-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FLTP6ae6dy++vZdjds0NIeCFDUIG2kyjAwwt8D/80oNbMQRSX7DXdX19ueRtXLKb b9pamoYxjqZlu0INMADIaA== 0000950129-96-000244.txt : 19960304 0000950129-96-000244.hdr.sgml : 19960304 ACCESSION NUMBER: 0000950129-96-000244 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960301 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANTA FE ENERGY RESOURCES INC CENTRAL INDEX KEY: 0000086772 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 362722169 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-00753 FILM NUMBER: 96529569 BUSINESS ADDRESS: STREET 1: 1616 S VOSS RD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137832401 MAIL ADDRESS: STREET 1: 1616 S VOSS ROAD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77057 FORMER COMPANY: FORMER CONFORMED NAME: SANTA FE NATURAL RESOURCES INC DATE OF NAME CHANGE: 19900111 S-3/A 1 SANTA FE ENERGY RESOURCES, INC. - AMENDMENT 2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 29, 1996 REGISTRATION NO. 333-00753 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ Amendment No. 2 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ SANTA FE ENERGY RESOURCES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2722169 (STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER) ORGANIZATION)
1616 SOUTH VOSS ROAD, SUITE 1000, HOUSTON, TEXAS 77057 (713) 507-5000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) DAVID L. HICKS, 1616 SOUTH VOSS ROAD, SUITE 1000, HOUSTON, TEXAS 77057 (713) 507-5000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPY TO: STEPHEN T. GIOVE G. MICHAEL O'LEARY TIMOTHY G. MASSAD SHEARMAN & STERLING ANDREWS & KURTH L.L.P. CRAVATH, SWAINE & MOORE 599 LEXINGTON AVENUE 4200 TEXAS COMMERCE TOWER WORLDWIDE PLAZA NEW YORK, NEW YORK 10022 HOUSTON, TEXAS 77002 825 EIGHTH AVENUE (212) 848-4000 (713) 220-4200 NEW YORK, NEW YORK 10019 (212) 474-1000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 *************************************************************************** * * * INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A * * REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED * * WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT * * BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE * * REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT * * CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY * * NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH * * SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO * * REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH * * STATE. * * * *************************************************************************** SUBJECT TO COMPLETION DATED FEBRUARY 29, 1996 PROSPECTUS 7,920,297 SHARES SANTA FE ENERGY RESOURCES, INC. COMMON STOCK ------------------ This Prospectus relates to the offer and sale of 7,920,297 shares (the "Shares") of common stock, par value $0.01 per share (the "Common Stock"), of Santa Fe Energy Resources, Inc., a Delaware corporation (the "Company"), by Minorco (U.S.A.) Inc. (the "Selling Stockholder"). The Company will not receive any part of the proceeds from the sale of the Shares. See "Selling Stockholder." The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the symbol "SFR." The closing sales price of the Common Stock as reported by the NYSE on February , 1996 was $ per share. ------------------ FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- UNDERWRITING PROCEEDS TO DISCOUNT AND SELLING PRICE TO PUBLIC COMMISSIONS(1) STOCKHOLDER(2) - ----------------------------------------------------------------------------------------------------- Per Share......................................... $ $ $ - ----------------------------------------------------------------------------------------------------- Total(3).......................................... $ $ $ - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Expenses payable by the Company are estimated at $172,000. (3) The Selling Stockholder has granted the Underwriters an option for 30 days to purchase up to an additional 792,030 shares at the initial price to public per share, less the underwriting discount and commissions, solely to cover over-allotments. If such option is exercised in full, the total initial price to public, underwriting discount and commissions and proceeds to Selling Stockholder will be $ , $ and $ , respectively. See "Underwriting." ----------------------- The Shares are offered, subject to prior sale, when, as and if delivered to and accepted by the Underwriters, subject to approval of certain matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that the Shares will be ready for delivery in New York, New York on or about , 1996. LAZARD FRERES & CO. LLC MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC ------------------ THE DATE OF THIS PROSPECTUS IS , 1996. 3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations promulgated thereunder and, in accordance therewith, files reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by the Company with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices of the Commission: Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621; and New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may also be obtained at prescribed rates from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's Common Stock, its Convertible Preferred Stock, Series 7% and its $.732 Series A Convertible Preferred Stock are listed for trading on the NYSE. The Company's registration statements, reports, proxy statements and other information may also be inspected at the offices of the NYSE, 20 Broad Street, New York 10005. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. DOCUMENTS INCORPORATED BY REFERENCE The following documents heretofore filed by the Company with the Securities and Exchange Commission (the "Commission") pursuant to Section 13 of the Exchange Act are incorporated herein by reference: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1995; and (ii) the description of the Common Stock contained in the Company's Registration Statement on Form 8-A (File No. 1-7667) filed on February 21, 1990. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the offered Shares shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus may obtain without charge, upon written or oral request, a copy of any of the documents incorporated by reference herein, except for the exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be addressed to the Company at its principal executive offices at Santa Fe Energy Resources, Inc., 1616 South Voss Road, Suite 1000, Houston, Texas 77057 (telephone (713) 507-5000); Attention: Mark A. Older, Associate General Counsel and Secretary. 2 4 PROSPECTUS SUMMARY The following information is a summary of the more detailed information and financial statements incorporated by reference in this Prospectus and is qualified in its entirety by reference thereto. Unless otherwise indicated or required by the context, references to "Santa Fe" and the "Company" include its consolidated subsidiaries. As used herein, gas is converted into a barrel of oil equivalent ("BOE") at the ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel of oil ("Bbl"). THE COMPANY GENERAL Santa Fe Energy Resources, Inc. is an independent oil and gas company engaged in the exploration, development and production of oil and natural gas in the continental United States and in certain foreign areas. At December 31, 1995, the Company had estimated worldwide proved reserves of oil and natural gas totaling 320.1 million barrels of oil equivalent ("MMBOE," consisting of approximately 279.2 million barrels of oil ("MMBbls") and approximately 245.1 billion cubic feet of natural gas ("Bcf")), of which approximately 92% were domestic reserves and approximately 8% were foreign reserves. During 1995, the Company's worldwide production aggregated approximately 33.3 MMBOE, of which approximately 72% was crude oil and approximately 28% was natural gas. The Company's three domestic core areas are the San Joaquin Valley of California (the "Western Division"), the Permian Basin in Texas and New Mexico (the "Central Division") and the offshore Gulf of Mexico (the "Gulf of Mexico Division"), and its two international core areas are in Argentina and Indonesia. The address and telephone number of the Company's principal executive offices are 1616 South Voss Road, Suite 1000, Houston, Texas 77057, (713) 507-5000. Most of the Company's domestic crude oil production is located in California and Texas, while its domestic natural gas production comes primarily from the Gulf of Mexico, New Mexico and Texas. A substantial portion of the Company's domestic oil production is in long-lived fields with well-established production histories and where enhanced oil recovery ("EOR") methods are employed. As of December 31, 1995, approximately 65% of the Company's domestic proved crude oil and liquids reserves and 53% of its 1995 average daily domestic production of crude oil and liquids were attributable to the Midway-Sunset field in the San Joaquin Valley of California. Nearly all of the reserves in this field are heavy oil (i.e., low gravity, high viscosity crude oil). The Company's foreign production is located in the El Tordillo and Sierra Chata fields in Argentina and in the Salawati Basin and Salawati Island area of Indonesia. Production from the Argentine operations averaged 2,600 Bbls per day in 1995 and 11.9 million cubic feet ("MMcf") per day of natural gas (which gas production did not commence until the latter part of the second quarter of 1995). Production from the Indonesian operations averaged 5,200 Bbls of oil per day in 1995. In addition, the Company has recently announced discoveries at Mudi, Geragai and Betara in Indonesia and a discovery at Tchatamba in waters offshore Gabon, all of which are in various stages of delineation. In 1993, the Company embarked upon a comprehensive restructuring program that was completed in 1994. The restructuring resulted in an improved capital structure, greater liquidity and financial flexibility (as a result of a significant reduction in indebtedness and the sale of the Company's non-core assets), as well as a reduction in the Company's cost structure (which was achieved through the sale of its higher cost, non-core properties, the reduction in the salaried work force by approximately 20%, an improvement in the efficiency of its information systems and reductions in other general and administrative costs). In 1995, the Company increased its capital spending by approximately 58% to an annual level of approximately $205 million to exploit more fully its inventory of domestic projects and to continue the expansion of its international operations. Oil production for 1995 averaged 66.3 thousand barrels of oil ("MBbls") per day, up from 65.7 MBbls per day in 1994, and natural gas production in 1995 averaged 150.0 MMcf per day compared with 136.6 MMcf per day the previous year. During the fourth quarter of 1995, average daily production rates grew to 68.4 MBbls of oil and 160.2 MMcf of natural gas as compared to 64.8 MBbls of oil and 125.1 MMcf of natural gas in the fourth quarter of 1994. At the end of 1995, the Company's efforts had added more than 54 MMBOE of proved reserves, or approximately 164% of its 1995 production, at an average replacement cost of approximately $4.18 per BOE. 3 5 OPERATING STRATEGY The Company's operating strategy in 1996 is to continue increasing its cash flow and earnings through the sustained growth of its oil and gas reserves and production. This operating strategy is designed to permit the Company to take advantage of the balance sheet strength and reduced cost structure per BOE of production that were achieved in its 1994 restructuring as it more fully exploits its inventory of domestic and international drilling projects. The key components of this strategy are discussed below. - Capital Spending. A key component of the Company's strategy is to continue in 1996 the increased level of capital spending that it initiated last year. In 1995, the Company spent $168.7 million and $35.9 million on development and exploration, respectively, and in 1996 it intends to spend $162.2 million on development and $38.3 million on exploration. The Company believes that the increased 1995 capital spending was a principal factor contributing to the Company's sustained production growth throughout last year and that the 1996 capital spending levels can lead to further growth. - Domestic Project Inventory. A second component of the Company's strategy is its extensive inventory of identified drilling projects in its domestic core areas to be exploited in 1996. In the Western Division, the Company successfully drilled and completed 224 development wells during 1995 (for a 100% success rate) and added estimated