SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
June 28, 1996
Commission File Number 0-20872
ST. MARY LAND & EXPLORATION COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 41-0518430
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1776 Lincoln Street, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip Code)
(303) 861-8140
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1996, St. Mary Land & Exploration Company (the "Registrant")
purchased a 90 percent interest in certain of the assets of Siete Oil and Gas
Company for a net price of approximately $9.8 million. The acquisition includes
approximately 150 wells in southeast New Mexico and West Texas producing from
the Yates/Queen and Delaware sands at depths of between 3,500 to 5,000 feet. The
acquired reserves are approximately 80 percent oil and have a reserve life of
about 15 years. St. Mary's 90 percent interest equates to current production of
approximately 770 MCFD and 345 BOPD. This acquisition was financed by available
credit under its revolving bank credit agreement with NationsBank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the financial statements
required by this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K,
such financial statements shall be filed by amendment to this Form 8-K no
later than 60 days after July 15, 1996.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial
information required by this Item 7(b). In accordance with Item 7(b) of Form
8-K, such financial statements shall be filed by amendment to this Form 8-K
no later than 60 days after July 15, 1996.
(c) Exhibit.
The Purchase and Sale Agreement between the Registrant and Siete Oil and Gas
is attached hereto as Exhibit 10.42.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
St. Mary Land & Exploration Company
July 15, 1996 By /S/ MARK A. HELLERSTEIN
------------------------
Mark A. Hellerstein
President and Chief Executive Officer
July 15, 1996 By /S/ RICHARD C. NORRIS
----------------------
Richard C. Norris
Vice President - Accounting and
Administration and Chief Accounting
Officer
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EXHIBIT 10.42
PURCHASE AND SALE AGREEMENT
For and in consideration of the sum of $100.00, the mutual promises set
forth herein, together with other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, this Purchase and Sale
Agreement ("this Agreement") is entered into on April 2, 1996, by
SIETE OIL & GAS CORPORATION and OLYMPIC TRADING AND TRANSPORTATION, INC.
("Seller") and ST. MARY LAND & EXPLORATION COMPANY, 1776 Lincoln Street, Suite
1100, Denver, Colorado 80203 ("St. Mary") and RIVERHILL ENERGY CORPORATION, 200
North Loraine, Suite 700, P.O. Box 2726, Midland, Texas 79702-2726 ("Riverhill")
in the respective percentages of 90% and 10%, and who are collectively referred
to herein as ("Purchaser").
1. Effective Date. The purchase and sale contemplated by this
Agreement shall be effective as of January 1, 1996, at 7:00 a.m. Mountain
Standard Time (the "Effective Date").
2. Property. As used in this Agreement, the "Property" shall refer to
all of Seller's right, title and interest in, to and under, or derived from, or
allocable or attributable to, the following:
(a) the oil and gas leases, or oil, gas and mineral leases described
in Exhibit A attached to this Agreement (the "Leases") and all interests
therein or thereunder, including, but not limited to, operating rights,
working interests, leasehold interests, the rights of the original lessee
thereunder, overriding royalty interests, production payments, net profits
interests, other payments out of production, carried interests, and net
revenue interests, insofar and only insofar as the Leases cover, affect or
pertain to the land and the depths or formations therein or thereunder
specifically described in Exhibit "A" attached to this Agreement (the
"Land");
(b) all right, title, and interest now or hereafter acquired by
Seller (which term shall not be deemed to include the shareholders,
directors, officers, or employees of Seller) in the oil, gas and other
wells (the "Wells") and units together with the respective working
interest and net revenue interest for each of the Wells all as described
in Exhibit A-1;
(c) all other interests in the Land, if any, including, but not
limited to, interests in oil, gas and other minerals of any kind or nature
whatsoever in and under or which may be produced from the Land, mineral
interests, royalty interests, nonparticipating mineral or royalty
interests, and reversionary interests, and including all interests in oil,
gas, or other minerals produced, from the Wells or otherwise attributable
to the Leases or Lands on or after the Effective Date, and all rents,
issues, profits, proceeds, products, revenues, and other income from or
attributable to the Property;
(d) all of the presently existing and valid unit or unitization
agreements, communitization or pooling agreements, and the units and
communitized or pooled areas or units created thereby (including, but not
limited to, all units and communitized or pooled areas or units formed
under orders, regulations, rules or other official acts of any
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federal or state governmental agency having jurisdiction) which affect or
relate to the Land, or the Leases insofar as they pertain to the Land, or
which affect or relate to the production therefrom or derived therefrom,
or the production allocable or attributable thereto;
(e) all of the presently existing and valid operating agreements,
farmout agreements, farm-in agreements, assignments, agreements for the
sale or purchase of oil, gas, casinghead gas, or other hydrocarbon
substances, processing agreements, gathering agreements, compression
agreements, transportation agreements, dry hole, bottom hole or acreage
contribution agreements, area of mutual interest agreements, salt water
disposal agreements, servicing contracts, and all other contracts,
agreements, assignments, conveyances and instruments which affect or
relate to the Land, or the Leases insofar as they pertain to the Land, or
which affect or relate to the production therefrom or derived therefrom,
or the production allocable or attributable thereto;
(f) all surface leases, rights-of-way, easements, permits, licenses,
servitudes and all other surface rights and interests appurtenant to,
pertaining to or affecting the Land, or the Leases insofar as they pertain
to the Land, or the production therefrom or derived therefrom, or the
production allocable or attributable thereto;
(g) all property, fixtures, equipment, appurtenances and other
property which is situated upon, appurtenant to, affixed or incidental to,
or is used in connection with, the Land, or the Leases insofar as they
pertain to the Land, together with any and all property, real or personal,
now or hereafter acquired and situated upon, or used, held for use, or
useful in connection with the exploration, development or operation of the
Land, or the Leases insofar as they pertain to the Land, or in connection
with the production, treating, storing, transporting or marketing of oil,
gas and other hydrocarbon substances or other minerals produced therefrom,
derived therefrom, or allocable or attributable thereto, including, but
not limited to, all wells, buildings, structures, separators, pumps,
gathering systems, tanks, tank batteries, valves, fittings, machinery,
parts, engines, boilers, meters, apparatus, appliances, tools, implements,
cables, wires, towers, casing, tubing, rods, pipes, pipelines, power
lines, water lines, flow lines, and all additions, substitutions,
replacements, accessions and attachments to or for any and all of the
foregoing. In addition this transfer of personal property and fixtures
shall include any and all furniture, office supplies, and office equipment
located in the Roswell, New Mexico office, together with any field office
or site of Seller, together with all oil wells, gas wells, injection
wells, or other wells, buildings, structures, equipment, camps, motor
vehicles, and all field equipment, including all rights-of-way, easements
and servitudes, together with all additions, substitutions, replacements,
accessions, and attachments to any and all of the foregoing properties;
(h) all books, records, reports, manuals, files, and title documents
relating to the Property, including correspondence, records of production,
maintenance, revenue, sales, expenses, warranties, lease files, land
files, well files, division order files, abstracts, title opinions,
assignments, maps, engineering, geological, and subject to any
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applicable licensing or confidentiality agreement, all geophysical
information, material and data, together with other files, contracts, and
records and data of Seller relating to the Property and including all
interpretative maps of any kind or character, whether originals,
reproductions, microfilm, or computer records, and wherever located.
3. Purchase and Sale. Seller agrees to sell and convey to Purchaser,
and Purchaser agrees to purchase from Seller, the Property, in accordance with,
and subject to the provisions of this Agreement.
4. Purchase Price. The total cash purchase price for the Property is
$12,400,000.00 ("the Purchase Price"). In Exhibit A attached to this Agreement,
the Property is divided or grouped into separate parcels, tracts, groups or
descriptions. The Purchase Price shall be allocated among the Property in the
manner set forth in Exhibit B attached to this Agreement. The value of each
portion of the Property as reflected in Exhibit B shall be referred to as an
"Allocated Value". This allocation shall be for the purposes of Sections 13 and
14 of this Agreement only, and Purchaser retains the right to internally
allocate values for equipment, property, and production in conformity with its
own accounting and allocation purposes. The Purchase Price shall be paid by
Purchaser to Seller at closing, subject to applicable adjustments provided for
in this Agreement. Payment shall be made in the form of a wire transfer of
immediately available funds to an account or accounts as directed by Seller and
in compliance with Sections 10 and 20. hereof.
5. Earnest Money. Upon the execution of this Agreement by Seller and
Purchaser, Purchaser shall deliver to the Escrow Agent (as defined below in
Section 20) the sum of $500,000.00 as an earnest money deposit ("the Earnest
Money"). The Earnest Money shall be delivered in the form of a Cashier's Check
or by wire transfer of immediately available funds to an account or accounts as
directed by Escrow Agent. The Earnest Money shall be held by the Escrow Agent in
an interest-bearing account, subject to the further provisions of this
Agreement. Except as specifically provided in this Agreement, and until all
applicable conditions have been fulfilled and closing has occurred, Seller shall
have no right or title to, or interest in, the Earnest Money. If closing does
not occur and if Purchaser is not in material breach of any of its
representations, covenants or warranties, the Earnest Money shall be promptly
returned to Purchaser.
6. Condition of Property. Seller makes no warranties or
representations whatsoever regarding the condition, quality or fitness of any of
the Property. Purchaser represents and acknowledges that it is purchasing the
Property as is. SELLER DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE.
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Purchaser acknowledges that it has been cautioned that oil and gas
producing formations may contain naturally occurring radioactive materials
("NORM"). Purchaser further acknowledges that it has been cautioned that
production activities may result in the concentration of certain levels of NORM
or man made material fibers ("MMF") on production facilities, equipment and pipe
so that a health hazard may exist in connection with the removal, handling or
disposal of such NORM or MMF contaminated facilities, equipment or pipe, if
proper environmental, regulatory or industrial hygiene procedures are not
observed. Purchaser further acknowledges and agrees that the presence of NORM or
MMF in or on facilities, equipment or pipe comprising a part of the Property
shall be the sole responsibility of Purchaser from and after the Effective Date.
7. Representations of Seller. The express representations of Seller
contained in this paragraph or otherwise stated in this Agreement are exclusive
and are in lieu of all other representations and warranties, express, implied,
statutory, or otherwise, are based only upon Seller's best information,
knowledge, or belief, and, are made without any warranty whatsoever. In
addition, the sole remedy for any breach of any representation of Seller shall
be in the manner set forth in Sections 13 and 16 of this Agreement, and breach
of any representation or covenant contained herein shall not give rise to any
other claim or cause of action against Seller or its shareholders, directors,
officers, or employees, except that Purchaser does not waive any right it may
have to assert any claim based on actual fraud or intentional tort. Subject to
the foregoing, Seller represents, but does not warrant, that, as of the date of
this Agreement, to the best of its knowledge, information and belief:
(a) Each Seller is a corporation, duly organized, validly existing
and in good standing under the laws of New Mexico and is properly
qualified to do business in the State of New Mexico, and Siete Oil & Gas
Corporation is properly qualified to do business in the State of Texas;
(b) Seller has the requisite power and authority to carry on its
business as presently conducted and has the requisite power and authority
to enter into and perform its obligations under this Agreement; the
consummation of the transactions contemplated by this Agreement will not
conflict with, or result in a violation or breach of, or give rise to any
rights of acceleration or any default under the Articles of Incorporation
or Bylaws of Seller, or any provision of any mortgage, indenture,
contract, material agreement or other instrument to which Seller is a
party or by which any of its material assets are bound or any judgment,
decree, order, statute, rule or regulation applicable to Seller or to
which any material portion of their respective properties and assets are
subject;
(c) Upon the approval of the Board of Directors of Seller, the
execution and delivery of this Agreement will be, and the execution and
delivery of all certificates, documents and instruments required to be
executed and delivered by Seller at the closing, and the consummation of
the transactions contemplated hereby as of the Effective Date will be,
duly authorized by all necessary action.
