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EXHIBIT 10.1
CONVEYANCE AND CONTRIBUTION AGREEMENT
This Conveyance and Contribution Agreement (this "Agreement"),
dated effective 7:00 a.m., Pacific Time, November 1, 1996 (the "Effective
Date"), is from Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa
Fe"), having its principal office at 0000 X. Xxxx Xxxx, Xxxxxxx, Xxxxx 00000 to
Monterey Resources, Inc., a Delaware corporation ("Monterey"), having its
principal office at 0000 Xxxxxxx Xxxxxx, Xxxxx Xx. 000, Xxxxxxxxxxx, Xxxxxxxxxx
00000. Santa Fe and Monterey are hereinafter sometimes referred to individually
as a "Party" and collectively as the "Parties."
RECITAL
Santa Fe is executing and delivering this Agreement to convey
and contribute all property and other assets to Monterey that are held by Santa
Fe in its Western Division in the State of California, other than certain
excluded assets, as more fully described herein, and to perform certain other
acts in connection with such conveyance and contribution. Monterey is
executing this Agreement in performance of its obligations to assume certain
liabilities of Santa Fe with respect to such property and assets and to
undertake certain other obligations in connection with such conveyance and
contribution.
NOW, THEREFORE, for valuable consideration, the Parties agree
and grant as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. The following definitions shall apply
to the following terms when used in this Agreement:
"Agreement" is defined in the introductory paragraph of this
instrument.
"Ancillary Agreements" means the Spin-Off Tax Indemnity
Agreement, Corporate Services Agreement, Tax Allocation Agreement, and
Registration Rights and Indemnification Agreement, all between Monterey and
Santa Fe and dated of even date herewith.
"Assistance Costs" is defined in Section 3.11(d).
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"Assumed Liabilities" means (a) the liabilities, obligations,
and other matters of Santa Fe described in Exhibit A, and (b) all other
liabilities, losses, costs, expenses, fines, penalties, payments, and other
obligations of Santa Fe relating to or arising out of the Subject Assets or the
Business, whether accrued, contingent, known or unknown, and whether or not
reflected on the books and records of Santa Fe on the date of this Agreement,
excluding, however, (x) the Retained Liabilities and (y) obligations and
liabilities of Santa Fe under the Ancillary Agreements.
"Business" means all of the business activities now or
heretofore conducted by Santa Fe, its affiliates, and its and their
predecessors in interest, in the Business Area, including the oil and gas
exploration, development, and production business of Santa Fe and the
businesses and operations identified in Exhibit B.
"Business Area" means the State of California and all lands
lying in federal or state waters seaward of the west coast of the State of
California.
"Excluded Assets" means the following assets:
(a) The assets described in Exhibit C, and all rights,
privileges and benefits pertaining to the assets described in Exhibit
C;
(b) All of Santa Fe's right, title and interest in and to
all non-proprietary seismic, geological, geophysical and similar data
and computer software related to the Subject Assets, to the extent
Santa Fe is contractually prohibited by unaffiliated third parties
from transferring such data and software;
(c) All proprietary computer software (including, without
limitation, tapes, data, and program documentation) and other
intellectual property that is used in, or useful to, Santa Fe's
retained businesses and operations;
(d) Except as provided in Section 3.11, all of Santa Fe's
rights under all policies or agreements of insurance or indemnity; and
(e) All cash, proceeds, income, or revenues accruing with
respect to the other Excluded Assets described above.
"Insurance Administration" means, for each Policy, the
accounting for premiums, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles, and retentions as appropriate under each such
Policy, and the distribution of Insurance Proceeds under each such Policy.
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"Insurance Proceeds" means, for each Policy, those monies (i)
received by an insured from an insurance carrier or (ii) paid by an insurance
carrier on behalf of the insured, in either case, net of any applicable premium
adjustment, retrospectively-rated premium, deductible, retention, cost or
reserve paid or held by or for the benefit of such insured.
"Insured Claims" means, for a Policy, those claims, losses,
liabilities, costs, and expenses that, individually or in the aggregate, are
covered by such Policy, whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively-rated premium adjustments, but only to the
extent that such claims, losses, liabilities, costs, and expenses are within
the limits of such Policy.
"IPO Date" means the closing date for the initial public
offering of the common stock of Monterey.
"New Credit Facility" means the note agreement described in
item 4 in Exhibit A.
"Party" and "Parties" are defined in the introductory
paragraph of this Agreement.
"Perpetuities Period" means that period of time commencing on
the date of this Agreement and ending 21 years after the death of the last to
die of all descendants of Xxxxxx X. Xxxxxxx, father of our late President, Xxxx
X. Xxxxxxx, who are living on the date of this Agreement.
"Person" means an individual, a corporation, a partnership, a
trust, an unincorporated organization, a governmental agency, an association or
any other entity.
"Policies" means insurance policies and contracts of indemnity
described in Exhibit G.
"Restriction" is defined in Section 3.5.
"Retained Liabilities" means (a) the liabilities, obligations,
and matters of Santa Fe described in Exhibit H and (b) all losses, costs,
expenses, fines, penalties, payments, and other obligations related to the
Excluded Assets.
