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EXHIBIT 10.11
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇ EXPLORATION & PRODUCTION COMPANY
AND
▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY
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TABLE OF CONTENTS
RECITALS............................................................................................1
ARTICLE IAGREEMENT TO BUY AND SELL..................................................................1
1.1 Agreement to Sell the Subject Property............................................1
1.2 Assumption of Obligations.........................................................4
1.3 Reservation of Rights and Interests...............................................4
ARTICLE IIPURCHASE AND SALE.........................................................................5
2.1 Transfer of the Subject Property..................................................5
2.2 Purchase Price....................................................................5
2.3 Determination of the Closing Amount and the Final Settlement Statement...........5
ARTICLE III.REPRESENTATIONS OF SELLER...............................................................7
3.1 Existence.........................................................................7
3.2 Power.............................................................................7
3.3 Authorization.....................................................................8
3.4 Broker............................................................................8
3.5 Litigation........................................................................8
3.6 Preferential Rights Approvals and Consents........................................8
3.7 Title.............................................................................9
3.8 Due Execution and Enforceability..................................................9
3.9 Lease Maintenance.................................................................9
3.10 Other Maintenance.................................................................9
3.11 Equipment.........................................................................9
3.12 Compliance with Laws..............................................................9
3.13 Environmental.....................................................................9
3.14 Contracts........................................................................10
3.15 Adverse Changes..................................................................10
3.16 Taxes............................................................................10
3.17. Agreements to Sell or Mortgage...................................................10
3.18. Take-or-Pay and Other Settlements................................................10
3.19. Production Payments and Calls on Production......................................11
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ARTICLE IVREPRESENTATIONS OF PURCHASER.............................................................11
4.1 Existence........................................................................11
4.2 Power............................................................................11
4.3 Authorization....................................................................11
4.4 Independent Evaluation and Review................................................11
4.5 Further Distribution.............................................................12
4.6 Brokers..........................................................................12
4.7 Litigation.......................................................................12
ARTICLE VTITLE MATTERS.............................................................................12
5.1 Title Examination Period.........................................................12
5.2 Title Defects....................................................................12
5.3 Remedies for Title Defects.......................................................13
ARTICLE VIPRE-CLOSING TRANSACTIONS.................................................................13
6.1 Operation of the Subject Property Pending the Closing Date.......................13
6.2 Casualty Insurance...............................................................14
6.3 Permissions......................................................................14
6.4 Copies of Contracts..............................................................14
ARTICLE VIISELLER'S CONDITIONS OF CLOSING..........................................................14
7.1 Representations..................................................................14
7.2 Performance......................................................................14
7.3 Pending Matters..................................................................14
7.4 Certificates.....................................................................15
7.5 Opinions.........................................................................15
7.6 Encumbrance or Impairment of Security............................................15
ARTICLE VIIIPURCHASER'S CONDITIONS OF CLOSING......................................................15
8.1 Representations..................................................................15
8.2 Performance......................................................................15
8.3 Pending Matters..................................................................16
8.4 Approval of Contracts............................................................16
8.5 Environmental Condition..........................................................16
8.6 Certificates.....................................................................16
8.7 Opinions.........................................................................16
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ARTICLE IXCLOSING..................................................................................16
9.1 Time and Place of Closing........................................................16
9.2 Closing Obligations..............................................................17
ARTICLE XPOST-CLOSING OBLIGATIONS..................................................................18
10.1 Receipts and Credits.............................................................18
10.2 Indemnity........................................................................18
10.3 Further Assurances...............................................................20
ARTICLE XITERMINATION..............................................................................20
11.1 Right of Termination.............................................................20
11.2 Effect of Termination............................................................20
ARTICLE XIITAXES...................................................................................21
12.1 Sales Taxes......................................................................21
12.2 Other Taxes......................................................................21
12.3 Cooperation......................................................................21
ARTICLE XIIIINDEPENDENT INVESTIGATION AND DISCLAIMER...............................................21
ARTICLE XIVPRODUCTION PAYMENT.....................................................................22
14.1 Definition of Purchaser's Property...............................................22
14.2 Delivery of Gas..................................................................22
14.3 Delivery Points..................................................................22
14.4 Balancing and Alternative Payment................................................23
A. Imbalances..............................................................23
B. Alternative Payment.....................................................23
14.5 Purchaser Grants a First Priority Security Interest..............................24
ARTICLE XVMISCELLANEOUS............................................................................24
15.1 Governing Law....................................................................24
15.2 Entire Agreement.................................................................24
15.3 Waiver...........................................................................25
15.4 Captions.........................................................................25
15.5 Notices..........................................................................25
15.6 Expenses.........................................................................26
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15.7 Severability.....................................................................26
15.8 Publicity........................................................................26
15.9 Consequential Damages............................................................26
15.10 Survival.........................................................................26
15.11 Successors and Assigns...........................................................26
15.12 Counterparts.......................................................................26
15.13 Binding Arbitration................................................................26
15.14 Well information.................................................................27
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PURCHASE AND SALE AGREEMENT
United States of America ss.
Outer Continental Shelf Lands ss.
KNOW ALL MEN BY THESE PRESENTS:
Offshore Alabama ss.
This Purchase and Sale Agreement (the "Agreement") dated
this 26th day of May, 1999, and effective as of 7:00 a.m. on April 1, 1999 (the
"Effective Date"), is made by ▇▇▇▇▇▇ EXPLORATION & PRODUCTION COMPANY, whose
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter
called "SELLER") in favor of ▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY whose address
is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, P. O. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter called "PURCHASER").
RECITALS
Whereas, Seller desires to sell and Purchaser desires to
purchase certain oil and gas properties and related rights on the terms and
conditions provided in this Agreement;
Now, therefore, in consideration of the premises and the
respective promises, representations, warranties, covenants, agreements and
conditions contained herein, Seller and Purchaser hereby agree as follows:
ARTICLE I
AGREEMENT TO BUY AND SELL
1.1 Agreement to Sell the Subject Property. Seller hereby agrees to sell
and Purchaser hereby agrees to buy, subject to the terms, conditions,
representations and warranties contained in this Agreement, all of Seller's
rights, title and interest, subject to certain reservations as hereinafter set
forth, in the following properties (hereinafter the "Subject Property"), as
follows:
A. The oil, gas and mineral leases described in Exhibit "A" (the
"Leases"), together with all of Seller's rights in respect of any
pooled, communitized or unitized acreage of which any such
interest is a part, together with all right, title, interest,
(or operating rights, where Applicable) tenements,
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hereditaments, appurtenances, benefits and privileges of Seller
attributable to the foregoing, including without limitation
all of Seller's rights in and to that certain Mobile 864 Unit,
as more specifically described on Exhibit "A", less and
except any reservation of deep rights and/or overriding royalty
interest described in Exhibit "A."
B. The oil, condensate or natural gas well(s) located on the
Subject Property, whether producing, operating, shut-in or
temporarily abandoned (the "▇▇▇▇▇"), as identified on Exhibit
"B" attached hereto.
C. Subject to the provisions of Article 2.2 and Article XIV which
provide, among other things, that Seller shall receive as
consideration a Production Payment to be delivered in kind, the
severed crude oil, natural gas, casing head gas, drip gasoline,
natural gasoline, petroleum, natural gas liquids, condensate,
products, liquids and other hydrocarbons and other minerals or
materials of every kind and description produced from the
Subject Property on and after the Effective Date (collectively,
the "Substances").
