PURCHASE AND SALE AGREEMENT
by and between
CONOCO INC.
(formerly Continental Oil Company)
Charter Number 0917525
and
CONOCO OFFSHORE PIPE LINE COMPANY
(ASSIGNOR)
and
STONE ENERGY CORPORATION
(ASSIGNEE)
---------------------
▇▇▇▇▇ BANK ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ISLAND 9,
AND SOUTH ▇▇▇▇▇ ISLAND 107 FIELDS
and
SLEEPING TURTLE GATHERING FACILITIES,
▇▇▇▇▇▇ ISLAND FLOWLINE SYSTEM, AND
SOUTH ▇▇▇▇▇ ISLAND 288 PIPELINE
Offshore, Louisiana
---------------------
Dated October 8, 2001
Effective December 31, 2001
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1. PROPERTY DESCRIPTION...........................................1
1.1 The Property.................................................1
1.2 Exclusions from the Property.................................2
1.3 Ownership of Production from the Property....................5
1.4 Hydrocarbon Imbalances.......................................5
ARTICLE 2. CONSIDERATION..................................................6
2.1 Purchase Price...............................................6
2.2 Adjustments at Closing.......................................7
2.3 Adjustments after Closing....................................8
2.4 Payment Method...............................................9
2.5 Principles of Accounting.....................................9
2.6 Reporting Value of the Property..............................9
2.7 Section 1031 Exchange........................................9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.................................9
3.1 Reciprocal Representations and Warranties....................9
3.2 ASSIGNOR's Representations and Warranties....................10
3.3 ASSIGNEE's Representations and Warranties....................11
3.4 Limitation as to Environmental Matters.......................12
3.5 Notice of Changes............................................12
3.6 Representations and Warranties Exclusive.....................12
ARTICLE 4. DISCLAIMER OF WARRANTIES.......................................12
4.1 Title; Encumbrances..........................................12
4.2 Condition and Fitness of the Property........................12
4.3 Information About the Property...............................13
4.4 Information in Exhibits......................................14
4.5 Subrogation of Warranties....................................14
4.6 Disclaimers Deemed Conspicuous...............................14
ARTICLE 5. DUE DILIGENCE REVIEW OF THE PROPERTY...........................14
5.1 Records Review and Confidentiality...........................14
5.2 Physical Inspection..........................................14
5.3 Environmental Assessment.....................................15
5.4 Government Approvals.........................................17
5.5 Preferential Rights and Consents to Assign...................19
5.6 Title Defects................................................20
5.7 Casualty Losses and Government Takings.......................22
5.8 Termination Due to Impairments to the Property...............23
ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS...........................23
6.1 Closing Date.................................................23
6.2 Conditions to Closing........................................24
6.3 Closing......................................................26
6.4 Post-Closing Obligations.....................................27
ARTICLE 7. ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS....................28
7.1 ASSIGNEE's Rights After Closing..............................28
7.2 ASSIGNEE's Obligations After Closing.........................28
7.3 ASSIGNOR's Obligations After Closing.........................29
7.4 Plugging and Abandonment Obligations.........................30
7.5 Environmental Obligations....................................31
ARTICLE 8. INDEMNITIES....................................................32
8.1 Definition of Claims.........................................32
8.2 Application of Indemnities...................................32
8.3 ASSIGNEE's Indemnity.........................................33
8.4 ASSIGNOR's Indemnity.........................................33
8.5 Notices and Defense of Indemnified Claims....................34
8.6 ASSIGNOR's Indemnity Limit...................................34
8.7 NORM.........................................................34
8.8 Pending Litigation and Claims................................34
8.9 Waiver of Consequential and Punitive Damages;
Data Room Matters.........................................34
ARTICLE 9. TAXES AND EXPENSES.............................................35
9.1 Recording Expenses...........................................35
9.2 Ad Valorem, Real Property and Personal Property Taxes........35
9.3 Severance Taxes..............................................35
9.4 Tax and Financial Reporting..................................36
9.5 Sales and Use Taxes..........................................36
9.6 Income Taxes.................................................36
9.7 Incidental Expenses..........................................36
ARTICLE 10. OPERATIONS AFTER CLOSING......................................36
10.1 ASSIGNOR-Operated Properties................................36
10.2 ASSIGNEE's Approval.........................................37
ARTICLE 11. MISCELLANEOUS.................................................37
11.1 Preferential Right to Purchase and Process Production.......37
11.2 Dispute Resolution..........................................39
11.3 Suspense Accounts...........................................39
11.4 ASSIGNOR's Marks and Logos; Post-Closing Inspections........39
11.5 Survival of Representations and Warranties..................39
11.6 Public Announcements........................................39
11.7 Notices.....................................................40
11.8 Effective Date..............................................40
11.9 Binding Effect; Assignment..................................40
11.10 Entire Agreement and Amendment.............................41
11.11 Interpretation.............................................41
11.12 Third-Party Beneficiaries..................................42
11.13 Successors and Assigns.....................................42
11.14 Severability...............................................42
11.15 Counterparts...............................................42
11.16 Governing Law..............................................42
11.17 Exhibits...................................................42
11.18 Waiver.....................................................42
11.19 Default and Remedies.......................................42
INDEX OF DEFINED TERMS
Page
Adverse Environmental Condition............................................15
Agreement..................................................................1
Allocated Value............................................................9
ASSIGNEE...................................................................1
ASSIGNEE's Assumed Obligations.............................................28
Assignment Documents.......................................................26
ASSIGNOR...................................................................1
ASSIGNOR's Retained Obligations............................................29
Casualty Loss..............................................................22
Claims.....................................................................32
Closing....................................................................23
Closing Date...............................................................23
Code.......................................................................9
Conoco.....................................................................1
Consents...................................................................19
COPL.......................................................................1
Downstream Pipelines.......................................................2
Effective Date.............................................................1
Environmental Defect Value.................................................15
Environmental Laws.........................................................16
Environmental Obligations..................................................31
Final Settlement Statement.................................................8
Gaseous Hydrocarbons.......................................................37
Government Taking..........................................................22
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act......................................................19
Hydrocarbons...............................................................5
Includes...................................................................41
Inspector..................................................................15
Interim Period.............................................................36
Knowledge..................................................................41
Lease Property and Equipment...............................................2
Leases.....................................................................1
Liquid Hydrocarbons........................................................37
Miscellaneous Personal Property............................................2
MMS........................................................................11
NORM.......................................................................30
OCS........................................................................11
Overriding Royalty Interests...............................................2
Performance Deposit........................................................6
Permits and Easements......................................................2
Pipeline Inventory.........................................................5
Plugging and Abandonment Obligations.......................................30
Post-Sale Hydrocarbon Imbalances...........................................2
Pre-Sale Hydrocarbon Imbalances............................................4
Preferential Rights........................................................19
Preliminary Settlement Statement...........................................7
Property...................................................................1
Property Records...........................................................2
Property Taxes.............................................................35
Purchase Price.............................................................6
Related Contracts..........................................................2
Stock Tank Oil.............................................................5
STONE......................................................................1
Title Defect...............................................................20
▇▇▇▇▇......................................................................2
PURCHASE AND SALE AGREEMENT
LIST OF EXHIBITS
A Schedule 1 - Oil and Gas Leasehold Interests and Units
Schedule 2 - ▇▇▇▇▇
Schedule 3 - Platforms, Pipelines, Other Immovables and Equipment,
and Miscellaneous Personal Property
Schedule 4 - Easements, Surface Leases, and Permits
Schedule 5 - Related Contracts
Schedule 6 - Overriding Royalty Interests
Schedule 7 - Allocation of Purchase Price
B B-1 - ASSIGNOR's Assignment Notice
B-2 - ASSIGNEE's Assignment Notice
C Pending Litigation and Claims Affecting the Property
D Schedule 1 - Assignment of Record Title to Oil and Gas Lease Schedule 2
- Assignment of Oil and Gas Lease Operating Rights Schedule 3 - ▇▇▇▇ of
Sale Schedule 4 - Assignment of Overriding Royalty Interests
E Assignment of Contracts
F Nonforeign Affidavit
G Production, Transportation and Processing Imbalances
H Dispute Resolution Procedures
I Form of Performance Bond
PURCHASE AND SALE AGREEMENT
(▇▇▇▇▇ Bank ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ Island 9, and South ▇▇▇▇▇ Island 107 Fields
and
Sleeping Turtle Gathering Facilities, ▇▇▇▇▇▇ Island Flowline System, and
South ▇▇▇▇▇ Island 288 Pipeline)
This Purchase and Sale Agreement (the "Agreement"), executed on October 8, 2001,
and effective December 31, 2001 at 11:59 p.m., local time (the "Effective
Date"), is between CONOCO INC.(formerly Continental Oil Company, Charter Number
0917525, "Conoco"), a Delaware corporation, with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, CONOCO OFFSHORE PIPE LINE COMPANY ("COPL"), a
Delaware corporation, with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, and STONE ENERGY CORPORATION ("STONE"), a Delaware corporation with
offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. As used in
this Agreement, the term "ASSIGNOR" means Conoco and (to the extent of the
Downstream Pipelines) COPL, and the term "ASSIGNEE" means Stone. Notwithstanding
any other provision to the contrary, but subject to Section 6.2.8, the
representations, warranties, covenants, obligations, liabilities and indemnities
of Conoco and COPL under this Agreement are several and not joint.
