first to occur of (i) the annual
meeting of the stockholders of the Surviving Corporation held in the year 2000
and (ii) the death, resignation or removal of such person.
Section 6.09 Stockholder Meetings.
(a) Subject to Section 6.02(b), SOCO shall, as promptly as reasonably
practicable after the date hereof (i) take all steps reasonably necessary to
call, give notice of, convene and hold a special meeting of its stockholders
(the "SOCO Special Meeting") for the purpose of securing the SOCO Stockholders'
Approval, (ii) distribute to its stockholders the Proxy Statement/Prospectus in
accordance with applicable federal and state law and with its certificate of
incorporation and bylaws, which Proxy Statement/Prospectus shall contain the
recommendation of the Board of Directors of SOCO that its stockholders approve
and adopt this Agreement and the transactions contemplated hereby, (iii) use
all reasonable commercial efforts to solicit from its stockholders proxies in
favor of the approval and adoption of the this Agreement and the transactions
contemplated hereby and to secure the SOCO Stockholder's Approval, and (iv)
cooperate and consult with Santa Fe with respect to each of the foregoing
matters.
(b) Subject to Section 6.02(a), Santa Fe shall, as promptly as reasonably
practicable after the date hereof (i) take all steps reasonably necessary to
call, give notice of, convene and hold a special meeting of its stockholders
(the "Santa Fe Special Meeting") for the purpose of securing the Santa Fe
Stockholders' Approval, (ii) distribute to its stockholders the Proxy
Statement/Prospectus in accordance with applicable federal and state law and
its articles of incorporation and bylaws, which Proxy Statement/Prospectus
shall contain the recommendation of the Santa Fe Board of Directors that its
stockholders approve this Agreement and the election of directors described in
Section 6.08 and (iii) use all reasonable commercial efforts to solicit from
its stockholders proxies in favor of approval of this Agreement and the
election of directors described in Section 6.08 and to secure the Santa Fe
Stockholders' Approval, and (iv) cooperate and consult with SOCO with respect
to each of the foregoing matters.
(c) The Santa Fe Special Meeting and the SOCO Special Meeting shall be held
on the same day unless otherwise agreed by Santa Fe and SOCO.
Section 6.10 Preparation of the Proxy Statement/Prospectus and Registration
Statement.
(a) Santa Fe and SOCO shall promptly prepare and file with the SEC a
preliminary version of the Proxy Statement/Prospectus and will use all
reasonable commercial efforts to respond to the comments of the SEC in
connection therewith and to furnish all information required to prepare the
definitive Proxy
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Statement/Prospectus. At any time from (and including, without limitation) the
initial filing with the SEC of the Proxy Statement/Prospectus, Santa Fe shall
file with the SEC the Registration Statement containing the Proxy
Statement/Prospectus so long as Santa Fe shall have provided to SOCO a copy of
the Registration Statement containing the Proxy Statement/Prospectus at least
10 days prior to any filing thereof and any supplement or amendment at least
two days prior to any filing thereof. Subject to the foregoing sentence, the
date that the Registration Statement is filed with SEC shall be determined
jointly by Santa Fe and SOCO. Each of Santa Fe and SOCO shall use all
reasonable commercial efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing. Santa Fe shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or filing a
general consent to service of process in any jurisdiction required or filing a
general consent to service or process in any jurisdiction) required to be taken
under applicable state securities laws in connection with the issuance of Santa
Fe Common Stock in the Merger and SOCO shall furnish all information concerning
SOCO and the holders of shares of SOCO capital stock as may be reasonably
requested in connection with any such action. Promptly after the effectiveness
of the Registration Statement, each of Santa Fe and SOCO shall cause the Proxy
Statement/Prospectus to be mailed to its respective stockholders, and if
necessary, after the definitive Proxy Statement/Prospectus shall have been
mailed, promptly circulate amended, supplemented or supplemental proxy
materials and, if required in connection therewith, resolicit proxies. Santa Fe
shall advise SOCO and SOCO shall advise Santa Fe, as applicable, promptly after
it receives notice thereof, of the time when the Registration Statement shall
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Santa Fe Common
Stock for offering in any jurisdiction, or any request by the SEC for amendment
of the Proxy Statement/Prospectus or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional
information.
(b) None of the information to be supplied by SOCO for inclusion in (a) the
joint proxy statement relating to the SOCO Special Meeting and the Santa Fe
Special Meeting (as defined in Section 6.09(a) and 6.09(b), respectively) (also
constituting the prospectus in respect of Santa Fe Common Stock into which
shares of SOCO Common Stock will be converted) (the "Proxy
Statement/Prospectus"), to be filed by SOCO and Santa Fe with the SEC, and any
amendments or supplements thereto, or (b) the Registration Statement on Form S-
4 (the "Registration Statement") to be filed by Santa Fe with the SEC in
connection with the Merger, and any amendments or supplements thereto, will, at
the respective times such documents are filed, and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any
amendment or supplement thereto is first mailed to stockholders of SOCO, at the
time such stockholders vote on approval and adoption of this Agreement and at
the Effective Time, and, in the case of the Registration Statement, when it
becomes effective under the 1933 Act, contain any untrue statement of a
material fact or omit to state any material fact required to be made therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(c) None of the information to be supplied by Santa Fe for inclusion in (a)
the Proxy Statement/Prospectus, to be filed by SOCO and Santa Fe with the SEC,
and any amendments or supplements thereto, or (b) the Registration Statement to
be filed by Santa Fe with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, at the respective times such documents
are filed, and, in the case of the Proxy Statement/Prospectus, at the time the
Proxy Statement/Prospectus or any amendment or supplement thereto is first
mailed to stockholders of Santa Fe, at the time such stockholders vote on
approval and adoption of this Agreement and at the Effective Time, and, in the
case of the Registration Statement, when it becomes effective under the 1933
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be made therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(d) Following receipt by PricewaterhouseCoopers, Santa Fe's independent
auditors, of an appropriate request from SOCO pursuant to SAS No. 72, Santa Fe
shall use all reasonable commercial efforts to cause to be delivered to SOCO a
letter of PricewaterhouseCoopers, dated a date within two business days before
the effective date of the Registration Statement, and addressed to SOCO, in
form and substance reasonably
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satisfactory to SOCO and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy
Statement/Prospectus.
(e) Following receipt by Arthur Andersen LLP, SOCO's independent auditors,
of an appropriate request from Santa Fe pursuant to SAS No. 72, SOCO shall use
all reasonable commercial efforts to cause to be delivered to Santa Fe a letter
of Arthur Andersen LLP, dated a date within two business days before the
effective date of the Registration Statement, and addressed to Santa Fe in form
and substance satisfactory to Santa Fe and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Proxy Statement/Prospectus.
Section 6.11 Stock Exchange Listing. Santa Fe shall use its reasonable
commercial efforts to cause the shares of Santa Fe Common Stock to be issued in
connection with the Merger (and the shares of Santa Fe Common Stock underlying
substitute options) to be listed on the NYSE, subject to official notice of
issuance.
Section 6.12 Employee Benefits. (a) It is the intent of the parties that the
Surviving Corporation will establish, as soon as reasonably practicable on or
after the Effective Time, compensation and employee benefit plan programs for
the continuing employees of the Surviving Corporation that, except as provided
below, will provide similarly situated employees with compensation and benefits
on substantially the same basis to the extent reasonably practicable; i.e.,
employees of Santa Fe and SOCO shall receive levels of employee compensation
and employee benefits which are, in the aggregate (taking into account all
types of direct and indirect compensation, including base compensation,
incentive compensation and benefit plan participation), as comparable as
practicable to other employees of similar position, responsibility, pay grade,
length of service and performance level. Until such programs are established,
the Surviving Corporation shall provide that the continuing employees shall be
eligible to continue to participate (subject to satisfaction of the eligibility
provisions of any such plan) in the respective employee benefit plans of Santa
Fe or SOCO, as the case may be, or shall be eligible to participate in any
combination of such plans or new plans as the Surviving Corporation deems
appropriate. Nothing in this Section 6.12(a) shall prohibit the Surviving
Corporation from maintaining separate or different benefit plans for employees
of Santa Fe and SOCO, from amending, terminating or consolidating any existing
employee benefit plans, or from creating new employee benefit plans, subject in
each case to the continuing applicability of the foregoing provisions of this
Section 6.12(a). The employees of SOCO shall be given credit for their service
with SOCO prior to the Effective Time for all purposes under the compensation
and employee benefit plans of the Surviving Corporation, other than the accrual
of benefits under any defined benefit plan. Notwithstanding the foregoing, any
member of senior management of SOCO continuing employment with the Surviving
Corporation who is receiving compensation and benefits immediately prior to the
Effective Time in excess of that being received at the Effective Time by a
similarly situated Santa Fe employee shall be entitled to continue to receive
such level of compensation and benefits, but shall not be eligible for positive
compensation and benefits adjustments until the compensation and benefits of
such former member of SOCO's senior management are in the aggregate equal to
that received by a similarly situated Santa Fe employee.