D. The currently existing physical facilities or interests therein,
well protectors, the platforms, production equipment,
compressors, separating facilities, metering facilities, pumping
units, departing pipelines (other than the MAGGP referred to in
subsection H hereinafter), gathering lines, equipment and
fixtures of every type and description to the extent that the
same are used or held for use in connection with the ownership
of the Subject Property described in Paragraphs A, B, and C
above, whether located on or off such Subject Property,
including, without limitation, all casing and tubulars in the
▇▇▇▇▇, (collectively the "Facilities"), and including, but not
limited to, the assets listed on Exhibit "B" attached hereto.
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The leases, easements, privileges, rights-of-way agreements,
licenses, permits orders, authorizations or other agreements
relating to the use or ownership of surface or subsurface
properties and structures that are used or held for use in
connection with the exploration for and production of the
Substances, identified on Exhibit "C" attached hereto.
F. The (i) lease and land files, filings with regulatory agencies,
design files, shallow hazard survey, other documents and
instruments that relate to the properties described in
paragraphs A through E above and which are in the possession or
under the control of Seller, (ii) production and other technical
data, excluding seismic data, that are owned by Seller and
relate to the Subject Property or the ▇▇▇▇▇ except to the extent
transfer of same is restricted or prohibited by agreement with a
third party; and (iii) all other books, records and files
containing financial, title or information that are in
possession or under the control of Seller and relate to the
properties described in Paragraphs A through E above. Seller
shall provide a list of files to be transferred and such list
shall be signed by both parties as stipulated in that certain
Minerals Management Service ("MMS") memorandum No. --- 5210
dated June 26, 1996. Notwithstanding the foregoing, Seller shall
be entitled to keep the originals of all files, records, data
and other documents ("Records") relating to Mobile Block 863 and
copies of all Records relating ------- to the balance of all
other blocks which comprise the Subject Property. Purchaser
shall provide such copies to Seller at Purchaser's own expense.
Upon request of Seller, for a period of up to ten (10) years
Purchaser shall provide Seller access to the originals of any
such Records and Contracts (as defined below) relating to the
Subject
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Property at Purchaser's offices during normal business hours.
G. The contracts, commitments, agreements and arrangements that
relate to the properties described in Paragraph A through E
above and to any period of time after the Effective Date,
including the production, storage, treatment, transportation,
processing, purchase, sale or other disposal of Substances
therefrom or in connection therewith and any and all amendments,
ratifications or extension of the foregoing, as identified on
Exhibit "D" attached hereto (the "Contracts"), together with all
rights of Seller thereunder to audit the records of any party
thereto and receive refunds of any nature thereunder, relating
to periods on or after the Effective Date.
H. Notwithstanding the above, Seller hereby excludes from this
transaction its undivided 17.9274% working interest in that
certain 12-inch, approximately 7.6 mile Mobile Area Gas
Gathering Pipeline (the "MAGGP"), which extends from the Mobile
908 Platform (located on OCS-G 5071) to an interconnection with
Chandeleur Pipe Line Company at or near Mobile ▇▇▇▇ 861 "A"
Platform.
1.2 Assumption of Obligations. The sale of Seller's interest
in the Properties shall be subject to, and Purchaser shall assume, the terms,
conditions and obligations of the interest conveyed pursuant to this Agreement
in the Leases and Contracts including all existing lease burdens (including,
but not limited to, royalties or similar burdens), and duties imposed by
governmental regulation, but not including any insurance contracts held by
Seller, including the assumption by Purchaser of Seller's share of all
plugging and abandonment liabilities of the Subject Property, the Facilities
and the ▇▇▇▇▇.
Through March, 1999, Seller represents that it has certain
gas imbalances, as follows: over-delivered in the amounts of 20,074 MCF in
Mobile Block 952, 953 and 955; and 16,076 MCF under-delivered in the Mobile
864 Unit, for a total net amount of 3,998 MCF over-delivered (per Operator's
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latest gas balance statement). Purchaser assumes any liabilities regarding
this imbalance and holds Seller harmless against any future claim for such
imbalance.
1.3 Reservation of Rights and Interests. Seller shall
reserve unto itself certain deep rights and the overriding royalty interests
in certain Leases as set forth below in and to all of the oil, gas and other
substances produced, saved and marketed from or attributable to the Leases.
The overriding royalty interests shall be computed and paid at the same time
and in the same manner as the lessor royalty under the terms of said Leases.
Said overriding royalty shall be free and clear of all costs and expenses of
both drilling and production operations, but shall bear its proportionate
share of severance, production, excise and other like taxes applicable to the
interest. Seller shall have the right from time to time upon thirty (30) days
notice to Purchaser, to take its reserved overriding royalty interest in kind,
which shall be delivered free of cost to certain sales points as provided in
Article XIV hereof. The Assignments attached hereto as Exhibits "E-1" through
"E-10", shall contain the following reservations:
(a) Seller shall assign all of its operating rights from
surface down to 4,200 feet subsea, retaining unto Seller all right, title and
interest and operating rights as to all depths below 4,200 feet subsea in
OCS-G 5748, Mobile Block 863;
(b) Seller shall assign all right, title and interest in all
depths, retaining unto Seller a 10% of 8/8ths overriding royalty interest,
proportionately reduced as to Seller's operating rights interest, as to depths
below 4,200 feet subsea in OCS-G 7844, OCS-G 5071, ▇▇▇-▇ ▇▇▇▇, ▇▇▇-▇ 5756 and
▇▇▇-▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ 907, 908, 952, 953 and 955 respectively;
(c) Seller shall assign all right, title and interest in all
depths, retaining unto Seller a net 6.00% of 8/8ths overriding royalty
interest in OCS-G 18125 and OCS-G 18126, Mobile Blocks 997 and 998
respectively;
(d) Seller shall assign all right, title and interest in all
depths, retaining unto Seller a net 5.50% of 8/8ths overriding royalty
interest in OCS-G 19888, Mobile Block 999;
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(e) Seller shall assign all right, title and interest in and
to the Mobile Block 864 Unit with no reservations.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of the Subject Property. Subject to the terms
and conditions of this Agreement, on or before June 8, 1999, at 10:00 a.m.
Central Time ("Closing Date") Seller shall sell and Purchaser shall purchase
and assume the obligation to pay the Purchase Price as set forth in Article
2.2, as adjusted hereunder, for all of Seller's right, title, and interest (or
operating rights, where applicable) in and to the Subject Property effective
as of the Effective Date.
2.2 Purchase Price. The "Purchase Price" for all of Seller's
right, title and interest in and to the Subject Property shall be the
agreement and firm obligation by Purchaser to deliver to Seller from the
Purchaser's Property (as defined in Section 14.1) a fixed daily volume of
Purchaser's first gas produced from Purchaser's Property of 6.375 MMCFD at
14.73 psi ("Production Payment") net to Seller for each day in the period
commencing on the Effective Date until July 1, 2002 ("Satisfaction Date"), and
the assumption by Purchaser as of the Effective Date of all of Seller's
liability for the plugging and abandonment of the Subject Property, the
Facilities and the ▇▇▇▇▇. The delivery of said Production Payment shall be
further subject to the provisions of Article XIV.
2.3 Determination of the Closing Amount and the Final
Settlement Statement. At or in connection with the Closing, the following
accounting shall be effected between Seller and Purchaser.
