EXHIBIT 10.6
PUT AND CALL OPTION AGREEMENT
This Put and Call Option Agreement dated as of January 29, 2003 (the
"Agreement") is by and among St. Mary Land & Exploration Company, a Delaware
corporation ("St. Mary"), and Flying J Oil & Gas Inc., a Utah corporation
("FJOG") and Big West Oil & Gas Inc., a Utah corporation ("BWOG"), (FJOG and
BWOG are collectively referred to herein as "Flying J").
RECITALS
WHEREAS, St. Mary, FJOG and BWOG have entered into that certain
Purchase and Sale Agreement dated as of December 13, 2002 (the "PSA") by and
among FJOG, BWOG, NPC Inc., a Colorado corporation, and St. Mary, whereby upon
the closing of the PSA St. Mary shall issue to FJOG and BWOG a total of
3,380,818 shares (the "Shares") of St. Mary common stock, $0.01 par value per
share (the "St. Mary Stock"); and
WHEREAS, as a condition to the Closing and in connection with the
issuance of such Shares of St. Mary Stock, St. Mary and Flying J have agreed
that St. Mary shall grant to FJOG and BWOG the right to require St. Mary to
repurchase such Shares, and FJOG and BWOG shall grant to St. Mary the right to
require FJOG and BWOG to sell to St. Mary such Shares, under the terms and
conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the PSA, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
Section 1. Certain Definitions. For purposes of this Agreement, the
--------------------
following terms shall have the following respective meanings:
(a) "Call Exercise Notice" shall mean a written notice, in
----------------------
substantially the form of Exhibit B attached hereto, from St. Mary to
FJOG and BWOG with respect to the exercise of St. Mary's Call Option.
(b) "Call Option" shall mean St. Mary's right and option to
------------
require FJOG and BWOG, on the terms and conditions set forth herein, to
sell to St. Mary all of the Shares of St. Mary Stock issued under the
PSA.
(c) "Person" shall mean any individual, partnership,
------
corporation, limited liability company, association, joint stock
company, trust, joint venture, other form of business organization, or
unincorporated organization.
(d) "Put Exercise Notice" shall mean a written notice, in
---------------------
substantially the form of Exhibit A attached hereto, from FJOG and BWOG
to St. Mary with respect to the exercise of FJOG's and BWOG's Put
Option.
(e) "Put Option" shall mean FJOG's and BWOG's right and option
----------
to require St. Mary, on the terms and conditions set forth herein, to
purchase from FJOG and BWOG all of the Shares of St. Mary Stock issued
under the PSA.
All other capitalized terms used but not defined herein shall have the
respective meanings given to them in the PSA.
Section 2. Grant of Put Option and Call Option.
-----------------------------------
(a) Put Option. Subject to the terms and conditions set forth
----------
herein, St. Mary irrevocably grants and issues to FJOG and BWOG a Put
Option whereby FJOG and BWOG shall have the right and option to require
St. Mary to purchase from FJOG and BWOG, upon five days advance written
notice by delivering a Put Exercise Notice, all of the Shares of St.
Mary Stock issued to FJOG and BWOG under the PSA at a purchase price
(the "Put Payment Price") of $71,593,795 together with interest thereon
at the rate of two percent above the one-year LIBOR rate (London
InterBank Offered Rate) in effect at the closing (the "Closing") of the
transaction pursuant to which NPC Inc. has acquired substantially all
of the oil and gas assets of the FJOG and BWOG (the "Acquisition") and
with such interest adjusted on each one year anniversary of the
Closing, compounded annually, with such interest due and payable upon
exercise of the Put Option. It is the intention of the parties that St.
Mary shall pay to FJOG and BWOG for exercise of this Put Option the
exact amount, including both principal and interest, that FJOG and BWOG
shall be required to pay to St. Mary under the Nonrecourse Secured
Promissory Note dated January 29, 2003. It is further intended that
FJOG and BWOG shall have the full right to offset all sums owed to St.
Mary under the Nonrecourse Secured Promissory Note against sums St.