proved reserves of 23.8 MMBbls as of December 31, 1995. The Company intends to drill 197 development wells in this Division during 1996. In the Gulf of Mexico Division, the Company successfully completed all 8 development wells drilled during 1995 and 9 of the 12 exploration wells drilled during such period, resulting in 9.6 MMBOE of estimated proved reserve additions at December 31, 1995. The success of last year's drilling program has added to the Company's inventory in this Division, and in 1996 it plans to drill 8 development and 13 exploration wells in this Division. In the Central Division, the Company successfully completed 52 of the 56 development wells drilled during 1995 and 13 of the 15 exploratory wells drilled last year. In addition, during 1995 the Company took advantage of selected property acquisition opportunities available in this Division, resulting in total estimated proved reserve additions from drilling and acquisition activities of 15.5 MMBOE at December 31, 1995. In 1996, the Company plans to drill 70 development and 20 exploratory wells in the Central Division and to consider additional property acquisitions. - International Project Inventory. In addition to its domestic inventory, the Company has built a significant inventory of international projects, predominantly due to its exploration activities conducted since 1993. In 1995, the Company spent $25.4 million on development projects and $8.9 million on exploration projects. The major portion of the development capital related to the Company's 1993 natural gas discovery in the Sierra Chata field, where facilities were installed and production commenced in 1995. The balance of the 1995 international development expenditures were principally incurred in the El Tordillo field in Argentina and in the Mudi field in Indonesia (discovered by the Company in 1994). The 1995 international exploration expenditures resulted in the successful completion of 5 of the 8 wells drilled with discoveries announced at Geragai and Betara in Indonesia and at Tchatamba offshore Gabon. In 1996, the Company plans to spend $22.8 million for international development expenditures and $12.7 million for international exploration expenditures. The planned development expenditures include funds for 28 development wells, including 23 wells in Argentina, 4 wells in Indonesia and one well in Gabon. The planned exploration expenditures include funds for 11 exploratory wells, including 2 wells in Argentina, 6 wells in Indonesia, 2 wells in Ecuador and one well in Gabon. The discussion of operating strategy set forth above includes forward-looking statements that are based upon numerous assumptions with respect to the volume of the Company's production, the oil and gas prices to be received for its production, the future results of its drilling activities and other factors affecting the Company's business that are beyond the Company's control. Many of such factors are discussed herein under the caption "Risk Factors." Any changes in such factors could produce significantly different results. As used herein, (i) capital expenditures include expenditures for exploration, development and property acquisitions, (ii) expenditures related to the acquisition of proved properties are treated as development expenditures and (iii) in all cases the number of wells refers to gross wells. 4 6 THE OFFERING The Selling Stockholder is Minorco (U.S.A.) Inc., an indirect wholly owned subsidiary of Minorco, a Luxembourg societe anonyme ("Minorco"). The Shares were originally acquired by the Selling Stockholder in 1992 in connection with the acquisition by the Company of Adobe Resources Corporation, of which the Selling Stockholder was a stockholder at the time of such acquisition. Shares offered hereby....................................... 8,712,327(a) Shares outstanding before and after the offering............ 90,329,311(b) Use of proceeds............................................. The Company will not receive any of the proceeds from the sale of the Shares. NYSE Trading Symbol......................................... SFR
- --------------- (a) Assumes that the Underwriters' over-allotment option to purchase 792,030 shares of Common Stock from the Selling Stockholder is exercised in full. See "Underwriting." (b) Based on the number of shares outstanding as of February 1, 1996, which excludes a total of 14,456,500 shares of Common Stock subject to issuance upon conversion of the outstanding shares of the Company's Series A Convertible Preferred Stock and its Convertible Preferred Stock, Series 7%, and a total of 4,431,548 shares of Common Stock subject to issuance under stock options outstanding as of such date. 5 7 SUMMARY FINANCIAL INFORMATION The following table presents summary historical financial information for the periods presented and should be read in conjunction with the historical consolidated financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated by reference herein.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 1995 1994 1993 1992 1991 ----------- -------- -------- -------- ------ (IN MILLIONS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Revenues............................... $ 442.0 $ 391.4 $ 436.9 $ 427.5 $379.8 Production and operating expenses...... 154.9 150.0 163.8 153.4 134.6 Exploration expenses................... 23.4 20.4 31.0 25.5 18.7 General and administrative............. 26.9 27.3 32.3 30.9 27.8 Depreciation, depletion and amortization......................... 133.2 121.3 152.7 146.3 106.6 Impairment of oil and gas properties... 30.2(a) -- 99.3(a) -- -- Restructuring charges.................. -- 7.0(b) 38.6(c) -- -- Income (loss) from operations.......... 53.9 48.2 (113.0) 57.5 64.4 Interest expense(d).................... 32.5 27.5 45.8 55.6 47.3 Net income (loss)...................... 26.6 17.1 (77.1) (1.4) 18.5 Earnings (loss) to common stock........ 11.8 5.4 (84.1) (5.7) 18.5 Earnings (loss) per share of common stock................................ $ 0.13 $ 0.06 $ (0.94) $ (0.07) $ 0.29 Weighted average number of shares of common stock outstanding............. 90.2 89.9 89.7 79.0 63.8 CASH FLOW DATA: Net cash provided by operating activities........................... $ 174.5 $ 124.5 $ 160.2 $ 141.5 $128.4 Capital expenditures, including acquisitions......................... 223.2 138.8 159.7 102.9 136.6 Preferred dividends.................... 14.8 11.7 7.0 4.3 -- BALANCE SHEET DATA (AT END OF PERIOD): Properties and equipment, net.......... $ 889.5 $ 843.0 $ 832.7 $1,101.8 $797.4 Total assets........................... 1,064.8 1,071.4 1,076.9 1,337.2 911.9 Long-term debt......................... 344.4 350.4 405.4 492.8 440.8 Convertible Preferred Stock, Series 7%................................... 80.0 80.0 80.0 80.0 -- Shareholders' equity................... 437.7 423.3 323.6 416.6 225.1
- --------------- (a) Reflects a non-cash charge of $30.2 million recorded in 1995, for the impairment of oil and gas properties associated with the adoption of FAS No. 121, a new accounting standard, and $99.3 million recorded in 1993 for the impairment of oil and gas properties. For further description of the impairments recorded in 1995 and 1993, see Note 1 of the Notes to the historical consolidated financial statements incorporated herein by reference. (b) Reflects non-recurring charges relating to the Company's restructuring program of $7.0 million recorded in the first quarter of 1994 comprised of severance, benefits and relocation expenses. (c) Reflects non-recurring charges relating to implementation of the Company's restructuring program of $38.6 million recorded in 1993, comprised of (i) losses on property dispositions of $27.8 million; (ii) long-term debt prepayment penalties of $8.6 million; and (iii) accruals for certain personnel benefits and related costs of $2.2 million. (d) Includes capitalized interest of $5.8 million, $3.6 million, $4.3 million, $4.9 million and $7.7 million for the years 1995, 1994, 1993, 1992 and 1991, respectively. 6 8 SUMMARY OPERATING DATA
YEAR ENDED DECEMBER 31, -------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ DAILY PRODUCTION: Oil (MBbls per day)(a)..................... 66.3 65.7 66.7(i) 62.5 55.5 Natural gas (MMcf per day)(a).............. 150.0 136.6 165.4(i) 126.3 95.2 Oil equivalent (MBOE per day)(a)........... 91.3 88.5 94.3(i) 83.6 71.4 AVERAGE SALES PRICE: Oil (per Bbl)(b)........................... $14.15 $12.41 $12.93 $14.96 $16.16 Natural gas (per Mcf)(b)................... $ 1.43 $ 1.73 $ 1.89 $ 1.70 $ 1.49 COSTS PER BOE: Production costs(c)........................ $ 5.15 $ 5.30 $ 5.39 $ 5.66 $ 6.06 Exploration costs, including dry hole costs................................... $ 0.70 $ 0.63 $ 0.90 $ 0.84 $ 0.72 General and administrative costs........... $ 0.81 $ 0.85 $ 0.94 $ 1.01 $ 1.07 Depletion, depreciation and amortization(d)......................... $ 3.96 $ 3.76 $ 4.44 $ 4.79 $ 4.09 Interest, net(e)........................... $ 0.93 $ 1.08 $ 1.30 $ 1.58 $ 1.43 FIVE-YEAR AVERAGE REPLACEMENT COSTS PER BOE(F)..................................... $ 4.89 $ 4.97 $ 4.80 $ 4.05 $ 3.66 ANNUAL RESERVE REPLACEMENT RATIO(G).......... 164% 126% 121% 262% 127% ESTIMATED RESERVE LIFE (IN YEARS)(H)......... 9.6 9.2 8.5(i) 9.9 9.9
- --------------- (a) Includes production attributable to certain net profits interests sold by the Company to unaffiliated persons, which interests burden the Company's working or royalty interests held in certain properties. (b) Includes revenues and expenses realized in connection with the Company's hedging program. As of December 31, 1995, the Company had hedged for 1996 an average of approximately 15,000 Bbls of oil per day from January through April at a New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") price of $18.52 per Bbl, and, provided that if the WTI price is greater than $16.80 per barrel, up to an additional 15,000 barrels of oil per day is hedged for the period January through March at a NYMEX WTI price of $18.65 per barrel. For its 1996 natural gas production, the Company has hedged for the entire year an average of 55 MMcf per day of its Gulf Coast natural gas production at an average NYMEX price of $1.82 per Mcf and 30 MMcf per day of its Permian Basin production at an average index price of $1.53 per Mcf. Due to its location, the Company's Permian Basin natural gas traditionally sells at a discount to its Gulf Coast gas. Based upon prevailing NYMEX futures prices and other index prices for oil and natural gas as of February 5, 1996, the Company estimates it would realize hedging expenses of approximately $4.5 million for the quarter ending March 31, 1996. Actual hedging expenses realized could vary significantly from such estimates if prices vary significantly from those used in calculating the estimates. (c) Includes related production, severance and ad valorem taxes. (d) Excludes effect of unproved property writedown of $0.03 per BOE in 1995. (e) Excludes effects of the (i) benefit of federal income tax audit refund of $0.25 per BOE in 1995; (ii) benefit of an adjustment to certain financing costs recorded in a prior period of $0.05 per BOE in 1995; (iii) benefit of adjustments to provisions for potential state income tax obligations of $0.15 per BOE in 1995 and $0.36 per BOE in 1994; (iv) benefit of adjustment to provisions made in prior periods with respect to interest on certain federal income tax audit adjustments of $0.07 per BOE in 1994; and (v) benefit of federal income tax audit refund and revised tax sharing agreement with the Company's former parent of $0.36 per BOE in 1993. (f) Reflects the average replacement cost per BOE during the five years ended December 31 as of the year reflected in the column. (g) The annual reserve replacement ratio is a fraction, of which the numerator is the estimated number of reserves added during a year through additions of estimated proved reserves from exploratory and development drilling, acquisitions of proved properties, improved recovery techniques and revisions of previous estimates, and of which the denominator is the oil and natural gas produced during that year. (h) Based upon a fraction, of which the numerator is estimated proved reserves at year end and of which the denominator is annual production during that year. (i) Includes production attributable to properties sold in 1993 and other properties sold in 1994. Production attributable to such properties during the year ended December 31, 1993 totaled approximately 4.1 MBbls of oil and 21.7 MMcf of natural gas per day (7.7 MBOE per day). 7 9 SUMMARY OIL AND GAS RESERVE INFORMATION The following table sets forth summary information with respect to the Company's proved oil and gas reserves estimated by Ryder Scott Company, independent petroleum engineers, as of the dates indicated.