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(d) Upon the approval by the Board of Directors of Seller, this
Agreement will be duly and validly executed and delivered by Seller and
will constitute a legal, valid and binding obligation of Seller
enforceable against it in accordance with its terms, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium and
similar laws as well as to general principles of equity;
(e) Except as set forth in Exhibit C hereto, no action, suit or
proceeding is pending or threatened before any court or governmental
agency or arbitral body which might have a material adverse effect with
respect to the Property or which seeks to invalidate, enjoin or restrain
the consummation of the transactions contemplated hereby or any action
taken or to be taken in connection therewith;
(f) Subject to the further provisions of this paragraph, each of the
production and expense data and computer printouts or other data or
documentation in any form or medium heretofore furnished or caused to be
furnished by Seller to Purchaser (the "Information"), and any supplement
thereto, was complete and the Information reported therein correct as of
the date of such delivery, and the Information, as of its respective dates
and of the respective dates of its delivery, did not contain a material
misstatement of fact regarding the matters described therein and did not
omit to state therein a material fact necessary to make the statements
therein not misleading, in light of the circumstances under which they
were made. Except as set forth in this Agreement, no representation or
warranty of any kind is made by Seller as to the Information or with
respect to the interests to which the Information relates and Purchaser
expressly agrees that any conclusions drawn therefrom shall be the result
of its own independent review and judgment. The representations contained
in this paragraph shall apply only to matters of fact, and shall not apply
to any information, data, printouts, extrapolations, projections,
documentation, maps, graphs, charts, or tables which reflect, depict,
present, portray, or represent, or which are based upon or derived from,
in whole or in part, matters of interpretation including, but not limited
to, matters of geological, geophysical, engineering, or scientific
interpretation. Seller makes no warranty, and, except as expressly set
forth in this paragraph (f), Seller makes no representation, express,
implied, statutory or otherwise, as to the accuracy or completeness of any
data, reports, records, projections, information or materials now,
heretofore or hereafter furnished or made available to Purchaser, in
connection with this Agreement including, without limitation, any
description of the Property, pricing assumptions, or quality or quantity
of hydrocarbon reserves (if any) attributable to the Property or the
ability or potential of the Property to produce hydrocarbons or any other
matters contained in the proprietary data or any other materials furnished
or made available to Purchaser by Seller or by Seller's agents or
representatives. Any and all such data, records, reports, projections,
information and other materials furnished by Seller or otherwise made
available to Purchaser are provided to Purchaser as a convenience, and
shall not create or give rise
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to any liability of or against Seller except as may be set forth in
Sections 13 and 16 of this Agreement. Any reliance on or use of the same
shall be at the Purchaser's sole risk to the maximum extent permitted by
law.
(g) Seller has not incurred any obligation or liability, contingent
or otherwise, for brokers' or finders' fees in respect of the transactions
contemplated by this Agreement other than a fee which Seller shall pay to
Chemical Securities Inc., Houston, Texas, at or before the closing;
(h) All ad valorem, property, production, severance and similar
taxes and assessments (including applicable penalties and interest, if
any) based on or measured by the ownership of property or the production
of hydrocarbons or the receipt of proceeds therefrom with respect to the
Property for all periods prior to the Effective Date have been properly
paid or at or prior to closing will be paid and all such taxes and
assessments which must be paid prior to the closing shall be properly paid
by Seller;
(i) All royalties, rentals and other payments (including any due by
virtue of any take or pay or other gas contract settlement) due by Seller
under all Leases have been properly and timely paid and all conditions
necessary to keep the same in force have been fully performed;
(j) Seller is not obligated by virtue of any prepayment arrangement
under any contract for the sale of hydrocarbons, including "take or pay"
obligation, imbalance of production or similar provisions or a production
payment or any other arrangement to deliver hydrocarbons from the Property
at some future time without then or thereafter receiving full payment
therefor;
(k) Seller has all material governmental licenses and permits and
has properly made all material filings, necessary or appropriate to obtain
such licenses and permits to own and operate the Property as presently
being owned and operated, and such licenses, permits and filings are in
full force and effect, and no material violations exist in respect of any
such licenses, permits or filings, no proceeding is pending or threatened
looking toward the challenging, revocation or limitation of any such
licenses, permits or filings; and Seller has complied in all material
respects with all laws, rules, regulations, ordinances, codes, orders,
licenses, concessions and permits relating to any of the Property;
(l) Seller has not sold, nor permitted to be sold, any hydrocarbons
in violation of any law, ordinance, rule or regulation pertaining to the
pricing, production, conservation or allocation of hydrocarbons;
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(m) All of the wells in which Seller has an interest by virtue of
its respective ownership of the Property have been drilled and completed
within the boundaries of such Property or within the limits otherwise
permitted by contract, pooling or unit agreement, and by law, and all
drilling and completion of the wells included in the Property have been
conducted in material compliance with all applicable laws, ordinances,
rules, regulations and permits, and judgments, orders and decrees of any
court, tribal or governmental body or agency, and no well included on the
Property is subject to material penalties or allowables after the date
hereof because of any overproduction or any other violation of applicable
laws, rules, regulations or permits or judgments, orders or decrees of any
court or governmental body or agency which would prevent such well from
being entitled to its full legal and regular allowable from and after the
date hereof as prescribed by any court or governmental body or agency;
(n) Seller is not a "public utility holding company" as defined in
the Public Utility Holding Company Act of 1935, as amended;
(o) Seller has not received any pending claims of defaults,
offsets, or cancellations from any lessors with respect to the Leases, and
each of the Leases is in full force and effect in accordance with its
terms;
(p) Except as set forth on Exhibit F attached hereto and made a
part hereof, there are no gas balancing obligations or makeup rights
relating to the Property;
(q) Except as set forth on the attached Exhibits A and A-1 attached
hereto and made a part hereof, the Property is not subject to any back-in
arrangements which will diminish the interests set forth on the attached
Exhibits A and A-1;
(r) There are no surface use or access agreements currently in
force and effect that would materially interfere with oil and gas
operations on the Leases;
(s) Except as specifically set forth on Exhibit G attached hereto
and made a part hereof, none of the Wells included within the Property has
been plugged and abandoned subsequent to the Effective Date;
(t) Either Seller has acquired, or will acquire at or prior to
closing, any and all overriding royalty interests and any right to such
overriding royalty interests previously conveyed to Chemical Bank, or
Chemical Bank will convey such overriding royalty interests directly to
Purchaser at or prior to closing, and the net revenue interests set forth
on the attached Exhibit A-1 reflect the inclusion of such overriding
royalty interests.
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(u) Environmental Matters.
(i) Without limiting the generality or applicability of any
other provision of this Agreement, oil and gas activities on the
Property do not violate any applicable Federal, state, local, or
tribal law (including common law), ordinance, rule, standard,
prohibition, or regulation relating to the environment including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. 9601 et seq., as amended
("CERCLA"), the Resource Conservation and Recovery Act, the Clean
Air Act, the Clean Water Act and the Safe Drinking Water Act, or any
comparable, applicable Texas or New Mexico statute, rule or
regulation (collectively "Environmental Laws"). Seller has timely
filed all required reports, obtained all required approvals and
permits, and generated and maintained all required data,
documentation and records under any applicable Environmental Laws.
(ii) There has not been, and is not occurring, any discharge
or release of any "Hazardous Substances" in, on or around any of the
Property operated by the Seller in violation of any applicable
Environmental Laws and in amounts or concentrations which reasonably
could be expected to give rise to liabilities or obligations
exceeding $15,000 in any instance, or exceeding $75,000 in the
aggregate, net to Seller's interest in the affected property. For
purposes of this Agreement, the term "Hazardous Substances" shall
mean any material regulated or addressed under any applicable
Environmental Law.
(iii) Seller has not sent Hazardous Substances to a site which
pursuant to CERCLA or any similar state law has been placed, or is
proposed to be placed, on the "National Priority List" of hazardous
waste sites or which is subject to a claim, an administrative order
or other request to take any cleanup, removal, or remedial action or
to pay for any costs relating to such site.
(iv) There is no existing naturally occurring radioactive
material (NORM) within the Property exceeding standards imposed by
applicable Environmental Laws.
(v) There are no pending or threatened claims nor any basis
for claims against Seller relating to the Property under applicable
Environmental Laws.
(vi) Seller has not constructed, placed, deposited, stored,
disposed of nor located on the Property any polychlorinated
biphenyls (PCBs) nor transformers, compressors nor other equipment
which contains PCBs, to the extent that the same would be a
violation of any applicable Environmental Laws.
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(v) Except as set forth on Exhibit H attached hereto and made a part
hereof, there are no forward sales, or price hedging arrangements in place
and affecting the Property;
(w) To the extent required by, and in accordance with, rules and
regulations of the Texas Railroad Commission or the New Mexico Oil
Conservation Commission and other applicable laws, rules and regulations
and other obligations imposed upon Seller by contract, Seller has properly
plugged and abandoned all wells, including, but not limited to salt water
disposal wells, which wells were located on the Leases or lands pooled
therewith and which were plugged and abandoned prior to the Effective
Date. Further, Seller has paid the costs of all plugging and abandonment
of wells, all removal of facilities, equipment, and pipelines, and all
restoration of lands or water bottoms, performed by third parties on any
wells, facilities, equipment or pipelines located on the Leases or on
lands or water bottoms pooled or unitized therewith to the extent that
such operations were conducted prior to the Effective Date;
(x) Prior to the Effective Date, and to the extent required by, and
in accordance with, rules and regulations of the Texas Railroad Commission
or the New Mexico Oil Conservation Commission and other applicable laws,
rules and regulations and other obligations imposed upon Seller by
contract, Seller has restored associated or affected surface areas,
conforming to and satisfying the terms and conditions of the said Leases
and/or any agreements, laws, orders, rules, regulations, or permit
obligations pertinent thereto, to the extent that such actions were
required to have been performed by the Effective Date;
(y) Except as set forth on Exhibit I attached hereto and made a part
hereof, the Property does not include any "Inactive Wells". The term
"Inactive Wells" shall mean wells which have not been plugged and which
are not currently (i) being used to produce oil, gas, or hydrocarbon
substances, or (ii) being used for the disposal of salt water or other
substances, or (iii) being used for pressure maintenance or for the
injection of water or other fluids;
8. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller:
(a) St. Mary is duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is or will be by
closing properly qualified to do business in the States of Texas and New
Mexico. Riverhill is duly organized, validly existing and in good standing
under the laws of the State of Texas and is or will be by closing properly
qualified to do business in the States of Texas and New Mexico;
(b) Purchaser has all requisite power and authority, corporate and
otherwise, to carry on its business as presently conducted, to enter into
this Agreement, to purchase
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the Property on the terms described in this Agreement and to perform its
other obligations under this Agreement. The consummation of the
transactions contemplated by this Agreement will not violate, or be in
conflict with, any provisions of Purchaser's Article of Incorporation or
Bylaws, or of Purchaser's agreements or governing documents or any
material agreement or instrument to which Purchaser is a party or by which
it is bound, or any judgment, decree, order, statute, rule or regulation
applicable to Purchaser;
(c) Upon the approval of the Board of Directors of Purchaser the
execution and delivery of this Agreement will be, and the execution and
delivery of all certificates, documents, and instruments required to be
executed and delivered by Purchaser at the closing, and the consummation
of the transactions contemplated hereby as of the Effective Date will be
duly authorized by all requisite action;
(d) Upon the approval of the Board of Directors of Purchaser, this
Agreement will constitute a legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium and
similar laws as well as to general principles of equity;
(e) To the knowledge of Purchaser, no action, suit or proceeding is
pending or threatened before any court or governmental agency which seeks
to invalidate, enjoin or restrain the consummation of the transactions
contemplated hereby, or any action taken or to be taken in connection
therewith;
(f) Purchaser has adequate financial resources to make timely
payment of the Purchase Price and to pay and perform its other obligations
hereunder and all financial statements furnished to Seller accurately
reflect Purchaser's current financial position;
(g) Purchaser has incurred no liability, contingent or otherwise,
for brokers' or finders' fees relating to the transactions contemplated by
this Agreement for which Seller shall have any responsibility whatsoever;
(h) The consummation of the transactions contemplated herein are not
"prohibited transactions" under the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the consummation of the transactions
contemplated herein will not violate any other provisions of ERISA.