RECITALS:
--------
Conoco owns certain producing oil and gas properties in the ▇▇▇▇▇ Bank, Main
Pass, Ship Shoal, and South ▇▇▇▇▇ Island Areas situated in the Gulf of Mexico,
offshore the state of Louisiana, together with related facilities and
contractual rights, and desires to assign its interest in this property and
facilities, and transfer these contractual rights.
COPL owns certain common carrier pipelines associated with such producing oil
and gas properties and desires to assign its interest in this property.
Stone desires to acquire Conoco's and COPL's interests in these properties,
facilities and contractual rights.
Therefore, Conoco, COPL and Stone agree to the sale of Conoco's and COPL's
interests in these properties, facilities and contractual rights to Stone on the
terms and conditions set forth in this Agreement.
ARTICLE 1. PROPERTY DESCRIPTION
--------------------
1.1 The Property. Subject to the terms of this Agreement and except for the
excluded items described under Section 1.2, ASSIGNOR shall sell, convey,
and assign to ASSIGNEE and ASSIGNEE shall purchase, pay for, and accept all
of ASSIGNOR's right and title to, and interest in, the following
(collectively the "Property"):
1.1.1 The oil, gas and mineral lease(s), operating rights and other
interests in oil and gas described in Exhibit A, Schedule 1, and
all rights, privileges and obligations appurtenant to those
interests and leases, together with all rights and interest in
any unit in which such leases are included (to the extent that
such rights and interests arise from and are associated with such
leases and operating rights), INSOFAR AND ONLY INSOFAR AS those
interests, rights and leases cover and include the lands, depths
(being all depths unless otherwise specified) and rights
described in Exhibit A, Schedule 1 (the "Leases");
1.1.2 All oil, gas and condensate ▇▇▇▇▇ (whether producing, not
producing or abandoned), water source, water injection and other
injection or disposal ▇▇▇▇▇ and systems located on the Leases,
including those described in Exhibit A, Schedule 2 (the "▇▇▇▇▇"),
together with all equipment, facilities, pipelines, flow lines,
gathering systems (other than gas plant gathering systems),
platforms, caissons, subsea equipment, tank batteries,
improvements, fixtures, inventory, spare parts, tools, moveables,
immovables, abandoned property and junk, and other personal
property on the Leases or the sea floor covered by the Leases, or
directly used held for use in developing or operating the Leases
and ▇▇▇▇▇, or producing, treating, storing, compressing,
processing or transporting Hydrocarbons on the Leases and ▇▇▇▇▇,
including those items described in Exhibit A, Schedule 3 (the
"Lease Property and Equipment");
1.1.3 To the extent assignable or transferable, all permits, licenses,
easements, rights-of-way, servitudes, land, surface leases,
surface use agreements, and similar rights and interests
applicable to or used in operating the Leases, ▇▇▇▇▇, Lease
Property and Equipment or Overriding Royalty Interests, as
described in Exhibit A, Schedule 4 (the "Permits and Easements");
1.1.4 To the extent assignable or transferable, all contracts and
contractual rights, obligations and interests INSOFAR ONLY as
they cover and are attributable to the Leases, ▇▇▇▇▇, or Lease
Property and Equipment, including without limitation unit
agreements (and any declaration or order of any governmental
authority associated therewith), farmout agreements, farmin
agreements, operating agreements, and hydrocarbon sales,
purchase, gathering, transportation, treating, marketing,
exchange, processing and fractionating agreements, which include
those described in Exhibit A, Schedule 5 (the "Related
Contracts");
1.1.5 Any overriding royalty interests, net profit interests or other
oil and gas interests described in Exhibit A, Schedule 6 (the
"Overriding Royalty Interests"), including all rights and
obligations pertaining to the Overriding Royalty Interests under
any of the Related Contracts;
1.1.6 All rights against and obligations to third parties with respect
to any production, transportation and processing imbalances
attributable to Hydrocarbons produced from the Property on and
after the Effective Date (the "Post-Sale Hydrocarbon
Imbalances");
1.1.7 The pipelines downstream of the Leases as described in Exhibit
A, Schedule 3, (the "Downstream Pipelines"); and
1.1.8 All other tangibles, miscellaneous interests or other assets on
or directly used in connection with the Leases, ▇▇▇▇▇, Lease
Property and Equipment, Permits and Easements, Related Contracts,
Downstream Pipelines, or Overriding Royalty Interests (the
"Miscellaneous Personal Property"), including copies of all lease
files, land files, well files, geologic and interpretive maps,
well logs, the right to use and analyze cores and other physical
samples or materials from the ▇▇▇▇▇, core analyses and other well
test results, production records, division order files,
abstracts, title opinions, and contract files, insofar as they
are directly related to the Leases (the "Property Records").