NET PROVED RESERVES AS OF DECEMBER 31,(A) ----------------------------------------------------- 1995 1994 1993(B) 1992 1991 -------- ------ ------- ------ ------ Crude oil, condensate and natural gas liquids (MMBbls)................................... 279.2 258.3 248.2 255.1 229.2 Natural gas (Bcf)............................ 245.1 242.4 263.0 277.5 170.8 Proved reserves (MMBOE)...................... 320.1 298.7 292.0 301.5 257.7 Total proved developed reserves (MMBOE)...... 253.6 224.5 225.5 248.4 210.3 Present value pre-tax future net cash flows (in millions)(c)........................... $1,257.2 $970.8 $567.8 $915.2 $602.6
- --------------- (a) Includes estimated proved reserves attributable to certain net profits interests sold by the Company to unaffiliated persons, which interests burden the Company's working or royalty interests held in certain properties. (b) The estimates set forth in this table for 1993 give effect to the sale by the Company of approximately 8.0 MMBOE of proved reserves, which sale closed in April 1994. (c) Represents the present value (discounted at 10%) of the future net cash flows estimated to result from production of the Company's estimated proved reserves using estimated sales prices and estimates of production costs, ad valorem and production taxes and future development costs necessary to produce such reserves. The sales prices used in the determination of proved reserves and of estimated future net cash flows are based on the prices in effect at year end, which at December 31, 1995 averaged $14.87 for oil and $1.79 for natural gas. The average sales prices realized by the Company for its production during 1995 were $14.15 ($14.05 unhedged) per barrel for oil and $1.43 ($1.44 unhedged) per Mcf for natural gas. 8 10 RISK FACTORS Prospective investors should carefully consider all of the information contained in and incorporated by reference in this Prospectus, and in particular the investment considerations described in the following paragraphs. VOLATILITY OF OIL AND NATURAL GAS PRICES The Company's profitability is dependent upon prevailing prices for oil and natural gas. Prices for oil and natural gas have been subject to wide fluctuations, which continue to reflect imbalances in supply and demand as well as other market conditions and the world political situation as it affects OPEC, the Middle East (including the current embargo of Iraqi crude oil from worldwide markets), the former Soviet Union and other producing countries. Moreover, the price of oil and natural gas may be affected by the price and availability of alternative sources of energy, weather conditions and the general state of the economy. Even relatively modest changes in oil and natural gas prices may significantly change the Company's revenues, results of operations, cash flows and proved reserves. Since the Company is primarily an oil producer, a change in the price paid for its oil production more significantly affects its results of operations than a change in natural gas prices. EFFECTS OF HEAVY OIL PRODUCTION A substantial portion of the Company's oil production consists of heavy oil produced from the Midway-Sunset Field. The market for such heavy crude oil production differs substantially from the remainder of the domestic crude oil market, due principally to the transportation and refining requirements associated with heavy crude. As a result, the profit margin realized from the sale of heavy crude oil is generally lower than that realized from the sale of light crude oil, because the costs of producing heavy oil are generally higher, and the sales price realized for heavy crude oil is generally lower, than the comparable costs and prices paid for light crude oils. POSSIBLE IMPAIRMENT OF OIL AND GAS PROPERTIES The Company follows the successful efforts method of accounting for its oil and natural gas exploration and production activities. Under this method, costs (both tangible and intangible) of productive wells and development dry holes, as well as the costs of prospective acreage, are capitalized. The costs of drilling and equipping exploratory wells which do not result in proved reserves are expensed upon the determination that the well does not justify commercial development. Other exploratory costs, including geological and geophysical costs and delay rentals, are charged to expense as incurred. The Company periodically reviews individual proved properties to determine if the carrying value of the field as reflected in its accounting records exceeds the estimated undiscounted future net revenues from oil and natural gas reserves attributable to the field. Based on this review and the continuing evaluation of development plans, economics and other factors, if appropriate, the Company records impairments (additional depletion and depreciation) pursuant to Statement of Financial Accounting Standards No. 121 to the extent that the net book values of its properties exceed the expected discounted future net revenues. Such impairments constitute a charge to earnings which does not impact the Company's cash flow from operating activities. However, such writedowns impact the amount of the Company's shareholders' equity. The risk that the Company will be required to write down the carrying value of its oil and natural gas properties increases when oil and natural gas prices are depressed. The Company recorded impairments of $30.2 million in 1995 associated with the adoption of FAS No. 121. No assurance can be given that the Company will not record additional impairments in the future. GOVERNMENTAL AND ENVIRONMENTAL REGULATION The Company's activities are subject to various federal, state and local laws and regulations covering the discharge of material into the environment or otherwise relating to protection of the environment. In particular, the Company's oil and natural gas exploration, development, production and enhanced oil recovery 9 11 operations, its activities in connection with storage and transportation of liquid hydrocarbons and its use of facilities for treating, processing, recovering or otherwise handling hydrocarbons and waste therefrom are subject to stringent environmental regulation by governmental authorities. Such regulations have increased the costs of planning, designing, drilling, installing, operating and abandoning the Company's oil and natural gas wells and other facilities. The Company has expended significant resources, both financial and managerial, to comply with environmental regulations and permitting requirements and anticipates that it will continue to do so in the future. Although the Company believes that its operations and facilities are in general compliance with applicable environmental regulations, risks of substantial costs and liabilities are inherent in oil and gas operations, and there can be no assurance that significant costs and liabilities will not be incurred in the future. Moreover, it is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies thereunder, and claims for damages to property, employees, other persons and the environment resulting from the Company's operations, could result in substantial costs and liabilities in the future. UNCERTAINTIES IN ESTIMATES OF PROVED RESERVES Proved reserves of crude oil and natural gas are estimated quantities that geological and engineering data demonstrate with reasonable certainty to be economically producible under existing conditions. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures. All reserve estimates are based on various assumptions and are, therefore, inherently speculative, and various classifications of reserves only constitute attempts to define the degree of speculation involved. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment and the assumptions used regarding quantities of recoverable oil and natural gas reserves and prices for crude oil, natural gas liquids and natural gas. Actual prices, production, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves will vary from those assumed in the estimates, and such variances may be significant. Any significant variance from the assumptions could result in the actual quantity of the Company's reserves and future net cash flow therefrom being materially different from the estimates set forth in this Prospectus. In addition, results of drilling, testing and production and changes in crude oil, natural gas liquids and natural gas prices after the date of the estimate may require substantial upward or downward revisions. Although a substantial portion of the Company's proved oil reserves is in long-lived fields with well-established production histories where enhanced oil recovery and other development projects are employed to produce such reserves, the external factors discussed above will directly affect the Company's determination to proceed with any of such projects and, therefore, the quantity of reserves in these fields classified as proved. The reserve estimates incorporated by reference in this Prospectus were prepared as of a date prior to the date of this Prospectus and could be materially different from the quantities of crude oil, natural gas liquids and natural gas that ultimately will be recovered from the Company's properties. In addition, actual future net cash flows from production of the Company's reserves will be affected by factors such as actual production, supply and demand for oil and natural gas, curtailments or increases in consumption by natural gas purchasers, changes in governmental regulations or taxation and the impact of inflation on costs. The timing of actual future net revenues from proved reserves, and thus their actual present value, can be affected by the timing of the incurrence of expenditures in connection with development of oil and natural gas properties. The 10% discount factor, which is required by the Commission to be used to calculate present value for reporting purposes, is not necessarily the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the oil and natural gas industry. Discounted present value, no matter what discount rate is used, is materially affected by assumptions as to the amount and timing of future production, which may and often do prove to be inaccurate. INDUSTRY CONSIDERATIONS; COMPETITION; OPERATING RISKS The Company's business is the exploration for, and the development and production of, oil and natural gas. Exploration for oil and natural gas involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. In addition, there is strong competition 10 12 relating to all aspects of the oil and natural gas industry, and in particular in the exploration and development of new oil and natural gas reserves. The Company must compete with a substantial number of other oil and natural gas companies, many of which have significantly greater financial and other resources than the Company. All of the Company's oil and natural gas activities are subject to the risks normally incident to exploration for and production of oil and gas, including blowouts, cratering, watering out, spillage and fires, the occurrence of any of which could result in substantial losses to the Company. Offshore operations are subject to usual marine perils, including hurricanes and other adverse weather conditions, and governmental regulations as well as interruption or termination by governmental authorities based on environmental and other considerations. In accordance with customary industry practices, the Company carries insurance against some, but not all, of the risks associated with the Company's business. Accordingly, the Company may be subject to liability or losses due to events that are not insured. Other risks inherent in the oil and gas industry are the risks that a well will be a dry hole or will not be sufficiently productive to provide an economic return on the capital expended to drill the well or to repay the entire cost of drilling, testing, completing and equipping the well. Crude oil and natural gas are depleting assets, and the Company's producing properties are characterized by a high initial production rate, followed by a steep decline in production. As a result, the Company must locate and develop or acquire new oil and natural gas reserves to replace those being depleted by production. Without successful exploration or acquisition activities, the Company's reserves and revenues will decline over time. There can be no assurance that the Company's future exploration and development wells will be financially successful. In addition, the continuing development of reserves will require significant capital expenditures. If the Company's cash flow from operations is not sufficient for that purpose, there can be no assurance that additional debt or equity financing will be available to the Company. INTERNATIONAL OPERATIONS Foreign properties, operations or investment may be adversely affected by local political and economic developments, exchange controls, currency fluctuations, royalty and tax increases, retroactive tax claims, expropriation, import and export regulations and other foreign laws or policies as well as by laws and policies of the United States affecting foreign trade, taxation and investment. In addition, in the event of a dispute arising from foreign operations, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in the United States. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. RESTRICTIONS ON PAYMENT OF DIVIDENDS The Company has not paid dividends on its Common Stock since the third quarter of 1993 and does not expect to pay dividends to holders of Common Stock in the foreseeable future. In addition, certain of the Company's credit agreements restrict the payment of dividends to the holders of the Company's capital stock, including the Common Stock. Under the most restrictive covenant, dividends on the Common Stock are limited to generally (i) the sum of (a) $50 million plus (b) 50% (or minus 50% in the case of a deficit) of the Company's consolidated net earnings for the period commencing on April 1, 1994 and ending as of the most recent quarter preceding the date of determination plus (c) the net cash proceeds from certain sales of capital stock less (ii) the sum of all restricted investments and restricted payments previously made. For a description of the aggregate amount that the Company could pay as a dividend on the Common Stock as of a recent date, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" most recently incorporated herein by reference. In addition, the terms of the Company's outstanding Preferred Stock restrict any dividend payment by the Company to holders of Common Stock unless all dividends on the Preferred Stock for all past dividend periods shall have been paid, or declared and a sum sufficient for the payment thereof set apart. Annual dividends payable on the shares of Preferred Stock outstanding as of December 31, 1995 total approximately $14.8 million per year, none of which are currently in arrears. The determination of the amount of future cash dividends, if any, to be declared and paid is in the sole discretion of the Company's 11 13 Board of Directors and will depend on dividend requirements with respect to the Company's Preferred Stock, the Company's financial condition, earnings and funds from operations, the level of its capital and exploration expenditures, dividend restrictions in its financing agreements, its future business prospects and other matters as the Company's Board of Directors deems relevant. USE OF PROCEEDS The Selling Stockholder will receive the net proceeds from the sale of the Shares, and none of such proceeds will be available for use by the Company or otherwise for the Company's benefit. SELLING STOCKHOLDER The Selling Stockholder, a Colorado corporation, is an indirect wholly owned subsidiary of Minorco. The Selling Stockholder acquired 8,712,327 shares of Common Stock in 1992 in connection with the acquisition by the Company of Adobe Resources Corporation. This Prospectus relates to the registration and offering of 8,712,327 shares of Common Stock (including shares subject to the Underwriters' over-allotment option), which represented approximately 9.6% of the shares of Common Stock outstanding as of February 1, 1996. The shares offered hereby constitute all of the shares of Common Stock owned by the Selling Stockholder and Minorco. Pursuant to the terms of a Stock Ownership and Registration Rights Agreement dated December 10, 1991, among the Company, the Selling Stockholder and Minorco, the Selling Stockholder is currently entitled to have one designee appointed to the Board of Directors of the Company. Reuben F. Richards, the Chairman, President and Chief Executive Officer of the Selling Stockholder, currently serves as a designee of the Selling Stockholder on the Company's Board of Directors for a term expiring in 1996. The right of the Selling Stockholder to have one designee appointed to the Board of Directors will terminate automatically upon consummation of this offering. Mr. Richards has agreed to remain as a director of the Company after consummation of this offering. The following table provides certain information with respect to the Selling Stockholder and the number of shares of Common Stock currently owned, offered hereby and to be owned by the Selling Stockholder after this offering, assuming the Underwriters' over-allotment option is exercised in full.