(b) An employee of SOCO who (i) is involuntarily terminated after the date
of this Agreement and either on or before, but in contemplation of, the Merger,
or (ii) becomes an employee of the Surviving Corporation and is terminated
within twelve months following the Effective Time, shall be eligible to elect
to receive benefits under either the Santa Fe severance plan or the SOCO
severance plan, but not both plans; provided, however, in no event shall such
employee be entitled to less than 12 weeks severance pay. For purposes of this
Section 6.12(b), the SOCO severance plan shall refer to the SOCO Change in
Control Severance Plan.
(c) Any SOCO employee who is a party to a change in control agreement or
employment agreement ("SOCO Agreement") and is terminated on or prior to the
Effective Time or not offered continuing employment with the Surviving
Corporation shall be entitled to severance benefits only to the extent so
provided by his SOCO Agreement, and shall not be eligible to receive severance
benefits pursuant to Section
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6.12(b). Any SOCO employee who is offered employment with the Surviving
Corporation as a condition thereto shall surrender his SOCO Agreement in
exchange for an employment agreement with Santa Fe ("Santa Fe Agreement")
containing the severance and other terms (other than as to title and
compensation) available to similarly situated employees within Santa Fe. For
purposes of all Santa Fe Agreements issued upon surrender of SOCO Agreements,
(i) the Merger shall be deemed to constitute a "Change in Control" thereunder,
and (ii) for those SOCO employees required to locate to Houston or otherwise
experiencing a "Change in Duties" (as defined under any SOCO Agreement), "Good
Reason" shall be deemed to exist entitling the employee to terminate the
employee's employment with Santa Fe for two years following the Effective Time
and receive the compensation and benefits provided in Paragraph 7(c)(i) of the
Santa Fe Agreements currently in effect.
(d) Following the Effective Time, former SOCO employees (other than William
G. Hargett) who are employed by the Surviving Corporation shall be eligible for
grants, commensurate with grants provided to similarly situated Santa Fe
employees under the applicable stock option plans maintained by the Surviving
Corporation. Notwithstanding the foregoing, persons who were employees of SOCO
immediately prior to the Effective Time (including William G. Hargett) and who
become employees of the Surviving Corporation shall receive an annual grant
during the summer of 1999 on terms as established by past practices of Santa Fe
and commensurate with grants usually provided to similarly situated Santa Fe
employees, regardless of whether Santa Fe employees receive an annual grant
during the summer of 1999, subject to the availability of shares under the
applicable stock option plans of the Surviving Corporation.
Section 6.13 Reasonable Commercial Efforts. Subject to the terms and
conditions of this Agreement, each party will use all reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
Section 6.14 Certain Filings. SOCO and Santa Fe shall cooperate with one
another (i) in connection with the preparation of the Proxy
Statement/Prospectus and the Registration Statement and the filing(s) necessary
under the HSR Act, (ii) in determining whether any action by or in respect of,
or filing with, any governmental body, agency, official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing information required
in connection therewith or with the Proxy Statement/Prospectus, the
Registration Statement or the HSR Act and seeking timely to obtain any such
actions, consents, approvals, waivers or early termination of the applicable
waiting periods under the HSR Act.
Section 6.15 Public Announcements. Santa Fe and SOCO will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby. Except as
may be required by applicable law or any listing agreement with any national
securities exchange as advised by counsel, neither Santa Fe nor SOCO will issue
any such press release or make any such public statement prior to such
consultation.
Section 6.16 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of SOCO or Santa Fe, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of SOCO or Santa Fe, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
SOCO acquired or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger.
Section 6.17 Notices of Certain Events. Each of SOCO and Santa Fe shall
promptly notify the other party hereto of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
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(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge threatened against, relating to or involving or
otherwise affecting such party that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Sections 3.11, 3.12, 3.14, 3.16, 3.20, 4.11, 4.12, 4.14, 4.16 or 4.20 (as
the case may be) or that relate to the consummation of the transactions
contemplated by this Agreement.
Section 6.18 Tax-free Reorganization. Prior to the Effective Time, each
party shall use all reasonable commercial efforts to cause the Merger to
qualify as a 368 Reorganization, and will not take any action reasonably likely
to cause the Merger not to so qualify.
Section 6.19 Affiliates. Within 45 days following the date of this
Agreement, SOCO shall deliver to Santa Fe a letter identifying all known
persons who may be deemed affiliates of SOCO under Rule 145 of the 1933 Act.
SOCO shall use its reasonable commercial efforts to obtain a written agreement
from each person who may be so deemed as soon as practicable and, in any event,
at least 30 days prior to the Effective Time, substantially in the form of
Exhibit A hereto.
Section 6.20 Stockholder Litigation. Each of Santa Fe and SOCO shall give
the other the reasonable opportunity to participate in the defense of any
litigation against Santa Fe or SOCO, as applicable, and its directors relating
to the transactions contemplated by this Agreement.
Section 6.21 Indenture Matters. Santa Fe and SOCO shall, and shall cause
their respective subsidiaries to, take all actions that are necessary or
appropriate (as mutually agreed by Santa Fe and SOCO) in order for the
Surviving Corporation to succeed to, assume, guarantee or modify (as required
or as Santa Fe and SOCO determine to be appropriate) the agreements governing
the outstanding publicly held debt securities of SOCO referred to in the SOCO
SEC Filings in order to avoid defaults thereunder.
ARTICLE VII
Conditions to the Merger
Section 7.01 Conditions to the Obligations of Each Party. The obligations of
SOCO and Santa Fe to consummate the Merger are subject to the satisfaction of
the following conditions:
(a) the SOCO Stockholders' Approval and Santa Fe Stockholders' Approval
shall have been obtained;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(d) the Registration Statement shall have been declared effective and no
stop order suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings for such purpose shall be pending before or
threatened by the SEC; and
(e) the shares of Santa Fe Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
Section 7.02 Conditions to the Obligations of Santa Fe. The obligations of
Santa Fe to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) SOCO shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, each of the representations and warranties of SOCO
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contained in this Agreement and in any certificate or other writing
delivered by SOCO pursuant hereto that is qualified as to materiality shall
be true in all respects and each of those that is not so qualified shall be
true in all material respects at and as of the Effective Time as if made at
and as of such time (except that the accuracy of representations and
warranties that by their terms speak as of a specified date other than as
of the date of this Agreement will be determined as of such specified date)
and Santa Fe shall have received a certificate signed by an executive
officer of SOCO (which certificate shall not impose any personal liability
on such officer) to the foregoing effect;
(b) All proceedings to be taken by SOCO in connection with the
transactions contemplated by this Agreement and all documents, instruments
and certificates to be delivered by SOCO in connection with the
transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to Santa Fe and its counsel;
(c) Santa Fe shall have received an opinion of Andrews & Kurth LLP in
form and substance reasonably satisfactory to Santa Fe, on the basis of
certain facts, representations and assumptions set forth in such opinion,
dated the Effective Time, to the effect that (i) the Merger will be treated
for federal income tax purposes as a 368 Reorganization, (ii) Santa Fe and
SOCO will each be a party to that reorganization and (iii) no gain or loss
will be recognized by Santa Fe or SOCO by reason of the Merger.