1.2 Exclusions from the Property. The Property to be conveyed and assigned
under this Agreement does not include:
1.2.1 Unless the parties otherwise agree in writing and enter into a
separate data license agreement and except as expressly provided
in Section 1.1.8, (i) seismic, geological, geochemical, or
geophysical data (including cores and other physical samples or
materials from ▇▇▇▇▇ or tests) belonging to ASSIGNOR or licensed
from third parties, and (ii) interpretations of seismic,
geological, geochemical or geophysical data belonging to ASSIGNOR
or licensed from third parties;
1.2.2 ASSIGNOR's intellectual property used in developing or operating
the Leases, ▇▇▇▇▇, Lease Property and Equipment, or Overriding
Royalty Interests, including proprietary computer software,
computer software licensed from third parties, patents, pending
patent applications, trade secrets, copyrights, and names, marks
and logos (all of which ASSIGNEE will remove as soon as possible
after Closing);
1.2.3 ASSIGNOR's right, title and interest in the Permits and
Easements, to the extent they are attributable and allocable to
rights and interests retained by ASSIGNOR (if any);
1.2.4 ASSIGNOR's corporate, financial and tax records, and legal
files, except that ASSIGNOR will provide ASSIGNEE with copies of
any tax records that are necessary for ASSIGNEE's ownership,
administration or operation of the Leases, ▇▇▇▇▇, Lease Property
and Equipment, Related Contracts or Overriding Royalty Interests;
1.2.5 Notwithstanding any other provision of this Agreement to the
contrary, any records or information that ASSIGNOR considers
proprietary or confidential (including employee information and
internal valuation data regarding the Leases, ▇▇▇▇▇, Lease
Property and Equipment, Miscellaneous Personal Property, Related
Contracts or Overriding Royalty Interests), or which ASSIGNOR
cannot legally provide to ASSIGNEE because of third-party
restrictions;
1.2.6 Trade credits and rebates from contractors and vendors, and
adjustments or refunds attributable to any period before the
Effective Date, including transportation tax credits and refunds,
tariff refunds, take-or-pay claims, insurance premium
adjustments, and audit adjustments under the Related Contracts;
1.2.7 Claims of ASSIGNOR for refund of or loss carry forwards with
respect to (i) production, windfall profit, severance, ad valorem
or any other taxes attributable to any period prior to the
Effective Date, (ii) income or franchise taxes, or (iii) any
taxes attributable to the excluded items described in this
Section 1.2;
1.2.8 (i) All deposits, cash, checks in process of collection, cash
equivalents and funds attributable to any period prior to the
Effective Date, (ii) all accounts and notes receivable
attributable to any period prior to the Effective Date, and (iii)
any security or other deposits made with third parties prior to
the Effective Date;
1.2.9 All proceeds, benefits, income or revenues attributable to
periods prior to the Effective Date received in connection (i)
with accounts and notes receivable relating to the Property
(other than accounts receivable related to joint interest
▇▇▇▇▇▇▇▇ under applicable operating agreements) for the period
between the Effective Date and the Closing Date, it being
recognized and agreed that ASSIGNEE will receive full credit for
such receivables pursuant to the provisions of Section 2.2.2, or
(ii) any excluded items described in this Section 1.2;
1.2.10 Claims and causes of action arising from acts, omissions or
events, or damage or destruction of the Property before the
Effective Date, and all rights, titles, claims and interests of
ASSIGNOR (i) under any policy or agreement of insurance or
indemnity, (ii) under any bond or letter of credit, or (iii) to
any insurance or condemnation proceeds or awards;
1.2.11 All rights, obligations, benefits, awards, judgments, and
settlements, if any, applicable to the pending and potential
litigation, Claims and proceedings listed under the section of
Exhibit C entitled "ASSIGNOR's Responsibility";
1.2.12 (i) All contracts for support services to which ASSIGNOR is a
party (except for those contracts specifically listed as part of
the Related Contracts in Exhibit A, Schedule 5), and the Related
Contracts insofar as they pertain to oil and gas interests of
ASSIGNOR other than the interests being assigned and conveyed to
ASSIGNEE under this Agreement, and (ii) all offshore service
agreements and charter party agreements to which ASSIGNOR is a
party, whether or not services thereunder are or were utilized in
connection with the property interests being assigned and
conveyed to ASSIGNEE under this Agreement;
1.2.13 Any production sales contracts between ASSIGNOR and ASSIGNOR's
affiliates or subsidiaries, and all swap, futures, or derivative
contracts backed by or related to the Hydrocarbons;
1.2.14 (i) Any pipelines, facilities and equipment located on the
Leases that were not used in the past or are not currently used
or held for use in connection with the development or operation
of the Leases and ▇▇▇▇▇ or the production of Hydrocarbons from or
in the Leases and ▇▇▇▇▇, and (ii) all gas processing plants and
their associated facilities, pipelines and gathering lines,
wherever located;
1.2.15 (i) All radio towers, remote terminal units, personal computer
equipment, vehicles, communication equipment, and photocopy
machines, wherever located, (ii) all leased vehicles and
equipment for which ASSIGNEE does not assume the applicable lease
under this Agreement, and (iii) all third party equipment and
property located on or used in connection with the Leases, ▇▇▇▇▇,
or Lease Property and Equipment, including contractor equipment;
1.2.16 ASSIGNOR's rights under any existing contracts providing for
the gathering, compression, treating, transportation or
processing of oil or gas produced from the Leases or ▇▇▇▇▇, other
than those contracts listed on Exhibit A, Schedule 5 (ASSIGNEE
will need to make its own arrangements for these matters with
respect to its production from the Leases);
1.2.17 Any payments to ASSIGNOR from third parties relating to joint
interest ▇▇▇▇▇▇▇▇ (including overhead charges) under applicable
operating agreements and attributable to operations between the
Effective Date and the first day of the month following the
Closing Date, which ASSIGNOR shall be entitled to retain without
adjustment to the Purchase Price; and
1.2.18 All rights against and obligations to third parties with
respect to any production, transportation and processing
imbalances which exist and are attributable to Hydrocarbons
produced from the Property prior to the Effective Date (the
"Pre-Sale Hydrocarbon Imbalances").
1.3 Ownership of Production from the Property.
1.3.1 Production Before the Effective Date.
(i) ASSIGNOR will own all merchantable oil, gas, condensate and
gas liquids ("Hydrocarbons") produced from the Property
before the Effective Date. If, on the Effective Date,
Hydrocarbons produced from the Property before the Effective
Date are stored in the Lease or unit stock tanks (the "Stock
Tank Oil"), or in Lease or unit gathering lines or
production facilities upstream of the sale or custody
transfer meters of the purchaser or processor of Hydrocarbon
production from the Property (the "Pipeline Inventory"),
ASSIGNEE shall purchase from ASSIGNOR the merchantable Stock
Tank Oil above pipeline connections in the stock tanks and
the Pipeline Inventory for the market value which shall be
based upon (1) for oil, ASSIGNOR's posted price for South
Louisiana Sweet (Onshore) crude oil at Empire, Louisiana,
less taxes and transportation fees deducted by the purchaser
of such oil, and (2) for gas plant products, if any, the
market value of the unsold inventory at the point of sale.
ASSIGNEE will pay ASSIGNOR for the Stock Tank Oil and
Pipeline Inventory as an adjustment to the Purchase Price at
Closing, as provided in Section 2.2.
(ii) The Stock Tank Oil and the Pipeline Inventory will be gauged
and measured as of 7:00 a.m. local time where the Property
is located on the Effective Date. ASSIGNOR and ASSIGNEE will
accept the Lease or unit operator's tank gauge readings,
meter tickets or other inventory records of the Stock Tank
Oil and Pipeline Inventory.
1.3.2 Production After the Effective Date. ASSIGNEE will own all
Hydrocarbons produced from the Property on and after the
Effective Date. If the Effective Date precedes the Closing Date,
ASSIGNOR will sell on ASSIGNEE's behalf all Hydrocarbons produced
from the Property between the Effective Date and the Closing
Date, and ASSIGNOR will credit ASSIGNEE for the proceeds of these
sales as an adjustment at Closing, as provided in Section 2.2.
Subject to any continuing sale obligations under the Related
Contracts, and ASSIGNOR's preferential right to purchase
Hydrocarbons from the Property, as provided in Section 11.1,
ASSIGNEE may sell Hydrocarbons produced from the Property on and
after the Closing Date as it deems appropriate.
1.4 Hydrocarbon Imbalances. ASSIGNOR represents to ASSIGNEE that, although
ASSIGNOR will make a good faith attempt to balance the Property to zero as
of the Effective Date, as indicated in Exhibit G, certain imbalances may
exist with third parties as a result of production, transportation,
processing or sales of Hydrocarbons attributable to ASSIGNOR's ownership of
Hydrocarbons produced from the Property prior to the Effective Date. The
imbalances are such that ASSIGNOR is either entitled to make up or receive
delivery of Hydrocarbons, or payments in lieu thereof, in accordance with
the provisions of certain applicable gas balancing and other agreements.
ASSIGNEE and ASSIGNOR agree that all liabilities, duties, obligations,
benefits and entitlements with respect to all such imbalances are
specifically reserved by ASSIGNOR, and that ASSIGNOR retains all of its
contractual rights with third parties as a result of such imbalances, but
retains no right to balance any such Hydrocarbons in kind from ASSIGNEE's
share of production from the Leases. ASSIGNEE and ASSIGNOR further agree
that the existence of such imbalances owed by or to ASSIGNOR shall not be
deemed to be a Title Defect, and that ASSIGNEE has no liabilities, duties,
obligations, benefits or entitlements whatsoever to any such imbalances. To
the extent ASSIGNEE is requested to deliver Hydrocarbons from the Leases
after the Effective Date to any third party as a result of any imbalance in
existence as of the Effective Date, ASSIGNOR hereby covenants and further
agrees promptly to deliver to ASSIGNEE, upon ASSIGNEE's written demand, a
like quantity and quality of Hydrocarbons. Said Hydrocarbons will be
delivered by ASSIGNOR to ASSIGNEE at a mutually acceptable location whereby
ASSIGNEE receives the same value, giving consideration to all relevant
factors, including location, transportation costs, pipeline fuel charges,
and differences in pipeline fuel charges and quality and heating content.