(i) Purchaser is relying solely upon its own inspection of the
Property, and, except as provided in this Agreement, if closing occurs
Purchaser shall accept all of the same in their "as is", "where is"
condition.
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(j) Purchaser warrants that it is acquiring the Property for its
sole account and not for resale, in whole or part, to any other person,
firm or entity in any manner that will violate any applicable state or
federal securities law.
(k) Purchaser expressly waives the provisions of Chapter XVII,
Subchapter E, Sections 17.41 through 17.63, inclusive (other than Section
17.555, which is not waived), Vernon's Texas Code Annotated, Business and
Commerce Code (the "Deceptive Trade Practices Act") as well as the
provisions of ss.ss.57-12-1 through 22, inclusive, NMSA (1978) (the
"Unfair Practices Act"); Purchaser acknowledges that this express waiver
shall be considered a material and integral part of this sale and the
consideration thereof, and acknowledges that this waiver has been brought
to the attention of Purchaser and explained in detail and that Purchaser
has voluntarily and knowingly consented to this waiver.
(l) Purchaser acknowledges and understands that the transactions
contemplated by this Agreement are incident and integral to the
liquidation of the assets of the Seller, the winding up of the affairs of
the Seller, and the eventual dissolution of the Seller.
9. Seller's Covenants.
(a) During the period from the date of this Agreement to the
closing, or the termination of this Agreement pursuant to the terms
hereof, Seller will exercise its best efforts to cause the Property to be
developed, maintained and operated in a prudent and workmanlike manner in
accordance with standard oil and gas industry practices;
(b) During the period from the date of this Agreement to the
closing, or the termination of this Agreement pursuant to the terms
hereof, without the prior written consent of Purchaser, Seller will not
(i) abandon or permit the abandonment of any material part of the Property
(except the abandonment of Leases upon the expiration of their respective
primary terms), (ii) commence any material operation on the Property
requiring an authority for expenditure under applicable joint operating
agreements (except emergency operations, and operations required under
presently existing contractual obligations or commitments described in
Exhibit I hereto), or (iii) convey or dispose of any material part of the
Property (other than hydrocarbons produced from the Property in the
ordinary course of business) provided, however, that Purchaser
acknowledges that Seller owns undivided interests in certain of the
Property, and Purchaser agrees that the acts or omissions of parties other
than Seller shall not constitute a violation of the provisions of this
Section nor shall any action required by a vote of working interest owners
other than Seller constitute such a violation so long as Seller has voted
its interest in compliance with the express instructions of Purchaser
which instructions shall be delivered to Seller 24 hours prior to any vote
required of Seller under any applicable operating agreement;
<PAGE>
(c) Seller shall promptly notify Purchaser of any suit, action,
adverse claim, or other proceeding that arises prior to the closing with
respect to which Seller receives actual notice or otherwise has actual
knowledge;
(d) Seller will promptly notify Purchaser of the occurrence of any
event, or the non-occurrence of any event, which would result in the
representations or covenants of Seller herein to be incorrect in any
material respect;
(e) Seller shall exercise all due diligence in safe-guarding and
securely maintaining all engineering, geological and geophysical data,
reports and maps, all other confidential information, in any medium or
form whatsoever, in the possession of Seller relating to the Property;
(f) Seller shall cooperate with Purchaser in order to obtain, prior
to the closing, all other necessary consents and waivers, as the case may
be, of Preferential Rights and similar rights of other parties, including
governmental authorities and agencies, lessors or any other persons or
entities, to purchase any portion of the Property or to prohibit the sale
thereof to Purchaser, and Seller further acknowledges that prior to
closing it shall be Seller's obligation to deal with such third parties in
accordance with the terms of the agreement creating such Preferential
Rights;
(g) Seller shall use all reasonable efforts to maintain its
corporate existence from the date hereof until closing or the termination
hereof, and to assure that as of the closing it will not be under any
material corporate, legal, or contractual restriction (including the
filing of a voluntary petition in bankruptcy or voluntarily seeking
protection from its creditors) that would prohibit or delay the timely
consummation of the transactions contemplated hereby; and
(h) All policies of insurance currently in force and effect and
pertaining to the Property shall be maintained by Seller in full force and
effect through closing.
(i) Seller agrees to provide to Purchaser at or prior to closing,
assurances that the officers, directors, and the holders of a majority of
the outstanding shares of stock of Siete Oil & Gas Corporation will vote
for Purchaser or its designee as operator with regard to any portion of
the Property currently being operated by Siete Oil & Gas Corporation, to
the extent that said parties have the right to vote on such matter.
10. Siete Liens. Portions of the Property may be subject to various
mortgages, deeds of trust, security interests, statutory lien claims, or other
liens or charges against the Property, which were created by Seller or which are
or may be asserted specifically against Seller and Seller's interests in the
Property. Such matters shall be collectively referred to as the "Siete Liens".
Except as set forth below in this Section 10, the existence of any Siete Liens
shall not
<PAGE>
be deemed to be a "Title Defect", nor shall it render Seller's title to the
Property less than "Good and Defensible Title" (as said terms are defined below
in Section 11). Nevertheless, the Property shall be conveyed to Purchaser free
and clear of any Siete Liens. To the extent such information is currently
available, Exhibit D attached hereto sets forth the Siete Liens. If it has not
already done so, as soon as possible after execution of this Agreement, Seller
shall obtain lien searches from all counties in which any portion of the
Property is located, and will identify all Siete Liens. After the lien searches
have been completed, Exhibit D shall be supplemented and updated. Seller will
contact and negotiate with the holders of Siete Liens and will use its best
efforts toward the end that, at closing, as many of the Siete Liens will be
released as possible. For purposes hereof, if there exist any Siete Liens the
enforcement of which is barred or precluded by applicable law, such Siete Liens
shall be deemed to have been released. At closing, the Escrow Agent (defined
below in Section 20) shall use so much of the Purchase Price as may be necessary
to fully pay and satisfy those holders of Siete Liens who have provided releases
to the Escrow Agent, in accordance with the terms of the settlements negotiated
by Seller with such holders. If, at closing, there are unreleased or unsatisfied
Siete Liens the enforcement of which has not been barred or precluded by
applicable law, and with respect to which the holders thereof have not provided
releases, then, subject to the further provisions of this Section 10, such Siete
Liens shall be deemed to be "Title Defects" (defined below in Section 11), and
shall be resolved in accordance with Section 13. Notwithstanding the previous
sentence, neither the $100,000 threshhold nor the 10 day notice requirement set
forth below in Section 13 shall apply to Siete Liens.
11. Title - Due Diligence Review. For purposes of this Agreement, "Good
and Defensible Title" shall mean such title that (i) entitles Seller to receive
and be paid based on not less than the net revenue interests specified in
Exhibit A-1 to this Agreement with respect to each parcel, tract, group or
description, or with respect to any wells described in connection therewith, and
obligates Seller to pay costs and expenses of operation not more than the
working interest specified in Exhibit A-1 (without a proportionate increase in
the corresponding net revenue interest) with respect to each parcel, tract,
group or description, or with respect to any wells in connection therewith; and
(ii) is free and clear of any and all liens and mortgages (other than any Siete
Liens) and free and clear of other encumbrances relating to or affecting
Seller's title or the title to be conveyed to Purchaser as contemplated by this
Agreement. The existence of any "Permitted Encumbrances" (defined below) shall
not be deemed to render Seller's title to the Property less than Good and
Defensible Title.
For purposes of this Agreement, "Permitted Encumbrances" shall mean the
following, but only to the extent that the following do not reduce Seller's net
revenue interests in the Property below the net revenue interests specified in
Exhibit A with respect to each parcel, tract, group, description or well: (i)
lessor's royalties, overriding royalty interests, production payments, net
profits interests, carried interests, reversionary interests and other burdens
on
<PAGE>
production; (ii) unit or unitization agreements, communitization agreements or
pooling agreements, unitization or pooling designations or declarations, and
pooling or unitization orders of any federal or state governmental agency having
jurisdiction; (iii) operating agreements, farmout agreements, assignments,
agreements for the sale or purchase of oil, gas, casinghead gas or other
hydrocarbon substances which have either been disclosed on Exhibit F or which
provide for payment at not less than that otherwise attainable in the area where
the production occurs, processing agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements
which are customary in the oil, gas and mineral exploration and development
business or in the business of processing gas and gas condensate for the
extraction of products therefrom; (iv) preferential rights to purchase, rights
of first refusal, and required third-party consents which are waived, or which
are deemed to be waived, by the time of closing the transaction contemplated by
this Agreement; and (v) all other liens, charges, encumbrances, defects and
irregularities which do not materially interfere with the operation, value or
use of the Property, including, but not limited to, those which are customarily
acceptable to prudent operators and interest owners in the area. Such customary
liens, charges, encumbrances, defects and irregularities include, but are not
limited to, defects in the early chain of title such as the failure to recite
marital status in documents, omission of succession or heirship proceedings,
lack of survey, defects that have been cured by possession under applicable
statutes of limitation, and failure to record releases of liens, production
payments or mortgages that have expired by their terms, to the extent such
matters are not reasonably expected to result in claims that will materially and
adversely affect Purchaser's title to the Property.