Section 7.03 Conditions to the Obligations of SOCO. The obligations of SOCO
to consummate the Merger are subject to the satisfaction of the following
further conditions:
(a) Santa Fe shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, each of the representations and warranties of Santa Fe
contained in this Agreement and in any certificate or other writing
delivered by Santa Fe pursuant hereto that is qualified as to materiality
shall be true in all respects and each of those that is not so qualified
shall be true in all material respects at and as of the Effective Time as
if made at and as of such time (except that the accuracy of representations
and warranties that by their terms speak as of a specified date other than
as of the date of this Agreement will be determined as of such specified
date) and SOCO shall have received a certificate signed by an executive
officer of Santa Fe (which certificate shall not impose any personal
liability on such officer) to the foregoing effect;
(b) All proceedings to be taken by Santa Fe in connection with the
transactions contemplated by this Agreement and all documents, instruments
and certificates to be delivered by Santa Fe in connection with the
transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to SOCO and its counsel; and
(c) SOCO shall have received an opinion of Vinson & Elkins L.L.P., in
form and substance reasonably satisfactory to SOCO, on the basis of certain
facts, representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that (i) the Merger will be treated for
federal income tax purposes as a 368 Reorganization, (ii) Santa Fe and SOCO
will each be a party to that reorganization, (iii) no gain or loss will be
recognized by SOCO by reason of the Merger, and (iv) no gain or loss will
be recognized by holders of SOCO Common Stock by reason of the Merger upon
the conversion of shares of SOCO Common Stock into Santa Fe Common Stock,
except with respect to cash received in lieu of fractional shares.
ARTICLE VIII
Termination
Section 8.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the Board of Directors of SOCO or Santa Fe or the
stockholders of SOCO or Santa Fe):
(a) by mutual written agreement of SOCO and Santa Fe;
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(b) by either SOCO or Santa Fe, if
(i) the Effective Time of the Merger shall not have occurred on or
before June 30, 1999; provided that the right to terminate this
Agreement pursuant to this Section 8.01(b)(i) shall not be available to
any party whose breach of any covenant or agreement of such party
results in the failure of the Merger to be consummated by such time;
(ii) there shall be any law, rule or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining any party from
consummating the Merger is entered and such judgment, injunction, order
or decree shall have become final and non-appealable; or
(iii) if, at a duly held meeting of stockholders or at any
adjournment or postponement thereof, the SOCO Stockholders' Approval or
the Santa Fe Stockholders' Approval referred to in Section 3.23 and
Section 4.23, respectively, shall not have been obtained by reason of
the failure to obtain the requisite vote;
(c) by SOCO if there has been a breach by Santa Fe of (i) any
representation, warranty, covenant or agreement set forth in this Agreement
such that the condition set forth in Section 7.03(a) would not be satisfied
if the Effective Time were deemed to occur on the date notice of such
breach is given by SOCO to Santa Fe, which breach has not been cured in all
material respects within 20 business days following receipt by Santa Fe of
notice of such breach (a "Santa Fe Breach");
(d) by Santa Fe, if there has been a breach by SOCO of (i) any
representation, warranty, covenant or agreement set forth in this Agreement
such that the condition set forth in Section 7.02(a) would not be satisfied
if the Effective Time were deemed to occur on the date notice of such
breach is given by Santa Fe to SOCO, which breach has not been cured in all
material respects within 20 business days following receipt by SOCO of
notice of such breach (a "SOCO Breach");
(e) by Santa Fe, if (i) the Board of Directors of SOCO withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Santa Fe or shall have resolved to do any of the
foregoing or the Board of Directors of SOCO shall have recommended to the
stockholders of SOCO any SOCO Acquisition Proposal or resolved to do so; or
(ii) a tender offer or exchange offer for outstanding shares of capital
stock of SOCO then representing 50% or more of the power to vote generally
for the election of directors is commenced, and the Board of Directors of
SOCO does not, within the applicable period required by law, recommend that
stockholders not tender their shares into such tender or exchange offer;
(f) by SOCO, if (i) the Board of Directors of Santa Fe withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to SOCO or shall have resolved to do any of the foregoing or
the Board of Directors of Santa Fe shall have recommended to the
stockholders of Santa Fe any Santa Fe Acquisition Proposal or resolved to
do so; or (ii) a tender offer or exchange offer for outstanding shares of
capital stock of Santa Fe then representing 50% or more of the power to
vote generally for the election of directors is commenced, and the Board of
Directors of Santa Fe does not, within the applicable period required by
law, recommend that stockholders not tender their shares into such tender
or exchange offer;
(g) by SOCO or Santa Fe, if SOCO accepts a Superior SOCO Acquisition
Proposal and makes payment of the SOCO Termination Fee and the Expenses
required by Section 6.04(c); provided, however, that SOCO shall not be
permitted to terminate this Agreement pursuant to this Section 8.01(g)
unless (i) it has complied with the requirements of Section 6.02(b), (ii)
it has provided Santa Fe with two business days prior written notice of its
intent to so terminate this Agreement together with a detailed summary of
the terms and conditions of such Superior SOCO Acquisition Proposal, (iii)
prior to any such termination, SOCO shall, and shall cause its respective
financial and legal advisors to, use all reasonable commercial efforts to
negotiate in good faith with Santa Fe to make such adjustments in the terms
and conditions of this Agreement as would enable SOCO to proceed with the
transactions contemplated herein, and (iv) the
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SOCO Board of Directors shall have concluded in good faith, after duly
considering advice of outside counsel of SOCO, that notwithstanding all
concessions that may be offered by Santa Fe in the negotiations entered
into pursuant to clause (iii) above, such action is necessary for the SOCO
Board of Directors to act in a manner consistent with its fiduciary duties
under applicable law;
(h) by Santa Fe or SOCO, if Santa Fe accepts a Superior Santa Fe
Acquisition Proposal and makes payment of the Santa Fe Termination Fee and
the Expenses required by Section 6.04(d); provided, however, that Santa Fe
shall not be permitted to terminate this Agreement pursuant to this Section
8.01(h) unless (i) it has complied with the requirements of Section
6.02(a), (ii) it has provided SOCO with two business days prior written
notice of its intent to so terminate this Agreement together with a
detailed summary of the terms and conditions of such Superior Santa Fe
Acquisition Proposal, (iii) prior to any such termination, Santa Fe shall,
and shall cause its respective financial and legal advisors to, use all
reasonable commercial efforts to negotiate in good faith with SOCO to make
such adjustments in the terms and conditions of this Agreement as would
enable Santa Fe to proceed with the transactions contemplated herein, and
(iv) the Santa Fe Board of Directors shall have concluded in good faith,
after duly considering advice of outside counsel of Santa Fe, that
notwithstanding all concessions that may be offered by SOCO in the
negotiations entered into pursuant to clause (iii) above, such action is
necessary for the Santa Fe Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law.
Section 8.02 Effect of Termination. If this Agreement is terminated pursuant
to Section 8.01, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (i) the agreements
contained in this Section 8.02, the last sentence of Section 6.01 and Sections
6.04, 6.10(b), 6.10(c), 6.15, 6.20, 9.01, 9.05, 9.06, 9.07, 9.08, 9.09, 9.10,
9.11, 9.12, 9.13, 9.14 and 9.15 shall survive the termination hereof and (ii)
no such termination shall release any party of any liabilities or damages
resulting from any intentional, reckless or grossly negligent action by that
party resulting in a breach of any provision of this Agreement.
ARTICLE IX
Miscellaneous
Section 9.01 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including, without limitation, facsimile
transmission) and shall be given,
If to Santa Fe, to:
Santa Fe Energy Resources, Inc.
1616 South Voss Road
10th Floor
Houston, Texas 77057
Attention:David L. Hicks
Vice President, Law and General Counsel
Facsimile No.: 713.507.5341
with a copy to:
Andrews & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
Attention: G. Michael O'Leary
Facsimile No.: 713.220.4285
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If to SOCO, to:
Snyder Oil Corporation
777 Main Street
Suite 1400
Fort Worth, Texas 76102
Attention: John H. Karnes
Vice President and General Counsel
Facsimile No.: 817.882.5905
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Jeffrey E. Eldredge
Facsimile No.: 214.999.7708
or such other address or fax number as such party may hereafter specify for the
purpose by notice to the other parties hereto. All such notices, requests and
other communications shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5:00 p.m. in the place of receipt and
such day is a business day in the place of receipt. Otherwise, any such notice,
request or communication shall be deemed not to have been received until the
next succeeding business day in the place of receipt.
Section 9.02 Survival of Representations and Warranties. The representations
and warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time except
for the agreements set forth in Sections 6.03, 6.08(b), 6.08(c), 6.12, 9.05,
9.06, 9.07, 9.08, 9.09 and 9.10.