"Santa Fe Group" is defined in Section 3.4(a).
"Santa Fe Liabilities" means all liabilities, costs, expenses,
fines, penalties, payments, and obligations of Santa Fe, other than the Assumed
Liabilities.
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"Series G Notes" means the senior notes described in item 3 in
Exhibit A.
"Specific Conveyances" is defined in Section 3.6.
"Spin-Off" means the sale, distribution, or other disposition
of the remaining shares of common stock held by Santa Fe after the IPO Date in
a single transaction or series of transactions.
"Spin-Off Date" means the date on which the Spin-Off first
occurs.
"Subject Assets" means all of the assets owned by Santa Fe in
the Business Area or used or held for use by Santa Fe solely to conduct the
Business, on the Effective Date, including the following assets:
(a) All right, title, and interest of Santa Fe in and to
the plots, pieces, and parcels of land, surface estates, and fee
interests of Santa Fe in the Business Area, including those described
in Exhibit D (collectively, the "Lands");
(b) "All right, title, and interest of Santa Fe in and to
(i) the estates created by the oil and gas leases (and the undivided
interests therein), operating rights, mineral servitudes, and fee,
mineral, royalty, and overriding interests of Santa Fe in the Business
Area, including those described in, or created by the instruments
described in, Exhibit D and (ii) the easements, permits, licenses,
rights-of-way, surface leases, and other surface rights held by Santa
Fe in the Business Area, including those described in, or created by
the instruments described in, Exhibit D (collectively, the "Oil and
Gas Interests");
(c) All right, title, and interest of Santa Fe in all
presently existing and valid unitization, pooling and communitization
agreements, declarations and orders and production sharing agreements,
and the properties covered and the units created thereby (including
all units formed under orders, regulations, rules, or other official
acts of any federal, state, or other governmental agency having
jurisdiction), to the extent attributable to any of the Lands or the
Oil and Gas Interests;
(d) All right, title, and interest of Santa Fe in
existing and valid oil, casinghead gas and gas sales, purchase,
exchange, transportation and processing contracts, operating
agreements, joint venture agreements, partnership agreements,
participation agreements, exploration agreements, farmin and farmout
agreements, acreage contribution agreements, bidding agreements,
option agreements, purchase and sale agreements, advance payment
agreements, and all other contracts to the extent attributable to any
of the Lands or the Oil and Gas Interests or the Business, including
those contracts, agreements, and instruments set forth on Exhibit E;
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(e) All right, title, and interest of Santa Fe in all
improvements, xxxxx,
wellbores, casing, tubing, tanks, buildings, fixtures, compression and
steam generation facilities, pipelines, gathering systems, lines
and other appurtenances, easements and facilities, production
platforms, drilling platforms, docks, shore facilities and bases, radio
and microwave equipment (and associated licenses), and vessels to the
extent located in, on or under any of the Lands or Oil and Gas
Interests or used or held for use as a part of the Business as
presently conducted;
(f) All right, title, and interest of Santa Fe in all
seismic, geological, geophysical and similar data related to the
Subject Assets, all lease files, land files, legal files, well files,
gas and oil sales contract files, division order files, abstracts,
title opinions, land surveys, computer software (including tapes, data
and program documentation), and all other books, records, files, and
accounting records to the extent attributable to or used in the
exploration, development, maintenance, or operation of any of the
Subject Assets described in subsections (a), (b), (c), (d), and (e)
above or the Business (collectively, the "Records");
(g) All of the following:
(i) All right, title, and interest of Santa Fe in
and to all inventories of oil, gas and other petroleum
products, tubular goods, supplies and tools, in each case to
the extent produced from or held for use on the Subject Assets
described in subsections (a), (b), (c), (d), and (e) above;
and
(ii) All right, title, and interest of Santa Fe in
all other personal property to the extent used or held for use
in connection with the exploration, development, operation, or
maintenance of the Subject Assets described in subsections
(a), (b), (c), (d), and (e) above, including office furniture
and equipment, computer hardware, leasehold interests therein;
(h) All right, title, and interest of Santa Fe in and to
all governmental permits, licenses, franchises, registrations, and
similar rights relating to the Business or the Subject Assets;
(i) All right, title, and interest of Santa Fe in and to
all automobiles, trucks, trailers, other vehicles, and similar assets
used in connection with the Business, including leasehold interests
therein;
(j) Cash, cash equivalents, accounts receivable,
goodwill, claims, causes of action and choses in action relating to
the Subject Assets and the Business;
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(k) All right, title, and interest of Santa Fe in and to
the stock certificates, partnership interests, contract rights, and
other intangible interests described in Exhibit F;
(l) All of Santa Fe's right, title, and interest in and
to any patents, trade secrets, copyrights, or other intellectual
property rights that relate solely to the Subject Assets; and
(m) All rights, benefits, privileges and appurtenances
pertaining to any of the foregoing;
less and except, however, the Excluded Assets.
"Title Policy" is defined in Section 3.1.
"Uninsured Retentions" is defined in Section 3.11(f).