For purposes of this Agreement, "Title Defect" shall mean any material
deficiency in one (or more) of the following respects, to-wit:
(a) Seller's title at the Effective Date and at closing, as to one
or more properties, is subject to an encumbrance, irregularity, or defect
in or objection to Seller's title (expressly excluding the Siete Liens and
the Permitted Encumbrances) that renders Seller's title to any portion of
the Property less than Good and Defensible Title;
(b) Seller owns less than the net revenue interest shown on Exhibit
A-1 or is obligated to bear a share of the costs of operation greater than
the working interest shown on Exhibit A-1 without a corresponding
proportionate increase in net revenue interest;
(c) Seller's rights and interests have been or are subject to being
reduced by virtue of the exercise by a third party reversionary or back-in
interest, farm-out of other than wellbore rights, or other similar right
not reflected on Exhibit A-1;
<PAGE>
(d) Seller is in default under some material provision of any of
the Leases, or any of the contracts to which the Leases are subject;
(e) Seller is in Material Breach of any representations or covenants
made herein. A breach shall be a Material Breach if the liability or
diminution in value associated with the matter affected by such breach
shall exceed $15,000 as to any single occurrence, or $75,000 in the
aggregate as to all such events of breach, net to Seller's interest in the
affected property. It is understood and agreed by Seller and Purchaser
these are threshold numbers, not a deductible;
(f) Changes in the gas balancing amounts from those set out on
Exhibit F;
(g) The existence of contracts for the sale of oil or gas including
calls on production, not shown on Exhibit F and which provide for payment
at less than that otherwise reasonably attainable in the area where the
production occurs. For purposes of this Section, any contract which
extends for a term greater than thirty (30) days for oil production or one
(1) year for gas production, or which requires physical payment to be made
more than thirty (30) days after the month in which the oil is produced or
sixty (60) days after the month in which the gas is produced, or which
provides for prices which are less than that attainable in the area where
this production occurs inclusive of any bonus or premium payments which
are customarily made, shall be considered as providing for payment at less
than that otherwise reasonably attainable in the area. Further, with
regard to calls on production, if the effect of such call was not
reflected on the information furnished in the data room, then such call on
production shall be deemed a Title Defect.
(h) There exists an Environmental Defect or Environmental Defects.
Immediately upon execution of this Agreement by Seller and Purchaser,
Seller shall make available to Purchaser all files, records, data and
information of every kind and character in Seller's possession or to which
Seller has reasonable access and which directly relate to the Property, but only
to the extent that Seller may do so without violating any obligation of
confidence or contractual commitment to a third party. Purchaser shall be
permitted to inspect, examine and review such materials. Any Title Defect which
is not brought to the attention of Seller in the manner and within the time
periods set forth in Sections 12 or 13 below shall be deemed to have been waived
by Purchaser.
12. Physical and Environmental Inspection. After the execution of this
Agreement, Purchaser and their authorized representatives shall have physical
access to the Property at Purchaser's sole cost, risk and expense for the
purpose of inspecting the Property, conducting
<PAGE>
such tests, examination, investigations and assessments as may be reasonable and
necessary or appropriate to evaluate the environmental and physical conditions
of the Property, including the identification of wetlands. For those portions of
the Property which are not operated by Seller, Purchaser shall obtain permission
from the operator to conduct such inspections. Seller shall provide all
reasonable assistance in obtaining this permission for Purchaser. Purchaser
shall defend and indemnify Seller and its directors, shareholders, officers,
employees, agents, and contractors from any and all liability, claims, and
causes of action which relate to or arise out of injury to Purchaser's
employees, agents or contractors or to Purchaser's property, and/or injury to
Seller's property, employees, agents or contractors which may arise out of
Purchaser's inspections, but only to the extent of Purchaser's negligence or the
negligence of Purchaser's employees, agents, or contractors. Purchaser agrees to
provide to Seller, upon request, a copy of any environmental assessments,
including any reports, data, and conclusions. Likewise, Seller shall furnish to
Purchaser a copy of any environmental assessments, including any reports, data,
and conclusions pertaining to the Property in the possession of Seller.
Purchaser and Seller shall keep any and all data or information acquired by all
such examinations and results of all analysis of such data and information
strictly confidential and not disclose same to any person or agency without the
prior written approval of both Purchaser and Seller. The foregoing obligation of
confidentiality shall survive closing or termination of this Agreement without
closing.
If, before closing, Purchaser discovers that Seller is not in
compliance with applicable Environmental Laws, and such non-compliance would
adversely affect the value of the Property by $15,000 per occurrence or $75,000
in the aggregate net to Seller's interest in the affected property (an
"Environmental Defect") Purchaser shall give Seller written notice thereof not
later than ten (10) business days prior to closing together with the basis for
such assertion and data in support thereof, and shall furnish Seller with any
proposed reduction in the Purchase Price attributable to each such matter.
Environmental Defects shall be resolved under the provisions of Paragraph 13.
Any Environmental Defect which is not brought to Seller's attention in the
manner and within the time period set forth above shall be deemed to have been
waived by Purchaser.
13. Purchase Price Adjustments. Purchaser may, by delivery of written
notice in good faith to Seller of the existence of a Title Defect, request
reduction of the Purchase Price for the property affected. Seller may in good
faith request an increase in the Purchase Price of a property by delivery to
Purchaser of written notice that the net revenue interest actually owned by
Seller therein is greater than that shown on Exhibit A-1. Provided however, an
adjustment in the Purchase Price pursuant to this Section 13 shall be made only
if the total net value of all adjustments claimed by the affected party (either
Seller or Purchaser), net to Seller's interest in the affected property, is
greater than $100,000.00 exclusive of exercised preferential rights to purchase
or rights of first refusal, but inclusive of other necessary consents or
approvals which
<PAGE>
are refused, as described in Section 14. This $100,000.00 sum is a threshold,
and assuming it is exceeded, the party entitled to the adjustment shall have the
adjustment in its favor by the total amount of the adjustment, including this
initial $100,000.00.
Any such notice by Purchaser or Seller shall include appropriate evidence
to substantiate its position and shall be delivered to the other party on or
before ten (10) business days prior to closing. After said date Purchaser shall
be deemed to have fully inspected and accepted the Property "as is" in their
then current physical and environmental condition and the Property shall be
deemed to be free of Title Defects except for those with respect to which notice
has been given in the manner and within the time period above provided.
Upon timely delivery of a notice by Purchaser of Title Defects aggregating
in excess of $100,000.00, as provided above, Seller shall elect one of the
following options with respect to each Title Defect separately:
(a) attempt to cure the Title Defect at Seller's sole cost and
expense within sixty (60) days after receipt of the notice; if Seller
elects this option but is unsuccessful in curing the Title Defect, seller
may then elect option (b), (c) or (d), below, as is appropriate;
(b) subject to Seller's rights under option (c), below, agree to a
mutually acceptable Purchase Price reduction based on the following:
(i) if the Title Defect is an Environmental Defect, the amount
of the Purchase Price reduction shall not be limited to the
Allocated Value for the affected portion of the Property, but rather
shall be equal to the costs reasonably associated with curing such
Environmental Defect;
(ii) except as provided in the preceding sentence with regard
to an Environmental Defect, the Purchase Price adjustment to resolve
the Title Defect shall be based on the reasonably estimated
diminution of value to the affected Property, not to exceed the
Allocated Value, if any, and to the extent possible, shall be
determined in good faith and in accordance with the following
guidelines for the Title Defects specifically described therein:
(1) If a Title Defect is based upon notice that Seller
owns a different net revenue interest or working interest than
that shown on Exhibit A-1, then the value for the portion of
the Property affected shall be reduced or increased (as the
case may be) proportionately to reflect the changes in the net
revenue and working interest from those shown on
<PAGE>
Exhibit A-1, and the Purchase Price shall be reduced or
increased accordingly.
(2) If a Title Defect is a lien, encumbrance or other
charge upon a property which is liquidated in amount, then the
sum necessary to be paid to the obligee to remove the Title
Defect from the affected property shall be deducted from the
Purchase Price. If a Title Defect represents an obligation or
burden upon the affected property for which the economic
detriment to Purchaser is not liquidated but can be estimated
with reasonable certainty, the adjustment shall be the sum
necessary to compensate Purchaser at closing for the adverse
economic effect which such Title Defect will have on the
affected property. If there is a lien or encumbrance in the
form of a judgment secured by a supersedeas bond or other
security approved by the court issuing such order, it shall
not be considered a Title Defect under this Agreement.
Notwithstanding the existence of any bond or other security,
if the judgment affecting a portion of the Property shall,
upon becoming final, result in Seller being divested of its
ownership position in this portion of the Property, then this
judgment shall be considered a Title Defect under this
Agreement and the Purchase Price adjusted accordingly.
(c) if the parties acting in good faith cannot agree as to either
the existence of a Title Defect or the amount of the reduction in the
Purchase Price as contemplated by (b) above, or if the Purchase Price
reduction for any portion of the Property under option (b), above, equals
or exceeds the Allocated Value of the affected portion, Seller may remove
the portion of the Property affected by the Title Defect from the sale and
the Purchase Price shall be reduced by the Allocated Value attributable to
the portion of the Property so removed, or
(d) terminate this Agreement without liability to Purchaser provided
that Seller may not terminate this Agreement unless the aggregate value of
all Purchase Price downward adjustments resulting from the good faith
application of this Section 13 exceeds One Million Five Hundred Thousand
Dollars ($1,500,000.00) exclusive of exercised preferential rights to
purchase or rights of first refusal, but inclusive of other necessary
consents or approvals which are refused. In the event of such termination,
Escrow Agent shall return the Earnest Money to Purchaser.
The parties shall use their best efforts to reach an agreement as to the
existence and resolution of all Title Defects no later than two (2) business
days prior to closing.
<PAGE>
In the event a third party exercises an applicable preferential right to
purchase, the Purchase Price shall be reduced by the Allocated Value of the
portion of the Property affected and closing shall occur as to the remainder of
the Property.
Including Purchase Price adjustments attributable to the exercise of any
preferential right to purchase, in the event the net amount of the Purchase
Price adjustments downward exceeds Two Million Dollars ($2,000,000.00) then
Purchaser may, upon written notice to the Seller, terminate this Agreement and
the same shall be of no further force and effect. In the event of such
termination, Escrow Agent shall return the Earnest Money to Purchaser.
14. Preferential Rights to Purchase and Related Matters. Certain portions
of the Property may be subject to preferential rights to purchase or rights of
first refusal, or similar rights, in favor of third parties. In addition, any
conveyance of certain portions of the Property may be subject to the approval or
consent of third parties. Seller has used its best efforts to identify and
describe in Exhibit E attached hereto all such rights and necessary consents or
approvals, and, to the best of Seller's knowledge, information and belief, there
are no such rights, consents or approvals other than those set forth on Exhibit
E. However, Seller does not warrant this to be the case, and it is possible that
Purchaser's due diligence review under Section 11 could turn up additional
rights, consents or approvals. Upon execution of this Agreement by Seller and
Purchaser, Seller shall immediately provide any required notices to the holders
of such preferential rights or rights of first refusal in accordance with the
documents which created such rights, or shall request any required approvals or
consents. The values to be assigned to said portions of the Property for
purposes of giving notice shall be the respective Allocated Values for those
portions of the Property reflected on Exhibit "B" attached to this Agreement.
Subject to the provisions of Section 13 above, if any holder of a preferential
right to purchase or a right of first refusal exercises such right, or if by
closing there exists any unwaived, unexercised preferential right to purchase or
right of first refusal which has not expired, or if a necessary approval or
consent is refused, the affected property shall be deleted from this Agreement,
and Purchaser shall not be relieved of its obligation to purchase the remainder
of the Property. In such event, however, the Purchase Price shall be reduced by
the amount of the Allocated Value of those portions of the Property with respect
to which preferential rights to purchase or rights of first refusal have been
exercised, or with respect to which there exist unwaived, unexercised and
unexpired preferential rights to purchase or rights of first refusal, or with
respect to which necessary approvals or consents have been refused. If Purchaser
receives a reduction in the Purchase Price as a result of the existence of any
unwaived, unexercised preferential right to purchase which has not expired as of
closing, the portion of the Property affected thereby shall be conveyed to
Purchaser upon either the waiving or expiration of the right to exercise such
preferential right to purchase, and Purchaser shall concurrently remit the
Allocated Value attributable to such portion of the Property to Seller or
Chemical Bank, if so directed by Seller.