MAXIMUM NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES TO BE OWNED NAME AND ADDRESS OF OWNED PRIOR TO TO BE SOLD IN AFTER SELLING STOCKHOLDER THE OFFERING(1) THE OFFERING(2) THE OFFERING - -------------------------------------------- ---------------- ---------------- ---------------- Minorco (U.S.A.) Inc........................ 8,712,327 8,712,327 0 30 Rockefeller Plaza Suite 4212 New York, NY 10112
- --------------- (1) The Selling Stockholder shares voting and investment powers concerning the Shares with its parent, Minorco. (2) Assumes the Underwriters' over-allotment option to purchase 792,030 shares of Common Stock from the Selling Stockholder is exercised in full. See "Underwriting." 12 14 UNDERWRITING Subject to the terms and conditions of the underwriting agreement (the "Underwriting Agreement), among the Company, the Selling Stockholder and each of the Underwriters named below (the "Underwriters"), for whom Lazard Freres & Co. LLC, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc are acting as representatives (the "Representatives"), each of the Underwriters has severally agreed to purchase, and the Selling Stockholder has agreed to sell, the respective number of Shares set forth opposite its name below:
NUMBER OF SHARES --------- Lazard Freres & Co. LLC........................................... Morgan Stanley & Co. Incorporated................................. Salomon Brothers Inc.............................................. --------- Total........................................................ 7,920,297 =========
The Selling Stockholder has been advised by the Representatives that the several Underwriters propose to offer the Shares offered hereby directly to the public at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share to certain other dealers. After the offering, the public offering price and such concessions may be changed. The Selling Shareholder has granted the Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase, at the initial price to public less the underwriting discount, as set forth on the cover page of this Prospectus, up to an aggregate of 792,030 additional shares of Common Stock to cover over-allotments, if any. The Company and the Selling Stockholder have agreed with the Underwriters not to publicly offer, sell or otherwise dispose of any shares of Common Stock (or securities convertible into or exercisable or exchangeable for Common Stock or any rights to purchase or acquire Common Stock) for a period of 90 days after the date of this Prospectus without the prior written consent of Lazard Freres & Co. LLC except pursuant to employee benefit plans described in (or descriptions of which are incorporated by reference in) this Prospectus. The Company and the Selling Stockholder have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Underwriters may be required to make in respect thereof. Lazard Freres & Co. LLC and Salomon Brothers Inc served as financial advisors to the Company during 1995 for which they were paid customary fees by the Company. In addition, certain Underwriters and their affiliates have from time to time provided investment banking and commercial banking services to the Company in the ordinary course of business, for which they received customary fees. 13 15 LEGAL OPINIONS The validity of the Common Stock and certain other legal matters will be passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters will be passed upon for (i) the Selling Stockholder by Ben L. Keisler, General Counsel for the Selling Stockholder, and (ii) the Underwriters by Cravath, Swaine & Moore, New York, New York. EXPERTS The financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 1995, have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. Certain information incorporated in this Prospectus by reference regarding the estimated quantities of reserves of the oil and natural gas properties owned by the Company, the future net revenues from such reserves and the present value thereof is based on estimates of such reserves and present values prepared by Ryder Scott Company, independent petroleum engineers. 14 16 ================================================================================ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information................. 2 Documents Incorporated by Reference... 2 Prospectus Summary.................... 3 Risk Factors.......................... 9 Use of Proceeds....................... 12 Selling Stockholder................... 12 Underwriting.......................... 13 Legal Opinions........................ 14 Experts............................... 14
================================================================================ ================================================================================ LOGO 7,920,297 SHARES SANTA FE ENERGY RESOURCES, INC. COMMON STOCK ------------------------- PROSPECTUS ------------------------- LAZARD FRERES & CO. LLC MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC , 1996 ================================================================================ 17 PART II INFORMATION NOT REQUIRED IN PROSPECTUS All capitalized terms used and not defined in Part II of this Registration Statement shall have the meanings assigned to them in the Prospectus which forms a part of this Registration Statement. ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses payable by the Company in connection with this offering are as follows: SEC registration fee...................................................... $ 27,610 Accounting fees and expenses.............................................. 30,000 Legal fees and expenses................................................... 80,000 Printing expenses......................................................... 20,000 Blue sky fees and expenses................................................ 10,000 Miscellaneous............................................................. 4,390 ------- Total*.......................................................... $172,000 =======
- --------------- * Total expenses to be paid by the Company will not include underwriters' and brokers' discounts or commissions, if any, attributable to the sale of the Shares by the Selling Stockholder. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subsection (a) of Section 145 of the General Corporation Law of the State of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; that indemnification provided by Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and II-1 18 shall inure to the benefit of such person's heirs, executors and administrators; and empowers the corporation to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. Section 102(b)(7) of the General Corporation Law of the State of Delaware provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Article NINTH of the Company's Restated Certificate of Incorporation states that: "No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages from breach of fiduciary duty by such director as a director; provided, however, that this Article NINTH Shall not eliminate or limit the liability of a director to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article NINTH shall apply to, or have any effect on, the liability or alleged liability of any director of the Corporation for or with respect to any facts or omissions of such director occurring prior to such amendment or repeal. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended." Article VI of the Company's Bylaws further provides that the Company shall indemnify its officers, directors, employees and agents to the fullest extent permitted by law. Pursuant to such provision, the Company has entered into agreements with various of its officers, directors and employees which provide for indemnification of such persons. ITEM 16. LIST OF EXHIBITS. 1.1* Form of Underwriting Agreement. 4.1 Specimen certificate representing shares of Common Stock (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Reg. No. 33-32831) and incorporated herein by reference). 5.1** Opinion of Andrews & Kurth L.L.P. 23.1* Consent of Price Waterhouse LLP. 23.2** Consent of Andrews & Kurth L.L.P. (included in their opinion filed as Exhibit 5.1). 23.3* Consent of Ryder Scott Company, independent petroleum engineers. 24.1** A power of attorney, pursuant to which amendments to this Registration Statement may be filed, is included on the signature page contained in Part II of this Registration Statement.