To the extent ASSIGNOR is entitled to make up or receive delivery of
Hydrocarbons from other co-owners in the Leases after the Effective Date as
a result of any imbalance in existence as of the Effective Date, and
ASSIGNOR is unable to secure a payment or other delivery of the imbalance
elsewhere than at the Leases, ASSIGNEE hereby covenants and further agrees
to receive such Hydrocarbons for the account of ASSIGNOR, upon ASSIGNOR's
written request, and to redeliver such Hydrocarbons to ASSIGNOR. If
ASSIGNOR and ASSIGNEE determine no later than one (1) year after Closing
that the Pre-Sale Hydrocarbon Imbalances stated in Exhibit G are
inaccurate, the parties agree that the remedies provided in this Section
1.4 are their sole remedies for any difference between the Pre-Sale
Hydrocarbon Imbalances set forth in Exhibit G and the correct Pre-Sale
Hydrocarbon Imbalances determined by the parties, all other remedies as
between ASSIGNOR and ASSIGNEE being waived and released regardless of when
any inaccuracy may be discovered or adjustments in balancing accounts may
be made.
ARTICLE 2. CONSIDERATION
-------------
2.1 Purchase Price.
2.1.1 Amount Due at Closing. At Closing, ASSIGNEE will pay ASSIGNOR Two
Hundred Forty Six Million, Three Hundred Thousand dollars (U.S.
$246,300,000.00) for the Property (the "Purchase Price"),
adjusted by the Closing adjustments specified in Section 2.2. The
Purchase Price will be subject to the further post-Closing
adjustments specified in Section 2.3. For purposes of this
Agreement and for federal income tax purposes, the Purchase Price
will be allocated among the various portions of the Property and
among depreciable assets and nondepreciable (or depletable)
assets as provided in Exhibit A, Schedule 7.
2.1.2 Performance Deposit. Upon execution of this Agreement, ASSIGNEE
shall pay to ASSIGNOR ten percent (10%) of the Purchase Price
(U.S. $24,630,000.00) as a performance deposit ("Performance
Deposit") on the Property to be transferred to ASSIGNEE to assure
ASSIGNEE's performance under this Agreement. The Performance
Deposit is solely to assure the performance of ASSIGNEE pursuant
to the terms and conditions of this Agreement. If ASSIGNEE
refuses or is unable for any reason (including failure to obtain
financing) to close the transaction in accordance with the terms
of this Agreement, ASSIGNOR may, at its sole option, retain the
Performance Deposit as agreed liquidated damages and not as a
penalty. However, if this Agreement is terminated pursuant to the
provisions of Sections 5.3 (Environmental Assessment), 5.4
(Governmental Approvals), 5.6 (Title Defects), 5.7 (Casualty
Loss), 5.8 (Termination Due to Impairments to the Property) or
11.19.2 (ASSIGNEE's Remedies) of this Agreement, the Performance
Deposit shall be returned without interest as provided in this
Agreement. If Closing occurs, ASSIGNOR at its sole option may
either (i) return the Performance Deposit to ASSIGNEE, without
interest, at Closing, in which case ASSIGNEE must pay ASSIGNOR
the full amount of the Purchase Price at Closing, adjusted as
provided in Section 2.2, or (ii) retain and credit the
Performance Deposit against the Purchase Price at Closing, in
which case ASSIGNEE must pay ASSIGNOR an amount equal to the
Purchase Price, adjusted as provided in Section 2.2, less the
Performance Deposit. If preferential rights are exercised on any
portion of the Property such that ASSIGNEE will not be acquiring
that portion, ASSIGNOR shall return to ASSIGNEE without interest
a proportionate amount of the Performance Deposit allocable
(based on the Allocated Values) to such portion of the Property,
and the remaining amount of the Performance Deposit shall become
the Performance Deposit for the remainder of the Property.
2.2 Adjustments at Closing.
2.2.1 Preliminary Settlement Statement. At Closing, the Purchase Price
will be adjusted as set forth in Sections 2.2.2 and 2.2.3. No
later than five (5) business days prior to Closing, ASSIGNOR will
provide ASSIGNEE a Preliminary Settlement Statement identifying
all adjustments to the Purchase Price to be made at Closing (the
"Preliminary Settlement Statement"). ASSIGNOR and ASSIGNEE
acknowledge that some items in the Preliminary Settlement
Statement may be estimates or otherwise subject to change in the
Final Settlement Statement for the Property, to be prepared
pursuant to Section 2.3.
2.2.2 Upward Adjustments. The Purchase Price will be increased by the
following expenses and revenues:
(i) ASSIGNOR's share of all actual production expenses,
operating expenses, overhead charges under applicable
operating agreements and capital expenditures paid or
incurred by ASSIGNOR in connection with the Property
(including without limitation royalties, minimum royalties,
rentals, and prepaid charges), to the extent they are
attributable to ownership or operation of the Property on
and after the Effective Date; provided that with respect to
those portions of the Property for which ASSIGNOR is a one
hundred percent (100%) working interest owner, all
attributable costs of production, including overhead
charges, shall be computed in accordance with ASSIGNOR's
existing accounting practices;
(ii) ASSIGNOR's share of any proceeds from the sale of
Hydrocarbon production and other income from the Property
received by ASSIGNEE, to the extent they are attributable to
the ownership or operation of the Property before the
Effective Date, and the value of the Stock Tank Oil and the
Pipeline Inventory; and
(iii)Any other increases in the Purchase Price specified in this
Agreement or otherwise agreed in writing between ASSIGNOR
and ASSIGNEE prior to or at Closing.
2.2.3 Downward Adjustments. The Purchase Price will be decreased by
the following expenses and revenues:
(i) ASSIGNOR's share of all actual production expenses,
operating expenses, overhead charges under applicable
operating agreements and capital expenditures paid or
incurred by ASSIGNEE in connection with the Property
(including without limitation royalties, minimum royalties,
rentals, and prepaid charges), to the extent they are
attributable to operation of the Property before the
Effective Date (except as provided in Section 2.2.2(iii);
provided that with respect to those portions of the Property
for which ASSIGNOR is a one hundred percent (100%) working
interest owner, all attributable costs of production,
including overhead charges, shall be computed in accordance
with ASSIGNOR's existing accounting practices;
(ii) ASSIGNOR's share of any proceeds from the sale of
Hydrocarbon production (before deduction of any royalties
under the applicable pricing provisions of any oil, gas and
gas plant liquids sales and processing agreements) and other
income received by ASSIGNOR from the Property, to the extent
they are attributable to the ownership or operation of that
Property on and after the Effective Date; and
(iii)Any other decreases in the Purchase Price specified in this
Agreement or otherwise agreed in writing between ASSIGNOR
and ASSIGNEE prior to or at Closing.
2.3 Adjustments after Closing.
2.3.1 Final Settlement Statement. Within 120 days after Closing,
ASSIGNOR will prepare a final settlement statement for the
Property containing a final reconciliation of the adjustments to
the Purchase Price specified in Section 2.2 (the "Final
Settlement Statement"). (However, failure of ASSIGNOR to complete
the Final Settlement Statement within 120 days after Closing will
not constitute a waiver of any right to an adjustment otherwise
due.) ASSIGNEE will have 30 days after receiving the Final
Settlement Statement to provide ASSIGNOR with written exceptions
to any items in the Final Settlement Statement that ASSIGNEE
believes in good faith to be questionable. All items in the Final
Settlement Statement to which ASSIGNEE does not except within the
30-day review period will be deemed correct.
2.3.2 Payment of Post-Closing Adjustments. Any additional adjustments
to the Purchase Price (including disputed items) will be offset
against each other so that only one payment is required. The
party owing payment will pay the other party the net post-closing
adjustment to the Purchase Price within 10 days after the
expiration of ASSIGNEE's 30-day review period for the Final
Settlement Statement. However, the payment of any disputed items
will be subject to the further rights of the parties under
Section 2.3.3.