(a) All oil, gas and other hydrocarbons produced prior to
the Effective Date (irrespective of whether payment for the same has been made
or received) which is attributable to Seller's interest in the Subject
Property shall be and remain the property of Seller. All oil, gas and other
hydrocarbons produced after the Effective Date (irrespective of whether
payment for the same has been made or received) which is attributable to
Seller's interest in the Subject Property shall be the property of Purchaser.
All costs, expenses, taxes (subject to Article XII) and disbursements,
incurred prior to the Effective Date, regardless of when due or payable, shall
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be and remain the obligation of Seller. All costs, expenses, taxes (subject to
Article XII) and disbursements, incurred subsequent to the Effective Date,
regardless of when due or payable, shall be the obligation of Purchaser.
(b) Interim Period. (i) Gas Sales - During the period
between the Effective Date and May 31, 1999 (the "Interim Period"), Seller
shall continue to nominate and market the gas production attributable to the
Subject Properties. Seller shall pay all royalties due on such gas and shall
retain the net proceeds associated with volumes up to the net daily Production
Payment volume of 6.375 MMCFD. All volumes sold by or credited to the Seller
during the Interim Period shall be credited against the volumes due under the
Production Payment. During the Interim Period, Purchaser shall nominate and
market all of the gas production attributable to Purchaser's interest prior to
this transaction and pay all royalties due on that interest (ii) Costs Seller
and Purchaser acknowledge that their respective joint interest billing
prepared in connection with the Subject Property for the month of April 1999
shall be a combination of costs that were incurred both prior to the Effective
Date and costs that were incurred after the Effective Date. Both Seller and
Purchaser agree to pay the other party's April 1999 joint interest billing
when due. No joint interest billing shall be sent to the other party after the
April 1999 billing. Any invoice from Purchaser received by Seller after Seller
has processed the joint interest billing for April will be handled in the
Final Settlement Statement. Settlement of all costs, expenses, taxes (subject
to Article XII) and disbursements shall be handled in connection with the
Final Settlement Statement referred to below. Purchaser shall assume all
regulatory and production reporting beginning with the production month of May
1999.
(c) At least three (3) business days prior to the Closing,
Seller shall cause to be prepared an unaudited settlement statement (the
"Preliminary Settlement Statement") setting forth an estimation of the volume
of gas due for the Interim Period which shall be computed as the differential
between the net volumes Seller sold and the net daily Production Payment
volume of 6.375 MMCFD. The differential volume shall be valued at the gas
price (exclusive of transportation costs to the delivery point as defined in
Article 14.3) received by the Seller during the Interim Period. Purchaser
shall pay, at Closing that estimated net amount, which shall be referred to
hereinafter as the "Closing ▇▇▇▇▇▇".
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(▇) As soon as practicable after the Closing, but not later
than sixty (60) days thereafter, Seller and Purchaser shall agree on, in
accordance with generally accepted accounting principles, a statement (the
"Final Settlement Statement") setting forth each adjustment that was estimated
as of the Closing and a settlement of all costs, expenses, taxes (subject to
Article XII), and disbursements due to each party based on the Effective Date,
after giving effect to this subsection (d) and subsections (e), (f) and (g) of
this Section 2.3. As soon as practicable after receipt of the Final Settlement
Statement but not later than 30 days after such receipt, Purchaser shall
deliver to Seller a written report containing any changes that Purchaser
proposes be made to the Final Settlement Statement. The parties shall
undertake to agree with respect to the amounts due pursuant to such Final
Settlement Statement no later than 90 days after the Closing Date. If the
Final Settlement Statement reveals that either party owes a sum of money to
the other, then the party owing same shall promptly pay to the other party
such sum by cashier's or certified check or other guaranteed funds. Purchaser
shall have the right to one audit of Seller's accounts and records relating to
this Agreement at Purchaser's sole cost and expense.
(e) Ad valorem taxes, if any, assessed in the jurisdiction
in which the Property is located which are payable in arrears, shall be
included in the Final Settlement Statement on a prorated basis based on 1998
taxes.
(f) All prepaid charges other than for insurance applicable
to periods following the Effective Date and prepaid rentals or royalties paid
under the Lease or any contracts for periods subsequent to the Effective Date
shall be prorated as of the Effective Date and the pro rata share of Purchaser
shall be included in the Final Settlement Statement.
(g) Purchaser shall pay all sales, use or transfer taxes
that may be or become due on account of the sale and purchase herein provided
for.
(h) Notwithstanding anything contained herein to the
contrary, in the event Closing has not occurred by May 24, 1999, Purchaser and
Seller shall each nominate and market their respective gas from the Subject
Property for the month of June, the sale of which shall be accounted for in
the same manner as the Closing Amount.
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ARTICLE III.
REPRESENTATIONS OF SELLER
Seller represents and warrants to Purchaser that:
3.1 Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly qualified to carry on its business on the Outer Continental Shelf.
3.2 Power. Seller has the corporate power to enter into and
perform this Agreement and the transactions contemplated hereby, subject to
rights to consent by, required notices to, and filings with or other actions
by governmental entities where the same are customarily obtained subsequent to
the assignment of oil and gas interests and leases. The execution, delivery
and performance of this Agreement by Seller, and the transactions contemplated
hereby, will not violate (i) any provision of the certificates of
incorporation or bylaws of Seller, (ii) any material agreement or instrument
to which Seller is a party or by which Seller is bound, (iii) any judgment,
order, ruling, or decree applicable to Seller as a party in interest, or (iv)
any law, rule or regulation applicable to Seller.
3.3 Authorization. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of Seller.
This Agreement has been duly executed and delivered on behalf of Seller, and
at the Closing all documents and instruments required hereunder to be executed
and delivered by Seller shall be duly executed and delivered. This Agreement
does, and such documents and instruments executed as the result hereof shall,
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their terms, subject, however, to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time in
effect relating to the rights and remedies of creditors, as well as to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
3.4 Broker. Seller has not incurred any liability,
contingent or otherwise for broker's or finder's fees relating to the
transaction contemplated by this Agreement for which Purchaser shall have any
responsibility whatsoever.
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3.5 Litigation. There is no litigation proceeding pending or
any order, injunction or decree outstanding, against or relating to Seller or
the Subject Property that, if adversely determined would have a material
adverse effect upon the Subject Property or the continued operation of the
Subject Property. To Seller's knowledge, there is no litigation or proceeding
threatened nor is Seller in violation of any applicable law, regulation,
ordinance, or any other applicable requirement of any governmental body or
court, which violation would have a material adverse effect upon the Subject
Property or the continued operation of the Subject Property, and no notice has
been received by Seller alleging any such violation.
3.6 Preferential Rights Approvals and Consents. Purchaser
acknowledges that the Leases or portions thereof may be subject to a)
governmental approval; b) preferential rights to purchase; or c) other forms
of consent. Seller has disclosed to Purchaser, to the best of its knowledge,
all of the Leases which may be subject to preferential rights to purchase and
consents and Seller shall use its best efforts (with reasonable cooperation
from Purchaser) to obtain resolution of same prior to Closing. The process of
obtaining governmental approval or other consents may continue after Closing
and shall be the joint responsibility of Seller and Purchaser.
3.7 Title. Seller owns Good and Marketable Title (as
defined below) to the Subject Property.