ARTICLE 2
CONTRIBUTION AND CONVEYANCE OF SUBJECT ASSETS
TO MONTEREY
2.1 Contribution and Conveyance of Subject Assets. Santa
Fe hereby grants, conveys, assigns, transfers, contributes, and delivers unto
Monterey, its successors and assigns, forever, all of its right, title, and
interest in and to the Subject Assets, subject, however, to the terms and
conditions stated in this Agreement.
TO HAVE AND TO HOLD the above described interests in the
Subject Assets unto Monterey, its successors and assigns, forever, subject,
however, to the terms and conditions stated in this Agreement.
2.2 Assumption of Certain Liabilities by Monterey.
Monterey hereby assumes and agrees to pay, perform, and discharge the Assumed
Liabilities, to the full extent that Santa Fe has been or would be obligated to
pay, perform, and discharge the Assumed Liabilities.
2.3 Reservation of Production Payment. Santa Fe hereby
reserves and retains unto Santa Fe, its successors and assigns, as a production
payment, a variable undivided interest in and to certain of the Subject Assets,
as more particularly provided in the Reservation of Production-Payment Interest
attached hereto as Exhibit I.
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ARTICLE 3
OTHER PROVISIONS
3.1 Real Property Covered by Title Policies. With
respect to any Subject Asset that (a) constitutes real property or an interest
in real property, and (b) is covered by a policy of title insurance that is in
favor of, or otherwise provides protection in its capacity as owner to, Santa
Fe (a "Title Policy"), the following provisions shall apply:
(i) Santa Fe binds itself and its successors and assigns
to warrant and forever defend all and singular such Subject Asset to
Monterey, its successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof; subject,
however, to the matters set forth in paragraph (ii) below.
(ii) The contribution and conveyance of such Subject Asset
made by Section 2.1 is made expressly subject to (A) those matters
excluded or excepted from coverage under the applicable Title Policy
and (B) all recorded and unrecorded liens, charges, encumbrances,
contracts, agreements, instruments, obligations, defects and
irregularities affecting such Subject Asset that have accrued or
arisen since the effective date of the applicable Title Policy.
(iii) The sole remedy for breach of the warranty contained
in this Section 3.1 shall be recovery of damages limited to the
amount, if any, recovered by Monterey or Santa Fe under the applicable
Title Policy.
(iv) Monterey hereby expressly waives and disclaims any
remedies and damages, other than those provided for in paragraph (iii)
above, that may be available under applicable law for breach of the
warranty contained in this Section 3.1, including, without limitation,
consequential damages, incidental damages, punitive damages, attorneys
fees, and court costs.
(v) Santa Fe and Monterey acknowledge that the warranty
contained in this Section 3.1 would not have been granted had Santa Fe
not also been able to limit the remedies available for breach of the
warranty. Santa Fe and Monterey therefore adopt the following
procedure for ensuring that their mutual intent with regard to such
warranty be respected. If a court having jurisdiction over a Subject
Asset subject to this Section 3.1 should determine that the limitation
and waiver of remedies provided for herein are, under applicable law
with respect to such Subject Asset, unenforceable, then (A) the
warranty provided for in this Section 3.1 shall automatically be
waived, negated, and disclaimed for such Subject Asset; (B) such
Subject Asset shall automatically be deemed to have been
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conveyed to Monterey subject to the matters set forth in Section 3.2
and in the manner described in Section 3.3; and (C) Monterey shall
execute and deliver or cause to be delivered such instruments as may
be necessary to evidence the effect of this paragraph (v).
3.2 Encumbrances. Except as provided in Section 3.1, the
contributions and conveyances made by Section 2.1 are made expressly subject to
all recorded and unrecorded liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects, and irregularities affecting the
Subject Assets.
3.3 Disclaimer of Warranties; Subrogation.
(a) No Warranty of Title. Except as provided in Section
3.1, the contributions and conveyances made by Section 2.1 are made without
warranty of title, express, implied or statutory, and without recourse even as
to the return of the purchase price, but with full substitution and subrogation
of Monterey, and all persons claiming by, through and under Monterey, to the
extent assignable, in and to all covenants and warranties by Santa Fe's
predecessors in title and with full subrogation of all rights accruing under
the statutes of limitation or prescription under the laws of various states in
which the Subject Assets are located and all rights of actions of warranty
against all former owners of the Subject Assets.
(b) Disclaimer. Monterey and Santa Fe agree that, to the
extent required by applicable law to be operative, the disclaimers of certain
warranties contained in this paragraph are "conspicuous" disclaimers for the
purposes of any applicable law, rule, or order. Except as provided in Section
3.1, the Subject Assets are assigned to Monterey without recourse (even as to
the return of the purchase price), covenant or warranty of any kind, express,
implied, or statutory. WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY
PRECEDING SENTENCE, SANTA FE HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESSED, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, RELATING TO (A) THE CONDITION OF THE SUBJECT ASSETS (INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY, OF
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS), OR (B) ANY INFRINGEMENT BY SANTA FE OR ANY OF ITS AFFILIATES OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY; IT BEING THE INTENTION OF SANTA
FE AND MONTEREY THAT THE SUBJECT ASSETS ARE TO BE CONVEYED IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
(c) No Implied Warranties. Any covenants implied by
statute or law by the use of the words "grant", "convey", "assign", "transfer",
"contribute", or "deliver", or any other words
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used in this Agreement (except those in Section 3.1), are hereby expressly
disclaimed, waived, and negated.