2.3.3 Resolution of Disputed Items. After the completion and delivery
of the Final Settlement Statement, the parties agree to negotiate
in good faith to attempt to reach agreement on the amount due
with respect to any disputed items in the Final Settlement
Statement. If the parties reach agreement on the amount due with
respect to any disputed items, and a payment adjustment is
required, the party owing payment will pay the other party within
10 days after the parties reach agreement. If the parties are
unable to agree on the amount due with respect to any disputed
items within 60 days after ASSIGNOR receives ASSIGNEE's written
exceptions to the Final Settlement Statement, then the dispute
shall be resolved under the dispute resolution provisions of
Exhibit H.
2.3.4 Further Revenues and Expenses. After the completion of the
post-Closing adjustments under this Section 2.3, (i) if either
party receives revenues that belong to the other party under this
Agreement, the party receiving the revenues agrees to promptly
remit those revenues to the other party, and (ii) if either party
pays expenses that are the responsibility of the other party
under this Agreement, the party on whose behalf the expenses were
paid agrees to promptly reimburse the other party for the
expenses paid on its behalf upon receiving satisfactory evidence
of such payment. However, neither party will be obligated to
reimburse the other party for any such expense in excess of
$5,000 unless it has been consulted about that expense prior to
payment, unless that payment was required by a government agency
or other government entity.
2.4 Payment Method. Unless the parties otherwise agree in writing, all payments
under this Agreement will be by wire transfer in immediately available
funds to the account(s) designated by the party receiving payment.
2.5 Principles of Accounting. The Preliminary Settlement Statement and Final
Settlement Statement will be prepared in accordance with generally accepted
accounting principles in the petroleum industry and with reasonable
supporting documentation for each item in those statements.
2.6 Reporting Value of the Property. Neither party will take any position in
preparing financial statements, tax returns, reports to shareholders or
governmental authorities, or otherwise, that is inconsistent with
allocation of value for the Property in Exhibit A, Schedule 7, unless the
parties otherwise agree in writing. The value assigned to each portion of
the Property in Exhibit A, Schedule 7 is hereafter referred to as the
"Allocated Value" of that portion of the Property.
2.7 Section 1031 Exchange. ASSIGNOR and ASSIGNEE hereby agree that either
ASSIGNOR or ASSIGNEE shall have the right at any time prior to Closing to
assign all or a portion of its rights under this Agreement to a Qualified
Intermediary (as that term is defined in Section 1.1031(k)-1(g)(4)(v) of
the Treasury Regulations) in order to accomplish the transaction in a
manner that will comply, either in whole or in part, with the requirements
of a like-kind exchange pursuant to Section 1031 of the Internal Revenue
Code of 1986, as amended, (the "Code"). In the event either party assigns
its rights under this Agreement pursuant to this Section 2.7, such party
agrees to notify the other party in writing of such assignment at or before
Closing. If ASSIGNOR assigns its rights under this Agreement for this
purpose, ASSIGNEE agrees to (i) consent to ASSIGNOR's assignment of its
rights in this Agreement in form attached hereto as Exhibit B-1, and (ii)
pay the Purchase Price into a qualified escrow or qualified trust account
at Closing as directed in writing. If ASSIGNEE assigns its rights under
this Agreement for this purpose, ASSIGNOR agrees to (i) consent to
ASSIGNEE's assignment of its rights in this Agreement in the form of
Exhibit B-2, (ii) accept the Purchase Price from the qualified escrow or
qualified trust account at Closing, and (iii) at Closing, convey and assign
directly to ASSIGNEE the Property which is the subject of this Agreement
upon satisfaction of the other conditions to Closing and other terms and
conditions hereof. ASSIGNOR and ASSIGNEE acknowledge and agree that any
assignment of this Agreement to a Qualified Intermediary shall not release
either party from any of their respective liabilities and obligations to
each other under this Agreement, and that neither party represents to the
other that any particular tax treatment will be given to either party as a
result thereof.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Reciprocal Representations and Warranties. By their execution of this
Agreement, ASSIGNOR and ASSIGNEE each represent and warrant that the
following statements are true and accurate as to itself, as of the
execution date of this Agreement, the Effective Date and the Closing Date.
3.1.1 Corporate Authority. It is a corporation duly organized and in
good standing under the laws of its state of incorporation, is
duly qualified to carry on its business in the states or
jurisdictions where the Property is located, and has all the
requisite power and authority to enter into and perform this
Agreement.
3.1.2 Requisite Approvals. Upon execution of this Agreement, it will
have taken all necessary actions pursuant to its articles of
incorporation, by-laws and other governing documents to fully
authorize (i) the execution and delivery of this Agreement and
any transaction documents related to this Agreement; and (ii) the
consummation of the transaction contemplated by this Agreement.
3.1.3 Validity of Obligation. This Agreement and all other transaction
documents it is to execute and deliver on or before the Closing
Date (i) have been duly executed by its authorized
representatives; (ii) constitute its valid and legally binding
obligations; and (iii) are enforceable against it in accordance
with their respective terms.
3.1.4 No Violation of Contractual Restrictions. Its execution, delivery
and performance of this Agreement does not conflict with or
violate any agreement or instrument to which it is a party or by
which it is bound, except any provision contained in agreements
customary in the oil and gas industry relating to (i) the
preferential right to purchase all or any portion of the
Property; (ii) required consents to transfer and related
provisions; (iii) maintenance of uniform interest provisions; and
(iv) any other third-party approvals or consents contemplated in
this Agreement.
3.1.5 No Violation of Other Legal Restrictions. Its execution, delivery
and performance of this Agreement does not violate any law, rule,
regulation, ordinance, judgment, decree or order to which it or
the Property is subject.
3.1.6 No Restraining Litigation. To its knowledge and subject to those
matters listed in Exhibit C, there is no action, suit,
proceeding, claim or investigation by any person, entity,
administrative agency or governmental body pending or, to its
knowledge, threatened, against it before any court or
governmental agency that seeks to restrain or prohibit, or to
obtain substantial damages from it, with respect to this
Agreement or the consummation of all or part of the transaction
contemplated in this Agreement.
3.1.7 Bankruptcy. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to
its actual knowledge, threatened against it.
3.1.8 Broker's Fees. It has not incurred any obligation for brokers,
finders or similar fees for which the other party would be
liable.
3.2 ASSIGNOR's Representations and Warranties. By its execution of this
Agreement, ASSIGNOR represents and warrants to ASSIGNEE that the following
statements are true and accurate, as of the execution date of this
Agreement, the Effective Date and the Closing Date.
3.2.1 Mortgages and Other Instruments. The transfer of the Property to
ASSIGNEE does not violate any covenants or restrictions imposed
on ASSIGNOR by any bank or other financial institution in
connection with a mortgage or other instrument, and will not
result in the creation or imposition of a lien on any portion of
the Property.
3.2.2 Compliance with Laws. Except as disclosed by ASSIGNOR in writing
prior to Closing and limited by Section 3.4, if ASSIGNOR is the
operator of the Property, to ASSIGNOR's knowledge, it is in
compliance with all laws, rules, regulations and orders
pertaining to the Property.
3.2.3 Permits. Except as disclosed by ASSIGNOR in writing prior to
Closing and limited by Section 3.4, if ASSIGNOR is the operator
of the Property, to ASSIGNOR's knowledge, it has all governmental
permits necessary for the operation of the Property and is not in
default under any permit, license or agreement relating to the
operation and maintenance of the Property.
3.2.4 Lawsuits and Claims. Except as disclosed in Exhibit C to this
Agreement and limited by Section 3.4, to ASSIGNOR's knowledge,
there is no demand or lawsuit, nor any compliance order, notice
of probable violation or similar governmental action, pending or
threatened before any court or governmental agency that (i) would
result in an impairment or loss of title to any part of the
Property, or substantial impairment of the value thereof, or (ii)
would hinder or impede the operation of the Property.