Mary shall owe to FJOG and BWOG as a result of their exercise of this
Put Option. Notwithstanding anything to the contrary contained in the
foregoing, the Put Payment Price shall not however include any interest
accrued on the Nonrecourse Secured Promissory Note from and after two
years and six months following the Closing or any default interest on
such non-included interest or the costs of collection of such
non-included interest. Such Put Option shall be exercisable at any time
on or before the date that the loan by St. Mary to FJOG and BWOG
pursuant to the Nonrecourse Secured Promissory Note (the "Note")
matures and becomes repayable to St. Mary in full pursuant to the terms
of the Note and shall be exercisable only for all, and not a portion,
2
of the Shares of St. Mary Stock issued under the PSA.
(b) Call Option. Subject to the terms and conditions set forth
-----------
herein, FJOG and BWOG irrevocably grant and issue to St. Mary a Call
Option whereby St. Mary shall have the right and option to require FJOG
and BWOG to sell to St. Mary, upon five days advance written notice by
delivering a Call Exercise Notice, all of the Shares of St. Mary Stock
issued to FJOG and BWOG under the PSA at a sales price (the "Call
Payment Price") of $97,447,094. Such Call Option shall be exercisable
at any time on or before the date that the Loan matures and becomes
repayable to St. Mary in full pursuant to the terms of the Note and
shall be exercisable only for all, and not a portion, of the Shares of
St. Mary Stock issued under the PSA.
Section 3. Termination of Put Option and Call Option. Both the Put
--------------------------------------------
Option and the Call Option shall terminate and be of no further force or effect
at such time as the date that the Loan matures and becomes repayable to St. Mary
in full pursuant to the terms of the Note, or from and after any earlier
prepayment of the Loan. In addition, upon the exercise of the Put Option, the
Call Option shall terminate, and upon the exercise of the Call Option, the Put
Option shall terminate. The time at which the Put Option and Call Option
terminate shall be the "Expiration Time."
Section 4. Exercise of Put Option.
----------------------
(a) If at any time prior to the Expiration Time FJOG and BWOG
wish to exercise their Put Option, FJOG and BWOG shall deliver a Put
Exercise Notice to St. Mary. Such Put Exercise Notice shall be
effective if and only if it is received by St. Mary prior to the
Expiration Time.
(b) Within five days after delivery to St. Mary of the Put
Exercise Notice, St. Mary shall offset the full amount of the Put
Payment Price for all of the Shares of St. Mary Stock issued under the
PSA and to be repurchased by St. Mary, against the outstanding
indebtedness of FJOG and BWOG to St. Mary under the Note and FJOG and
BWOG shall deliver to St. Mary a certificate or certificates
representing all of the Shares, which shall be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever.
Section 5. Exercise of Call Option.
-----------------------
(a) If at any time prior to the Expiration Time St. Mary
wishes to exercise its Call Option, St. Mary shall deliver a Call
Exercise Notice to FJOG and BWOG. Such Call Exercise Notice shall be
effective if and only if it is received by FJOG and BWOG prior to the
Expiration Time.
3
(b) Within five days after delivery to FJOG and BWOG of the
Call Exercise Notice, St. Mary shall offset the full amount of the Call
Payment Price for all of the Shares of St. Mary Stock issued under the
PSA and to be sold by FJOG and BWOG to St. Mary, against the
outstanding indebtedness of FJOG and BWOG to St. Mary under the Note,
and to the extent that the Call Payment Price exceeds such outstanding
indebtedness it shall be payable in cash as FJOG and BWOG shall direct
in writing at least three business days prior to the payment date, and
FJOG and BWOG shall deliver to St. Mary a certificate or certificates
representing all of such Shares, which shall be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever.
Section 6. Transfers of Shares of St. Mary Stock. In the event that
---------------------------------------
while the Put Option and Call Option remain in effect FJOG or BWOG transfers any
of the Shares of St. Mary Stock subject to this Agreement, which transfer must
comply with the applicable transfer restrictions set forth in that certain Share
Transfer Restriction Agreement dated as of January 29, 2003 by and among FJOG,
BWOG, and St. Mary, to any Person that is not a party hereto or otherwise
subject to the terms and provisions hereof, such Person shall take such Shares
subject to all of the terms and provisions of this Agreement and such transfer
shall be effective if and only if such Person executes and delivers a written
agreement to St. Mary to the effect that such Person shall be bound by the terms
of this Agreement as if such Person were an original party hereto.
Section 7. Stock Certificate Legend. For so long as the Put Option and
-------------------------
Call Option remain in effect, each certificate representing the Shares of St.