3.4 Indemnification.
(a) Monterey's Indemnity. MONTEREY AGREES TO RELEASE,
PROTECT, DEFEND, INDEMNIFY, AND HOLD HARMLESS SANTA FE AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, AND REPRESENTATIVES (COLLECTIVELY, "SANTA FE GROUP") FROM
AND AGAINST ALL CLAIMS, COSTS, EXPENSES, LIABILITIES (INCLUDING ATTORNEYS' FEES,
COURT COSTS, AND OTHER COSTS OF SUIT), LOSSES, DAMAGES, PENALTIES, AND FINES
RELATING TO OR ARISING OUT OF THE SUBJECT ASSETS OR THE ASSUMED LIABILITIES,
WHETHER ATTRIBUTABLE TO PERIODS BEFORE OR AFTER THE EFFECTIVE DATE, AND WHETHER
OR NOT ATTRIBUTABLE TO THE SOLE, JOINT, AND/OR COMPARATIVE NEGLIGENCE, STRICT
LIABILITY, OR OTHER FAULT OF SANTA FE, ITS PREDECESSORS, AND ITS AND THEIR
EMPLOYEES, REPRESENTATIVES, OFFICERS, OR DIRECTORS.
(b) Santa Fe's Indemnity. SANTA FE AGREES TO RELEASE,
PROTECT, DEFEND, INDEMNIFY, AND HOLD HARMLESS MONTEREY AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, AND REPRESENTATIVES FROM AND AGAINST ALL CLAIMS, COSTS,
EXPENSES, LIABILITIES (INCLUDING ATTORNEYS' FEES, COURT COSTS, AND OTHER COSTS
OF SUIT), LOSSES, DAMAGES, PENALTIES, AND FINES RELATING TO OR ARISING OUT OF
THE EXCLUDED ASSETS, THE RETAINED LIABILITIES, OR THE SANTA FE LIABILITIES
WHETHER ATTRIBUTABLE TO PERIODS BEFORE OR AFTER THE EFFECTIVE DATE, AND WHETHER
OR NOT ATTRIBUTABLE TO THE SOLE, JOINT, AND/OR COMPARATIVE NEGLIGENCE, STRICT
LIABILITY, OR OTHER FAULT OF MONTEREY AND ITS EMPLOYEES, REPRESENTATIVES,
OFFICERS, OR DIRECTORS.
3.5 Restrictions on Conveyance. Santa Fe and Monterey
acknowledge that (a) there may exist certain prohibitions against the
conveyance or assignment of certain of the Subject Assets without the consent
of third parties (including governmental agencies); and (b) certain of the
Subject Assets may be incapable of being conveyed or assigned to Monterey prior
to the execution, acknowledgment, and/or delivery of Specific Conveyances.
Both types of impediments to conveyance or assignment are referred to herein as
a "Restriction." Any provisions of this Agreement to the contrary
notwithstanding, the following provisions shall apply to all Subject Assets
burdened by a Restriction:
(i) The conveyance or assignment to Monterey shall not
become effective unless and until such time as the Restriction is
satisfied.
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(ii) Santa Fe and Monterey shall each use their reasonable
efforts to cause the Restriction to be satisfied.
(iii) When and if the Restriction is satisfied, the
conveyance or assignment to Monterey shall become automatically
effective as to such Subject Asset as of the date of this Agreement.
(iv) If (A) any of the Subject Assets burdened by a
Restriction constitutes real property or an interest in real property,
and (B) such Restriction is not satisfied within the Perpetuities
Period, then the conveyance or assignment to Monterey of such Subject
Asset shall be null and void.
3.6 Further Assurances. Without further consideration,
Santa Fe and Monterey agree to take all such further actions and execute,
acknowledge, and deliver all such further documents that are necessary or
useful in carrying out the purposes of this Agreement. So long as not
prohibited by applicable laws so to do:
(a) Santa Fe agrees to execute, acknowledge, and deliver
to Monterey and, if applicable, record in the official property records of the
applicable jurisdiction, all such additional deeds, conveyances, assignments,
bills of sale, motor vehicle titles, and other documents (the "Specific
Conveyances"), and to do all such further acts and things as may be necessary
more fully and effectively to grant, convey, assign, transfer, contribute, and
deliver to Monterey the interests in the Subject Assets contributed and
conveyed by this Agreement or intended so to be. The Specific Conveyances (i)
shall evidence and perfect the conveyance made by this Agreement and shall not
constitute any additional conveyance of the Subject Assets or interests
therein; (ii) are not intended to modify, and shall not modify, any of the
terms, covenants and conditions herein set forth; and (iii) are not intended to
create and shall not create any additional covenants or warranties of or by
Santa Fe to Monterey. To the extent that the Specific Conveyances purport to
create any additional covenants or warranties, Monterey hereby expressly waives
such additional covenants or warranties.