3.8 Due Execution and Enforceability. There are no
bankruptcy, insolvency, reorganization, receivership or arrangement
proceedings pending, being contemplated by, or to the knowledge of Seller,
threatened against Seller.
3.9 Lease Maintenance. The Leases set forth on Exhibit "A"
are in full force and effect as to all lands and depths described in such
Leases.
3.10 Other Maintenance. All rents and royalties and other
payments due with respect to the Subject Property have been properly and
timely paid, and all liabilities of any kind or nature incurred with respect
to the Subject Property have been paid before delinquency; neither Seller nor
to Seller's knowledge any prior owners of the Subject Property have received
any notice of default or claimed default with respect to any obligations with
respect to the Subject Property or any part thereof.
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3.11 Equipment. To Seller's knowledge, all ▇▇▇▇▇,
Facilities, and other equipment that constitute part of the Subject Property
are in good repair and working condition and have been designed, installed and
maintained in accordance with good industry standards and all applicable legal
requirements.
3.12 Compliance with Laws. To Seller's knowledge, all
operations relating to the Subject Property have been conducted in accordance
with all laws, orders, rules and regulations of all governmental authorities
having or asserting jurisdiction relating to the ownership and operation
thereof, including the production of all Substances attributable thereto. All
necessary governmental certificates, consents, permits, licenses or other
authorizations with regard to the ownership or, to Seller's knowledge,
operation of the Subject Property have been obtained and no violations exist
or have been recorded in respect of such licenses, permits or authorizations.
3.13 Environmental. Seller has obtained all permits,
licenses and other authorizations that are required under federal, state and
local laws with respect to pollution or protection of the environment relating
to the Subject Property, including laws relating to actual or threatened
emissions, discharges or releases of pollutants, raw materials, products,
contaminants or hazardous or toxic materials or wastes into ambient air,
surface water, groundwater or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or
wastes, the failure of which to obtain would materially affect the value, use
or operation of any of the Subject Property; and to the best of Seller's
knowledge third parties operating the Subject Property are in compliance in
all material respects with all terms and conditions of such laws, permits,
licenses and authorizations, and also are in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree,
judgement, notice or demand letter issued, entered, promulgated or approved
thereunder relating to the Subject Property, the failure with which to comply
would materially affect the value, use or operation of any of the Subject
Property; and Seller has not (and to Seller's knowledge and belief no third
party operator has) received notice of any violation of or investigation
relating to any federal, state or
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local laws with respect to pollution or protection of the environment relating
to the Subject Property. Within no later than ten (10) days prior to Closing,
Seller shall furnish Purchaser copies of all environmental studies and reports
prepared or obtained by Seller relating to the Subject Property.
3.14 Contracts. Seller has performed in all material
respects all obligations required to be performed by it and is not in default,
or alleged to be in default, in any material respect under any of the
Contracts.
3.15 Adverse Changes. Since the Effective Date, (i) the
Subject Property, viewed as a whole, has not experienced any material adverse
change or material reduction in the rate of production of Substances, other
than changes in the ordinary course of operation, changes that result from
depletion in the ordinary course of operation, and changes that result from
variances in markets for the Substances, and (ii) none of the Subject Property
has suffered any material destruction, damage or loss.
3.16 Taxes. All ad valorem, property, occupation, severance,
production, gathering, pipeline, gross production, windfall profit, Btu,
energy, excise and other taxes, governmental charges and assessments imposed
or assessed with respect to, measured by, charged against or attributable to
the Subject Property have been duly paid.
3.17. Agreements to Sell or Mortgage. Except for potential
preferential rights to purchase, Seller has not agreed to sell or encumber the
Subject Property to any party other than Purchaser.
3.18. Take-or-Pay and Other Settlements. To the best of
Seller's knowledge, there are no take-or-pay settlements or gas sales contract
buy-downs or buy-outs that will affect the Subject Property after the
Effective Time, for which Purchaser will have any responsibility whatsoever or
for which Purchaser will owe any additional royalty after the Effective Time
or which will adversely affect Purchaser in any way.
3.19. Production Payments and Calls on Production. Except
for the Production Payment to be granted by Purchaser to Seller herein, the
Subject Property is not subject to any production payments and/or to any call
on production.
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ARTICLE IV
REPRESENTATIONS OF PURCHASER
Purchaser represents and warrants to Seller that:
4.1 Existence. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly qualified to carry on its business on the Outer Continental Shelf.
4.2 Power. Purchaser has the corporate power to enter into
and perform this Agreement and the transactions contemplated hereby, subject
to rights to consent by, required notices to, and filings with or other
actions by governmental entities where the same are customarily obtained
subsequent to the assignment of oil and gas interests and leases. The
execution, delivery and performance of this Agreement by Purchaser, and the
transactions contemplated hereby, will not violate (i) any provision of the
certificates of incorporation or bylaws of Purchaser, (ii) any material
agreement or instrument to which Purchaser is a party or by which Purchaser is
bound, (iii) any judgment, order, ruling, or decree applicable to Purchaser as
a party in interest, or (iv) any law, rule or regulation applicable to
Purchaser.
4.3 Authorization. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered on behalf of Purchaser,
and at the Closing all documents and instruments required hereunder to be
executed and delivered by Purchaser shall have been duly executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Purchaser enforceable in
accordance with their terms, subject, however, to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time in
effect relating to the rights and remedies of creditors, as well as to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.4 Independent Evaluation and Review. Purchaser
acknowledges that Purchaser is an experienced and knowledgeable investor in
the oil and gas business. Purchaser also acknowledges that other than as
expressly set out in this Agreement and the Assignment, Seller has made no
representations or warranties as to the accuracy or completeness of any
information supplied to
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Purchaser, or as to title to the Subject Property. Based on such
acknowledgments, in entering into and performing this Agreement, Purchaser has
relied and will rely solely upon Sellers Representations and warranties, its
independent investigation of, and judgment with respect to, the Subject
Property, its condition, value and Seller's title thereto.
4.5 Further Distribution. Purchaser is acquiring the
Property for its own account and not with a view to, or for offer or resale in
connection with, a distribution thereof within the meaning of the Securities
Act of 1933 and the rules and regulations pertaining to it or a distribution
thereof in violation of any applicable securities laws.
4.6 Brokers. Purchaser has incurred no liability, contingent
or otherwise, for broker's or finder's fees relating to the transactions
contemplated by this Agreement for which Seller shall have any responsibility
whatsoever.
4.7 Litigation. There is no litigation or other proceeding
pending or to Purchaser's knowledge threatened, or any order, injunction or
decree outstanding against or relating to Purchaser which would prevent
Purchaser from entering into this Agreement.
ARTICLE V
TITLE MATTERS
5.1 Title Examination Period. During the period commencing
with the execution date of this Agreement and concluding three (3) business
days prior to the Closing Date, Seller shall provide Purchaser and/or its
representatives access to and or use its best efforts to cause the operator of
any portion of the Subject Property to allow Purchaser access to (i) all
abstracts of title, title opinions, title files, ownership maps, lease files,
assignments, divisions orders, operating records, agreements and other books,
records, contracts, correspondence, maps, data, reports, documents and
information of Seller pertaining to the Subject Property, and (ii) the Subject
Property in order to conduct inspections thereof.