<PAGE>
15. Conveyance Documents. At the closing the Property, or those portions
of the Property which are being purchased by Purchaser, shall be conveyed to
Purchaser or its designee using the form of assignment which is attached to this
Agreement as Exhibit J. In addition, Seller shall execute a sufficient number of
conveyances or assignments on official forms as may be necessary to satisfy the
regulatory requirements of any pertinent governmental agency or authority,
including, but not limited to, the United States Bureau of Land Management, the
New Mexico State Land Office, or the Texas General Land Office. Any assignment
and bill of sale, deed, lease or other conveyance executed pursuant hereto shall
be without any warranty or representation of title, either express, implied,
statutory or otherwise, but shall include language sufficient to convey any
after acquired interests of Seller in the Property, and shall be without any
express, implied, statutory or other warranty or representation as to the
condition, quantity, quality, fitness for a particular purpose, conformity to
models or samples of materials or merchantability of any of the equipment or its
fitness for any purpose, and without any other express, implied, statutory or
other warranty or representation whatsoever.
16. Conditions of Closing by Purchaser. The obligation of Purchaser to
close is subject to the satisfaction of the following conditions:
(a) Purchaser shall have had reasonable access during normal
business hours to all data and records obligated to be provided Purchaser
as provided herein;
(b) Purchaser shall have had reasonable access to the Leases and
equipment included in the Property to conduct an inspection for all
purposes, including environmental condition;
(c) Seller shall not be in Material Breach (as that term is defined
in paragraph (e) of Section 11) of its representations and covenants as
contained in this Agreement (except that this condition shall not apply to
any representation or covenant for which there has been a price adjustment
under Sections 13 or 14, or which has been waived by Purchaser), and
Seller shall have performed and satisfied all agreements and covenants in
all material respects required by this Agreement to be performed and
satisfied by Seller;
(d) Seller shall have obtained and delivered to Purchaser (i) all
prerequisite waivers of preferential rights of purchase and (ii) all
necessary consents for transfer of the Property, except those which by
their nature cannot be requested or obtained until after closing, or
except those with respect to which Purchaser and Seller shall have
adjusted the Purchaser Price in accordance with the provisions of Section
14 of this Agreement;
<PAGE>
(e) No suit or other proceeding shall be pending or threatened
before any court or governmental agency seeking to restrain, prohibit, or
declare illegal, or seeking substantial damages in connection with the
transaction contemplated hereby; and
(f) No material adverse change in the condition of or title to the
Property shall have occurred subsequent to the Effective Date, except
depletion through normal production within authorized allowables, ordinary
changes in rates of production, and depreciation of equipment through
ordinary wear and tear.
17. Conditions of Closing by Seller. The obligation of Seller to close
is subject to the satisfaction of the following conditions:
(a) All representations of Purchaser contained in this Agreement
shall be true, correct, and not misleading in all material respects, and
Purchaser shall have performed and satisfied all agreements and covenants
in all material respects required by this Agreement to be performed and
satisfied by Purchaser;
(b) No suit or other proceeding shall be pending or threatened
before any court or governmental agency seeking to restrain, prohibit, or
declare illegal, or seeking substantial damages in connection with the
transaction contemplated hereby.
Neither party shall be obligated to close until all necessary filings have
been made and all waiting periods have expired under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
18. Preliminary Closing Statement. To the extent that necessary
information is then available, Seller shall prepare and furnish to Purchaser at
least two (2) business days prior to closing a preliminary closing statement
setting forth the adjustments to the Purchase Price to be paid by Purchaser at
closing. Such statement shall reflect each adjustment and the calculation used
to determine such amount. The preliminary adjusted Purchase Price shall mean the
Purchase Price adjusted as provided herein, including but not limited to, Title
Defects, Environmental Defects, interest variances, gas imbalances, operating
expense and revenues attributable to the Interests being conveyed on and after
the Effective Date. Insofar as concerns operating expenses and revenues
attributable to the Property subject to closing for the period from the
Effective Date through closing, for purposes of the preliminary closing
statement, Purchaser shall receive a net adjustment for estimated operating
expense and revenues for those periods for which the actual amounts cannot be
determined at closing. Final adjustments to the actual gas balancing, expenses
incurred and revenues received shall be taken into account on the Final
Statement.
<PAGE>
19. Post-Closing Adjustments. As soon as practicable after closing, but
in any event within forty-five (45) days thereafter, Seller shall prepare, in
accordance with this Agreement and (where applicable) in accordance with
generally accepted accounting principles consistently applied, a final
settlement statement (herein called the "Final Statement") setting forth each
adjustment or payment which was not finally determined as of the closing, and
showing the calculation of the final settlement price based on such Final
Statement (the "final settlement price"). Seller shall submit the Final
Statement to Purchaser and shall afford Purchaser access to Seller's records
pertaining to the computations contained in the Final Statement. As soon as
practicable after receipt of the statement, Purchaser shall deliver to Seller a
written report containing any changes which Purchaser proposes be made to the
Final Statement. The parties shall agree with respect to the amounts due
pursuant to such post-closing adjustments not later than thirty (30) days after
Purchaser's receipt of Seller's Final Statement. The date upon which such
agreement is reached shall be herein called the "Settlement Date". In the event
that (i) the final settlement price is more than the amount previously paid to
Seller, Purchaser shall pay to or as directed by Seller in immediately available
funds the amount of such difference; or (ii) the final settlement price is less
than the amount previously paid to Seller, Seller or the party receiving the
balance of the funds at closing shall pay to Purchaser in immediately available
funds the amount of such difference.
20. Closing. The transaction contemplated by this Agreement shall be
closed by an Escrow Agent (the "Escrow Agent") who shall be selected by the
agreement of Seller and Purchaser. Closing shall take place at a location
agreeable to Seller, Purchaser and Escrow Agent at a time agreeable to them
which is not later than June 4, 1996, provided that said date may be postponed
or changed by a writing signed by both Seller and Purchaser.
The Earnest Money shall be applied to the Purchase Price at closing. At or
prior to the closing, Purchaser shall deliver or cause to be delivered to Escrow
Agent the balance of the Purchase Price for that portion of the Property which
is being purchased, subject to applicable prorations and adjustments. At or
prior to the closing, Seller shall deliver or cause to be delivered to Escrow
Agent the following: (i) appropriate conveyance documents covering that portion
of the Property which is being purchased; and (ii) subject to the provisions of
Section 10, releases of the Siete Liens insofar as they affect that portion of
the Property being purchased.
At the closing, Escrow Agent shall close the transaction contemplated by
this Agreement as follows:
(a) Escrow Agent shall make all appropriate prorations and
adjustments.
<PAGE>
(b) Escrow Agent shall deliver to Purchaser all conveyance documents
as provided in Section 15 of this Agreement.
(c) Subject to and in accordance with the provisions of Section 10,
Escrow Agent shall pay the holders of debt secured by Siete Liens, except
for that held by Chemical Bank which shall not be paid in full, but rather
that portion which is being paid will be paid out of the balance of the
Purchase Price in accordance with the arrangements between Seller and
Chemical Bank pertaining thereto, and Escrow Agent shall deliver the
releases of the Siete Liens being released, including those held by
Chemical Bank, to Purchaser.
(d) Subject to the provisions of Section 10, Escrow Agent shall
deliver to Seller or Chemical Bank as directed by both of them the balance
of all funds deposited with Escrow Agent after appropriate deductions have
been made for prorations and adjustments.
The terms, provisions and conditions of this Agreement shall serve as
escrow and closing instructions to the Escrow Agent. Such instructions may be
supplemented by reasonable conditions of acceptance of the Escrow Agent to the
extent that the same are not inconsistent with the terms, provisions and
conditions of this Agreement.
Ad valorem, production, severance and any other tax based on production,
if any, attributable to any of the Property being purchased shall be paid by the
party receiving the production upon which the tax is based. At closing, all
other taxes, except income taxes which shall remain the responsibility of the
appropriate party, shall be prorated as of the Effective Date. All oil, gas and
hydrocarbon substances ("Production") produced and delivered or stored in tanks
and/or gathering lines as of the Effective Date shall belong to Seller, and all
Production produced on or after the Effective Date shall belong to Purchaser, or
the sales proceeds thereof shall be credited to Purchaser by Seller. All storage
tanks shall be measured or gauged by the parties on the Effective Date, such
measurement or gauging to be from a point 24 inches above the bottom of the
tanks. Such measurement may be based upon the meter readings or other
information in the possession of Seller and consistent with any reports filed
with any appropriate state regulatory agency. Proration of the Production in the
tanks will be accomplished in accordance with the results of said measurement or
gauging. At and after closing, Purchaser shall be entitled to proceeds or
revenues from the Production which is produced on or after the Effective Date,
and, subject to the covenants and terms hereof, Purchaser shall assume, bear and
pay all operating expenses or leasehold preservation costs incurred by Seller in
the ordinary course of business on and after the Effective Date. Seller shall be
entitled to receive actual, physical disbursement of proceeds from the sale of
such Production prior to closing, provided that at closing, Purchaser shall
receive a credit toward the Purchase Price for any such proceeds
<PAGE>
received by Seller on or after the Effective Date, after deducting therefrom all
operating expenses or leasehold preservation costs incurred by Seller on or
after the Effective Date. Pending implementation of conveyance documents, it is
possible that Seller will receive payments for Production produced on and after
the closing which are properly payable to Purchaser, but which have not been
credited against the Purchase Price as provided above. In this regard, Seller
agrees promptly to deliver to Purchaser all such payments and any related
production data received by it with respect to Production produced subsequent to
closing.
All recording and filing fees shall be the responsibility of Purchaser.
At closing, or as soon thereafter as is practical, Seller shall deliver to
Purchaser all original files, records, data and information of every kind and
character in Seller's possession which directly relate to the Property
(collectively "the Files"), but only to the extent that Seller may do so without
violating any obligation of confidence or contractual commitment to a third
party, and only to the extent that the same are not based upon confidential or
proprietary systems or techniques developed by Seller or any of its consultants
which could not be transferred without the transfer or disclosure of the
underlying system or technique. "The Files" shall not include any of Seller's
corporate, financial and general tax records. Within the five-year period
commencing on the closing date, Seller shall have the right to photocopy, copy
or reproduce any of the Files at its written request to Purchaser, and at its
sole expense.
21. Risk of Loss. The risk of loss of or casualty to any portion of the
Property shall be and shall remain upon Seller until the closing. After closing,
the risk of loss or casualty shall pass to Purchaser. If, prior to closing,
there occurs a loss or casualty which is covered by insurance, and if closing
occurs with respect to the affected property, any insurance proceeds paid to
Seller with respect thereto shall be credited toward the payment of the Purchase
Price. If, before the closing, there occurs any material loss of or casualty to
any of the Property (including loss through condemnation or the exercise of the
right of eminent domain or proceedings for such purposes are pending or
threatened) which is not fully compensated by insurance, the portion of the loss
or casualty which is not compensated by insurance shall be deemed to be a Title
Defect and shall be dealt with as provided in Section 13. For purposes of this
Paragraph, a loss or casualty is not "material" unless the resulting cost of
repair or replacement, or the resulting value of lost reserves, less any
insurance proceeds paid, exceeds $15,000.00.