(b) Santa Fe agrees to execute, acknowledge, and deliver
to Monterey and, if applicable, record in the official property records of the
applicable jurisdiction, substantially all of the Specific Conveyances within
120 days after the date of this Agreement.
(c) Santa Fe represents to Monterey that all Specific
Conveyances for Subject Assets that constitute real property or interests in
real property shall conform as to form in all material respects with all
applicable laws of the states in which such Subject Assets are located
governing the conveyance of such assets, including all applicable recording,
filing and registration laws and regulations.
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(d) Monterey agrees to execute and deliver or cause to be
delivered such other instruments as may be reasonably required to assume and
take responsibility more effectively for the Assumed Liabilities and the other
obligations and liabilities that Monterey has assumed or undertaken pursuant to
this Agreement.
3.7 Assets Intended to be Conveyed. Santa Fe and
Monterey acknowledge that the assets intended to be conveyed by this Agreement
are all of the assets and properties held by the Western Division of Santa Fe
in the Business Area or used or held for use by Santa Fe solely to conduct the
Business, on the Effective Date, other than the Excluded Assets. If this
Agreement erroneously fails to convey all such assets and properties, or
erroneously conveys an asset other than such assets or properties, Santa Fe and
Monterey shall execute such corrective documents and take such other actions as
are necessary to correct the error.
3.8 Property Taxes and Transfer Fees. All (i) sales,
use, recording, and other similar property transfer fees and charges incurred
in transferring the Subject Assets to Monterey and (ii) ad valorem and property
taxes for the Subject Assets shall be the responsibility of and paid by
Monterey.
3.9 Finance Matters.
(a) Cash Management. Monterey will establish its own
cash management system which is to be separate and distinct from the cash
management system maintained by Santa Fe, and such system will be operational
prior to or shortly after the Effective Date. Santa Fe further acknowledges
and agrees that after Monterey's cash management system is established and
operational, Santa Fe shall transfer to Monterey all funds, if any, in Santa
Fe's cash management system attributable to the Subject Assets or the Business,
which transfer shall be effected by wire transfer of immediately available
funds to such account as Monterey may designate. Santa Fe shall transfer such
funds to Monterey upon notification from Monterey that its cash management
system is operational together with wire transfer instructions. Any funds
received in Santa Fe's cash management system subsequent to such transfer that
are attributable to the Business shall be promptly (but in no event more than
30 days after receipt) delivered to Monterey by Santa Fe, and any funds
received in Monterey's cash management system subsequent to such transfer that
are attributable to Santa Fe or its other subsidiaries shall be promptly (but
in no event more than 30 days after receipt) delivered to Santa Fe by Monterey.
The Parties shall make appropriate adjustments for late deposits, checks
returned for not sufficient funds and other post-Effective Date transactions
that occur after the transfer as shall be reasonable under the circumstances
consistent with the purpose and intent of this Agreement.
(b) Settlement of Intercompany Accounts. The Parties
agree that the net balance of all intercompany accounts owed by Santa Fe to
Monterey, or owed by Monterey to Santa Fe, in
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each case as of the Effective Date, shall be paid by Santa Fe or Monterey, as
appropriate, as promptly as reasonably practicable after the Effective Date
(but in no event more than 30 days after receipt). All transactions
contemplated in this Section 3.9 shall be subject to audit by the Parties, and
any dispute with respect to any such transactions thereunder shall be resolved
by Price Waterhouse LLP (or another nationally recognized accounting firm
acceptable to the Parties) whose decision shall be final and nonappealable.
3.11 Insurance Matters.
(a) Existing Surety Bonds. Santa Fe shall continue to
maintain, and not to cancel, those surety and indemnity bonds currently
maintained by or for the benefit of the Subject Assets until the earlier of (i)
the expiration or renewal date therefor next following the IPO Date or (ii) one
year after the IPO Date. Santa Fe shall give Monterey at least 15 days'
advance notice of the expiration or renewal of each such surety and indemnity
bond. If Monterey decides not to renew any bond, Monterey agrees to provide
appropriate documentation to Santa Fe to allow Santa Fe to cancel such bonds.
Monterey shall indemnify and hold harmless Santa Fe from and against any
expense or loss incurred by Santa Fe after the IPO Date as a result of
maintaining such surety bonds. After the IPO Date, Monterey shall be
responsible for obtaining its own surety and indemnity bonds as may be
necessary for its operations, subject to the preceding sentences with respect
to existing bonds. Santa Fe shall have the right at any time or from time to
time, in Santa Fe's sole discretion, to require that Monterey provide
collateral security in favor of Santa Fe of the same kind that any surety
providing a bond or indemnity agreement for the benefit of Monterey advised
Santa Fe it will or might require under any applicable indemnity agreement or
bond.