5.2 Title Defects. The Subject Property shall be deemed to
have a "Title Defect" if Seller has less than Good and Marketable Title to any
of the Subject Property. As used herein, the term "Good and Marketable Title"
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means such record and beneficial title to Seller that: (i) entitles Seller to
receive not less than the percentage set forth in Exhibit "A" hereto as the
"Net Revenue Interest" of all hydrocarbons produced, saved and marketed from
the Subject Property, any Well, or any unit of which the Subject Property is a
part and that are allocated to such Subject Property, all without reduction,
suspension or termination of such interest throughout the duration of the life
of such Subject Property, except as specifically set forth in Exhibit "A", and
(ii) obligates Seller to bear not more than that percentage set forth in
Exhibit "A" hereto as the "Working Interest" of the costs and expenses
relating to the maintenance, development and operation of such Subject
Property, Well or unit, without increase throughout the duration of the life
of such Subject Property, except as specifically set forth in Exhibit "A".
5.3 Remedies for Title Defects. Seller shall have the right,
but not the obligation, to cure any Title Defect at its expense that it has
received timely notice from Purchaser. In the event Seller is unable to cure
any such Title Defect on or before three (3) days prior to the Closing Date,
Purchaser and Seller shall: (i) postpone the date of Closing by a mutually
agreeable time period to permit Seller to cure the Title Defect, or (ii) meet
and mutually agree to an adjustment of the Purchase Price as remedy for the
Title Defect(s). If the Purchaser and Seller cannot mutually agree in good
faith to an adjustment of the Purchase Price, then either party may terminate
this Agreement by written notice with no further obligation on the part of the
Purchaser or Seller.
ARTICLE VI
PRE-CLOSING TRANSACTIONS
6.1 Operation of the Subject Property Pending the Closing Date.
(a) Prior to the Closing Date, Seller agrees, unless
specifically waived by Purchaser in writing: (i) to pay timely all costs and
expenses incurred in connection with the Subject Property; (ii) not enter into
any material new agreements or amend or terminate any material existing
agreements relating to the Subject Property; (iii) not encumber, sell, or
otherwise dispose of any of the Subject Property other than in the ordinary
course of business; (iv) not abandon any well included in the Subject Property
or release or abandon any portion of the Lease included in the Subject
Property; (v) not waive, compromise or settle any material right or claim that
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would materially adversely affect the ownership or operation of the Subject
Property after the Closing Date; (vi) maintain insurance now in force with
respect to the Subject Property; and (vii) use reasonable efforts to cause the
Leases and Contracts to be kept in full force and effect and perform and
comply with all of the material covenants and conditions contained in same.
(b) Seller shall not propose any operation under the terms
of any applicable operating agreement after the date of this Agreement and
prior to Closing. Provided, however, in the event Closing does not occur on
this transaction, Seller retains all of its rights under the applicable
operating agreements in regard to any such proposed operation. In connection
with any operation proposed by a party other than Seller or Purchaser, Seller
shall furnish Purchaser any data and other information furnished to Seller
which has not already been furnished to Purchaser under any such operating
agreement by the party proposing such operation. Purchaser shall then elect
whether to consent to such proposed operation and Seller shall be bound by
Purchaser's decision to consent or not to such operation.
6.2 Casualty Insurance. Purchaser shall assume the risk of
any change in the condition of the Property from the Effective Date until
Closing. Should any of the ▇▇▇▇▇ producing from the Land covered by or
constituting part of the Property be destroyed, lost or cease to produce
because of blowout, fire, storm, casing collapse, Act of God or other casualty
pending the Closing Date, such event shall not constitute a title defect nor
shall Purchaser be relieved of its obligation to close hereunder but shall be
entitled to receive an assignment of any insurance claims or causes of action
that Seller may be entitled to assert or pursue against insurers or operators
or third parties who may be liable if the casualty was the result of the
operator's or such third party's negligence.
6.3 Permissions. Purchaser shall obtain all applicable
local, state and federal governmental and agency permissions, approvals and
consents as may be required to consummate the sale contemplated hereunder
(including those permissions, approvals, and consents which are customarily
obtained after the assignment of an oil and gas lease or interest), including
but not limited to approvals from the MMS.
6.4 Copies of Contracts. Prior to the Closing, Seller shall
have made available to Purchaser true copies of all of the Contracts in its
possession or under its control.
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ARTICLE VII
SELLER'S CONDITIONS OF CLOSING
Seller's obligation to consummate the transaction provided
for herein is subject to satisfaction or waiver by Seller of the following
conditions:
7.1 Representations. The representations and warranties of
Purchaser contained in Article IV shall be true and correct in all material
respects on the date of Closing as though made on and as of that date.
7.2 Performance. Purchaser shall have performed in all
material respects the obligations, covenants and agreements hereunder to be
performed by it at or prior to the Closing.
7.3 Pending Matters. No suit, action or other proceeding by
a third party or a governmental authority shall be pending or threatened which
seeks substantial damages from Seller in connection with, or seeks to
restrain, enjoin or otherwise prohibit, the consummation of the transactions
contemplated by this Agreement.
7.4 Certificates. Purchaser shall have delivered to Seller a
certificate by an officer of Purchaser, dated the date of Closing, certifying
on behalf of Purchaser that the conditions set forth in Sections 7.1 and 7.2
have been fulfilled.
7.5 Opinions. Purchaser shall have delivered to Seller a
legal opinion dated as of Closing, in form and substance satisfactory to
Seller, to the effect that: (i) it is a corporation organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to carry on its business in the States of Louisiana and Alabama
and to own properties under the jurisdiction of the MMS; (ii) the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite action on the
part of Purchaser; and (iii) this Agreement and all documents and instruments
executed by Purchaser at Closing have been duly executed and delivered on
behalf of Purchaser and constitute legal, valid and binding obligations of
Purchaser enforceable in accordance with their terms.
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In giving this legal opinion, counsel for Purchaser may rely
upon certificates of governmental officials and of the respective officers,
general partners and individuals, as appropriate, as to matters of fact, and
may qualify the legal opinion with such other assumptions and exceptions as
are reasonable under the circumstances.
7.6 Encumbrance or Impairment of Security. As of Closing,
there shall be no mortgage or other encumbrance of any kind on the volumes of
gas that Purchaser is obligated to deliver to Seller identified as the
Production Payment which would take priority over, or in any manner impair,
the first priority of the security interest to be granted under Section 14.5.
ARTICLE VIII
PURCHASER'S CONDITIONS OF CLOSING
Purchaser's obligation to consummate the transactions
provided for herein is subject to the satisfaction or waiver by Purchaser of
the following conditions:
8.1 Representations. The representations and warranties of
Seller contained in Article III shall be true and correct in all material
respects on the date of Closing as though made on and as of that date.
8.2 Performance. Seller shall have performed in all material
respects the obligations, covenants and agreements hereunder to be performed
by it at or prior to the Closing.
8.3 Pending Matters. No suit, action or other proceeding by
a third party or a governmental authority shall be pending or threatened which
seeks substantial damages from Purchaser in connection with, or seeks to
restrain, enjoin or otherwise prohibit, the consummation of the transactions
contemplated by this Agreement.
8.4 Approval of Contracts. Purchaser shall have approved the
terms and provisions of all of the Contracts.
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8.5 Environmental Condition. Purchaser shall be satisfied
with the environmental condition of the Subject Property.
8.6 Certificates. Seller shall have delivered to Purchaser a
certificate by an officer of Seller, dated the date of Closing, certifying on
behalf of Seller that the conditions set forth in Sections 8.1 and 8.2 have
been fulfilled.