22. Notification of Production Purchasers - Transfer Orders. Purchaser
shall be responsible for notifying all purchasers of production regarding the
closing of the transaction contemplated by this Agreement. In this regard,
Seller agrees to cooperate with Purchaser in executing transfer orders, or
letters in lieu thereof, and other documents as may be necessary
<PAGE>
to accomplish the transfer of the Property to the satisfaction of production
purchasers, which documents shall be executed and exchanged at closing.
23. Covenants of Purchaser - Indemnity.
(a) On and after the closing, Purchaser shall assume and timely
perform and discharge all duties and obligations of an owner of any
interest in the Property, whether imposed by contract, rule of law,
statute, regulation or otherwise, including, but not limited to, plugging
and abandonment of any and all existing and future wells, restoration of
the surface, and environmental and pollution clean up or remediation.
Seller shall incur no liability for Purchaser's failure to properly
perform or discharge any such duties or obligations.
(b) To the extent required by, and in accordance with, all
applicable laws, rules and regulations and other obligations imposed upon
Purchaser by contract, Purchaser shall plug and abandon all wells
(including, but not limited to, salt water disposal wells) which, as of
the Effective Date or thereafter, are located on the lands subject to the
Leases or on lands pooled therewith, or otherwise in which Seller's
interests are hereby transferred.
(c) To the extent required by, and in accordance with all applicable
laws, rules and regulations and other obligations imposed upon Purchaser
by contract, Purchaser shall remove all abandoned or unused production
facilities and equipment, which, as of the Effective Date or thereafter,
are located on the lands subject to the said Leases, or on lands pooled
therewith, or on lands subject to this Agreement, or otherwise in which
Seller's interests are hereby transferred.
(d) After closing but as of the Effective Date, and to the extent
required by, and in accordance with all applicable laws, rules and
regulations and other obligations imposed by contract, Purchaser shall
restore associated or affected surface areas, conforming to and satisfying
the terms and conditions of the said Leases and/or any agreements, laws,
orders, rules, regulations or permit obligations pertinent thereto.
(e) Purchaser shall pay the cost of all plugging and abandonment of
wells, all removal of facilities, equipment and pipelines, and all
restoration of lands which may be performed by third parties on any wells,
facilities, equipment or pipelines located on the Property or on lands
pooled or unitized therewith to the extent that these obligations arise
from and after the Effective Date.
<PAGE>
(f) Until the closing, Purchaser shall exercise reasonable diligence
in safeguarding and maintaining secure and confidential all confidential
data and information provided to Purchaser by Seller relating to the
Property. If the transaction contemplated by this Agreement is not
consummated, Purchaser will use its best efforts to keep the information
and data which is not public knowledge or otherwise disseminated, and
which is furnished to Purchaser by or on behalf of Seller, strictly
confidential and will not use any of such information or data in
competition with Seller.
(g) For purposes of this Paragraph (g), "Claims" shall mean all
claims, losses, damages, demands, suits, causes of action, liabilities,
fines, penalties, expenses and costs (including attorneys' fees, costs of
litigation and/or investigation and other costs associated therewith).
Purchaser shall fully protect, indemnify and defend Seller and its
officers, agents, employees, directors and shareholders against, and shall
hold them harmless from, any and all Claims which accrue on or after the
Effective Date and which arise out of, are related to, or in any way are
connected with, indirectly or directly, in whole or in part, the ownership
or operation of any of the Property by Purchaser, including, but not
limited to, Claims for the following:
(i) injury to or death of any person;
(ii) damage to or loss of any property or resource, or any
interest therein;
(iii) pollution, contamination or environmental damage,
liability or violation of any kind, including, but not limited to,
the use, handling, generation, release, discharge, storage,
transportation or disposal of any of the following: hazardous, toxic
or radioactive materials, substances or wastes, or other pollutants,
contaminants or wastes;
(iv) the presence of any facilities, equipment or pipe
contaminated by naturally occurring radioactive materials,
including, but not limited to, such Claims as may relate to the use,
resale, removal, handling or disposal of any such contaminated
facilities, equipment or pipe;
(v) Claims relating to Purchaser's failure properly to perform
or discharge all duties and obligations of an owner of any interest
in the Property including, but not limited to, plugging and
abandonment of any and all existing and future wells, restoration of
the surface, and environmental and pollution clean up or
remediation.
<PAGE>
The indemnities and obligations to defend set forth above shall apply
regardless of the cause, and regardless of whether any such Claims arise
in whole or in part from any act, omission, negligence or strict liability
of Purchaser or its officers, agents, employees, directors or
shareholders, or any other person or entity (other than Seller), whether
imposed by contract, rule of law, statute, regulation or otherwise. Such
indemnities and obligations to defend shall survive the closing of the
transaction contemplated by this Agreement.
24. Environmental Escrow Account.
(a) Purpose. The undersigned parties acknowledge and understand that
Purchaser will conduct the physical and environmental inspection
contemplated by the terms of Section 12 hereof. Notwithstanding this
review, the parties acknowledge that there exists the possibility that
there are latent environmental issues not readily ascertainable from the
type of environmental review contemplated by Section 12. It is not unusual
for agreements of this type to provide for a "look-back" period after
closing regarding certain defined environmental issues, and the Purchaser
customarily requires in transactions of this nature that such a
"look-back" period exist. Inasmuch as the Seller does not anticipate
having a continued existence as a financially capable entity which would
be in a position to remediate pre-existing environmental conditions
identified in accordance with such a"look-back" provision, the parties
have sought to arrive at a mechanism to safeguard the interests of both
parties with regard to environmental issues other than conducting an
inspection that far exceeds the scope and cost of that customarily done in
transactions of this type. It is for these reasons that the parties have
created the environmental escrow account set forth herein which will
operate as follows:
(b) Definitions. As used in this section, the following terms will
have the meanings ascribed thereto. Capitalized terms which are otherwise
defined in this Agreement shall retain the same definition as previously
set forth.
(1) "Condition" shall mean a material adverse environmental
condition which was created prior to, and existed as of, the Effective
Date. "Conditions" shall mean more than one material adverse environmental
condition.
(2) "material adverse environmental condition" shall mean a
condition that (i) applicable Environmental Laws in effect as of the
Effective Date required to be remediated, and (ii) the cost to remediate
the Condition to the levels required by applicable Environmental Laws
exceeds $15,000; however if the total cost to remediate all such
Conditions exceeds $75,000 then all such circumstances shall in the
aggregate be deemed to be a material adverse environmental condition.
These dollar amounts are
<PAGE>
threshold amounts, not deductibles, and are net to Seller's ownership in
the affected portion of the Property.
(3) "Environmental Laws" shall be as defined in Section
7(u)(i) hereof, and shall specifically not include other types of
governmental regulations not of this type, even if such are intended to
protect the health and welfare of workers or the public, including the
regulations of the Occupational Safety and Health Administration, the
Texas Railroad Commission Operating Regulations, the New Mexico Oil
Conservation Division Regulations, the provisions of applicable contracts,
and other types of statutes, regulations, ordinances, and contract
provisions, unless and except they fit within the previously described
definition of Environmental Laws.
(c) Notification Procedure. If within one year of closing, Purchaser
determines and notifies the Escrow Agent in writing that there exists a
Condition or Conditions arising from operations on or the use of the
Property, or a portion thereof, and that such Condition or Conditions was
created prior to the Effective Date, notwithstanding its date of
discovery, then Purchaser shall be deemed to have satisfied the notice
requirements of this Section.
(d) Response Upon Notification. It is understood and agreed that the
Escrow Agent shall, to the extent of the escrow account, assume
responsibility to the extent of Seller's former ownership interest in the
affected portion of the Property for the cost of any necessary remediation
for any Condition of which it has received timely notice in accordance
with this Section, presuming that remediation is the strategy agreed upon
by Escrow Agent and Purchaser. Escrow Agent and Purchaser will cooperate
with one another to devise an appropriate strategy to deal with any
Condition. These strategies include remediation or such other approach as
these entities may agree. If no agreement is reached, the default remedy
for a Condition will be remediation. Notwithstanding the preceding
sentence, the cost of such remediation attributable to Seller's interest
in the affected portion of the Property shall only be paid out of the
escrowed sums including the interest earned thereon provided for in this
Section. Seller and Escrow Agent shall have no liability or responsibility
for the expense of remediation beyond, or in excess of, the escrowed
funds. Remediation shall proceed in such a manner so as to comply with all
applicable Environmental Laws. For any Property not previously operated by
Seller, the default remedy is that Purchaser will be paid a portion of the
escrowed sums sufficient to pay for the share of remediation costs
attributable to Seller's former ownership interest in the affected portion
of the Property.
(e) Arbitration. If the Escrow Agent and Purchaser cannot agree
on the cost to remediate the Condition or Conditions or cannot agree as
to whether or not a Condition
<PAGE>
exists, the appropriate issue or issues will be submitted to binding
arbitration in accordance with the rules of the American Arbitration
Association using a single arbitrator. In lieu of the Escrow Agent bearing
the obligation and expense of arbitration of either issue identified
herein (cost or existence of a Condition), the position to be arbitrated
that is contrary to the position of Purchaser can either be asserted by
Seller or by Chemical Bank. With regard to the arbitration of any issue
hereunder, each party to such arbitration shall bear its own costs, and
such costs shall not be deducted from the amount of money in the escrow
account.
(f) Escrowed Funds. To provide for the escrow account contemplated
by this Section, at closing Purchaser shall deduct $250,000 from the
Purchase Price and shall deposit such sum with the Escrow Agent who shall
further place these monies in an interest bearing account for the purpose
of satisfying any costs associated with the cleanup or remediation of any
Condition. After all Conditions have been resolved in accordance with the
terms of this Section, the balance of the sums remaining in the escrow
account, if any, together with any interest thereon, shall be paid to
Chemical Bank. Thus, these escrowed sums can only be paid directly to
Purchaser if such sums are for remediation costs for a Condition.
25. HSR Act. Seller and Purchaser acknowledge that this Agreement may be
subject to and conditioned upon compliance with 15 U.S.C. ss.18a, and all rules
and regulations promulgated thereunder or pursuant thereto. Seller and Purchaser
each agree to make such filings and provide such information as may be required
under said statute, rules or regulations as soon as possible after execution of
this Agreement. Seller and Purchaser further agree to cooperate with each other
in making such filings and providing such information. The obligation of Seller
to sell the Property to Purchaser, and the obligation of Purchaser to purchase
the Property from Seller, is subject to, and is expressly conditioned upon,
compliance with all requirements, and obtaining all necessary consents, as may
be prescribed or set forth in said statute, rules or regulations.
26. Default by Purchaser. If, at and as of closing, Seller is ready,
willing, and able to close the transaction contemplated by this Agreement, and
has complied in all material respects with its obligations as imposed hereby,
and Purchaser, in breach of the provisions of this Agreement fails or refuses to
close this transaction in accordance herewith, Seller, as its sole remedy for
such a failure or refusal to close, may declare this Agreement terminated, in
which event Seller shall be entitled to receive from Escrow Agent the Earnest
Money as liquidated damages, and neither party shall thereafter have any
obligation one to the other by reason of this Agreement, except for obligations
of confidentiality. If Seller brings an action against Purchaser or institutes
or pursues other legal proceedings to enforce this Agreement or any of the
provisions of this Agreement, or to enforce any of its rights under this
Agreement,
<PAGE>
and if Seller obtains judgment or other relief against or from Purchaser, then
Purchaser shall pay Seller all costs and expenses incurred by Seller in
obtaining such judgment or relief, including reasonable attorneys' fees, court
costs, and expenses of litigation. A termination of this Agreement by Purchaser
pursuant to Section 13 shall not be a failure or refusal to close within the
meaning of this Section. The liquidated damages provided for above shall only
apply to a failure or refusal of Purchaser to close in breach of this Agreement.