(b) Policies and Rights Prior to Spin-Off. Prior to the
Spin-Off Date, Monterey shall be entitled to any and all rights of an insured
party under each of the Policies, specifically including rights of indemnity
and the right to be defended by or at the expense of the insurer, with respect
to all injuries, losses, liabilities, damages, and expenses incurred or claimed
to have been incurred prior to the Spin-Off Date (to the extent covered) by any
party in connection with the conduct of the Business. Nothing in this clause
shall be deemed to constitute (or to reflect) the assignment of the Policies,
or any of them, to Monterey. From and after the Spin-Off Date (or earlier upon
mutual agreement), Monterey agrees that it shall be responsible for obtaining
and maintaining, on such terms as Monterey determines to be appropriate,
insurance policies for injuries, claims, liabilities, losses, costs, and
expenses arising with respect to occurrences after the Spin-Off Date.
(c) Administration and Costs. Santa Fe shall be
responsible for (i) the Insurance Administration of the Policies, (ii) the
processing and management of claims under the Policies, and (iii) the
collection and distribution of Insurance Proceeds under the Policies, except,
in each case, as provided in Section 3.11(d) below. Monterey shall be required
to give notice of any claim or potential claim to Santa Fe in sufficient time
for Santa Fe to notify the insurance carrier of
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the Policy. For the period prior to the Spin-Off Date, Monterey shall pay
Santa Fe the portion of the cost of the Policies that is properly allocable to
the Assumed Liabilities and the Subject Assets. Monterey shall pay such
amounts within 15 days of receiving Santa Fe's invoice therefor.
(d) Claims After the Spin-Off Date. The Policies will
automatically cease and terminate with respect to the Business on the Spin-Off
Date for any occurrences after the Spin-Off Date. For each Insured Claim
asserted or arising after the Spin-Off Date that relates to occurrences prior
to the Spin-Off Date in connection with the Business, Santa Fe shall at the
time such claim is asserted be deemed to transfer, without need of further
documentation, to Monterey any and all rights of an insured party under the
applicable Policy with respect to such Insured Claim, specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer. The preceding sentence shall not, however, be deemed to constitute
(or to reflect) the assignment of any of the Policies to Monterey. Monterey
shall have the right to assert a claim under a Policy relating to an occurrence
prior to the Spin-Off Date in accordance with the terms of such Policy. Santa
Fe agrees not to amend, cancel, or terminate any Policy in a manner that
materially and adversely affects Monterey's right to assert a claim thereunder
that relates to an occurrence prior to the Spin-Off Date. Additionally, after
the Spin-Off Date, Santa Fe shall, to the extent reasonably practicable, assist
Monterey in the recovery of any amounts to which Monterey is validly entitled
under any of the Policies on account of Insured Claims. Notwithstanding the
foregoing, Santa Fe does not assume any liability and shall not incur any
liability to Monterey or its affiliates in agreeing to transfer its rights
under any Policy or to provide such action or assistance and shall promptly be
advanced, or reimbursed, if applicable, for all reasonable costs and expenses
incurred after the Spin-Off Date in transferring such rights or in providing
such action or assistance requested by Monterey ("Assistance Costs").
Assistance Costs include employee salaries and out-of-pocket expenses,
attorneys' fees, adjustor fees, surveyor fees, brokerage fees, travel expenses,
communication expenses and other similar costs and expenses incurred.
(e) Insurance Application to Assumed Liabilities. If and
to the extent Santa Fe receives Insurance Proceeds that relate to Assumed
Liabilities asserted against any member of the Santa Fe Group, Santa Fe may
directly apply such Insurance Proceeds to such Assumed Liabilities without
distribution to Monterey. If and to the extent Santa Fe is paid by, or
reimbursed from, the Policies for such Assumed Liabilities, Monterey shall be
relieved of its indemnification obligations that would otherwise apply under
Sections 3.4(a) for such Assumed Liabilities, provided, that, this subsection
(e) shall not apply to any amounts attributable to Uninsured Retentions or
Assistance Costs for which Monterey shall remain obligated to pay in full.
(f) Uninsured Retentions. Monterey recognizes that the
Policies are subject to various deductibles, self-insured retentions,
retentions under retrospective premium rating plans and similar charges, which
may not be reinsured by or collectible from commercial insurance markets. All
amounts incurred or payable by Santa Fe or its affiliates, attributable to such
deductibles,
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retentions, plans or non-reinsured or non-collectible insurance, after giving
effect to maximum premium provisions and stop loss provisions on a first come
first served basis ("Uninsured Retentions") shall not be considered as insured
losses or claims, or insurance proceeds, within the meaning of this Agreement
and notwithstanding anything to the contrary shall be and remain the obligation
of Monterey to the extent arising out of the Subject Assets or the Assumed
Liabilities. Monterey shall reimburse Santa Fe for all amounts incurred or paid
by Santa Fe or its affiliates for such Uninsured Retentions to the extent
arising out of Assumed Liabilities.
3.12 Delivery of Release. At the closing of the initial
public offering of Monterey, Monterey shall execute and deliver to Santa Fe a
release (in a form acceptable to Santa Fe) that releases any and all rights
Monterey may have to seek contribution or reimbursement for amounts borrowed by
Santa Fe under the $75 million Credit Facility between Santa Fe and Monterey,
as borrowers, and The Chase Manhattan Bank, as agent for the lenders that are
parties to the Credit Facility.