Section 9.03 Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by each party to this Agreement or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that (i) after the
approval and adoption of this Agreement by the stockholders of SOCO, no such
amendment or waiver shall, without the further approval of such stockholders,
reduce the amount or change the kind of consideration to be received in
exchange for any shares of capital stock of SOCO and (ii) after the approval
and adoption of this Agreement by the stockholders of Santa Fe, no such
amendment or waiver shall, without the further approval of such stockholders,
modify or change the Exchange Ratio in a manner adverse to Santa Fe's
stockholders.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.04 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
Section 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, regardless of
the law that might otherwise govern under applicable principles of conflicts of
law.
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Section 9.06 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought in any
federal court located in Houston, Harris County, Texas or Ft. Worth, Tarrant
County, Texas, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient form. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party as provided in Section
9.01 shall be deemed effective service of process on such party.
Section 9.07 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.08 Attorneys' Fees. If any action at law or equity, including,
without limitation, an action for declaratory relief, is brought to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and expenses from the other
party, which fees and expenses shall be in addition to any other relief which
may be awarded.
Section 9.09 No Third Party Beneficiaries. Except as provided in Section
6.03, 6.08(b), 6.08(c) and 6.12(c), no person or entity other than the parties
hereto is an intended beneficiary of this Agreement or any portion thereof.
Section 9.10 Disclosure Schedule. The disclosures made on any disclosure
schedule, including, without limitation, the SOCO Schedule and the Santa Fe
Schedule, with respect to any representation or warranty shall be deemed to be
made with respect to any other representation or warranty requiring the same or
similar disclosure to the extent that the relevance of such disclosure to other
representations or warranties is evident from the face of the disclosure
schedule. The inclusion of any matter on any disclosure schedule will not be
deemed an admission by any party that such listed matter is material or that
such listed matter has or would have a SOCO Material Adverse Effect or a Santa
Fe Material Adverse Effect, as applicable.
Section 9.11 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
Section 9.12 Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
Section 9.13 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
Section 9.14 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
holding of invalidity, voidness or unenforceability, the parties 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 in order
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
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Section 9.15 Definitions and Usage. (a) For purposes of this Agreement:
"affiliate" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such
person.
"knowledge" of any person which is not an individual means the knowledge of
such person's officers after reasonable inquiry.
"officer" means in the case of Santa Fe and SOCO, any executive officer of
Santa Fe or SOCO, as applicable, within the meaning of Rule 3b-7 of the 1934
Act.
"person" means an individual, corporation, partnership, limited liability
company, association, estate, trust or other entity or organization, including,
without limitation, a government or political subdivision or an agency or
instrumentality thereof.
"subsidiary" means, with respect to any person, any entity of which (i)
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such person or (ii)
such party or any subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company.
"tax" means any income tax or similar assessment or any sales, excise,
occupation, use, ad valorem, property, production, severance, transportation,
employment, payroll, franchise, or other tax imposed by any United States
federal, state or local (or any foreign or provincial) taxing authority,
including, without limitation, any interest, penalties or additions
attributable thereto.
"Treasury Regulations" means one or more treasury regulations promulgated
under the Code by the Treasury Department of the United States.
"WARN Act" means the Federal Worker Adjustment and Retraining Notification
Act of 1988.
A reference in this Agreement to any statute shall be to such statute as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
<TABLE>
<S> <C>
1933 Act......................................................... 3.03
1934 Act......................................................... 3.03
368 Reorganization............................................... 1.02
Certificate of Merger............................................ 1.01(b)
Charter.......................................................... 2.01
Closing.......................................................... 1.10
Closing Date..................................................... 1.10
Code............................................................. Recitals
Confidentiality Agreement........................................ 6.01
Customary Post Closing Consents.................................. 3.03
DGCL............................................................. 1.01(a)
D&O Insurance.................................................... 6.03(b)
Distribution Date................................................ 3.05
Effective Time................................................... 1.01(b)
Environmental Laws............................................... 3.16(c)
Environmental Permits............................................ 3.16(c)
ERISA............................................................ 3.15(a)
Excess Shares.................................................... 1.07
Exchange Agent................................................... 1.05(a)
Exchange Ratio................................................... 1.04(a)
</TABLE>
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<TABLE>
<S> <C>
Expenses...................................................... 6.04(b)
GAAP.......................................................... 3.08
HSR Act....................................................... 3.03
Hazardous Substances.......................................... 3.16(a)(ii)
Hydrocarbons.................................................. 3.20(d)
Indemnified Party............................................. 6.03(a)
International................................................. 3.06
Leases........................................................ 3.20(d)
Lien.......................................................... 3.04
Merger........................................................ Recitals
Merger Consideration.......................................... 1.04(a)
NYSE.......................................................... 1.07
Oil and Gas Contracts......................................... 3.20(d)
Oil and Gas Interests......................................... 3.20(d)
Permits....................................................... 3.11
Proxy Statement/Prospectus.................................... 6.10(b)
Registration Statement........................................ 6.10(b)
Santa Fe Acquisition Proposal................................. 6.02(a)
Santa Fe Agreement............................................ 6.12(c)
Santa Fe Balance Sheet........................................ 4.08
Santa Fe Balance Sheet Date................................... 4.08
Santa Fe Breach............................................... 8.01(c)
Santa Fe Common Stock......................................... 1.04(a)
Santa Fe Employee Plans....................................... 4.15(a)
Santa Fe Intellectual Property Rights......................... 4.19
Santa Fe Material Adverse Effect.............................. 4.06(a)
Santa Fe Plan................................................. 4.05
Santa Fe Preferred Stock...................................... 4.05
Santa Fe Reserve Report....................................... 4.21
Santa Fe Returns.............................................. 4.14
Santa Fe Schedule............................................. Article IV
Santa Fe SEC Filings.......................................... 4.07(a)
Santa Fe Special Meeting...................................... 6.09(b)
Santa Fe Stockholders' Approval............................... 4.23
Santa Fe Stock Options........................................ 1.06(a)
Santa Fe Termination Fee...................................... 6.04(d)
SEC........................................................... 3.07(a)
SOCO Acquisition Proposal..................................... 6.02(b)
SOCO Agreement................................................ 6.12(c)
SOCO Balance Sheet............................................ 3.08
SOCO Balance Sheet Date....................................... 3.08
SOCO Breach................................................... 8.01(d)
SOCO Common Stock............................................. 1.04(a)
SOCO Director Nominees........................................ 6.08(a)
SOCO Employee Plans........................................... 3.15(a)
SOCO Intellectual Property Rights............................. 3.19
SOCO Material Adverse Effect.................................. 3.06(a)
SOCO Plan..................................................... 3.05
SOCO Preferred Stock.......................................... 3.05
SOCO Reserve Report........................................... 3.21
SOCO Returns.................................................. 3.14
</TABLE>
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<TABLE>
<S> <C>
SOCO Schedule................................................. Article III
SOCO SEC Filings.............................................. 3.07(a)
SOCO Special Meeting.......................................... 6.09(a)
SOCO Stock Certificate........................................ 1.04(a)
SOCO Stock Options............................................ 1.06(a)
SOCO Stockholders' Approval................................... 3.23
SOCO Termination Fee.......................................... 6.04(c)
Superior Santa Fe Acquisition Proposal........................ 6.02(a)
Superior SOCO Acquisition Proposal............................ 6.02(b)
Surviving Corporation......................................... 1.01(a)
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SANTA FE ENERGY RESOURCES, INC.
/s/ JAMES L. PAYNE
-------------------------------------
James L. Payne
Chairman of the Board and Chief
Executive Officer
SNYDER OIL CORPORATION
/s/ JOHN C. SNYDER
-------------------------------------
John C. Snyder
Chairman of the Board and Chief
Executive Officer
A-45
<PAGE>
EXHIBIT A
MERGER AGREEMENT
AFFILIATE LETTER
, 1999
TO:
Santa Fe
SOCO
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of , Inc., a Delaware
corporation ("Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms
of the Agreement and Plan of Merger dated as of January , 1999 (the
"Agreement") between Company and Inc., a Delaware corporation ("Parent"),
Company will be merged with and into Parent with Parent to be the surviving
corporation in the merger (the "Merger").
As a result of the Merger, the undersigned will receive shares of Common
Stock, par value $0.01 per share, of Parent (the "Parent Common Stock") in
exchange for shares of Common Stock, par value $0.01 per share, of Company (the
"Company Common Stock") owned by the undersigned immediately prior to the time
of the effectiveness of the Merger.