3.3 ASSIGNEE's Representations and Warranties. By its execution of this
Agreement, ASSIGNEE represents and warrants to ASSIGNOR that the following
statements are true and accurate, as of the execution date of this
Agreement, the Effective Date and the Closing Date.
3.3.1 Independent Evaluation. ASSIGNEE is an experienced and
knowledgeable investor in the oil and gas business. ASSIGNEE has
been advised by and has relied solely on its own expertise and
legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Property and the value thereof.
3.3.2 Qualification. ASSIGNEE is now or at Closing will be, and
thereafter will continue to be, qualified to own and operate any
federal or state of Louisiana oil, gas and mineral leases that
constitute part of the Property, including meeting all bonding
requirements. Consummating the transaction contemplated in this
Agreement will not cause ASSIGNEE to be disqualified or to exceed
any acreage limitation imposed by law, statute or regulation.
3.3.3 Securities Laws and ASSIGNEE's Other Dealings. ASSIGNEE has
complied with all federal and state securities laws applicable to
the sale of the Property and will comply with such laws if it
subsequently disposes of all or any part of the Property.
ASSIGNEE is acquiring the Property for its own account and not
with a view to, or for offer of resale in connection with, a
distribution thereof, within the meaning of the Securities Act of
1933, 15 U.S.C.ss.77a et seq., and any other rules, regulations,
and laws pertaining to the distribution of securities. Except for
traditional mortgage financing from reputable financial
institutions, ASSIGNEE has not sought or solicited, nor is
ASSIGNEE participating with, investors, partners or other third
parties in order to fund the Purchase Price or the Performance
Deposit and to close this transaction, and all funds used by
ASSIGNEE in connection with this transaction are ASSIGNEE's own
funds.
3.3.4 Governmental Bonding. ASSIGNEE is unaware of any fact or
circumstance which would preclude or inhibit unconditional
approval of ASSIGNOR's assignment(s) of that portion of the
Property which constitutes state or federal oil, gas and mineral
leases in the Outer Continental Shelf ("OCS") of the Gulf of
Mexico to ASSIGNEE by the state of Louisiana or the Minerals
Management Service of the United States Department of the
Interior ("MMS"), as the case may be, including meeting existing
or increased area-wide bonding or any other bonding requirements
of the MMS.
3.3.5 MMS Operator's Bond Qualification. ASSIGNEE is unaware of any
fact or circumstance which would preclude or inhibit ASSIGNEE's
qualification to operate the federal oil, gas and mineral leases
and pipeline(s) subject hereto in the Gulf of Mexico OCS, for
which ASSIGNEE is seeking operatorship, including meeting the
existing or increased area-wide bonding or any other bonding or
supplemental security requirements of the MMS.
3.3.6 ASSIGNEE's Funds. ASSIGNEE has arranged or will arrange to have
available by the Closing Date sufficient funds to enable the
ASSIGNEE to pay in full the Purchase Price as herein provided and
otherwise to perform its obligations under this Agreement without
financing that is subject to any material contingency.
3.3.7 ASSIGNEE Financial Statements. ASSIGNEE's financial statements
supplied to ASSIGNOR, together with the notes thereto, are
complete and correct in all material respects and present fairly
the financial position and the results of operations of ASSIGNEE
as of the dates and for the periods therein indicated, and all
such statements have been prepared and conformed with accounting
principles generally applied on a consistent basis throughout the
periods involved. Since the last date of such financial
statements, there has not been any material adverse change,
however caused, in the business, assets, liabilities (actual or
contingent), earnings, financial or other conditions or other
operations of ASSIGNEE.
3.3.8 No Holding Company. ASSIGNEE is not (i) a "holding company," or
a "subsidiary company" of a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (ii)
subject in any respect to the provisions of that act.
3.3.9 No Investment Company. ASSIGNEE is not (i) an investment company
or a company controlled by an investment company within the
meaning of the Investment Company Act of 1940, as amended, or
(ii) subject in any respect to the provisions of that act.
3.4 Limitation as to Environmental Matters. The warranties and representations
of ASSIGNOR in this Article 3 do not extend to environmental matters,
permits, compliance with environmental laws and regulations, and
environmental lawsuits and environmental Claims pertaining to the ownership
or operation of the Property. All liabilities and obligations of ASSIGNOR
and ASSIGNEE with respect to environmental matters, permits, compliance
with environmental laws and regulations, and environmental lawsuits and
environmental Claims pertaining to the ownership or operation of the
Property will be governed solely and exclusively by the provisions of
Sections 5.3, 5.8, 7.5, and 8.4, regardless of the warranties or
representations in this Article 3.
3.5 Notice of Changes. Prior to Closing, ASSIGNOR and ASSIGNEE will each give
the other prompt written notice of any matter materially affecting any of
their representations or warranties under this Article 3 or rendering any
such warranty or representation untrue or inaccurate.
3.6 Representations and Warranties Exclusive. All representations and
warranties contained in this Agreement (including without limitation those
in this Article 3 are exclusive, and are given in lieu of all other
representations and warranties, express or implied.
ARTICLE 4. DISCLAIMER OF WARRANTIES
------------------------
4.1 Title; Encumbrances. ASSIGNOR CONVEYS THE PROPERTY TO ASSIGNEE SUBJECT TO
ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS, LIENS, ENCUMBRANCES, AND
SURFACE RIGHTS, AND WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR
IMPLIED.
4.2 Condition and Fitness of the Property. Except as expressly set forth in
this Agreement, ASSIGNOR CONVEYS THE PROPERTY TO ASSIGNEE WITHOUT ANY
EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND,
INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF
THE PROPERTY, (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE, OR
(iii) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE HAS INSPECTED,
OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN THE OPPORTUNITY TO
INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL, OPERATING,
REGULATORY COMPLIANCE, SAFETY, AND ENVIRONMENTAL CONDITION (BOTH SURFACE
AND SUBSURFACE) OF THE PROPERTY AND ACCEPTS THE PROPERTY "AS IS," "WHERE
IS," AND "WITH ALL FAULTS" and in its present condition and state of
repair. Without limiting the generality of the foregoing, ASSIGNOR makes no
representation or warranty as to (i) the amount, value, quality, quantity,
volume or deliverability of any oil, gas or other minerals or reserves (if
any) in, under or attributable to the Property, (ii) the physical,
operating, regulatory compliance, safety or environmental condition of the
Property (including the ability of any computer and electronic equipment
comprising a part of the Property to recognize, properly compute, or
otherwise function on or after January 1, 2000), or (iii) the geological or
engineering condition of the Property or any value thereof. WITH RESPECT TO
THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE PIPELINES COMPRISING A
PART OF THE PROPERTY (INCLUDING THE DOWNSTREAM PIPELINES), ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT ASSIGNOR OWNS THE EASEMENTS, RIGHTS-OF-WAY AND
PERMITS; THAT THEY ARE IN FORCE AND EFFECT; THAT THEY MAY BE ASSIGNED; THAT
THEY ARE CONTIGUOUS; THAT THE PIPELINES LIE WITHIN THE EASEMENTS,
RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE RIGHT TO LAY, MAINTAIN,
REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE PIPELINES. ASSIGNOR
EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT THERE ARE ANY EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN
FORCE AND EFFECT WITH RESPECT TO THE PIPELINES. If necessary, ASSIGNEE
shall secure its own rights to operate and maintain the pipelines on the
land of others at its own expense. If any consents of third parties are
required to assign the easements, rights-of-way, permits, or other
agreements with respect to the pipeline, ASSIGNEE shall secure any
necessary consents to assign at its own expense; provided, however,
ASSIGNOR shall provide such assistance to ASSIGNEE to secure the consents
as may reasonably be required.