27. Default by Seller. If, at and as of closing, Purchaser is ready,
willing, and able to close the transaction contemplated by this Agreement, and
has complied in all material respects with its obligations as imposed hereby,
and Seller, in breach of the provisions of this Agreement, fails or refuses to
close this transaction in accordance herewith, Purchaser shall be entitled to a
return of the Earnest Money and may bring an action against Seller for breach of
contract and/or specific performance, and shall have all available legal and
equitable remedies. In the alternative, Purchaser may declare this Agreement
terminated, in which event Purchaser shall be entitled to a return of the
Earnest Money and shall also be entitled to receive $500,000.00 as liquidated
damages, and neither party shall thereafter have any obligation one to the other
by reason of this Agreement, except for obligations of confidentiality. If
Purchaser brings an action against Seller or institutes or pursues other legal
proceedings to enforce this Agreement or any of the provisions of this
Agreement, or to enforce any of its rights under this Agreement, and if
Purchaser obtains judgment or other relief against or from Seller, then Seller
shall pay Purchaser all costs and expenses incurred by Seller in obtaining such
judgment or relief, including reasonable attorneys' fees, court costs, and
expenses of litigation. A termination of this Agreement by Seller pursuant to
Section 13 shall not be a failure or refusal to close within the meaning of this
Section. The liquidated damages provided for above shall only apply to a failure
or refusal of Seller to close in breach of this Agreement. Any breach of any
representation or covenant (other than the covenant to close) shall not entitle
Purchaser to liquidated damages. Nor shall a breach of a representation by
Seller give rise to any claim, cause of action or remedy other than as provided
for in Section 13.
28. Notices. All notices contemplated by this Agreement may be given to
the parties or to the Bank at the following addresses:
(a) If to Seller, to:
Siete Oil & Gas Corporation
P. O. Box 2523
Roswell, NM 88202-2523
or
<PAGE>
Petroleum Building
200 West First Street
Suite 200
Roswell, NM 88201
Attention: Mr. Gene Shumate, President
(b) If to Purchaser, to:
St. Mary Land & Exploration Company
1776 Lincoln Street, Suite 1100
Denver, CO 80203
Telephone: (303) 861-8140
Fax: (303) 861-0934
Attention: Mr. Milam Randolph Pharo, Vice President - Land
and
Riverhill Energy Corporation
P.O. Box 2726
Midland, TX 79702-2726
Telephone: (915) 688-0708
Fax: (915) 688-0765
Attention: Mr. J.W. Ramsey, Vice President - Exploitation
(c) If to Bank, to:
29. Further Assurances. After closing each of the parties shall execute,
acknowledge and deliver to the other such further instruments, and take such
other actions as may be reasonably necessary to carry out the provisions of this
Agreement.
30. Operations by Seller. Seller will operate the Seller-operated Property
until the later of closing, the Effective Date, or the time the applicable
operating agreement or plan of unitization may require, at which time operations
will be turned over to, and become the responsibility of, Purchaser, unless a
third party is elected Operator under such agreement.
<PAGE>
Seller makes no representation that Purchaser will be elected or appointed
Operator of any property included within the Property. Seller shall reasonably
assist Purchaser or its designee in its efforts to become Operator for any of
the Property in which Seller served as Operator.
(a) Operations conducted by Seller after the Effective Date with
respect to the Property will be conducted on behalf of Purchaser in
accordance with any applicable operating agreements, and Purchaser will
pay Seller for operation, protection and maintenance of the Property in
accordance with the terms and provisions of any applicable operating
agreement, provided that with regard to operations after closing,
Purchaser will pay all actual costs (including administrative overhead as
allowed by the applicable COPAS) incurred by Seller with regard to the
Property and will further pay operation and administrative overhead to
Seller at a rate equal to twenty-five percent (25%) of the sum of the
operation and maintenance expenses actually charged to Purchaser. For any
well without an operating agreement, Seller agrees to charge expenses
consistent with the Ernst & Young rate schedule published for use in the
oil and gas industry.
(b) Purchaser will take all necessary steps to ensure that Purchaser
is recognized as the owner and, if elected, Operator of the Property by
all appropriate parties, including any regulatory commission, body, or
board with jurisdiction. If Seller is the principal on any financial
assurance (including a bond) relating to the Property, which financial
assurance is required by any law, rule or regulation, then Purchaser will
secure replacement financial assurance in the required amount and deliver
it to the regulatory body requiring such assurance, to the end that
Seller's financial assurance is released and discharged.
(c) Seller may either remove its name and signs from the
Seller-operated Property or require Purchaser to do so. Purchaser grants
Seller a right of access to the Property to remove Seller's signs and name
from all wells, facilities and Leases, or to confirm that Purchaser has
done so. If Seller's name or signs remain on the Property after closing,
Purchaser will promptly, but no later than required by applicable rules
and regulations or forty-five (45) days after closing, whichever is
earlier, remove all remaining signs and references to Seller and erect or
install signs complying with applicable rules and regulations, including
signs showing the Purchaser as Operator of the Property.
31. Securities Laws. The solicitation of offers and the sale of the
Property by Seller have not been registered under any securities laws. Purchaser
represents that at no time has it been presented with or solicited by or through
any public promotion or any form of advertising in connection with this
transaction. Purchaser represents that it intends to acquire the Property for
its own benefit and account and that it is not acquiring the Property with the
intent of
<PAGE>
distributing fractional, undivided interests that would be subject to regulation
by federal or state securities laws, and that if it sells, transfers, or
otherwise disposes of the Property or fractional, undivided interests, it will
do so in compliance with applicable federal and state securities laws.
32. Due Diligence. Purchaser represents that it has performed, or will
perform prior to closing, sufficient review and due diligence with respect to
the Property, which includes reviewing well data, title, and other files, and
performing necessary evaluations, assessments, and other tasks involved in
evaluating the Property, to satisfy its requirements completely and to enable it
to make an informed decision to acquire the Property under the terms of this
Agreement.
33. Basis of Purchaser's Decision. Purchaser represents that by reason of
its knowledge and experience in the evaluation, acquisition, and operation of
oil and gas properties, Purchaser has evaluated the merits and risks of
purchasing the Property from Seller and has formed an opinion based solely on
Purchaser's knowledge and experience and not on any representations or
warranties by Seller. Purchaser represents that it has not relied and will not
rely on any statements by Seller or its Representatives in making its decision
to enter into this Agreement or to close this transaction.
34. Press Release. Prior to closing, there shall be no press release or
public communication concerning this purchase and sale by either party, except
as required by law or with the written consent of the party not originating said
release or communication. Prior to closing, the parties will endeavor to consult
each other in a timely manner on all press releases required by law.
35. Partial Invalidity. In the event any one or more of the provisions
contained in this Agreement or in any other document referred to herein shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such document.
36. Time of Essence. Time shall be of the essence in the performance by
the parties of all of the provisions of this Agreement.
37. Assignment - Successors and Assigns. This Agreement shall not be
assigned, transferred or encumbered, in whole or in part, by Purchaser without
the prior written consent of Seller, which may be withheld for any reason.
Subject to the foregoing, this Agreement shall be binding upon, and shall inure
to the benefit of, Seller and Purchaser and their respective successors and
assigns.
38. Governing Law. To the extent allowed by the jurisdiction in which
any portion of the Property is located, the provisions of this Agreement, and
all of the rights, obligations and
<PAGE>
remedies of Seller and Purchaser under this Agreement, shall be governed by, and
shall be construed, interpreted and enforced in accordance with, the laws of the
State of New Mexico.
39. Entire Agreement - Amendment. This Agreement constitutes the entire
agreement of Seller and Purchaser, and supersedes and replaces any and all
communications, representations and agreements previously or contemporaneously
made by Seller or Purchaser. This agreement may only be modified by a writing
executed by both Seller and Purchaser.
40. Merger of Title - Survival of Covenants. The provisions of this
Agreement shall not be merged into any assignment, conveyance or other document
executed and delivered pursuant hereto, and shall remain in full force and
effect after the execution and delivery of any document required or contemplated
by this Agreement. All covenants, representations, warranties and agreements
contained in this Agreement shall survive the closing of the transaction
contemplated by this Agreement. This provision does not apply to Sections 6(e)
through 6(aa), inclusive, or to Sections 8(a) through 8(h), inclusive, which
representations and covenants shall not survive the closing.
41. Counterparts. This Agreement may be executed in separate or multiple
counterparts. Each such counterpart shall be deemed to be an original and shall
be binding upon the parties executing the same, and all such counterparts
together shall constitute one and the same document.
42. Headings. The headings of the paragraphs contained in this Agreement
are inserted for convenience of reference only. Such headings are not intended
to be, and shall not be, a part of this Agreement, nor shall they affect the
meaning or interpretation of this Agreement.
SELLER:
SIETE OIL & GAS CORPORATION
By /S/ Gene Shumate
President
OLYMPIC TRADING AND TRANSPORTATION, INC.
By /S/ Gene Shumate
President
<PAGE>
PURCHASER:
ST. MARY LAND & EXPLORATION COMPANY
ATTEST:
___________________________ By /S/ Milam Randolph Pharo
Vice President - Land
RIVERHILL ENERGY CORPORATION
ATTEST:
____________________________ By /S/ J.W. Ramsey
Vice President - Exploitation
STATE OF New Mexico )
) ss.
COUNTY OF Chaves )
This instrument was acknowledged before me on April 10, 1996,
by Gene Shumate, as President of Siete Oil & Gas Corporation.
/S/ Carol A. Parker
Notary Public
My Commission Expires:
11/12/99
<PAGE>
STATE OF New Mexico )
) ss.
COUNTY OF Chaves )
This instrument was acknowledged before me on April 10, 1996,
by Gene Shumate, as President of Olympic Trading and Transportation, Inc.
My Commission Expires: /S/ Carol A. Parker
11/12/99 Notary Public
STATE OF New Mexico )
) ss.
COUNTY OF Chaves )
This instrument was acknowledged before me on April 10, 1996,
by Milam Randolph Pharo, as Vice President of St. Mary Land &
Exploration Company.
/S/ Carol A. Parker
My Commission Expires: Notary Public
11/12/99
STATE OF New Mexico )
) ss.
COUNTY OF Chaves )
This instrument was acknowledged before me on April 10, 1996,
by J.W. Ramsey, as Vice President of Riverhill Energy Corporation.
My Commission Expires: /S/ Carol A. Parker
11/12/99 Notary Public
<PAGE>
May 31, 1996
Siete Oil & Gas Corporation Olympic Trading and Transportation, Inc.