- --------------- * Filed herewith. ** Previously filed. II-2 19 ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 15 of this Registration Statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 20 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON FEBRUARY 29, 1996. SANTA FE ENERGY RESOURCES, INC. By: /s/ JAMES L. PAYNE* ------------------------------------ James L. Payne, Chairman of the Board, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------- ---------------------------------- ------------------ * Chairman of the Board, President - ------------------------------------- and Chief Executive Officer and James L. Payne Director (Principal Executive Officer) * Senior Vice President and Chief - ------------------------------------- Financial Officer (Principal R. Graham Whaling Financial and Accounting Officer) * Director - ------------------------------------- William E. Greehey * Director - ------------------------------------- Melvyn N. Klein * Director - ------------------------------------- Robert D. Krebs * Director - ------------------------------------- Allan V. Martini * Director - ------------------------------------- Michael A. Morphy * - ------------------------------------- Director Reuben F. Richards * Director - ------------------------------------- Marc J. Shapiro * Director - ------------------------------------- Robert F. Vagt * Director - ------------------------------------- Kathryn D. Wriston * By: /s/ DAVID L. HICKS February 29, 1996 - ------------------------------------- DAVID L. HICKS ATTORNEY-IN-FACT
21 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT - ------ ---------------------------------------------------------------------- 1.1* Form of Underwriting Agreement 4.1 Specimen certificate representing shares of Common Stock (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Reg. No. 33-32831) and incorporated herein by reference) 5.1** Opinion of Andrews & Kurth L.L.P. 23.1* Consent of Price Waterhouse LLP 23.2** Consent of Andrews & Kurth L.L.P. (included in their opinion filed as Exhibit 5.1) 23.3* Consent of Ryder Scott Company, independent petroleum engineers 24.1** A power of attorney, pursuant to which amendments to this Registration Statement may be filed, is included on the signature page contained in Part II of this Registration Statement
- --------------- * Filed herewith. ** Previously filed. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 [Draft--2/27/96] 7,920,297 Shares Santa Fe Energy Resources, Inc. COMMON STOCK ($0.01 PAR VALUE) UNDERWRITING AGREEMENT March __, 1996 Lazard Freres & Co. LLC Morgan Stanley & Co. Incorporated Salomon Brothers Inc As Representatives for the several Underwriters named in Schedule I c/o Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10020 Dear Sirs: SECTION 1. Introductory. Minorco (U.S.A.) Inc. (the "Selling Stockholder"), a Colorado corporation and stockholder of Santa Fe Energy Resources, Inc. (the "Company") proposes to sell to the several underwriters named in Schedule I hereto (the "Underwriters") for whom Lazard Freres & Co. LLC, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc are acting as representatives (the "Representatives"), an aggregate of 7,920,297 shares of the Company's Common Stock, par value $0.01 per share (the "Firm Shares"). The Selling Stockholder also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 4 hereof, up to an additional 792,030 shares of the Company's Common Stock, par value $.01 per share (the "Additional Shares"). The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares". The Company and the Selling Stockholder hereby, severally and not jointly, agree with the Underwriters as follows: 2 2 SECTION 2. Representations, Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, the Underwriters and the Selling Stockholder that: (a) The Company meets the registrant requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act"). A registration statement on Form S-3 (File No. 333-00753), including a form of prospectus relating to the Shares, has been filed by the Company pursuant to the Act, with the Securities and Exchange Commission (the "Commission"). The Company may have filed one or more amendments thereto, including the related preliminary prospectus, each of which has previously been furnished to you. The Company will next file with the Commission either (i) prior to effectiveness of such registration statement, a further amendment to such registration statement (including the form of final prospectus) or (ii) after effectiveness of such registration statement, a final prospectus in accordance with Rules 430A and 424(b)(1) or (4) under the Act. In the case of clause (ii), the Company has included or shall include in such registration statement, as amended at the Effective Time (as defined below), all information (other than information permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A ("Rule 430A Information")) required by the Act and the rules and regulations thereunder (the "Rules and Regulations") to be included in the final prospectus with respect to the Shares and the offering thereof. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, with respect to the Shares and the offering thereof, and, except to the extent you shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the execution of this Agreement or, to the extent not completed at such time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the execution of this Agreement, will be included or made therein. For purposes of this Agreement, "Effective Time" means the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was or is declared 3 3 effective by the Commission and each date after the date hereof on which a document incorporated by reference in the Registration Statement is filed. "Preliminary Prospectus" means each prospectus included in such registration statement, or amendments thereof, before it becomes effective under the Act, any prospectus filed with the Commission by the Company pursuant to Rule 424(a) and any prospectus included in the Registration Statement at the Effective Time that omits Rule 430A Information. Such registration statement, as amended at the Effective Time, including incorporated documents, exhibits and financial statements, and including all Rule 430A Information, if any, is hereinafter referred to as the "Registration Statement", and the form of prospectus relating to the Shares and the offering thereof, as first filed with the Commission pursuant to and in accordance with Rule 424(b) or, if no such filing is required, as included in the Registration Statement, is hereinafter referred to as the "Prospectus". Any reference herein to the Registration Statement, a Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934 (the "Exchange Act") on or before the Effective Time of the Registration Statement or the issue date of such Preliminary Prospectus or the Prospectus, as the case may be, and references to information being "included", "contained" or "set forth in" any such document (or similar expressions) shall be similarly construed; and any reference herein to the terms "amend", "amendment" or supplement" with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Time of the Registration Statement, or the issue date of any Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference. (b) At the Effective Time, the Registration Statement did or will, and when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined in Section 4), the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the Rules and Regulations; 4 4 at the Effective Time, the Registration Statement did not or will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, at the Effective Time, the Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus (together with any supplements thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to information contained in or omitted from the Registration Statement or the Prospectus (or any supplement thereto) based upon and in conformity with written information furnished to the Company by the Representatives specifically for use therein as specified in Section 9(a) (the "Underwriters' Information") or to written information furnished to the Company by the Selling Stockholder specifically for use therein as specified in Section 9(a) (the "Selling Stockholder's Information"). (c) The documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder, and, at the time of such filing, none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the rules and regulation of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 5 5 (d) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission and no proceedings for that purpose shall have been instituted or, to the Company's knowledge, threatened by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the Rules and Regulations, and did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that this representation and warranty shall not apply to any statements or omissions made based upon and in conformity with the Underwriters' Information or the Selling Stockholder's Information. (e) The consolidated financial statements included in the Registration Statement and Prospectus (and any amendment or supplement thereto) present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations, the statements of their cash flows and the changes in their financial position for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved; and the supporting schedules, if any, included in the Registration Statement present fairly the information required to be stated therein. (f) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as incorporated by reference, set forth or contemplated in the Prospectus, which had a material adverse effect on the financial condition, business, or results of operations of the Company and its subsidiaries considered as a whole (a "Material Adverse Effect"); and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been (i) any change in 6 6 the outstanding capital stock of the Company, (ii) any increase in long-term debt of the Company or any of its subsidiaries or (iii) any material adverse change, or any development involving a material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, which, with respect to any case referred to in sub-clause (i), (ii) or (iii) would be reasonably likely to have a Material Adverse Effect. (g) (i) The Company and each of its subsidiaries have good title to their producing oil and gas properties, free and clear of all liens, encumbrances and defects, except (W) those described in the Prospectus, (X) liens securing taxes and other governmental charges, or claims of materialmen, mechanics and similar persons, not yet due and payable, (Y) liens and encumbrances under oil and gas leases, options to lease, operating agreements, unitization and pooling agreements, participation and drilling concession agreements and gas sales contracts, securing payment of amounts not yet due and payable and of a scope and nature customary in the oil and gas industry and (Z) liens, encumbrances and defects that do not, singly or in the aggregate, materially affect the value of such oil and gas properties or materially interfere with the use made or proposed to be made of such properties by the Company and its subsidiaries; and (ii) except to the extent described in the Prospectus, the leases, options to lease, drilling concessions or other arrangements held by the Company and its subsidiaries reflect in all material respects the right of the Company and its subsidiaries to explore the unexplored and undeveloped acreage described in the Prospectus and the care taken by the Company and its subsidiaries with respect to acquiring or otherwise procuring such leases, options to lease, drilling concessions and other arrangements was generally consistent with standard industry practices for acquiring or procuring leases to explore acreage for hydrocarbons. (h) The Company and each of its subsidiaries have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation with power 7 7 and authority to own, lease and operate their properties and conduct their businesses as described in the Registration Statement and Prospectus; and each of them is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which it owns or leases properties or in which the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. (i) The Company has an authorized capitalization as set forth in the Prospectus, and all shares of capital stock outstanding, including the Shares, have been duly authorized, are validly issued, fully paid and non-assessable, and conform in all material respects to the description thereof contained in the Prospectus. The sale of the Shares is not subject to pre-emptive or other similar rights or to restrictions on transfer (other than those imposed by the Act, the Rules and Regulations or state securities or Blue Sky laws and other than restrictions on transfers contained in that certain Stock Ownership and Registration Rights Agreement, dated December 10, 1991, among Minorco, a Luxembourg societe anonyme, the Selling Stockholder and the Company (the "Stock Ownership Agreement") which have been met). The Shares are duly listed and admitted for trading on the New York Stock Exchange (the "NYSE"). (j) Neither the Company nor any of its subsidiaries is in violation of its or any of their Certificate of Incorporation or Bylaws or other organizational documents or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument to which it or any of them is a party or by which it or any of them or their properties may be bound, except any violation or default that would not have a Material Adverse Effect; the execution, delivery and performance of this Agreement, compliance by the Company with all the provisions hereof and the consummation by the Company of the transactions contemplated by this Agreement will not violate or constitute a breach of any of the terms or provisions of, or a default (with the passage of time or otherwise) under, the 8 8 Certificate of Incorporation or Bylaws or other organizational documents of the Company or any of its subsidiaries or any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument to which it or any of them is a party or by which it or any of them or their properties may be bound, or violate or breach with any laws, administrative regulations or rulings or court decrees applicable to the Company, any of its subsidiaries or their respective property. (k) No consent, approval, authorization, order, registration, filing or qualification of or with any court or governmental authority or agency or of the NYSE is required for the sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except such as may be required under the Act, the Rules and Regulations or state securities or Blue Sky laws in connection with the distribution of the Shares by the Underwriters. (l) The Company and its subsidiaries are in compliance in all material respects with all laws and regulations applicable to them and their respective properties and possess all certificates, authorities or permits issued by, and have made all filings with, the appropriate state, local, federal or foreign regulatory agencies or bodies necessary or desirable to conduct the business now operated by them, except where noncompliance with such laws or regulations or the failure to possess or make the same would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation, termination or modification of any such certificate, authority, permit or filing. (m) Except as described in the Prospectus, there are no actions, suits or proceedings before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, contemplated or threatened against