3.13 Transaction Costs. Monterey shall pay and reimburse
Santa Fe for all out-of-pocket costs and expenses incurred by Santa Fe in
connection with the conveyance of the Subject Assets to Monterey, the initial
public offering of Monterey, and the Spin-Off, including those incurred for (i)
the consent solicitation of the holders of Santa Fe's 11% Senior Subordinated
Debentures due 2004 in connection with certain amendments to such debentures,
(ii) the offer to purchase the outstanding shares of Santa Fe's Convertible
Preferred Stock, 7% Series, (iii) the exchange of the Series G Notes for the
New Credit Facility, and (iv) pursuit by Santa Fe of a ruling from the Internal
Revenue Service regarding the tax-free nature of the Spin-Off, including, in
each case, all legal, accounting, printing, underwriting, engraving,
consulting, and other third party charges and expenses.
3.14 Olinda Property.
(a) Purchase and Sale Agreement. Santa Fe is a party to
that certain Agreement for Purchase and Sale of Real Property and Escrow
Instructions with CWC, Inc., a California corporation, dba SUNCAL COMPANIES,
dated August 19, 1996 (the "Purchase and Sale Agreement"), pursuant to which
SUNCAL agreed to buy and Santa Fe agreed to sell certain real property and
other rights and interests in Orange County, California (the "Property") as
more particularly described in the Purchase and Sale Agreement.
(b) Transfer of Notes to Monterey. If the Close of
Escrow (as defined in the Purchase and Sale Agreement, as amended) occurs on or
before August 1, 1997, Monterey shall purchase, and Santa Fe shall sell, any
promissory notes given by the buyer of the Property ("Buyer") as consideration
for purchase of the Property (collectively, the "Notes") along with all liens,
security interests, and other rights securing repayment of the Notes by Buyer
(collectively, the "Property Liens"), for a purchase price equal to
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the aggregate face value of the Notes (the "Note Purchase Price") if the total
face value of the Notes does not exceed $10,000,000. The closing of the purchase
and sale of the Notes shall occur in the offices of Santa Fe within 10 business
days of the date of the Closing of Escrow. At the closing, Monterey shall wire
transfer the Note Purchase Price to Santa Fe in immediately available funds and
assume all obligations in connection with the Property (including those of Santa
Fe under the Purchase and Sale Agreement for the Property) and the Notes and the
Property Liens shall be assigned to Monterey without any warranties or
representations by Santa Fe.
(c) Transfer of Property to Monterey. If the Close of
Escrow fails to occur on or before August 1, 1997, Monterey shall purchase, and
Santa Fe shall sell, the Property for a purchase price of $23,000,000 (the
"Property Purchase Price") on the terms provided in this Agreement. The closing
of the purchase and sale of the Property shall occur in the offices of Santa Fe
on or before August 15, 1997. At the closing, Monterey shall wire transfer the
Property Purchase Price to Santa Fe in immediately available funds and the
Property shall be conveyed and transferred to Monterey by a Specific Conveyance
as provided herein. On and after such closing, the defined term "Subject
Assets" shall be deemed to include the Property for all purposes under this
Agreement.
3.15 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns. Nothing in this Agreement is intended to confer upon any other
person any benefits, rights, or remedies.
3.16 Articles, Sections and Exhibits. Except to the
extent otherwise stated in this Agreement, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement, and references to
"Exhibits" are to Exhibits attached to this Agreement, which are made parts
hereof for all purposes.
3.17 Governing Law. THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THAT MIGHT REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
3.18 Deed; Xxxx of Sale; Assignment. To the extent
required by applicable law, this Agreement shall also constitute a "deed,"
"xxxx of sale" or "assignment" of the Subject Assets.
3.19 Construction of Agreement. In construing this
Agreement, the following principles shall be followed:
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(i) no consideration shall be given to the captions of
the articles, sections, subsections, or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not
as an aid in its construction;
(ii) no consideration shall be given to the fact or
presumption that one party had a greater or lesser hand in drafting
this Agreement;
(iii) the word "includes" and its syntactical variants
means "includes, but is not limited to" and corresponding syntactical
variant expressions;
(iv) a defined term has its defined meaning throughout
this Agreement and the exhibits, regardless of whether it appears
before or after the place in this Agreement or the exhibits where
it is defined;
(v) the plural shall be deemed to include the singular,
and vice versa; and
(vi) each exhibit, attachment, and schedule to this
Agreement is a part of this Agreement, but if there is any conflict or
inconsistency between the main body of this Agreement and any exhibit,
attachment, or schedule, the provisions of the main body of this
Agreement shall prevail.
3.20 Counterparts. This Agreement may be executed in any
number of counterparts, and each counterpart hereof shall be deemed to be an
original instrument, but all such counterparts shall constitute but one
instrument.
3.21 Survival. This Agreement shall survive the execution
and delivery of the Specific Conveyances.
3.22 Integrated Agreement. This Agreement is the final,
complete, and exclusive expression of the agreements of the Parties with
respect to the matters covered by this Agreement.