4.3 Information About the Property. Except as expressly set forth in this
Agreement, the parties to this Agreement each disclaim all liability and
responsibility for any representation, warranty, statements or
communications (orally or in writing) to the other party (including, but
not limited to, any information contained in any opinion, information or
advice that may have been provided to any such party by any employee,
officer, director, agent, consultant, engineer or engineering firm,
trustee, representative, partner, member, beneficiary, stockholder or
contractor of such disclaiming party or its affiliates) wherever and
however made, including those made in any data room and any supplements or
amendments thereto or during any negotiations with respect to this
Agreement or any confidentiality agreement previously executed by the
parties with respect to the Property. ASSIGNOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY,
COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED
TO ASSIGNEE IN CONNECTION WITH THE PROPERTY; (ii) INFORMATION CONCERNING
THE QUALITY AND QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO
THE PROPERTY; (iii) INFORMATION CONCERNING THE ABILITY OF THE PROPERTY TO
PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (iv) GAS BALANCING OR PAYOUT
ACCOUNT INFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS, (v) THE
PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF
ANY, TO BE DERIVED FROM THE PROPERTY, (vi) THE ENVIRONMENTAL CONDITION OF
THE PROPERTY, (vii) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT
OCCUR, AND (viii) ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY
INFORMATION OR MATERIAL FURNISHED TO ASSIGNEE BY ASSIGNOR. ANY DATA,
INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE PROVIDED TO ASSIGNEE
AS A CONVENIENCE AND ASSIGNEE'S RELIANCE ON OR USE OF THE SAME IS AT
ASSIGNEE'S SOLE RISK.
4.4 Information in Exhibits. ASSIGNOR MAKES NO REPRESENTATION OR WARRANTY AS TO
THE COMPLETENESS OR ACCURACY OF THE INFORMATION CONTAINED IN EXHIBIT A,
SCHEDULE 2 (▇▇▇▇▇), EXHIBIT A, SCHEDULE 3 (PLATFORMS, PIPELINES, AND OTHER
IMMOVABLES AND EQUIPMENT), EXHIBIT A, SCHEDULE 4 (EASEMENTS, SURFACE
LEASES, AND PERMITS) OR EXHIBIT A, SCHEDULE 5 (RELATED CONTRACTS).
4.5 Subrogation of Warranties. To the extent transferable, ASSIGNOR will give
and grant to ASSIGNEE, its successors and assigns full power and right of
substitution and subrogation in and to all covenants and warranties
(including warranties of title) by preceding owners, vendors, or others,
given or made with respect to the Property or any part thereof prior to the
Effective Date of this Agreement.
4.6 Disclaimers Deemed Conspicuous. To the extent required to be operative,
ASSIGNEE here agrees that the disclaimers of warranties contained in this
Agreement are conspicuous disclaimers for the purpose of any applicable
law, rule or order.
ARTICLE 5. DUE DILIGENCE REVIEW OF THE PROPERTY
------------------------------------
5.1 Records Review and Confidentiality. To allow ASSIGNEE to confirm ASSIGNOR's
title and conduct other due diligence with respect to the Property,
ASSIGNOR shall give ASSIGNEE, and ASSIGNEE's authorized representatives, at
mutually agreeable times before Closing, access to all contract, land and
lease, and operational records, to the extent such data and records are in
ASSIGNOR's possession and relate to the Property. With ASSIGNOR's
permission, ASSIGNEE may photocopy such records at its sole expense.
ASSIGNEE shall keep confidential all information made available to ASSIGNEE
until the later of the Closing Date or the Effective Date. This Agreement
and the terms and provisions thereof, including the Purchase Price, shall
be maintained confidential by ASSIGNEE until Closing; provided however that
this Agreement and the terms and provisions thereof may be disclosed to
ASSIGNEE's lenders, if any, and their consultants, who shall be required to
keep such information confidential. Any confidentiality agreement
previously executed by ASSIGNOR and ASSIGNEE with respect to the Property
will continue in force until the later of the Closing Date or the Effective
Date, and for as long thereafter as provided in the confidentiality
agreement. ASSIGNEE shall take all reasonable steps necessary to ensure
that ASSIGNEE's authorized representatives comply with the provisions of
this Section 5.1 and any confidentiality agreement in effect.
5.2 Physical Inspection. Before Closing, (i) with respect to that portion of
the Property operated by ASSIGNOR, ASSIGNOR will permit ASSIGNEE and its
representatives, at their sole risk and expense, to conduct reasonable
inspections of the Property at times approved by ASSIGNOR, and (ii) with
respect to that portion of the Property not operated by ASSIGNOR, ASSIGNOR
will attempt to obtain access to the Property, in accordance with the
applicable operating agreements, for ASSIGNEE and its representatives, at
their sole risk and expense, to conduct reasonable inspections of the
Property at times approved by the operator of the Property. ASSIGNEE shall
repair any damage to the Property resulting from its inspection and shall
indemnify, defend and hold ASSIGNOR harmless from and against any and all
Claims arising from ASSIGNEE inspecting and observing the Property,
including, without limitation, (i) Claims for personal injuries to or death
of employees of the ASSIGNEE, its contractors, agents, consultants and
representatives, and damage to the property of ASSIGNEE or others acting on
behalf of ASSIGNEE, regardless of whether and including such Claims arising
out of or resulting, in whole or part, from the condition of the Property
or ASSIGNOR's (or its employees', agents', contractors', successors' or
assigns') sole or concurrent negligence, strict liability or fault, and
(ii) Claims for personal injuries to or death of employees of ASSIGNOR or
third parties, and damage to the property of ASSIGNOR or third parties, to
the extent caused by the negligence, gross negligence or willful misconduct
of ASSIGNEE.
5.3 Environmental Assessment.
5.3.1 Inspection. Up to five (5) days prior to Closing, the ASSIGNEE
will have the right, at its sole cost, to conduct a Phase I
environmental assessment of the Property. However, the Phase I
environmental assessment must be conducted by an agent or
representative (the "Inspector") of ASSIGNEE acceptable to both
ASSIGNOR and ASSIGNEE. For purposes of this Agreement, a Phase I
environmental assessment means (i) a review of ASSIGNOR's and the
government's environmental records, (ii) the submission of
pre-inspection questionnaires to ASSIGNOR, (iii) a site visit to
visually inspect the Property, and (iv) interviews with corporate
and site personnel of ASSIGNOR. A Phase I environmental
assessment does not include soil or groundwater sampling or
subsurface testing of any kind.
5.3.2 Inspection Results. Each party will be entitled to receive a copy
of Inspector's Phase I review of the Property, including all
written reports, data and conclusions. ASSIGNEE agrees not to
disclose the Phase I inspection results for the Property, or any
ASSIGNOR information reviewed during the Phase I environmental
assessment, to third parties without the agreement of ASSIGNOR,
except as required by law or by the order of a court or
regulatory agency. This confidentiality obligation shall be
effective for five (5) years after the Closing Date and will
survive the termination of this Agreement for any reason.
5.3.3 Notice of Adverse Environmental Conditions. Prior to Closing,
ASSIGNEE will review the inspection results for the Property and
determine based on those results if any Adverse Environmental
Conditions exist with respect to the Property. No later than
twenty (20) business days before Closing, ASSIGNEE will notify
ASSIGNOR in writing of any Adverse Environmental Condition with
respect to the Property. Such notice shall describe in reasonable
detail the Adverse Environmental Condition, include all data and
information in ASSIGNEE's and the Inspector's possession or
control bearing thereon, and include the estimated Environmental
Defect Value attributable thereto. The "Environmental Defect
Value" attributable to any Adverse Environmental Condition will
be the estimated amount of all reasonable costs and Claims, net
to ASSIGNOR's interest in the property, associated with the
existence, remediation or correction of the Adverse Environmental
Condition, as reasonably determined and estimated by the
Inspector. The term "Adverse Environmental Condition" means and
includes, with respect to any portion of the Property, (i) the
failure of the Property to be in compliance with applicable
Environmental Laws, (ii) the Property being subject to any
agreements, consent orders, decrees, or judgments, in existence
at this time based on any Environmental Laws that negatively
impact the future use of any portion of the Property, or that
require any change in the present conditions of any of the
Property, or (iii) the Property being subject to any uncured
notices of violations of or noncompliance with any applicable
Environmental Laws; provided, however, that no matter shall be
deemed to be or constitute an Adverse Environmental Condition
unless the Environmental Defect Value attributable thereto
exceeds $50,000, net to ASSIGNOR's interest in the Property. The
term "Environmental Laws" means all laws, regulations, rules,
codes, permits and orders relating to pollution or protection of
the public health and the environment
5.3.4 Right and Remedies for Adverse Environmental Conditions.
(i) With respect to any Adverse Environmental Condition
affecting the Property, ASSIGNEE may (a) request ASSIGNOR to
cure the environmental condition, but ASSIGNOR will have no
obligation to cure the Adverse Environmental Condition, or
(b) request an adjustment in the Purchase Price equal to the
estimated value of the Adverse Environmental Condition. If
ASSIGNOR and ASSIGNEE are unable to agree no later than 15
business days before Closing on curative measures or an
adjustment in the Purchase Price with respect to any such
Adverse Environmental Condition, the parties will have the
rights and remedies set forth in subpart (ii) of this
Section 5.3.4.