8.7 Opinions. Seller shall have delivered to Purchaser a
legal opinion dated as of Closing, in form and substance satisfactory to
Purchaser, to the effect that: (i) it is a corporation organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to carry on its business in the States of Louisiana and Alabama
and to own properties under the jurisdiction of the MMS; (ii) the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite action on the
part of Seller; and (iii) this Agreement and all documents and instruments
executed by Seller at Closing have been duly executed and delivered on behalf
of Seller and constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms.
In giving this legal opinion, counsel for Seller may rely
upon certificates of governmental officials and of the respective officers,
general partners and individuals, as appropriate, as to matters of fact, and
may qualify the legal opinion with such other assumptions and exceptions as
are reasonable under the circumstances.
ARTICLE IX
CLOSING
9.1 Time and Place of Closing. If the conditions of Closing
have been satisfied or waived, the consummation of the transactions
contemplated hereby (the "Closing") shall be held as soon as possible, but not
later than, 10:00 a.m. (C.D.T.) on the Closing Date at Seller's offices, or
other mutually acceptable location.
9.2 Closing Obligations. At the Closing:
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(a) Seller shall execute, acknowledge and deliver
appropriate Assignments of Record Title Interest or Operating Rights, where
applicable, to convey title to the Subject Property to Purchaser with special
limited warranty of title (in sufficient counterparts to facilitate
recording), in the form of Exhibit "E-1" through "E-10", attached hereto.
(b) Seller shall execute such other instruments, including
without limitation, Change of Operator forms, and take such other action as
may be necessary to carry out its obligations under this Agreement;
(c) Purchaser shall pay the Closing Amount, if any;
(d) Seller shall deliver to Purchaser possession of the
Subject Property, including without limitation those materials referenced in
Section 1.1 G. herein, provided, however, in regard to files, delivery shall
be within thirty (30) days after Closing.
(e) Purchaser shall execute, acknowledge and accept the said
Assignments executed by Seller. Purchaser shall execute such other instruments
including, but not limited to the Financing Statement pursuant to Article 14.5
and take such other action as may be necessary to carry out its obligations
under this Agreement;
(f) In the event Seller is responsible at the time of the
Closing for the disbursement of proceeds from production from the Subject
Property to third parties and in the event Purchaser requires additional time
after the Closing to assume this responsibility from Seller in order to avoid
any interruption in the payments to third parties as the result of sale of the
Subject Property, Seller and Purchaser shall enter into a mutually acceptable
letter agreement, the terms of which will provide for Seller to retain
responsibility for disbursement of proceeds for a period not to exceed ninety
(90) days from the first day of the month nearest to the Closing Date. Such
letter agreement shall contain provisions consistent with those normally used
by Seller under similar circumstances in the usual conduct of its business;
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(g) Purchaser is satisfied with the condition of the Subject
Property.
ARTICLE X
POST-CLOSING OBLIGATIONS
10.1 Receipts and Credits. All monies, proceeds, receipts,
credits and income attributable to Seller's interest in the Subject Property
for all periods of time subsequent to the Effective Date shall be the sole
property and entitlement of the Purchaser, and, to the extent received by
Seller after the Closing, Seller shall fully disclose, account for and
transmit same to Purchaser promptly. All monies, proceeds, receipts and income
attributable to Seller's interest in the Subject Property for all periods of
time prior to the Effective Date shall be the sole property and entitlement of
Seller and, to the extent received by Purchaser, Purchaser shall fully
disclose, account for and transmit same to Seller promptly. All costs,
expenses, taxes (subject to Article XII) and disbursements, attributable to
periods of time prior to Effective Date, regardless of when due or payable,,
shall be the sole obligation of Seller and Seller shall promptly pay, or if
paid by Purchaser, promptly reimburse Purchaser for same. All costs, expenses,
taxes (subject to Article XII) and disbursements, attributable to periods of
time subsequent to the Effective Date, regardless of when due or payable,
shall be the sole obligation of the Purchaser, and if paid by Seller, Seller
shall be promptly reimbursed by the Purchaser. All uncollected accounts
receivable attributable to the Subject Property, after the Effective Date,
shall be assigned to Purchaser.
To the extent the provisions of this Section 10.1 may be
interpreted to conflict with the provisions of Section 12.2 below, the
provisions of Section 12.2 shall be deemed to control.
10.2 Indemnity. If Closing occurs:
(I) PURCHASER SHALL ASSUME AS OF THE EFFECTIVE DATE ALL
OBLIGATIONS AND LIABILITIES ARISING AFTER THAT DATE RELATING TO THE OWNERSHIP
OR USE OF THE SUBJECT PROPERTY, INCLUDING BUT NOT LIMITED TO RECLAMATION AND
THE PLUGGING AND ABANDONMENT OF ALL ▇▇▇▇▇ AND ALL ENVIRONMENTAL OBLIGATIONS,
LIABILITIES AND DUTIES WITH RESPECT TO THE SUBJECT PROPERTY, REGARDLESS OF
WHETHER SUCH ENVIRONMENTAL OBLIGATIONS,
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LIABILITIES AND DUTIES RELATE TO THE PERIOD PRIOR TO OR AFTER THE EFFECTIVE
DATE. THE RECLAMATION AND PLUGGING AND ABANDONMENT SHALL BE PERFORMED IN A
GOOD AND WORKMANLIKE MANNER AND IN ACCORDANCE WITH ALL APPLICABLE LAWS, RULES
OR REGULATIONS.
(II) PURCHASER SHALL FULLY PROTECT, INDEMNIFY AND DEFEND
SELLER, ITS OFFICERS, AGENTS AND/OR EMPLOYEES AND HOLD THEM HARMLESS FROM ANY
AND ALL CLAIMS, LOSSES, DAMAGES, DEMANDS, SUITS, CAUSES OF ACTION AND
LIABILITIES (INCLUDING REASONABLE ATTORNEY'S FEES, COSTS OF LITIGATION AND/OR
INVESTIGATION AND OTHER COSTS ASSOCIATED THEREWITH) (COLLECTIVELY REFERRED TO
HEREAFTER AS "CLAIMS") OF EVERY KIND ARISING OUT OF OR CONNECTED, DIRECTLY OR
INDIRECTLY, WITH THE OWNERSHIP, OPERATION OR ABANDONMENT OF THE SUBJECT
PROPERTY, OR ANY PART THEREOF, AFTER THE EFFECTIVE DATE REGARDLESS OF CAUSE OR
OF SELLER'S NEGLIGENCE OR FAULT, WHETHER IMPOSED BY STATUTE, RULE OR
REGULATION OR STRICT LIABILITY OF SELLER, ITS OFFICERS, AGENTS AND/OR
EMPLOYEES.