the Company or any of its subsidiaries, or to which any of their respective properties is subject, which, if adversely determined, would individually or in the aggregate be reasonably likely to result in any Material Adverse 9 9 Effect or adversely affect the sale of the Shares in the manner contemplated by the Prospectus. (n) This Agreement has been duly authorized, executed and delivered by the Company. (o) The Company has complied with all the provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida). (p) Other than the Stock Ownership Agreement and that certain agreement dated March 24, 1995 between HC Associates and the Company, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities under the Registration Statement. (q) Except as set forth in the Prospectus under the caption "Underwriting" or as incorporated by reference therein, neither the Company nor any of its officers, directors or, to the Company's knowledge, holders of five percent or more of any class of its capital stock or any of their respective affiliates is a member of, or is associated or affiliated with a member of, the National Association of Securities Dealers, Inc. SECTION 3. Representations, Warranties and Agreements of the Selling Stockholder. The Selling Stockholder represents and warrants to, and agrees with, the Underwriters and the Company that: (a) This Agreement has been duly authorized, executed and delivered by or on behalf of the Selling Stockholder. (b) The Selling Stockholder has the legal right and power to execute and deliver this Agreement and to sell, transfer and deliver the Shares to be sold by the Selling Stockholder in the manner provided in this Agreement, and no such action will contravene any provision of applicable law, or the certificate of incorporation or by-laws or other organizational document of the Selling Stockholder, or any agreement 10 10 or other instrument binding upon the Selling Stockholder [(after giving effect to the waiver by the Company of the restrictions on transfer contained in the Stock Ownership Agreement)] or any administrative or court, decree or order, and no consent, approval, authorization, order, filing, registration or qualification of or with any court or governmental authority or agency is required for the execution and delivery of this Agreement and the consummation of the transactions contemplated herein by the Selling Stockholder, except such as may be required under the Act and the Rules and Regulations or state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (c) The Selling Stockholder has, and will deliver to the Underwriters, good and marketable title to the Shares to be sold by the Selling Stockholder, free and clear of any mortgage, pledge, lien, encumbrance, adverse claim or equity (collectively, a "Lien"). (d) During the 90-day period beginning from the date hereof, the Selling Stockholder will not, except as provided hereunder, sell any equity securities of the Company or any securities convertible into or exchangeable or exercisable for any such equity securities without the prior written consent of Lazard Freres & Co. LLC. (e) The Selling Stockholder has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares. (f) To the extent that any statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto are made in reliance upon and in conformity with the Selling Stockholder Information, such Preliminary Prospectus and the Registration Statement did, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of 11 11 the Act and the rules and regulations of the Commission thereunder and such Registration Statement and Prospectus will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (and, in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. (g) In order to document an exemption from any liability for withholding under Section 1445(a) of the Internal Revenue Code of 1986, as amended, with respect to the transactions herein contemplated, the Selling Stockholder will deliver to you prior to or at the Closing Date a certification of non-foreign status substantially similar to the sample certification provided in Treasury Regulations Section 1.1445- 2(b)(2)(iii)(B). SECTION 4. Purchase, Sale and Delivery of Shares. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Stockholder hereby agrees to sell to the Underwriters, and the Underwriters agree to purchase from the Selling Stockholder, at a purchase price of $______ per Share (the "purchase price per Share"), the Firm Shares. The Selling Stockholder will deliver the Firm Shares to you for your account, against payment of the purchase price therefor by wire transfer of same day funds (subject to payment to Lazard Freres & Co. LLC by the Selling Stockholder of one day's interest on the amount of such purchase price at a rate determined by Lazard Freres & Co. LLC to reflect its cost of funds) to an account specified in writing by the Selling Stockholder. Payment for the Firm Shares shall be made at the office of Cravath, Swaine & Moore at 10:00 A.M., New York Time, on March __, 1996 or at such other place or time not later than three full business days thereafter as you and the Company determine (the "Initial Closing Date"). The Selling Stockholder hereby agrees to sell to the Underwriters and, on the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Underwriters shall have the right to purchase, severally and not jointly, from the Selling Stockholder, pursuant to an option to be 12 12 exercised in the 30-day period commencing on the date of this Agreement, all or less than all of the Additional Shares at the purchase price per Share. Additional Shares may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase from the Selling Stockholder that proportion of the total number of Additional Shares (subject to adjustment by you to eliminate fractions) to be purchased as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto bears to the total number of Firm Shares. The Selling Stockholders will deliver the Additional Shares to be purchased by you for the accounts of the Underwriters, against payment of the purchase price therefor by wire transfer of same day funds (subject to payment to Lazard Freres & Co. LLC by the Selling Stockholder of one day's interest on the amount of such purchase price at a rate determined by Lazard Freres & Co. LLC to reflect its cost of funds) to an account specified in writing by the Selling Stockholder, at the office of Cravath, Swaine & Moore on such date and at such time (the "Option Closing Date") as shall be specified in the notice from Lazard Freres & Co. LLC to the Selling Stockholder exercising the option to purchase Additional Shares. The Option Closing Date may be the same as the Initial Closing Date but shall in no event be earlier than the Initial Closing Date nor earlier than two nor later than ten business days after the giving of the notice hereinafter referred to. Such notice may be given, by letter or by telecopy or other facsimile transmission or by telephone (if subsequently confirmed in writing), to the Selling Stockholder at any time within 30 days after the date of this Agreement. The Option Closing Date may be varied by agreement between the Underwriters and the Selling Stockholder. The Initial Closing Date and the Option Closing Date are herein collectively referred to as the "Closing Date". The certificates for all the Shares so to be delivered will be made available at the office of Lazard Freres & Co., New York, New York for checking and packaging at least one full business day prior to the Initial Closing Date or the Option Closing Date, as the case may be. SECTION 5. Offering by Underwriters. After the Registration Statement becomes effective the Underwriters 13 13 will offer the Shares for sale to the public on the terms and conditions as set forth in the Prospectus. SECTION 6. Covenants of the Company. The Company covenants and agrees with the Underwriters and the Selling Stockholder that: (a) If the Effective Time is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable, and with your consent, subparagraph (4)) of Rule 424(b) within the time period prescribed by such rule. The Company will advise you promptly of any proposal to amend or supplement the Registration Statement as filed, or the related Prospectus, prior to the Closing Date, and will not effect such amendment or supplement without your consent; the Company will also advise you promptly of the effectiveness of the Registration Statement (if the Effective Time is subsequent to the execution and delivery of this Agreement), of the filing and effectiveness of any amendment or supplement to the Registration Statement or the Prospectus, and of the issuance by the Commission of any stop order in respect of the Registration Statement or of any order preventing or suspending the use of any Preliminary Prospectus or any Prospectus relating to the Shares or the initiation of proceedings for any such purpose, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or of any request by the Commission to amend or supplement the Registration Statement or Prospectus or for additional information and will use its best efforts to prevent the issuance of any such stop order or of any order preventing or suspending the use of any Preliminary Prospectus or any prospectus relating to the Shares or suspending any such qualification and to obtain as soon as possible its lifting, if issued. (b) If, at any time prior to the expiration of nine months after the Effective Date when a prospectus relating to the Shares is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact, or omit to state a material fact necessary to make the 14 14 statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend or supplement the Prospectus to comply with the Act, the Rules and Regulations or any other law, the Company promptly will prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance and will notify you and, upon your request, prepare and furnish without charge to the Underwriters, the Selling Stockholder and to any dealer in securities as many copies as you may from time to time reasonably request, of an amended Prospectus or a supplement to the Prospectus complying with Section 10(a) of the Act which will correct such statement or omission or effect such compliance. (c) The Company will make generally available to the Company's security holders as soon as practicable an earnings statement which will satisfy the provisions of Section 11(a) of the Act and the Rules and Regulations thereunder (including Rule 158). (d) The Company will deliver to you as many signed and conformed copies of the Registration Statement (as originally filed) and of each amendment thereto (including exhibits filed therewith) and copies of each Preliminary Prospectus and the Prospectus as you may reasonably request. (e) The Company will take such action as you may reasonably request, in cooperation with you, to qualify the Shares for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as you may designate, and will maintain such qualifications in effect for as long as may be required for the distribution of the Shares provided, however, that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation, or to execute a general consent to service of process. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Shares have been qualified as above provided. (f) The Company will not effect any public sale or public distribution of its equity securities, or any securities convertible into or exchangeable or 15 15 exercisable for such securities, during the 90-day period beginning from the date hereof (except (i) pursuant to (A) registration on Form S-8 or any successor form, (B) registration on Form S-4 or any successor form, or (C) registration of securities in connection with a dividend reinvestment plan on form(s) applicable to such securities, or (ii) the issuance of shares of common stock upon the conversion by holders of shares of preferred stock of the Company outstanding on the date hereof) without the prior written consent of Lazard Freres & Co. LLC. SECTION 7. Conditions of the Obligations of the Underwriters. The obligations of the Underwriters to purchase and pay for the Firm Shares on the Initial Closing Date will be subject (i) in the case of representations and warranties qualified as to materiality, to the accuracy of such representations and warranties in all respects, and in the case of representations and warranties not qualified as to materiality, to the accuracy of such representations and warranties in all material respects taken as a whole, in each case on the part of the Company and the Selling Stockholder herein as of the date hereof and as of the Initial Closing Date with the same force and effect as if made as of that date, (ii) to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, (iii) to the performance by the Company and the Selling Stockholder of their respective obligations hereunder and (iv) to the following additional conditions precedent: (a) If the Effective Time is not prior to the execution and delivery of this Agreement, the Effective Time shall have occurred not later than (i) 6:00 p.m. New York City time on the date of determination of the offering price, if such determination occurred at or prior to 3:00 p.m. New York City time on such date or (ii) 12:00 noon New York City time on the business day following the day on which the offering price was determined if such determination occurred after 3:00 p.m. New York City time on such date. If the Effective Time is prior to the execution and delivery of this Agreement, the Company shall have filed the Prospectus with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the Rules and Regulations and in accordance with Section 6(a) hereof. In either case, prior to the Initial Closing Date no stop order suspending the 16 16 effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened by the Commission; and the Company shall have complied in all material respects with all requests for additional information on the part of the Commission to your reasonable satisfaction. (b) You shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains any untrue statement of fact or omits to state any fact which, you have concluded, is material and in the case of an omission is required to be stated therein or is necessary to make the statements therein not misleading. (c) You and the Selling Stockholder shall each have received a favorable opinion of Andrews & Kurth L.L.P., counsel for the Company, dated the Initial Closing Date, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with corporate power and authority to own, and operate its properties and conduct its businesses in all material respects as described in the Prospectus. (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued and outstanding shares of capital stock of the Company (including the Shares) have been duly and validly authorized and issued and are fully paid and non-assessable; and the Shares conform in all material respects to the description of such stock contained in the Prospectus. (iii) This Agreement has been duly authorized, executed and delivered by the Company. (iv) The compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will breach or result in violation of (a) any of the provisions of the Certificate of Incorporation or Bylaws of the Company or (b) any 17 17 statute or any order, rule or regulation of the United States (or any state, territory or possession thereof) known to such counsel of any court or governmental agency or body of the United States (or any state, territory or possession thereof) having jurisdiction over the Company or any of its subsidiaries or any of their properties other than, in