P.O. Box 2523 P.O. Box 2523
Roswell, NM 88202-2523 Roswell, NM 88202-2523
Riverhill Energy Corporation
200 North Loraine, Suite 1100
P.O. Box 2726
Midland, TX 79702-2726
Re: Title Defect Resolution and Closing
Pursuant to that certain Purchase
and Sale Agreement dated April 2,
1996
Gentlemen:
This letter will confirm our agreement and understanding that for valuable
consideration, the receipt of which is acknowledged by the undersigned, the
undersigned agree that the transaction contemplated by that certain Purchase and
Sale Agreement dated April 2, 1996, by and between Siete Oil & Gas Corporation,
Olympic Trading and Transportation, Inc., as "Seller" and St. Mary Land &
Exploration Company and Riverhill Energy Corporation, as "Purchaser", (the
"Agreement") will not close on June 4, 1996, as provided in Section 20 of the
Agreement. Rather, the undersigned parties agree that they shall meet in the
offices of Coastal Management Corporation in Midland, Texas, at 1:30 p.m. on
Thursday, June 6, 1996, and to resolve the existence and treatment of claimed
Title Defects as defined by Section 11 of the Agreement, all as prescribed in
Section 13 of the Agreement.
In addition, the undersigned parties agree that at this meeting, they will
mutually agree on a new date for closing which will take into account the
matters to be resolved at this meeting, but which date for closing shall in no
event be later than June 27, 1996, subject to Seller's right to cure Title
Defects pursuant to and within the time permitted by Section 13 of the
Agreement.
The undersigned parties agree that this letter agreement can be executed
by facsimile with an executed original to be furnished to each of the
undersigned parties.
<PAGE>
Siete Oil & Gas Corporation, et al.
May 31, 1996
Page 2
If this letter properly sets forth your understanding and agreement,
please so indicate by signing in the space provided below.
Very truly yours,
ST. MARY LAND & EXPLORATION COMPANY
/S/ Milam Randolph Pharo
Milam Randolph Pharo
Vice President - Land
ACCEPTED AND AGREED TO this 31 day of May , 1996.
RIVERHILL ENERGY CORPORATION SIETE OIL & GAS CORPORATION
By: /S/ J.W. Ramsey By: /S/ Gene Shumate
J.W. Ramsey Gene Shumate
Vice President - Exploration President
OLYMPIC TRADING AND TRANSPORTATION, INC.
By: /S/ Gene Shumate
Gene Shumate
President
cc: Mr. John Nelson
Mr. John Knight
p:\mrp\closeltr.doc
<PAGE>
June 21, 1996
Siete Oil & Gas Corporation Olympic Trading and Transportation, Inc.
P.O. Box 2523 P.O. Box 2523
Roswell, NM 88202-2523 Roswell, NM 88202-2523
Riverhill Energy Corporation
200 North Loraine, Suite 1100
P.O. Box 2726
Midland, TX 79702-2726
Re: Title Defect Resolution and Closing
Pursuant to that certain Purchase
and Sale Agreement dated April 2,
1996
Gentlemen:
This letter will confirm our agreement and understanding that the
undersigned parties agree to adjust the Purchase Price as that term is defined
in the above-referenced agreement and proceed to closing the transaction
contemplated by the Purchase and Sale Agreement dated April 2, 1996 (the "PSA")
as follows:
1. By its letter dated May 20, 1996, Purchaser gave notice to Seller of
various claimed Title Defects which included Environmental Defects in accordance
with Section 13 of the PSA. Seller responded to this notice by its letter of May
29, 1996. In accordance with Section 13.b. of the PSA, Seller and Purchaser have
negotiated a downward adjustment to the Purchase Price in the amount of
$250,000.00. This agreed adjustment is subject to the terms and provisions of
this letter agreement, the PSA, and to Seller curing the matters it has
previously indicated it will cure. However, as to Title Defects that Purchaser
raised or should have raised pursuant to the PSA, it is agreed that subject to
the above-referenced items, this is the final price adjustment for all Title
Defects.
2. In determining the $250,000.00 downward price adjustment noted in the
preceding paragraph, Seller and Purchaser tentatively agreed that the downward
Purchase Price adjustment relating to the Parkway Unit gas overproduction was
$17,730.00. Seller and Purchaser agree that this gas overproduction value shall
be adjusted either upward or downward, as appropriate, to reflect the actual
Parkway gas balancing on the basis of an equation of overproduced volumes x
$1.75 per MMBTU.
3. Robert Lee will prepare the SPCC documentation for both the Zuni and
Rock Pen Fields and the Purchaser will be responsible for construction or
enhancement of any dikes required to comply with such permits.
<PAGE>
Siete Oil & Gas Corporation, et al.
June 21, 1996
Page 2
4. Subject to Seller's 60-day right to cure which was previously invoked,
Seller will continue to work to satisfy the title requirements it agreed to cure
as a result of the June 6, 1996, meeting between Seller and Purchaser. Those
requirements include, but are not limited to, the ratifications for the Rock Pen
and Zuni Units. Seller will also provide ratifications and joinders of the
Parkway Unit by Tom Campbell and Gene Shumate and their respective spouses.
5. Seller and Purchaser agree that notwithstanding the fact that certain
issues regarding the Blackhawk water disposal facility have been discussed
between these parties, that should any third party such as the landowner or any
governmental entity make a claim, institute litigation, or issue any sort of
citation, noncompliance certificate, or request or demand that remediation or
restoration work be performed at the Blackhawk site, and such claim occurs
within the one (1) year period contemplated by the environmental escrow account
provision contained in Section 24 of the PSA, that Seller agrees that this
Blackhawk area will remain subject to this Section 24, and Seller will not
assert that Purchaser has waived any right it otherwise has under this Section
24 to seek the use of the escrowed funds to satisfy such third party claim.
Notwithstanding the provisions of Section 24 of the PSA, Purchaser shall
not be entitled to invoke this Section 24 with respect to the disposal pits or
overflow pits at the Blackhawk area unless, during said one-year period, a third
party makes a claim, institutes litigation, or issues any sort of citation,
noncompliance certificate, or request or demand that remediation or restoration
work be performed with respect to such pits. In addition, execution of this
letter agreement by Seller is not, and shall not be construed as an admission or
agreement by Seller that a Condition existed with respect to the Blackhawk area
as of the Effective Date.
6. To clarify a portion of the mechanics of Closing, Seller and
Purchase agree as follows:
(a) To the extent necessary, the instructions to the Escrow Agent
will be amended to provide that upon Purchaser paying the Adjusted
Purchase Price to the Escrow Agent, the Escrow Agent will pay directly to
the holder of any Siete Lien who has furnished a release to the Escrow
Agent, the amount required for the satisfaction of such Siete Lien so that
the release can be delivered to Purchaser.
(b) In addition, the Escrow Agent shall retain the amount set forth
on Exhibits A and A-1 attached hereto and made a part hereof, which
exhibits, in the aggregate and to the extent they do not constitute a
Siete Lien, reflect the "Designated Claims" of various creditors of Seller
which shall be paid to Siete or the respective claimant, as appropriate,
upon the earlier to occur of either (i) Siete provides evidence reasonably
satisfactory to the Escrow Agent (such as a certificate or letter from the
appropriate claimant) that the claim of any particular claimant listed as
having a Designated Claim shall have been resolved whether for a greater,
lesser, or equal amount than that listed on Exhibits A or A-1, or (ii)
September 2, 1996, shall have arrived without a particular claim listed on
Exhibits A or A-1 being resolved, in which event, the Escrow Agent shall
<PAGE>
Siete Oil & Gas Corporation, et al.
June 21, 1996
Page 3
deliver payment for and on behalf of this particular claim directly to
such claimant in the amount set forth on Exhibit A or A-1.
In accordance with the terms of the PSA, the Escrow Agent shall also
retain a portion of the Adjusted Purchase Price equal to the amount of
unreleased Siete Liens. These sums shall be released to each individual Siete
Lien holder at such time as this third party provides a release of its lien to
the Escrow Agent.
Seller and Purchaser agree to keep the terms of this escrow arrangement
confidential so as to not jeopardize Seller's right to resolve both the Siete
Liens and the Designated Claims. Upon Closing, all other sums not otherwise
required to be retained by the Escrow Agent in accordance with either the terms
of the PSA, this letter agreement, or the previously drafted Escrow Agreement,
shall be released to Seller or Chemical Bank, as they may direct.
While it is understood and believed that these Exhibits A and A-1 are in
final form, Purchaser has accepted the amounts and claimants supplied by Seller,
and the parties agree that these amounts and claimants may change to accurately
reflect the unsecured claims in excess of $10,000.00 after Purchaser's
accounting representative has met with Seller on June 24 or June 25, 1996.
7. The parties agree that Purchaser shall take over Seller's duties as
operator at 7:00 a.m., July 1, 1996, at the location of the properties.
8. Capitalized terms used in this letter agreement, but which are not
otherwise defined, shall have the meaning ascribed to such terms in the PSA.
Except as specifically set forth in this letter, the parties agree to
proceed to Closing on June 28, 1996, at 9:00 a.m., in Midland, Texas, at the
office of the Escrow Agent, as provided and in accordance with the terms of that
certain Purchase and Sale Agreement between these parties dated April 2, 1996.
If this letter properly sets forth your understanding and agreement,
please so indicate by signing in the space provided below.
Very truly yours,
ST. MARY LAND & EXPLORATION COMPANY
/S/ Milam Randolph Pharo
Milam Randolph Pharo
Vice President - Land
<PAGE>
Siete Oil & Gas Corporation, et al.
June 21, 1996
Page 4
ACCEPTED AND AGREED TO this 27 day of June , 1996.
RIVERHILL ENERGY CORPORATION SIETE OIL & GAS CORPORATION
By: /S/ J.W. Ramsey By: /S/ Gene Shumate
J.W. Ramsey Gene Shumate
Vice President - Exploitation President
OLYMPIC TRADING AND TRANSPORTATION, INC.
By: /S/ Gene Shumate
Gene Shumate
President
cc: Mr. John Nelson
Mr. John Knight
p:\mrp\amdclltr.doc
<PAGE>
June 28, 1996
Siete Oil & Gas Corporation Olympic Trading and Transportation, Inc.
Post Office Box 2523 Post Office Box 2523
Roswell, NM 88202-2523 Roswell, NM 88202-2523
St. Mary Land & Exploration Company
1776 Lincoln Street, Suite 1100
Denver, Colorado 80203
RE: Amended Exhibits A and A-1
Gentlemen:
This letter will confirm our agreement and understanding that the
undersigned parties to that certain Purchase and Sale Agreement dated April 2,
1996 (the "PSA"), have determined through the course of due diligence that
certain changes should be made to Exhibits A and A-1 as originally attached to
the PSA.
Therefore the undersigned agree that the PSA shall be amended to delete
the Exhibits A and A-1 originally attached thereto and those exhibits are hereby
replaced and superseded with and by the Exhibits A and A-1 attached to this
amendment letter.
If this letter properly sets forth your understanding and agreement,
please so indicate by signing in the space provided below.
Very truly yours,
RIVERHILL ENERGY CORPORATION
/S/ J.W. Ramsey
J. W. Ramsey
Vice President, Exploitation
c:\johnb\amendexh.ltr
<PAGE>
Siete Oil and Gas Corporation, et. al.
June 28, 1996
Page 2
ACCEPTED AND AGREED TO this 28th day of June, 1996.
SIETE OIL & GAS CORPORATION
By: /S/ Gene Shumate
Gene Shumate, President
OLYMPIC TRADING AND TRANSPORTATION, INC.
By: /S/ Gene Shumate
Gene Shumate, President
ST. MARY LAND & EXPLORATION COMPANY
By: /S/ Milam Randolph Pharo
Milam Randolph Pharo
c:\johnb\amendexh.ltr