The undersigned represents, warrants and covenants to Parent and Company
that as of the date the undersigned receives any Parent Common Stock as a
result of the Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. The undersigned has carefully read this letter and discussed the
requirements of this letter and other applicable limitations upon the
undersigned's ability to sell, transfer or otherwise dispose of the Parent
Common Stock to the extent the undersigned felt necessary with the
undersigned's counsel or counsel for Company.
C. The undersigned has been advised that the issuance of Parent Common
Stock to the undersigned pursuant to the Merger will be registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
the undersigned has also been advised that, since at the time the Merger is
submitted for a vote of the stockholders of Company, the undersigned may be
deemed to be an affiliate of Company, the undersigned may not sell,
transfer or otherwise dispose of the Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or
other disposition is made in conformity with Rule 145 promulgated by the
Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Parent, or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer or other
disposition is otherwise exempt from registration under the Act; provided,
however, that, for so long as the undersigned holds any Parent Common Stock
which is subject to the limitations of Rule 145, Parent will use its
reasonable efforts to file all reports required to be filed by it pursuant
to the Securities Exchange Act of 1934, as amended, and the Rules and
Regulations thereunder, as the same shall be in effect at the time, so as
to satisfy the requirements of paragraph (c) of Rule 144 under the Act that
there be available current public information with respect to Parent, and
to that extent to make available to the undersigned the exemption afforded
by Rule 145 with respect to the sale, transfer or other disposition of the
Parent Common Stock.
<PAGE>
D. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of the Parent Common Stock
by the undersigned or on the undersigned's behalf under the Act.
E. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned
set forth herein are for the benefit of Parent, Company and the Surviving
Corporation (as defined in the Merger Agreement) and will be relied upon by
such entities and their respective counsel and accountants.
F. The undersigned understands and agrees that this letter agreement
shall apply to all shares of the capital stock of Parent and Company that
are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws.
The undersigned acknowledges and agrees that appropriate restrictive legends
will be placed on certificates representing Parent Common Stock received by the
undersigned in the Merger or held by a transferee thereof and that "stop
transfer" orders may be entered in the records of the transfer agent for
Parent's Common Stock. Such orders will be removed and such legends will be
removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Parent from independent counsel
reasonably satisfactory to Parent to the effect that such legends are no longer
required to assure compliance with applicable provisions of the Act.
Notwithstanding the foregoing, any such legends will be removed by delivery of
substitute certificates upon written request of the undersigned if at the time
of making such request the undersigned, in the opinion of independent counsel
reasonably satisfactory to Parent, would otherwise be permitted to dispose of
the Parent Common Stock represented by such certificates pursuant to Rule
145(d)(2).
Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of Company as
described in the first paragraph of this letter or as a waiver of any rights
the undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
By: _________________________________
Name: _______________________________
Title: ______________________________
Agreed and accepted this day
of , 1999.
PARENT
By: ___________________________
Name: _________________________
Title: ________________________
Exhibit A-2
<PAGE>
EXHIBIT 6.08(b)
EXECUTIVE OFFICERS OF SURVIVING CORPORATION
<TABLE>
<C> <S>
James L. Payne Chief Executive Officer
Hugh L. Boyt President--International
William G. Hargett President--North America
Duane C. Radke Executive Vice President--Production
Tim S. Parker Executive Vice President--Exploration
Mark A. Jackson Executive Vice President and Chief Financial Officer
Janet F. Clark Executive Vice President--Corporate Development and
Administration
David L. Hicks Vice President and General Counsel
</TABLE>
<PAGE>
ANNEX B
[Letterhead of Donaldson, Lufkin & Jenrette]
January 13, 1999
Board of Directors
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 1000
Houston, TX 77057
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Santa Fe Energy Resources, Inc. (the "Company") and its stockholders of
the consideration to be paid by the Company pursuant to the terms of the
Agreement and Plan of Merger, dated as of January 13, 1999 (the "Agreement"),
by and between Snyder Oil Corporation ("Snyder") and the Company pursuant to
which Snyder will be merged (the "Merger") with and into Santa Fe Energy
Resources, Inc.
Pursuant to the Agreement, each share of common stock, par value $0.01 per
share, of Snyder ("Snyder Common Stock") will be converted, subject to certain
exceptions, into the right to receive 2.05 shares (the "Exchange Ratio") of
common stock, par value $0.01 per share, of the Company ("Santa Fe Common
Stock").
In arriving at our opinion, we reviewed the Agreement. We also reviewed
certain publicly available business and financial information relating to the
Company and Snyder and certain business and financial information, including
certain information as to future financial results, relating to the Company and
Snyder, prepared by the respective managements based on, among other things,
certain estimates of proved and non-proved reserves, projected annual
production of such reserves in certain domestic and international areas and
amounts and timing of the cost savings and operating synergies expected to
result from a combination of the business of the Company and Snyder. We
discussed the historical operating and financial data and performance of the
Company and Snyder with management and operating personnel of each company and
discussed operating and other information prepared by the respective
managements of the Company and Snyder with management and operating personnel
of the Company and Snyder as well as their views of the business, operating and
strategic benefits of the merger, including the amount and timing of cost
savings and operating synergies expected to result from the merger. In
addition, we compared certain financial, operating and securities data of the
Company and Snyder with various other companies that we deemed relevant;
reviewed the historical stock prices and trading volumes of Santa Fe Common
Stock and Snyder Common Stock; compared financial terms of the merger with the
financial terms of certain other transactions that we deemed relevant; and
conducted such other financial studies, analyses and investigations as we
deemed necessary and appropriate for purposes of its opinion.
In rendering our opinion, we relied upon and assumed the accuracy and
completeness of all the financial and other information that was available to
it from public sources and that was provided to us by the Company and Snyder or
their respective representatives. In particular, we relied upon estimates of
the managements of the Company and Snyder of operating synergies achievable as
a result of the merger and its discussion of such synergies with the
managements of the Company and Snyder. With respect to the non-historical
financial information supplied by us, we assumed that such information was
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the managements of the Company and Snyder as to the
future operating and financial performance of each company, respectively. We
did not assume any responsibility for making any independent evaluation of the
Company's and Snyder's assets or liabilities or for making any independent
verification of any of the information reviewed by us.
<PAGE>
In addition, we assumed, in all respects material to our analysis, that the
representations and warranties of each party contained in the merger agreement
were true and correct, that each party will perform all of the covenants and
agreements required to be performed by it under the merger agreement and that
all conditions to the consummation of the merger will be satisfied without
waiver thereof. We also assumed that all material governmental, regulatory or
other consents and approvals will be obtained and that, in the course of
obtaining any necessary governmental, regulatory or other consents and
approvals, or any amendments, modifications, or waivers to any documents to
which either the Company or Snyder is a party, no restrictions will be imposed
or amendments, modifications or waivers made that would have any material
adverse effect on the contemplated benefits to the Company and Snyder of the
merger. In addition, we assumed that the merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which Santa Fe Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company in the past and
has been compensated for such services.
Based upon and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that the Exchange Ratio is fair to the Company
and holders of Santa Fe Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ralph Eads
-------------------------------------
Ralph Eads
Managing Director
Annex B-2
<PAGE>
ANNEX C
[LETTERHEAD OF CHASE SECURITIES INC.]
Chase Securities Inc.
600 Travis Street, 20th Floor
Houston, Texas 77002
January 13, 1999
Board of Directors
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 1000
Houston, Texas 77057
Members of the Board:
You have informed us that Santa Fe Energy Resources, Inc. ("Santa Fe
Energy") and Snyder Oil Corporation ("Snyder Oil") propose to enter into an
Agreement and Plan of Merger, dated as of January 13, 1999 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Snyder Oil with and into Santa Fe Energy pursuant to a transaction in which
each outstanding share of the common stock, par value $0.01 per share, of
Snyder Oil, including the associated preferred stock purchase rights (the
"Snyder Oil Shares") will be converted into the right to receive 2.05 shares
(the "Exchange Ratio") of common stock, par value $0.01 per share, of Santa Fe
Energy, including the associated preferred stock purchase rights (the "Santa Fe
Energy Shares").