Mary Stock subject to this Agreement shall bear, in addition to any legend or
legends required by applicable securities laws and any other agreements
pertaining to such Shares, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF A PUT AND CALL
OPTION AGREEMENT DATED JANUARY 29, 2003, BY
AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS
OF THE COMPANY. A COPY OF SUCH PUT AND CALL
OPTION AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY WHERE IT MAY BE INSPECTED.
Section 8. Injunctive Relief and Specific Performance. Each party
----------------------------------------------
hereto hereby acknowledges and agrees that irreparable harm would occur in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, and that damages would be
an inadequate remedy for a breach of this Agreement. Therefore, it is agreed
that the parties shall be entitled to specific relief hereunder, including,
without limitation, an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and an order of specific performance of the
4
terms and provisions of this Agreement, in addition to any other remedy to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond in connection with obtaining any such remedy are hereby
waived.
Section 9. Representations and Warranties of Flying J. To induce St.
--------------------------------------------
Mary to enter into this Agreement and to consummate the transactions
contemplated hereby, each of FJOG and BWOG represents and warrants to St. Mary
as follows:
(a) Binding Agreement. The execution, delivery and performance
-----------------
of this Agreement by such party and the consummation by such party of
the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of such party.
This Agreement has been duly executed and delivered by such party, and,
assuming the valid authorization, execution and delivery hereof by St.
Mary, is a valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws affecting or relating to the
enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding at law or in equity).
(b) Execution; No Violations. The execution and delivery of
--------------------------
this Agreement by such party does not, and the consummation by such
party of the transactions contemplated hereby will not: (i) violate or
conflict with the organizational documents of such party or any
agreement, order, injunction, decree, or judgment to which such party
is a party or by which such party or any of its respective properties
is bound; or (ii) violate any law, rule or regulation applicable to
such party.
(c) Governmental and Other Consents. No consent, approval or
-------------------------------
authorization of, or designation, registration, declaration or filing
with, any governmental entity or third Person is required on the part
of such party in connection with the execution or delivery of this
Agreement or the consummation by it of the transactions contemplated
hereby.
Section 10. Representations and Warranties of St. Mary. To induce FJOG
------------------------------------------
and BWOG to enter into this Agreement and to consummate the transactions
contemplated hereby, St. Mary represents and warrants to FJOG and BWOG as
follows:
(a) Binding Agreement. The execution, delivery and performance
-----------------
of this Agreement by St. Mary and the consummation by St. Mary of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of St. Mary. This
Agreement has been duly executed and delivered by St. Mary, and,
assuming the valid authorization, execution and delivery hereof by the
5
other parties hereto, is a valid and binding obligation of St. Mary,
enforceable against St. Mary in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar laws affecting or
relating to the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding at law or
in equity).
(b) Execution; No Violations. The execution and delivery of
--------------------------
this Agreement by St. Mary does not, and the consummation by St. Mary
of the transactions contemplated hereby will not: (i) violate or
conflict with the organizational documents of St. Mary or any
agreement, order, injunction, decree, or judgment to which St. Mary is
a party or by which St. Mary or any of its properties is bound; or (ii)
violate any law, rule or regulation applicable to St. Mary.
(c) Governmental and Other Consents. No consent, approval or
-------------------------------
authorization of, or designation, registration, declaration or filing
with, any governmental entity or third Person is required on the part
of St. Mary in connection with the execution or delivery of this
Agreement or the consummation by it of the transactions contemplated
hereby.
(d) No Impairment of Capital. No impairment to the capital of
------------------------
St. Mary exists on the date of this Agreement or on the date that the
transactions contemplated by this Agreement shall be performed. St.
Mary's execution and performance of the PSA and other agreements
referenced therein, including this agreement will not impair the
capital of St. Mary.
Section 11. Miscellaneous.
-------------
(a) Notices. All notices, consents, instructions,
-------
authorizations, waivers and other communications required or permitted
by this Agreement shall be in writing and unless specified otherwise
herein shall be deemed duly given to a party when (i) delivered to the
appropriate address by hand or by nationally recognized overnight
courier service (costs prepaid); (ii) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment; or (iii)
received or rejected by the addressee, if sent by certified mail,
return receipt requested, in each case to the addresses, facsimile
numbers or e-mail addresses and marked to the attention of the person
(by name or title) designated in the PSA (or to such other address,
facsimile number, e-mail address or person as a party may designate by
notice to the other parties).