3.23 Severability. If any provision of this Agreement is
held to be unenforceable or invalid, the remaining provisions of this Agreement
shall remain in full force and effect.
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EXECUTED by the Parties as of the Effective Date.
Santa Fe:
SANTA FE ENERGY RESOURCES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Monterey:
MONTEREY RESOURCES, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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LIST OF EXHIBITS
Exhibit A - Assumed Liabilities
Exhibit B - Businesses
Exhibit C - Excluded Assets
Exhibit D - Surface Interests, Leasehold Interests, Mineral
Interests, and Other Rights and Interests
Exhibit E - Contracts
Exhibit F - Certain Intangible Property Rights
Exhibit G - Insurance Policies
Exhibit H - Retained Liabilities
Exhibit I - Reservation of Production-Payment Interest
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Exhibit A
ASSUMED LIABILITIES
1. Series E Notes. Series E 10.23% Senior Notes due March 31, 1997 in
the principal amount of $35,000,000 issued by Santa Fe Resources, Inc.
pursuant to the Note Agreement dated as of March 31, 1990 among Santa
Fe Energy Resources, Inc. and the purchasers party thereto (as
amended, the "Note Agreement")
2. Series F Notes. Series F 10.23% Senior Notes due March 31, 1998 in
the principal amount of $35,000,000 issued by Santa Fe Resources, Inc.
pursuant to the Note Agreement.
3. Series G Notes. Series G 10.61% Senior Notes due March 31, 2005 in the
principal amount of $175,000,000 issued by Santa Fe Resources, Inc.
pursuant to the Note Agreement.
4. New Credit Facility. All obligations and liabilities of Santa Fe
under that certain Note Agreement dated as of _____________, 1996
among Monterey Resources, Inc., and the purchasers party thereto
pursuant to which Monterey Resources, Inc. issued its 10.61% Senior
Notes due March 31, 2005 in the principal amount of $175,000,000.
5. Litigation. [Describe ongoing litigation]
6. Tax Indemnity Agreement. All liabilities and obligations of Santa Fe
under that certain First Amended and Restated Spin-Off Tax
Indemnification Agreement, dated November 26, 1990, between Santa Fe
Energy Resources, Inc. and Santa Fe Pacific Corporation.
7. Advisor's Fee. All amounts that become due by Santa Fe to Xxxxxx
Xxxxxxx & Co., Inc. and Chase Securities Inc. under paragraphs 3 and
4 of that certain letter agreement, dated June 13, 1996, among Xxxxxx
Xxxxxxx & Co., Inc., Chase Securities Inc., and Santa Fe Energy
Resources, Inc.
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Exhibit B
BUSINESSES
1. Predecessors of Santa Fe. The businesses and operations conducted in
the Business Area by the following companies:
o Xxxxxxxx - Xxxxxxxx Midway Oil Company, Inc.
x Xxxxxxxx - Western Oil and Development Company, Inc.
o Santa Fe Energy Company
o Santa Fe Natural Resources, Inc.
o Santa Fe Energy Operating Partners, L.P.
o Santa Fe Energy Partners, L.P.
o Santa Fe Pacific Exploration Company
o Bravo Oil Company
o Coline Gasoline Corporation
o The Los Angeles Corporation
2. Other Businesses. The following businesses and operations conducted
in the Business Area by Santa Fe or its predecessors:
o oil, gas, and other minerals exploration and development
o oil and gas marketing, storage and transportation
o real estate management and development
o electrical power generation
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Exhibit C
EXCLUDED ASSETS
[Attached behind this page.]
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Exhibit D
SURFACE INTERESTS, LEASEHOLD INTERESTS, MINERAL INTERESTS,
AND OTHER RIGHTS AND INTERESTS
[Attached behind this page.]
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Exhibit E
CONTRACTS
[Attached behind this page.]
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Exhibit F
CERTAIN INTANGIBLE PROPERTY RIGHTS
1. Please describe stock certificates of Cure Inc., NuCure Inc., and
general partner interest in S. Belridge Limited Partnership and any
other subsidiaries or partnerships in which Monterey holds or will
hold an interest.
1. NuCure, Inc.
1,739 shares of common stock of NuCure, Inc., a Delaware
corporation, certificate No. 54, par value $0.01.
2. Coalition Undertaking Remedial Efforts, Inc.
1,339 shares Coalition Undertaking Remedial Efforts, Inc., a
Delaware corporation, certificate No. 19, par value $0.01.
3. South Belridge Limited Partnership.
Santa Fe's general partnership interest in the South Belridge
Limited Partnership, a Texas limited partnership, formed under
Agreement of Limited Partnership dated October 31, 1990.
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Exhibit G
INSURANCE POLICIES
[Attached behind this page.]
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Exhibit H
RETAINED LIABILITIES
1. Retirement Plan. All liabilities and obligations under the Santa Fe
Retirement Income Plan that, as of the Spin-Off Date, are attributable
to those participants in the plan who are employees of Monterey.
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Exhibit I
RESERVATION OF PRODUCTIONS--PAYMENT INTEREST
[Attached behind this page.]
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