You have requested that we render our opinion as to the fairness, from a
financial point of view, to the holders of Santa Fe Energy Shares (other than
Snyder Oil and its affiliates) of the Exchange Ratio in the Merger.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed a draft of the Merger Agreement in the form provided to us
and have assumed that the final form of the Merger Agreement will not vary
in any regard that is material to our analysis;
(b) reviewed certain publicly available business and financial
information that we deemed relevant relating to Snyder Oil and Santa Fe
Energy and the industries in which they operate;
(c) reviewed certain internal non-public financial and operating data
provided to us by or on behalf of the managements of Snyder Oil and Santa
Fe Energy relating to such businesses, including certain forecast and
projection information as to the future financial results of such
businesses, as well as the amount and timing of the cost savings and the
related expenses and synergies expected to result from the Merger (the
"Expected Synergies");
(d) discussed with members of the senior management and representatives
of Snyder Oil and Santa Fe Energy, the operations, historical financial
statements and future prospects (before and after giving effect to the
Merger) of Snyder Oil and Santa Fe Energy, as well as their views of the
business, operational and strategic benefits and other implications of the
Merger, including the Expected Synergies and such other matters as we
deemed necessary or appropriate;
(e) compared the financial and operating performance of Snyder Oil and
Santa Fe Energy with publicly available information concerning certain
other companies we deemed relevant and reviewed the relevant historical
stock prices and trading volumes of the Snyder Oil Shares, the Santa Fe
Energy Shares and certain publicly traded securities of such other
companies;
(f) reviewed the financial terms of certain recent business combinations
and acquisition transactions we deemed relevant to the Merger and otherwise
relevant to our inquiry; and
(g) made such other analyses and examinations as we have deemed
necessary or appropriate.
<PAGE>
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available, for purposes of this opinion, and have further relied upon the
assurances of management of Snyder Oil and Santa Fe Energy that they are not
aware of any facts that would make such information inaccurate or misleading.
We have neither made nor obtained any independent evaluations or appraisals of
the reserves or other assets or liabilities of Snyder Oil or Santa Fe Energy,
nor have we conducted a physical inspection of the properties and facilities of
Snyder Oil or Santa Fe Energy. With respect to the oil and natural gas reserves
of Santa Fe Energy and Snyder Oil, we have relied upon and assumed the accuracy
of the reserve information provided to us by management of Santa Fe Energy and
Snyder Oil. We have assumed that the financial forecast and projection
information and the Expected Synergies provided to or discussed with us by or
on behalf of Snyder Oil and/or Santa Fe Energy have been reasonably determined
on bases reflecting the best currently available estimates and judgements of
the managements of Snyder Oil and Santa Fe Energy as to the future financial
performance of Snyder Oil and Santa Fe Energy, as the case may be, and the
Expected Synergies. We have further assumed that, in all material respects,
such forecasts, projections and Expected Synergies will be realized in the
amounts and times indicated thereby. We express no view as to such forecast or
projection information or the assumptions on which they were based.
We have not been asked to consider, and this opinion does not in any manner
address, the prices at which the Santa Fe Energy Shares or Snyder Oil Shares
will actually trade following the announcement or consummation of the Merger.
In addition, we were not requested to, and did not, solicit offers from third
parties to acquire all or part of Santa Fe Energy.
For purposes of rendering our opinion, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it
under the Merger Agreement and that all conditions to the consummation of the
Merger will be satisfied without waiver thereof. We have also assumed that all
material governmental, regulatory or other consents and approvals will be
obtained and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either of Snyder Oil or Santa Fe Energy are
party, as contemplated by the Merger Agreement, no restrictions will be imposed
or amendments, modifications or waivers made that would have any material
adverse effect on the contemplated benefits to Snyder Oil and Santa Fe Energy
of the Merger. We have further assumed that the Merger will qualify as a tax-
free reorganization for U.S. federal income tax purposes.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to the
holders of Santa Fe Energy Shares (other than Snyder Oil and its affiliates) of
the Exchange Ratio in the Merger and we express no opinion as to the merits of
the underlying decision by Santa Fe Energy to engage in the Merger. This
opinion does not constitute a recommendation to any holder of Santa Fe Energy
Shares as to how such holder of Santa Fe Energy Shares should vote with respect
to the Merger or any matter related thereto.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to Santa Fe Energy in
connection with the Merger and will receive a fee for our services, including
for rendering this opinion. Our fee that is not payable for rendering this
opinion is contingent on the consummation of the Merger or the termination of
the Merger Agreement under circumstances where Santa Fe Energy is entitled to
the payment of a fee pursuant to Section 6.04(c) of the Merger Agreement. In
addition, Santa Fe Energy has agreed to indemnify us for certain liabilities
arising out of our engagement. As we have previously advised you, The Chase
Manhattan Corporation and its affiliates, including Chase Securities Inc., in
the ordinary course of business, have, from time to time, provided, and in the
future may continue to provide, commercial and/or investment banking services
to Santa Fe Energy and Snyder Oil, including serving as agent bank under Santa
Fe Energy's senior credit facility. In the ordinary
Annex C-2
<PAGE>
course of business, we or our affiliates may trade in the debt and equity
securities of Santa Fe Energy and Snyder Oil for our own accounts and for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the Exchange Ratio in the Merger is fair, from a financial
point of view, to the holders of Santa Fe Energy Shares (other than Snyder Oil
and its affiliates).
This opinion is for the use and benefit of the Board of Directors of Santa
Fe Energy in its evaluation of the Merger and shall not be used for any other
purpose without the prior written consent of Chase Securities Inc.
Very truly yours,
/s/ Chase Securities Inc.
-------------------------------------
CHASE SECURITIES INC.
Annex C-3
<PAGE>
ANNEX D
[Letterhead of Petrie Parkman & Co.]
January 13, 1999
The Board of Directors
Snyder Oil Corporation
777 Main Street
Fort Worth, TX 76102
Members of the Board:
Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa Fe"), and
Snyder Oil Corporation, a Delaware corporation ("Snyder"), propose to enter
into an agreement and plan of merger, dated as of January 13, 1999 (the "Merger
Agreement"), which provides for, among other things, the merger (the "Merger")
of Snyder with and into Santa Fe. Upon consummation of the Merger, each share
of common stock, par value $0.01 per share, including all of the associated
preferred stock purchase rights (the "Snyder Common Stock"), of Snyder issued
and outstanding immediately prior thereto (other than Snyder Common Stock held
by Snyder as treasury stock or owned by Santa Fe or any of its subsidiaries)
will be converted into the right to receive 2.05 shares (the "Exchange Ratio")
of common stock, par value $0.01 per share (the "Santa Fe Common Stock"), of
Santa Fe.
You have requested our opinion as to whether the Exchange Ratio is fair from
a financial point of view to the holders of Snyder Common Stock.
In arriving at our opinion, we have, among other things:
1. reviewed certain publicly available business and financial information
relating to Snyder and Santa Fe, including (a) the Annual Reports on
Form 10-K and related audited financial statements for the fiscal year
ended December 31, 1997, (b) the unaudited financial statements for the
fiscal quarters ended March 31, 1998, June 30, 1998, and September 30,
1998, (c) the unaudited financial statements of Snyder for the year to
date period ended October 31, 1998, which includes an income statement
for the month of October 1998, prepared by the management of Snyder, (d)
a projection dated December 14, 1998 of the balance sheet of Snyder as
of December 31, 1998 and the related income statement for the year ended
December 31, 1998, prepared by the management of Snyder, (e) a
projection dated December 16, 1998 of the balance sheet of Santa Fe as
of December 31, 1998, prepared by the management of Santa Fe, and (f) a
projection dated December 16, 1998 of the income statement for the
fiscal quarter ended December 31, 1998, prepared by the management of
Santa Fe;
2. reviewed certain estimates of Snyder's reserves, including (a) estimates
of proved oil and gas reserves prepared by Netherland, Sewell &
Associates, Inc. as of December 31, 1997, (b) unaudited proved,
probable, possible and other oil and gas reserves prepared by the
management and staff of Snyder as of June 30, 1998, and (c) preliminary
estimates of proved, probable, possible and other oil and gas reserves
prepared by the management and staff of Snyder as of December 31, 1998;
3. reviewed certain estimates of Santa Fe's reserves, including (a)
preliminary estimates of proved, probable and possible oil and gas
reserves of Santa Fe in the United States offshore Gulf of Mexico,
onshore United States Gulf Coast, and Argentina prepared by Ryder Scott
Petroleum Engineers as of
[Petrie Parkman & Co.]