(b) Entire Agreement. This Agreement sets forth the entire
-----------------
understanding of the parties with respect to the subject matter hereof.
6
(c) Binding Effect. This Agreement shall inure to the benefit
--------------
of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed
or implied, is intended to confer on any Person other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
(d) Assignment. No party may assign its rights or delegate its
----------
obligations hereunder (whether voluntarily, involuntarily, or by
operation of law) without the prior written consent of the other
parties except that if FJOG and BWOG shall transfer their interest in
the St. Mary Stock to Flying J Inc. in accordance with the Share
Transfer Restriction Agreement between the Parties hereto then the
rights and obligations of FJOG and BWOG herein may be assigned to
Flying J Inc. without the consent of the other parties hereto. Any
attempted assignment proscribed hereby shall be null and void.
(e) Further Assurances. The parties agree that at any time and
------------------
from time to time, upon the written request of a party, the parties
will execute and deliver such further documents and do such further
acts and things as reasonably requested to effect the purposes of this
Agreement.
(f) Amendments. This Agreement may be amended only by an
----------
agreement in writing executed by each of the parties hereto.
(g) Waiver. The observance of any term of this Agreement may
------
be waived only with the written consent of the party to be bound by
such waiver. No failure on the part of a party to exercise any right or
remedy shall operate as a waiver thereof.
(h) Governing Law. This Agreement shall be governed by and
--------------
construed and interpreted in accordance with the laws of the State of
Colorado, without regard to any conflict of laws provisions thereof,
except that the Delaware General Corporation Law shall govern as to
matters of corporate law pertaining to St. Mary and the Utah Revised
Business Corporation Act shall govern as to matters of corporate law
pertaining to FJOG and BWOG.
(i) Jurisdiction and Venue. The parties hereto agree that any
----------------------
actions, suits or proceedings arising out of or relating to this
Agreement, the transactions contemplated hereby or any document
referred to herein shall be brought solely and exclusively in the
courts of the State of Colorado located in the City and County of
Denver, Colorado and/or the courts of The United States of America
located in the City and County of Denver, Colorado (and the parties
agree not to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to the respective
7
addresses referred to in Section 11(a) hereof shall be effective
service of process for any such action, suit or proceeding brought
against any party in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the courts of the State of
Colorado or The United States of America located in the City and County
of Denver, Colorado, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(j) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable under applicable law,
the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated, and the term, provision,
covenant or restriction that is held to be invalid, void or
unenforceable shall be modified so that it accomplishes to the maximum
extent possible the original business purpose of such term, provision,
covenant or restriction in a valid and enforceable manner.
(k) Attorney Fees. If any action at law or in equity is
--------------
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to recover reasonable attorney fees,
costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
(l) Adjustments in Capitalization. The number of shares of St.
-----------------------------
Mary Stock subject to this Agreement shall be subject to proportionate
and appropriate adjustment in the event of any change in the number of
outstanding shares of St. Mary Stock that occurs by reason of a stock
dividend or split, recapitalization, reclassification, or other similar
change in capitalization by St. Mary.
(m) Headings. The headings, subheadings and other captions of
--------
this Agreement are for convenience and reference only and shall not be
used in interpreting, construing or enforcing any of the provisions of
this Agreement.
(n) Counterparts and Facsimile Signatures. This Agreement may
-------------------------------------
be executed in any number of counterparts, and signature pages may be
delivered by facsimile transmission.
8
IN WITNESS WHEREOF, this Put and Call Option Agreement has been duly
executed on behalf of each of the parties hereto by their duly authorized
representatives as of the date first above written.
ST. MARY LAND & EXPLORATION COMPANY,
a Delaware corporation
By:/s/ MILAM RANDOLPH PHARO
--------------------------------------
Milam Randolph Pharo, Vice President -
Land and Legal
FLYING J OIL & GAS INC.,
a Utah corporation
By:/s/ JOHN R. SCALES
--------------------------------------
John R. Scales, President
BIG WEST OIL & GAS INC.,
a Utah corporation
By:/s/ JOHN R. SCALES
--------------------------------------
John R. Scales, President
9