the case of clause (b) above, any violation which, individually or in the aggregate, will not have a Material Adverse Effect. (v) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental authority or agency or body of the United States (or any state, territory or possession thereof) having jurisdiction over the Company or any of its subsidiaries or of the NYSE is required for the sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except (a) the registration under the Act of the Shares, and (b) such consents, approvals, authorizations, registrations or qualifications (1) as have been, or prior to the Initial Closing Date will be, obtained or (2) as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (vi) The Registration Statement is effective under the Act and to their knowledge, no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued under the Act and no proceedings therefor have been initiated or threatened by the Commission. (vii) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion), when they became effective or 18 18 were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange Act, as applicable and the rules and regulations of the Commission thereunder; and such counsel does not believe that any of such documents, when such documents became effective or were so filed, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading. (viii) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data and information that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) appeared on their face to be appropriately responsive in all material respects with the requirements of the Act and the rules and regulations thereunder; they do not believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date or as of the Initial Closing Date, the Prospectus or any further amendment or supplement thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott 19 19 Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required. (d) David L. Hicks, General Counsel for the Company, shall have furnished to you and the Selling Stockholder his written opinion, dated the Initial Closing Date, in form and substance satisfactory to you and the Selling Stockholder, to the effect that: (i) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company, provided that he shall state that he believes that both you and he are justified in relying upon such opinions and certificates). (ii) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect; and all of the issued shares of capital stock of each such subsidiary have been duly and 20 20 validly authorized and issued, are fully paid and non-assessable, and, except as disclosed in the Prospectus or incorporated therein by reference, are owned directly or indirectly by the Company, free and clear of all Liens (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company or its subsidiaries, provided that he shall state that he believes that both you and he are justified in relying upon such opinions and certificates). (iii) The sale of the Shares is not subject to pre-emptive or other similar rights or to restrictions on transfer (other than those imposed by the Act, the Rules and Regulations or state securities or Blue Sky laws and other than restrictions on transfers contained in that Stock Ownership Agreement or other agreements to which the Selling Stockholder may be a party or to which its property may be subject which are not known to such counsel), and the Shares are duly listed and admitted for trading on the NYSE. (iv) To such counsel's knowledge after reasonable investigation and other than as set forth in the Prospectus, there are no legal or governmental proceedings now pending, contemplated or threatened to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would be likely, individually or in the aggregate, to have a Material Adverse Effect, or adversely affect the sale of the Shares. (v) Neither the Company nor any of its subsidiaries is in violation of its or any of their Certificate of Incorporation or Bylaws or other organizational documents or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument to which it or any of them is a party or by which it or any of them or their properties 21 21 may be bound, except any violation or default that would not have a Material Adverse Effect. (vi) The compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any contract indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject other than any breach, default or violation which, individually or in the aggregate, will not have a Material Adverse Effect. (vii) The Registration Statement is effective under the Act and to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued under the Act and no proceedings therefor have been initiated or threatened by the Commission. (viii) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion), when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange Act, as applicable and the rules and regulations of the Commission thereunder; and such counsel does not believe that any of such documents, when such documents became effective or were so filed, as the case may be, contained an untrue statement of a material fact or omitted to state a material 22 22 fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading. (ix) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) appeared on their face to be appropriately responsive in all material respects with the requirements of the Act and the rules and regulations thereunder; he does not believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date or as of the Initial Closing Date, the Prospectus or any further amendment or supplement thereto made by the Company prior to the Initial Closing Date (other than the financial statements and related schedules and other financial data therein, other financial data and information included therein that is extracted from a report of Ryder Scott Company pertaining to natural resource reserves that is referred to or included therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and he does not know of any amendment 23 23 to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required. (e) You shall have received an opinion of Ben L. Keisler, General Counsel for the Selling Stockholder, dated the Initial Closing Date, to the effect that: (i) This Agreement has been duly executed and delivered by or on behalf of the Selling Stockholder; and the sale of the Shares to be sold by the Selling Stockholder hereunder and the compliance by the Selling Stockholder with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Selling Stockholder is subject [(after giving effect to the waiver by the Company of the restrictions contained in the Stock Ownership Agreement)], nor will such action result in any violation of the provisions of the Certificate of Incorporation by By-laws of the Selling Stockholder or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Selling Stockholder or the property of the Selling Stockholder, except that such counsel need express no opinion as to the state securities or Blue Sky laws or as to compliance with the anti-fraud provisions of Federal or state securities laws. (ii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the Shares to be sold by the Selling Stockholder hereunder, except such as have 24 24 been obtained under the Act and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (iii) To the best of such counsel's knowledge after reasonable inquiry, the Selling Stockholder had full right, power and authority to sell, assign, transfer and deliver, or to cause to be sold, assigned, transferred and delivered, the Shares to be sold by the Selling Stockholder hereunder. (iv) The sale of the Shares is not subject to pre-emptive or other similar rights or to restrictions on transfer, except (a) those imposed by the Act, the Rules and Regulations or state securities or Blue Sky laws and (b) restrictions on transfers contained in that Stock Ownership Agreement which have been met. (v) The Underwriters have acquired marketable title to such Shares, free and clear of all Liens, assuming the Underwriters have acquired such Shares in good faith and without notice of any adverse claim as used in the Uniform Commercial Code in effect in the State of New York. In rendering the foregoing opinion, such counsel may rely upon certificates of the Selling Stockholder, the Company and the transfer agent for the Shares in respect of certain identified matters of fact, provided that such counsel shall state that they believe that both you and they are justified in relying upon such certificate. (f) You and the Selling Stockholder shall have received from Price Waterhouse LLP, independent public accountants, two letters, the first dated the date of this Agreement and the other dated such Initial Closing Date, addressed to the Underwriters and the Selling Stockholder, in a form acceptable to you. (g) You shall have received from the President or any Senior Vice President and a principal financial or accounting officer of the Company a certificate, dated the Initial Closing Date, in which such officers, shall 25 25 state that they have carefully examined the Registration Statement and the Prospectus and that, to the best of their knowledge and after reasonable investigation, (i) as of the Effective Time, the Registration Statement and the Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and since the Effective Time, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus; (ii) that there has not been, since the respective dates as of which information is given in the Registration Statement and the Prospectus, any change or event that would be reasonably likely to have a Material Adverse Effect, or whether or not arising in the ordinary course of business; (iii) the representations and warranties of the Company contained in Section 2 are true and correct with the same force and effect as though made on and as of the Initial Closing Date and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Initial Closing Date; and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (h) You shall have received certificates from officers of the Selling Stockholder satisfactory to you in which such officers, shall state that they have carefully examined the Registration Statement and the Prospectus and that, to the best of their knowledge and after reasonable investigation, (i) as of the Effective Time, the Selling Stockholder's Information did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (ii) the representations and warranties of the Selling Stockholder contained in Section 3 are true and correct with the same force and effect as though made on the Initial Closing Date and the Selling Stockholder has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Initial Closing Date. 26 26 (i) You shall have received from Ryder Scott Company a letter, dated as of the Initial Closing Date, to the effect that (other than changes in prices received by the Company for the sale of its hydrocarbon production, which changes have occurred since December 31, 1995), as of such date nothing has come to its attention which would cause them to change any opinion expressed by it in its report dated January 22, 1996, from which information included in the Prospectus was extracted with respect to its estimates of proved developed and proved undeveloped oil and gas reserves of the Company and its subsidiaries as a whole as at December 31, 1995, and the estimated future net cash flows from such reserves as described in the Prospectus. (j) At the Initial Closing Date, the Company shall have furnished to you a letter substantially in the form of Exhibit B hereto from each officer and director of the Company addressed to you, in which each such person agrees not to offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offering of, any shares of equity securities of the Company beneficially owned by such person or any securities convertible into or exchangeable or exercisable for any such equity securities for a period of 90 days following the Initial Closing Date without the prior written consent of Lazard Freres & Co. LLC, other than shares of Common Stock disposed of as bona fide gifts. (k) At the Initial Closing Date counsel for the Underwriters shall have been furnished with such other documents and opinions as they may reasonably require. The several obligations of the Underwriters to purchase the Additional Shares hereunder are subject to (i) the accuracy of and compliance with the representations and warranties of the Company and the Selling Stockholder contained herein on and as of the Option Closing Date, (ii) satisfaction on and as of the Option Closing Date of the conditions set forth in subsections (a) to (l) of this Section 7, inclusive (and, for purposes thereof, each reference therein to the Initial Closing Date shall be deemed to refer to the Option Closing Date), and (iii) the absence of circumstances on or prior to the Option Closing Date which would permit termination of this Agreement pursuant to Section 11. 27 27 SECTION 8. Payment of Expenses. The Company will pay all costs, expenses, fees, disbursements and taxes incident to (i) the preparation by the Company, printing, filing and distribution of the Registration Statement (including financial statements and exhibits), the Prospectus, each Preliminary Prospectus and all amendments and supplements to any of them prior to or during the period specified in Section 6(b), (ii) the printing, reproduction and distribution of this Agreement, and all other underwriting and selling group documents by mail, telex or other means, (iii) the registration with the Commission of the Shares, (iv) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states and the preparation, printing and distribution of Preliminary and Supplemental Blue Sky Memoranda and Legal Investment Survey (including the reasonable fees and disbursements of your counsel relating to the foregoing), (v) filing fees with the National Association of Securities Dealers, Inc. in connection with the offering, (vi) the fees and expenses of the Registrar and Transfer Agent for the Shares and its counsel and (viii) the performance by the Company of its other obligations under this Agreement. Fees and expenses of counsel to the Selling Stockholder and all other expenses of the Selling Stockholder in connection with the foregoing and the transactions contemplated herein shall be paid by the Company to the extent set forth in Section 3.7 of the Stock Ownership Agreement. If the sale of the Shares provided for herein is not consummated because of the failure to satisfy any condition to the obligations of the Underwriters set forth in Section 7 (other than Sections 7(e) or 7(h)) hereof, because of any termination pursuant to Section 11 hereof or because of any refusal, failure or inability of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by the Underwriters, the Company shall reimburse you for all of your reasonable out-of-pocket expenses incurred in connection with marketing and preparing for the offering of the Shares, including the reasonable fees and disbursements of counsel for the Underwriters. If the sale of the Shares provided for herein is not consummated because of the failure to satisfy any condition to the obligations of the Selling Stockholders set forth in Section 7(e) or 7(h) hereof or because of any refusal, failure or inability of the Selling Stockholder to 28 28 perform any agreement herein or comply with any provision hereof other than by reason of a default by the Underwriters, the Selling Stockholder shall reimburse you for all of your reasonable out-of-pocket expenses incurred in connection with marketing and preparing for the offering of the Shares, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 9. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each of the Underwriters and the Selling Stockholder and each person, if any, who controls any such Underwriter or the Selling Stockholder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (or actions in respect thereof) (including, without limiting the foregoing, the reasonable legal and other expenses incurred in connection with investigating or defending or preparing to defend or appearing as a third party witness in connection with any such loss, claim, damage, liability or action, as such expenses are incurred) arising out of or based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any Preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except the Company shall not be liable to any Underwriter under the indemnity agreement in this subsection (a) with respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results solely from the fact that such Underwriter sold Shares to a person as to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus or of the Prospectus as then amended or supplemented in any case where such delivery is required by the Act if the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in the Preliminary Prospectus which was corrected in the Prospectus or in the Prospectus as then amended or supplemented and (b) insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue 29 29 statement or omission based upon (x) the following information furnished to the Company by you in (i) the last paragraph of text on the cover page of the Prospectus concerning the terms of the offering by the Underwriters, (ii) the first paragraph on page 2 of the Prospectus concerning stabilization and over-allotment by the Underwriters and (iii) the first two paragraphs and the last paragraph of text under the caption "Underwriting" in the Prospectus (all of the foregoing the "Underwriters' Information") or (y) the information in the section captioned "Selling Stockholder" (the "Selling Stockholder's Information"). This indemnity agreement will be in addition to any liability which the Company may otherwise have to the persons referred to above in this Section 9(a). (b) The Selling Stockholder agrees to indemnify and hold harmless each of the Underwriters and each person, if any, who controls any such Underwriter within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act and the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section, from and against any and all losses, claims, damages and liabilities (or actions in respect thereof) (including, without limiting the foregoing, the reasonable legal and other expenses incurred in connection with investigating or defending or preparing to defend or appearing as a third party witness in connection with any such loss, claim, damage liability or action, as such expenses are incurred) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any Preliminary Prospectus or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only in each case with respect to the Selling Stockholder Information, except the Selling Stockholder shall not be liable to any Underwriter under the indemnity agreement in this subsection (b) with respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results solely from the fact that such Underwriter sold Shares to a person as to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus or 30 30 of the Prospectus as then amended or supplemented in any case where such delivery is required by the Act if the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in the Preliminary Prospectus which was corrected in the Prospectus or in the Prospectus as then amended or supplemented. This indemnity agreement will be in addition to any liability which the Selling Stockholder may otherwise have to the persons referred to above in this Section 9(b). (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Stockholder, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company or the Selling Stockholder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (or actions in respect thereof) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any Preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to the Underwriters' Information. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have to the persons referred to above in this Section 9(c). (d) In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be instituted involving any person in respect of which indemnity may be sought pursuant to any of the three preceding paragraphs, such person (hereinafter called the indemnified party) shall promptly notify the person against whom such indemnity may be sought (hereinafter called the indemnifying party) in writing; however, the omission to so notify the indemnifying party shall relieve the indemnifying party from liability under the three preceding paragraphs only to the extent prejudiced thereby. The indemnifying party, upon request of the indemnified party, shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the 31 31 indemnified party to represent the indemnified party and any others that the indemnifying party may designate and shall pay the fees and disbursements of such counsel related to such proceeding. In any such action or proceeding any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and, based upon the advice of counsel to the indemnified party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Underwriters and all persons, if any, who control any such Underwriter within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (b) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (c) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Selling Stockholder and all persons, if any, who control the Selling Stockholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons of such Underwriters, such firm shall be designated in writing by Lazard Freres & Co. LLC. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Stockholder and such controlling persons of the Selling Stockholder, such firm shall be designated in writing by the Selling Stockholder. 32 32 (e) If the indemnification provided for in this Section 9 is insufficient or unavailable to an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or if the indemnified party shall have failed to the prejudice of the indemnifying party to give the notice required by Section 9(d), in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportions as the total net proceeds from the offering (before deducting expenses) received by the Selling Stockholder bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Stockholder or by the Underwriters and the parties, relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. As between the Company and the Selling Stockholder, contribution payments under this subsection (e) in every circumstance shall be in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Selling Stockholder on 33 33 the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof). (f) The Company, the Selling Stockholder and each of the Underwriters agree that it would not be just and equitable if contribution pursuant to Section 9(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in the immediately preceding paragraph shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of Section 9(e), in no event shall any of the Underwriters be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (g) The Company and the Selling Stockholder agree that any claims that the Company may have against the Selling Stockholder and any claims that the Selling Stockholder may have against the Company in each case arising out of or based on any untrue statement or alleged untrue statement in the Registration Statement or the Prospectus or any Preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact, or otherwise arising out of or based upon the sale of Shares (each a "Cross-Claim"), shall be subordinated in right of payment as set forth below to the prior indefeasible payment in full in cash of any and all claims any Underwriters may have against the Selling Stockholder or the Company, as the case may be, arising out of or based on any untrue statement or 34 34 alleged untrue statement in the Registration Statement or the Prospectus or any Preliminary Prospectus, or caused by any omission or alleged omission to state therein a material fact, or otherwise arising out of or based upon the sale of Shares under this Agreement (each an "Underwriter Claim"). The Company and the Selling Stockholder agree that they will provide notice to Lazard Freres & Co. LLC within three business days of the making by them of any Cross-Claim, and that such notice shall provide reasonable detail as to the factual and legal basis for the Cross-Claim and the amount claimed. Thereafter, no amount may be paid by the Company or the Selling Stockholder in respect of any such Cross-Claim until the date that is 45 days after the receipt by Lazard Freres & Co. LLC of the foregoing notice; provided, however, that if Lazard Freres & Co. LLC shall have prior to such 45th day notified the Company or the Selling Stockholder, as the case may be, who made such Cross-Claim or against whom such Cross-Claim was made of any Underwriter Claim that any Underwriter is making or may make against it, then no amount may be paid by the Company or the Selling Stockholder with respect to such Cross-Claim without the prior written approval of Lazard Freres & Co. LLC until the prior indefeasible payment in full in cash of each such Underwriter Claim or until it has been established in a final adjudication by a court of competent jurisdiction that such Underwriter is not entitled to receive any payment from the Company or the Selling Stockholder in respect of such Underwriter Claim. If a payment or distribution is made to the Company or the Selling Stockholder that because of this Section 9(g) should not have been made to it, the Company or the Selling Stockholder receiving such payment or distribution shall hold it in trust for the Underwriters and pay it over to it or its designee as its interests shall appear. (h) The Company and the Selling Stockholder agree with the Underwriters that any indemnity provision of any agreement between the Company on the one hand and the Selling Stockholder on the other shall not be deemed to modify or supersede any provision of this Section 9. SECTION 10. Representations, Warranties and Agreements to Survive Delivery. All representations, 35 35 warranties and agreements contained in the Agreement, or contained in certificates of officers of the Company or the Selling Stockholder submitted pursuant hereto, including indemnity and contribution agreements, shall remain operative and in full force and effect, regardless of any termination of this Agreement, or any investigation, or any statement as to the results thereof, made by or on behalf of any Underwriter or any person controlling such Underwriter or by or on behalf of the Company, its officers or directors or controlling persons, or by the Selling Stockholder or any person controlling the Selling Stockholder, and shall survive acceptance of and payment for Shares hereunder. SECTION 11. Termination. This Agreement may be terminated for any reason at any time prior to the delivery of and payment for the Shares on the Initial Closing Date by the Underwriters upon the giving of written notice by Lazard Freres & Co. LLC of such termination to the Company, if prior to such time (i) there has been, since the respective dates as of which information is given in the Registration Statement and the Prospectus, (A) any material adverse change in the condition, financial or otherwise, earnings, business or prospects of the Company and its subsidiaries (considered as a whole, whether or not arising in the ordinary course of business or (ii) there has occurred any outbreak or escalation of hostilities or other calamity or crisis or material change in existing national or international financial, political, economic or securities market conditions, the effect of which is such as to make it, in the judgement Lazard Freres & Co. LLC, impracticable or inadvisable to market the Shares in the manner contemplated in the Prospectus or enforce contracts for the sale of the Shares, or (iii) trading in the Common Stock of the Company has been suspended by the Commission or a national securities exchange, or trading generally on either the American Stock Exchange or the New York Stock Exchange has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said exchanges or by order of the Commission or any other governmental authority, or a banking moratorium has been declared by either Federal or New York authorities. In the event of any such termination, the provisions of Section 8, the indemnity agreement and contribution provisions set forth in Section 9, and the provisions of Sections 10 and 15 shall remain in effect. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be 36 36 deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to you c/o Lazard Freres & Co. LLC, 30 Rockefeller Plaza, New York, NY 10020, Attention: Syndicate Department; notices to the Company shall be directed to it at Sante Fe Energy Resources, Inc., 1616 South Voss Road, 10th Floor, Houston, TX 77057, facsimile transmission no. (713) 507-5341, Attention: David L. Hicks with a copy to the Treasurer; and notices to the Selling Stockholder shall be directed to Minorco (U.S.A.) Inc., 30 Rockefeller Plaza, New York, NY 10020, Attention: Ben L. Keisler. SECTION 14. Parties. This Agreement shall inure to the benefit of and be binding upon the Company, its directors and officers who signed the Registration Statement, the Underwriters, the Selling Stockholder, any controlling persons referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of Shares from the Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. SECTION 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 37 37 If the foregoing is in accordance with your understanding of our agreement, please sign this Agreement and return to us counterparts hereof. Very truly yours, SANTA FE ENERGY RESOURCES, INC., By ------------------------- Name: Title: MINORCO (U.S.A.) INC., By ------------------------- Name: Title: Confirmed and Accepted, as of the date first above written: LAZARD FRERES & CO. LLC MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC By: -------------------------------- Lazard Freres & Co. LLC By: -------------------------------- Name: Title: Acting on behalf of themselves as Representatives of the several Underwriters named in Schedule I hereto 38 Schedule I
Number of Shares Underwriters To be Purchased - ------------ --------------- Lazard Freres & Co. LLC Morgan Stanley & Co. Incorporated Salomon Brothers Inc ========= Total 7,920,297
EX-23.1 3 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated February 23, 1996 appearing on Page 31 of Santa Fe Energy Resources, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995. We also consent to the reference to us under the heading "Experts" in such Prospectus. PRICE WATERHOUSE LLP Houston, Texas February 29, 1996 EX-23.3 4 CONSENT OF RYDER SCOTT COMPANY 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS We hereby consent to the incorporation by reference in the Prospectus forming a part of this Registration Statement on Form S-3 of references to our firm appearing in Santa Fe Energy Resources, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995. We also consent to the reference to us under the headings "Summary Oil and Gas Reserve Information" and "Experts" in such Prospectus. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 29, 1996 -----END PRIVACY-ENHANCED MESSAGE-----