<PAGE>
January 1, 1999, (b) preliminary estimates of proved, probable and
possible oil and gas reserves of Santa Fe in the Jabung field in
Indonesia prepared by DeGolyer and MacNaughton as of October 31, 1998,
and (c) preliminary estimates of proved, probable, possible and other
oil and gas reserves of Santa Fe prepared by the management and staff of
Santa Fe as of January 1, 1999;
4. analyzed certain historical and projected financial and operating data
of Snyder and Santa Fe prepared by the management of Snyder and Santa
Fe, respectively;
5. discussed the current and projected operations and prospects of Snyder
and Santa Fe with the management and operating staff of Snyder and Santa
Fe, respectively;
6. reviewed the historical trading history of the Snyder Common Stock and
the Santa Fe Common Stock;
7. compared recent stock market capitalization indicators for Snyder and
Santa Fe with the recent stock market capitalization indicators for
certain other publicly traded independent energy companies;
8. compared the financial terms of the Merger with the financial terms of
certain other transactions that we deemed to be relevant;
9. reviewed a draft dated January 13, 1999 of the Merger Agreement; and
10. reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
have deemed necessary or appropriate.
In preparing our opinion, we have assumed and relied upon, without assuming
any responsibility for verification, the accuracy and completeness of any
information supplied or otherwise made available to us by Snyder and Santa Fe.
We have further relied upon the assurances of the management of Snyder and
Santa Fe that they are unaware of any facts that would make the information
provided to us incomplete or misleading in any material respect. With respect
to projected financial and operating data, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgment of the management of Snyder and Santa Fe, respectively, relating
to the future financial and operational performance of Snyder and Santa Fe.
With respect to the estimates of oil and gas reserves, we have assumed that
they have been reasonably prepared on bases reflecting the best available
estimates and judgments of Snyder and Santa Fe or their respective engineering
consultants relating to the oil and gas properties of Snyder and Santa Fe,
respectively. We have not made an independent evaluation or appraisal of the
assets or liabilities of Snyder or Santa Fe nor, except for the estimates of
oil and gas reserves referred to above, have we been furnished with such an
evaluation or appraisal. Consistent with the Merger Agreement, we have assumed
that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended.
Our opinion relates solely to the fairness, from a financial point of view,
of the Exchange Ratio. This opinion is for the use and benefit of the Board of
Directors of Snyder and does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the Merger. We have not
been asked to consider, and this opinion does not address, the after-tax
consequences of the Merger to any particular stockholder of Snyder or the
price at which the Santa Fe Common Stock will actually trade following the
announcement or consummation of the Merger. As you are aware, we have acted as
financial advisor to Snyder and we will receive a fee from Snyder, a
substantial portion of which is contingent upon the consummation of the
Merger. We have also, in the past, provided financial advisory services to
Santa Fe and Snyder and have received customary fees for such services.
Our opinion is rendered on the basis of conditions in the securities
markets and the oil and gas markets prevailing as of the date hereof and the
condition and prospects, financial and otherwise, of Snyder and Santa Fe as
they have been represented to us as of the date hereof or as they were
reflected in the materials and discussions described above.
Annex D-2
<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair from a financial point of view to the
holders of Snyder Common Stock.
Very truly yours,
/s/ Petrie Parkman
PETRIE PARKMAN & CO., INC.
Annex D-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
All capitalized terms used and not defined in Part II of this registration
statement shall have the meanings assigned to them in the Prospectus which
forms a part of this registration statement.
Item 20. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 or in the defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
by Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators; and empowers the corporation to purchase and maintain insurance
on behalf of a director or officer of the corporation against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
II-1
<PAGE>
Article NINTH of Santa Fe's Restated Certificate of Incorporation states
that:
"No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however,
that this Article NINTH shall not eliminate or limit the liability
of a director to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived
an improper personal benefit. No amendment to or repeal of this
Article NINTH shall apply to, or have any effect on, the liability
or alleged liability of any director of the Corporation for or with
respect to any facts or omissions of such director occurring prior
to such amendment or repeal. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated
or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended."
Article VI of Santa Fe's Bylaws further provides that Santa Fe shall
indemnify its officers, directors, employees and agents to the fullest extent
permitted by law. Pursuant to such provision, Santa Fe has entered into
agreements with various of its officers, directors and employees which provide
for indemnification of such persons.
Item 21. List of Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of January 13, 1999 between
Snyder Oil Corporation and Santa Fe Energy Resources, Inc. (included
as Annex A to the Joint Proxy Statement/Prospectus).
4.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Form S-2 registration statement of Santa Fe Energy
Resources, Inc. ("Santa Fe") File No. 33-32831).
4.2 Bylaws, as amended September 1, 1998 (incorporated by reference to
Exhibit 3(a) to Santa Fe's Quarterly Report on Form 10-Q for the
period ended September 30, 1998).
4.3 Rights Agreement dated as of March 3, 1997, between Santa Fe and First
Chicago Trust of New York, as Rights Agent (incorporated by reference
to Exhibit 1 to Santa Fe's Form 8-A filed February 28, 1997).
4.4 Form of Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of Santa Fe (incorporated by reference
to Exhibit A to Exhibit 1 to Santa Fe's Form 8-A filed February 28,
1997).
4.5 Form of Indenture dated as of May 25, 1994 and Form of Debenture
relating to Santa Fe's 11% Senior Subordinated Debentures due 2004
(incorporated by reference to Exhibit 4.1 of the Form S-3 registration
statement of Santa Fe File No. 33-52849).
4.6 First Supplemental Indenture, dated as of October 21, 1996, between
Santa Fe and State Street Bank and Trust Company, as Trustee, relating
to Santa Fe's 11% Senior Subordinated Debentures due 2004
(incorporated by reference to Exhibit 10.1 to Santa Fe's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996).
*5.1 Opinion of Andrews & Kurth L.L.P. regarding legality of the securities
to be registered.
*8.1 Opinion of Andrews & Kurth L.L.P. regarding tax matters.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
*8.2 Opinion of Vinson & Elkins L.L.P. regarding tax matters.
*23.1 Consents of Andrews & Kurth L.L.P. (included in the opinions filed as
Exhibits 5.1 and 8.1 to this registration statement).
*23.2 Consent of Vinson & Elkins L.L.P. (included in the opinion filed as
Exhibit 8.2 to this registration statement).
**23.3 Consent of PricewaterhouseCoopers LLP
**23.4 Consent of Arthur Andersen LLP
**23.5 Consent of Ryder Scott Company--Santa Fe
**23.6 Consent of Netherland, Sewell & Associates, Inc.--Snyder
*24.1 Powers of Attorney
*99.1 Consent of Donaldson, Lufkin & Jenrette Securities Corporation--
Santa Fe
*99.2 Consent of Chase Securities, Inc.--Santa Fe
*99.3 Consent of Petrie Parkman & Co., Inc.--Snyder
**99.4 Form of Santa Fe Proxy
**99.5 Form of Snyder Proxy
*99.6 Consent of Nominees
</TABLE>
- --------
*Previously filed
** Filed herewith
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 of this registration
statement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)3 of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
II-3
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plans'
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(5) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus
and furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934 and, where interim
financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause
to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information;
(6) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form;
(7) That every prospectus: (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(8) To respond to requests for information that is incorporated by
reference into this Joint Proxy Statement/Prospectus pursuant to Items
4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request; and
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 30th day of March,
1999.
Santa Fe Energy Resources, Inc.
*
By: _________________________________
James L. Payne
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 30, 1999.
<TABLE>
<S> <C> <C>
</TABLE>
Signature Title
Chairman of the Board, Chief
* Executive Officer and Director
- ----------------------------------- (Principal Executive Officer)
James L. Payne
Senior Vice President and
* Chief Financial Officer
- ----------------------------------- (Principal Financial and
Janet F. Clark Accounting Officer)
Director
*
- -----------------------------------
William E. Greehey
Director
*
- -----------------------------------
Melvyn N. Klein
Director
*
- -----------------------------------
Allan V. Martini
Director
*
- -----------------------------------
Reuben F. Richards
Director
*
- -----------------------------------
Kathryn D. Wriston
Dated March 30, 1999
*By: /s/ David L. Hicks
-------------------------------
David L. Hicks, Attorney-in-
Fact
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of January 13, 1999 between
Snyder Oil Corporation and Santa Fe Energy Resources, Inc. (included
as Annex A to the Joint Proxy Statement/Prospectus).