(III) PURCHASER SHALL FULLY PROTECT, INDEMNIFY AND DEFEND
SELLER, ITS OFFICERS, AGENTS AND/OR EMPLOYEES AND HOLD THEM HARMLESS FROM ANY
AND ALL CLAIMS FOR POLLUTION AND/OR ENVIRONMENTAL DAMAGE OF ANY KIND, ANY
FINES OR PENALTIES ASSESSED ON ACCOUNT OF SUCH DAMAGE, CAUSED BY, ARISING OUT
OF, OR IN ANY WAY INCIDENTAL TO THE OWNERSHIP OR OPERATION OF THE SUBJECT
PROPERTY, IF SUCH CLAIMS ARE ASSERTED SUBSEQUENT TO THE EFFECTIVE DATE,
REGARDLESS OF WHEN THE ACT OR OMISSION GIVING RISE THERETO OCCURRED AND
REGARDLESS OF WHETHER OR NOT ARISING FROM, INCIDENTAL TO OR THE RESULT OF
SELLER'S NEGLIGENCE OR FAULT, OR WHETHER OR NOT ANY LIABILITY IS IMPOSED UPON
SELLER AS A RESULT OF ANY STATUTE, RULE OR REGULATION OR STRICT LIABILITY OF
SELLER, ITS OFFICERS, AGENTS OR EMPLOYEES, INCLUDING WITHOUT LIMITATION
LIABILITY UNDER THE COMPREHENSIVE ENVIRONMENTAL RECOVERY, COMPENSATION AND
LIABILITY ACT, 42 U.S.C. ss.9601 ET SEQ.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT THE SUBJECT
PROPERTY TO BE ASSIGNED PURSUANT TO SECTION 1.1 HEREOF ARE TO BE ASSIGNED AS
IS, AND SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED IN FACT OR BY LAW,
WHETHER OF TITLE, OPERATING CONDITION, SAFETY, COMPLIANCE WITH GOVERNMENT
REGULATIONS, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSES, CONDITION
OR OTHERWISE, CONCERNING ANY OF SUCH ASSETS. ALL ▇▇▇▇▇, PERSONAL PROPERTY,
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MACHINERY, EQUIPMENT AND FACILITIES THEREIN, THEREON AND APPURTENANT THERETO
TO BE CONVEYED BY SELLER AND ACCEPTED BY PURCHASER PRECISELY AND ONLY "AS IS,
WHERE IS" AND SELLER DOES NOT WARRANT THEM TO BE FREE FROM REDHIBITORY VICES
OR DEFECTS NOR WILL SELLER WARRANT AGAINST EVICTION THEREFROM.
It is the intention of the parties that the Purchaser's
indemnity of Seller shall not extend to any Claims, demands or causes of
action known to Seller as of the Effective Date.
The foregoing indemnification shall not apply to Claims
whensoever asserted by Seller's employees for injuries suffered with respect
to the Subject Property prior to said Effective Date.
10.3 Further Assurances. After Closing, Seller and Purchaser
agree to take such further actions and to execute, acknowledge and deliver all
such further documents that are necessary or useful in carrying out the
purposes of this Agreement or of any document delivered pursuant hereto.
ARTICLE XI
TERMINATION
11.1 Right of Termination. This Agreement and the
transactions contemplated hereby may be terminated at any time at or prior to
the Closing:
(a) By mutual consent of the parties; or
(b) By either party if the Closing shall not have occurred
as hereinabove provided, due to the failure of the other party to meet a
material condition to Closing.
(c) By Purchaser or Seller pursuant to Article V;
(d) By either Party if any court or governmental agency
shall have issued an order, judgment or decree or taken any other action
challenging, delaying, restraining, enjoining, prohibiting or invalidating the
consummation of any of the transactions contemplated herein.
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11.2 Effect of Termination. If this Agreement is terminated
pursuant to this Article, this Agreement shall become void and of no further
force or effect and each party shall bear alone its respective costs and
expenses incurred prior to such termination and neither party shall be liable
to the other for any actual, consequential, or incidental damages, including,
but not limited to, lost profits. Upon any termination of this Agreement
pursuant to this Article, Seller shall be free to immediately enjoy all
existing rights of ownership of the Subject Property and to sell, transfer,
encumber or otherwise dispose of Seller's interest in the Subject Property to
any party without any restrictions under this Agreement.
ARTICLE XII
TAXES
12.1 Sales Taxes. The Purchase Price provided for hereunder
is net of any sales taxes or other transfer taxes in connection with the sale
of Seller's interest in the Subject Property. Purchaser shall be liable for
any sales tax or other transfer tax, as well as any applicable conveyance,
transfer and recording fees, and real estate transfer stamps or taxes imposed
on the transfer of Seller's interest in the Subject Property pursuant to this
Agreement. Purchaser shall defend, indemnify and hold harmless Seller with
respect to the payment of any of those taxes including any interest or
penalties assessed thereon.
12.2 Other Taxes. All production, severance, excise,
conservation fees and other such similar taxes or fees relating to production
of oil, gas and condensate attributable to Seller's interest in the Subject
Property prior to the Effective Date shall be paid by Seller, and all such
taxes relating to such production on or after the Effective Date shall be paid
by Purchaser.
12.3 Cooperation. Each party to this Agreement shall:
(a) Provide the other party with reasonable access to all
relevant documents, data and other information which may be required by the
other party for the purpose of preparing tax returns and responding to any
audit by any taxing jurisdiction. Each party to this Agreement shall cooperate
with all reasonable requests of the other party made in connection
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with contesting the imposition of taxes. Notwithstanding anything to the
contrary in this Agreement, neither party to this Agreement shall be required
at any time to disclose to the other party any tax returns or other
confidential tax information.
(b) Cooperate with the other party to provide information
required by the Internal Revenue Service on asset sales and acquisitions.
ARTICLE XIII
INDEPENDENT INVESTIGATION AND DISCLAIMER
Purchaser acknowledges that in making the decision to enter
into this Agreement and consummate the transactions contemplated hereby,
Purchaser has relied solely on the basis of its own independent investigation
of the Subject Property, and upon the representations, warranties and
covenants in this Agreement. Accordingly, Purchaser acknowledges that Seller
has not made, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE, OR
OTHERWISE RELATING TO (i) THE CONDITION OF THE SUBJECT PROPERTY (INCLUDING
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OF
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS) AND (ii) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED TO PURCHASER BY OR ON BEHALF OF SELLER (INCLUDING, WITHOUT
LIMITATION, THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE
RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE OF
SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, PRESENT OR PAST PRODUCTION
RATES, COMPLIANCE WITH LEASE TERMS, THE CONDITION OF ANY WELL, AND THE ABILITY
TO SELL OIL OR GAS PRODUCTION AFTER CLOSING); provided, however, that the
foregoing disclaimer and negation of representations and warranties shall not
affect or impair the representations and warranties of Seller set forth in
Article III hereof.
ARTICLE XIV
PRODUCTION PAYMENT
14.1 Definition of Purchaser's Property. Subject to
Purchaser's obligation to make cash payments and/or alternate source gas
deliveries under
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Article 14.4, the Production Payment shall be delivered from the Purchaser's
,or its successors or assigns, working interest in Mobile Blocks 863, 864,
907, 908, 952, 953, 955, 997, 998 and 999 as reflected on Exhibit "F"
("Purchaser's Property").
14.2 Delivery of Gas. Purchaser shall deliver in kind from
Purchaser's first gas produced from the Purchaser's Property a fixed daily
volume of gas net to Seller equal to 6.375 MMCFD ("Production Payment") free
and clear of leasehold costs, MMS royalty, overriding royalties or any other
burdens whatsoever attributable to Purchaser's Property, including all
operating, processing and transportation costs to the delivery points.
14.3 Delivery Points. Purchaser shall deliver Seller's gas
volumes, at Seller's option upon reasonable notice, into the MAGGP or Mobile
Area Gathering System ("MAGS"). Delivery shall be made and title shall pass
from Purchaser to Seller at the inlet flange of the applicable pipeline at
Mobile 908 or other mutually agreeable delivery point. In the event that other
pipeline connections are made by Purchaser to production facilities covered by
this agreement, Purchaser shall notify Seller. Seller shall have the ongoing
option to take its gas into these new delivery points at no additional cost
for the use of Purchaser's connection to the new delivery point.
14.4 Balancing and Alternative Payment.
A. Imbalances: Any imbalances which occur between quantities
actually delivered to Seller by Purchaser in satisfaction of the
Production Payment and the volume due Seller as the Production Payment
shall be accounted for as follows:
Within twenty five (25) days after the end of the
month, Purchaser shall furnish a statement (the "Production
Balancing Statement"). The Production Balancing Statement
shall provide an accounting on a monthly basis of the
quantities of gas, expressed in MCFs, that Seller is
entitled to receive and the quantities of gas actually
delivered for Seller's account. The net difference from the
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Production Balancing Statement shall be settled in gas by
the end of the second month following the production month
in which the imbalance occurs.
B. Alternative Payment: For any monthly period for which
Purchaser is unable to deliver sufficient volumes from Purchaser's
Property equal to the Production Payment for reasons beyond
Purchaser's control, Purchaser shall so notify Seller. Purchaser
shall then to the extent the Production Payment volumes plus any
imbalances are under-delivered, and only to that extent, at
Purchaser's option, do one of the following:
(i) deliver in kind to Seller sufficient gas
volumes to equal the daily fixed Production Payment plus any
imbalance volumes, with such volumes coming from the Texas
Eastern East Louisiana Pool or another pipeline pool
acceptable to Seller, or
(ii) deliver the cash value of the under-delivered
volumes (Production Payment under-delivery along with the
value of any existing under-delivery) by the 25th day of the
month following the month for which the Production Payment
was due. The cash value shall be determined by using the Gas
Daily Midpoint average for the month in which the Production
Payment was due or the under-delivery occurred using the
table titled "Daily Price Survey" utilizing the
Louisiana-South Onshore, Texas E (ELA), for each respective
month. MCF shall be converted to BTU for such purposes by
using the then existing BTU value of gas from Purchaser's
Property or if there is no existing production from
Purchaser's Property, the last BTU value prior to cessation
of production.
(iii) If at Satisfaction Date, the Purchaser has
not paid, either in kind or cash, the full payment due under
Section 2.2, Purchaser shall make such payment
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within thirty (30) days of Satisfaction Date under the same
terms as 14.4 B. (i) or 14.4 B. (ii).
It is the intention of the parties that the Production Payment be
made monthly in gas, and that the cash out option only be applicable when
physical production from Producer's Property is insufficient to support the
Production Payment.
14.5 Purchaser Grants a First Priority Security Interest.
The Purchaser hereby grants a first priority security interest in Purchaser's
share of first gas produced from Purchaser's Property (as described on Exhibit
"F") in a recordable form which is attached hereto as Exhibit "G," Financing
Statement, to secure the Purchaser's payment obligations and all other
obligations hereunder. This granting of a security interest is deemed to be a
Security Agreement under the Uniform Commercial Code, and Seller shall have
all of the rights and remedies afforded by the Uniform Commercial Code as
adopted by the State of Alabama. Furthermore, Purchaser agrees not to mortgage
or otherwise encumber in any manner the amount of gas that Purchaser is
obligated to deliver to Seller identified as the Production Payment during the
period of time from the Effective Date through the Satisfaction Date as set
out in Article 2.2.
ARTICLE XV
MISCELLANEOUS
15.1 Governing Law. This Agreement and all assignments and
other instruments executed in accordance with it shall be governed by and
interpreted in accordance with the laws of the United States of America and
the State of Alabama.
15.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. No supplement, amendment, alteration, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by
the parties hereto.
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15.3 Waiver. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
15.4 Captions. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
15.5 Notices. Any notice provided or permitted to be given
under this Agreement shall be in writing, and may be sent by personal
delivery, facsimile machine or by depositing same in the United States mail,
addressed to the party to be notified, postage prepaid, and registered or
certified with a return receipt requested. Notices deposited in the mail in
the manner hereinabove described shall be deemed to have been given and
received upon the date of delivery as shown on the return receipt (or upon the
date of attempted delivery where delivery is refused). Notice served in any
other manner shall be deemed to have been given and received only if and when
actually received by the addressee (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communications sent by telecopy
or other facsimile means),and when delivered and receipt for, if
hand-delivered, sent by express courier or delivery service. For purposes of
this notice, the designated representatives and addresses of the parties shall
be as set forth below, or at such other address and number as either Party
shall have previously designated by written notice to the other Party in the
manner hereinabove set forth:
If to Seller: ▇▇▇▇▇▇ Exploration & Production Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: Mr. ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: ▇▇▇▇▇▇ Petroleum Operating Company
P. O. Box 1287
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: ▇▇. ▇▇▇ ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
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15.6 Expenses. Except as otherwise provided herein, each
party shall be solely responsible for all expenses incurred by it in
connection with this transaction (including, without limitation, fees and
expenses of its own counsel and accountants).
15.7 Severability. If any term or other provision of this
Agreement is held invalid, illegal or incapable of being enforced under any
rule of law, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in a
materially adverse manner with respect to either party.
15.8 Publicity. Seller and Purchaser shall consult with each
other with regard to all publicity and other releases issued at or prior to
the Closing concerning this Agreement and the transactions contemplated hereby
and, except as required by applicable law or the applicable rules or
regulations of any governmental body or stock exchange, neither party shall
issue any publicity or other releases without the prior written consent of the
other party.
15.9 Consequential Damages. The parties waive any rights to
incidental or consequential damages resulting from a breach of this Agreement,
including, without limitation, loss of profits.
15.10 Survival. The representations, warranties, covenants
and obligations of the parties under Article III, Article IV, Article IX,
Article XI and Article XII of this Agreement shall survive the Closing.
15.11 Successors and Assigns. This Agreement shall be a
covenant running with the land and shall enure to the benefit of and be
binding upon the Purchaser and Seller and their successors and assigns.
15.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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15.13 Binding Arbitration. In the event of any dispute
between the parties hereto after Closing as to the provisions hereof, the
documents executed or actions taken as a consequence of such execution, the
parties hereby agree that any such matter shall be submitted to binding
arbitration pursuant to the Louisiana Arbitration statute (R.S. 9:4201) and
each party shall appoint one arbitrator with the two arbitrators so selected
appointing a third. In the event the two arbitrators are unable to agree upon
the third, the third arbitrator shall be appointed by the senior judge of the
United States District Court for the Eastern District of Louisiana.
15.14 Well information. Upon request by Seller, Purchaser
shall provide to Seller in a timely manner all daily drilling reports, well
information, data and logs pertaining to any ▇▇▇▇▇ drilled or reworked on the
Subject Property.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase and Sale Agreement to be duly executed on this 26th day of May, 1999,
but effective as of the Effective Date.
SELLER: PURCHASER:
▇▇▇▇▇▇ EXPLORATION & ▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY
PRODUCTION COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------- --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇. Vice President Chief Operating ▇▇▇▇▇▇▇
- ▇▇ -
- ▇ -
▇▇▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇.
D:\DATA\MURPHYPUR-AG16.WPD