4.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Form S-2 registration statement of Santa Fe Energy
Resources, Inc. ("Santa Fe") File No. 33-32831).
4.2 Bylaws, as amended September 1, 1998 (incorporated by reference to
Exhibit 3(a) to Santa Fe's Quarterly Report on Form 10-Q for the
period ended September 30, 1998).
4.3 Rights Agreement dated as of March 3, 1997, between Santa Fe and First
Chicago Trust of New York, as Rights Agent (incorporated by reference
to Exhibit 1 to Santa Fe's Form 8-A filed February 28, 1997).
4.4 Form of Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of Santa Fe (incorporated by reference
to Exhibit A to Exhibit 1 to Santa Fe's Form 8-A filed February 28,
1997).
4.5 Form of Indenture dated as of May 25, 1994 and Form of Debenture
relating to Santa Fe's 11% Senior Subordinated Debentures due 2004
(incorporated by reference to Exhibit 4.1 of the Form S-3 registration
statement of Santa Fe File No. 33-52849).
4.6 First Supplemental Indenture, dated as of October 21, 1996, between
Santa Fe and State Street Bank and Trust Company, as Trustee, relating
to Santa Fe's 11% Senior Subordinated Debentures due 2004
(incorporated by reference to Exhibit 10.1 to Santa Fe's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996).
*5.1 Opinion of Andrews & Kurth L.L.P. regarding legality of the securities
to be registered.
*8.1 Opinion of Andrews & Kurth L.L.P. regarding tax matters.
*8.2 Opinion of Vinson & Elkins L.L.P. regarding tax matters.
*23.1 Consents of Andrews & Kurth L.L.P. (included in the opinions filed as
Exhibits 5.1 and 8.1 to this registration statement).
*23.2 Consent of Vinson & Elkins L.L.P. (included in the opinion filed as
Exhibit 8.2 to this registration statement).
**23.3 Consent of PricewaterhouseCoopers LLP
**23.4 Consent of Arthur Andersen LLP
**23.5 Consent of Ryder Scott Company--Santa Fe
**23.6 Consent of Netherland, Sewell & Associates, Inc.--Snyder
*24.1 Powers of Attorney
*99.1 Consent of Donaldson, Lufkin & Jenrette Securities Corporation--
Santa Fe
*99.2 Consent of Chase Securities, Inc.--Santa Fe
*99.3 Consent of Petrie Parkman & Co., Inc.--Snyder
**99.4 Form of Santa Fe Proxy
**99.5 Form of Snyder Proxy
*99.6 Consent of Nominees
</TABLE>
- --------
*Previously filed
** Filed herewith
II-6
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Santa Fe Energy Resources, Inc. of our report dated March 1, 1999
appearing on page 47 of Santa Fe Energy Resources, Inc.'s Annual Report on Form
10-K/A for the year ended December 31, 1998. We also consent to the reference
to us under the heading "Experts" in such Joint Proxy Statement/Prospectus.
/S/ PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 30, 1999
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in Santa Fe Energy Resources, Inc.'s Form S-4 (file No. 333-71595) of
our report dated February 10, 1999, included in Snyder Oil Corporation's Annual
Report on Form 10-K/A for the year ended December 31, 1998, and to all
references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Fort Worth, Texas
March 29, 1999
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum engineers, we hereby consent to the incorporation
by reference in the Joint Proxy Statement/Prospectus constituting part of this
Registration Statement on Form S-4 of Santa Fe Energy Resources, Inc. of our
report in Santa Fe Energy Resources, Inc.'s Annual Report on Form 10-K/A for
the year ended December 31, 1998. We also consent to all references to our firm
in such Joint Proxy Statement/Prospectus.
/s/ Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 30, 1999
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum consultants, we hereby consent to the incorporation
by reference in the Joint Proxy Statement/Prospectus constituting part of this
Registration Statement on Form S-4 of Santa Fe Energy Resources, Inc. of our
report in Snyder Oil Corporation's Annual Report on Form 10-K/A for the year
ended December 31, 1998. We also consent to all references to our firm in such
Prospectus.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
--------------------------------------
Frederic D. Sewell
President
Dallas, Texas
March 30, 1999
<PAGE>
Exhibit 99.4
SANTA FE ENERGY RESOURCES, INC.
PROXY FOR
SPECIAL MEETING OF STOCKHOLDERS
, 1999
This Proxy is solicited on behalf of the Board of Directors. The undersigned
stockholder of Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa
Fe"), hereby appoints James L. Payne and David L. Hicks, or either of them, as
proxies, each with power to act without the other and with full power of
substitution, for the undersigned to vote the number of shares of common stock
of Santa Fe that the undersigned would be entitled to vote if personally
present at the Special Meeting of Stockholders of Santa Fe to be held on
Wednesday, May 5, 1999, at 10:00 a.m., local time, at the St. Regis Hotel
(formerly The Luxury Collection), 1919 Briar Oaks Lane, Houston, Texas 77027,
and at any adjournment or postponement thereof, on the following matters that
are more particularly described in the Joint Proxy Statement/Prospectus dated
, 1999.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted "for" Proposals 1, 2, 3 and 4. Receipt of the Joint Proxy Statement/
Prospectus dated , 1999, is hereby acknowledged.
P R O X Y
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card.
<PAGE>
9349
[X] Please mark your
votes as in this
example.
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
January 13, 1999, between Snyder Oil Corporation and Santa Fe, relating to
the merger of Snyder with and into Santa Fe, with Santa Fe surviving the
merger, including the issuance of shares of Santa Fe common stock in the
merger;
FOR AGAINST ABSTAIN
[_] [_] [_]
2. Proposal to approve, contingent upon the passing of Proposal (1), the change
in the company's name to "Santa Fe Snyder Corporation";
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Proposal to approve, contingent upon the passing of Proposal (1), the
increase in the authorized shares of capital stock to 350,000,000 shares;
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Proposal to elect, subject to the completion of the merger, James E.
McCormick to serve until Santa Fe's 1999 Annual Meeting, Harold R. Logan, Jr.
and Edward T. Story to serve until Santa Fe's 2000 Annual Meeting and John A.
Hill and John C. Snyder to serve until Santa Fe's 2001 Annual Meeting.
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
---------------------------------------------------------
5. To consider and take action upon any other matter which may properly come
before the meeting or any adjournment or postponement thereof.
FOR AGAINST ABSTAIN
[_] [_] [_]
- -----------------------------------------------------------------------------
SIGNATURE(S) DATE
NOTE: Please sign your name exactly as it appears hereon. Joint owners must
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full ti-tle as it appears thereon.
<PAGE>
Exhibit 99.5
SNYDER OIL CORPORATION
PROXY FOR
SPECIAL MEETING OF STOCKHOLDERS
, 1999
This Proxy is solicited on behalf of the Board of Directors. The undersigned
stockholder of Snyder Oil Corporation, a Delaware corporation ("Snyder"),
hereby appoints John C. Snyder and John H. Karnes, or either of them, as
proxies, each with power to act without the other and with full power of
substitution, for the undersigned to vote the number of shares of common stock
of Snyder that the undersigned would be entitled to vote if personally present
at the Special Meeting of Stockholders of Snyder to be held on Wednesday, May
5, 1999, at 10:00 a.m., local time, at the St. Regis Hotel (formerly The Luxury
Collection), 1919 Briar Oaks Lane, Houston, Texas 77027, and at any adjournment
or postponement thereof, on the following matters that are more particularly
described in the Joint Proxy Statement/Prospectus dated , 1999:
(1) Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
January 13, 1999, between Snyder and Santa Fe Energy Resources, Inc., a
Delaware corporation ("Santa Fe"), relating to the merger of Snyder with
and into Santa Fe, with Santa Fe surviving the merger.
[_] FOR [_] AGAINST [_] ABSTAIN
(2) To consider and take action upon any other matter which may properly come
before the meeting or any adjournment or postponement thereof.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed on other side)
(Continued from other side.)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted "for" Proposal 1. Receipt of the Joint Proxy Statement/ Prospectus
dated , 1999, is hereby acknowledged.
----------------------------------------
----------------------------------------
Signature of Stockholder(s)
Please sign your name exactly as it
appears hereon. Joint owners must each
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title
as it appears thereon.
Date: ____________________________, 1999
PLEASE MARK, SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE.