(ii) The rights and remedies of the parties with respect to
Adverse Environmental Conditions on the Property on which
the parties cannot agree on curative measures or a Purchase
Price adjustment are as follows:
(a) If the collective value of the Adverse Environmental
Conditions is less than two percent (2%) of the
Purchase Price, the parties will be obligated to
proceed with Closing as to all of the Property without
curative action by ASSIGNOR with respect to such
Adverse Environmental Conditions and without an
adjustment to the Purchase Price.
(b) If the collective value of the Adverse Environmental
Conditions equals or exceeds two percent (2%) of the
Purchase Price, either ASSIGNOR or ASSIGNEE may exclude
the Property affected by the Adverse Environmental
Condition, in which case the Purchase Price will be
reduced by the Allocated Value of the excluded Property
and the parties will be obligated to proceed with
Closing, subject to the termination rights of the
parties under Section 5.8 and subpart (c) of this
Section 5.3.4.
(c) If the collective value of the Adverse Environmental
Conditions equals or exceeds twenty-five percent (25%)
of the Purchase Price, either party may terminate this
Agreement, and neither ASSIGNOR nor ASSIGNEE will have
any further obligation to conclude the transfer of the
Property under this Agreement. However, the right of
termination under this subpart (c) must be exercised no
later than 10 business days before Closing, after which
both parties will be deemed to have waived their
termination rights under this subpart (c) in connection
with Adverse Environmental Conditions.
(iii) Notwithstanding any agreement by ASSIGNOR to a attempt to
cure an Adverse Environmental Condition or to reduce the
Purchase Price due to an Adverse Environmental Condition
with respect to the Property, or any other provision of this
Agreement, ASSIGNEE at Closing will assume all Environmental
Obligations with respect to the Property, as provided in
Section 7.5.
5.3.5 Exclusive Remedies. The remedies set forth in this Section 5.3
are the sole and exclusive remedies of ASSIGNEE with respect to
any Adverse Environmental Condition (and all Environmental
Obligations arising out of any such Adverse Environmental
Condition) attributable to ASSIGNOR's ownership or operation of
the Property prior to the Effective Date that is known to
ASSIGNEE prior to Closing, regardless of whether ASSIGNEE
notifies ASSIGNOR of any such Adverse Environmental Condition.
ASSIGNOR shall have no liability to ASSIGNEE for any such Adverse
Environmental Condition (or its related Environmental
Obligations) known to ASSIGNEE prior to Closing, if ASSIGNEE
fails to notify ASSIGNOR as provided in Section 5.3.3. The
indemnification obligations set forth in Section 8.4.2 are the
sole and exclusive remedy of ASSIGNEE with respect to any Adverse
Environmental Condition (and all Environmental Obligations
arising out of any such Adverse Environmental Condition)
attributable to ASSIGNOR's ownership or operation of the Property
prior to the Effective date that becomes known to ASSIGNEE after
Closing.
5.4 Government Approvals.
5.4.1 MMS and State Approvals. ASSIGNEE agrees promptly after Closing
to take all actions required of it by the MMS or any other
regulatory agencies to obtain all requisite regulatory approvals
with respect to this transaction, and to use its best efforts to
obtain the unconditional approval by the MMS or state of
Louisiana, as applicable, of (i) the Assignment Documents
requiring MMS or state approval in order for ASSIGNEE to be
recognized by the MMS or the state of Louisiana as the owner of
the Property, and (ii) in the event ASSIGNEE is elected successor
operator under the operating agreements applicable to any of the
Property, its qualification as the operator of record with
respect to that portion of the Property for which it is seeking
operatorship, together with any necessary rights of use and
easements as to the pipeline(s) and platforms included in the
Property.
5.4.2 MMS and State Bonding Requirements. ASSIGNEE agrees to promptly
purchase and post any and all bonds, supplemental bonds or other
securities which may be required of it pursuant to 30
CFRss.ss.250.7, 256.58, 256.59, and 256.61 in excess of any
existing lease, pipeline or area-wide bond(s). Upon execution of
this Agreement, ASSIGNEE shall confer with the MMS regarding the
amounts and terms for the posting of any supplemental bonds or
pledge of securities to be required pursuant to the provisions of
30 CFRss.ss.250.7 and 256.61. If the terms and amounts of any
such supplemental bonds or arrangements for the pledge of
securities required (or anticipated to be required) of ASSIGNEE
by the MMS do not fully cover all of ASSIGNOR's Plugging and
Abandonment Obligations and other obligations being assumed under
this Agreement by ASSIGNEE with respect to the Property, then at
Closing ASSIGNEE shall also deliver to ASSIGNOR an additional
plugging and abandonment bond with terms and in a form approved
by ASSIGNOR in its sole discretion. The amount of the additional
bond to be delivered to ASSIGNOR at Closing under this Section
5.4 shall equal the difference between $18,500,000.00 and the
total amount of the bonds, supplemental bonds and/or pledge of
securities made and in place with the MMS by ASSIGNEE with
respect to the Property on the Closing Date. The additional bond
to be given by ASSIGNEE to ASSIGNOR under this Section 5.4 must
be issued by an insurance company, surety, or other financial
institution approved by ASSIGNOR in its sole discretion and shall
be executed on the form attached hereto as Exhibit "I", or such
other form mutually agreed to by the parties. ASSIGNEE shall
maintain this additional bond in full force and effect, at
ASSIGNEE's sole cost and expense, until the Property has been
finally and permanently plugged, abandoned, and restored, all in
accordance with governmental regulations. If preferential rights
are exercised on any portion of the Property such that ASSIGNEE
will not be acquiring that portion, the face amount of the bond
shall be proportionately reduced by the percentage of the
Purchase Price allocated to such portion of the Property based on
the Allocated Values. The face amount of the bond may also be
reduced by ASSIGNEE and its surety by the reasonable amounts
spent by ASSIGNEE in partial compliance with its Plugging and
Abandonment Obligations under this Agreement, once ASSIGNOR has
determined (in its sole discretion) that such operations have
been satisfactorily completed and has provided written notice of
same to ASSIGNEE and its surety. ASSIGNEE's intention not to
renew, or its failure to maintain, the additional bond in force
shall entitle ASSIGNOR to full payment of the face amount of the
bond on demand.
5.4.3 Title Pending Governmental Approvals. Until all of the
governmental approvals provided for in this Section 5.4 have been
obtained by ASSIGNEE, the following shall occur with respect to
the affected Property:
(i) ASSIGNOR shall continue to hold record title to the affected
Leases and other affected Property as nominee for ASSIGNEE;
(ii) ASSIGNEE shall assume responsibility for all of ASSIGNEE's
Assumed Obligations with respect to the affected Leases and
other affected Property as if ASSIGNEE were the record owner
of such Leases and other Property as of the Effective Date,
and shall indemnify ASSIGNOR with respect to all Claims
arising in connection with the ownership or operation of
such Leases and other Property, as provided in Section 8.3.
(iii)ASSIGNOR shall act as ASSIGNEE's nominee but shall be
authorized to act only upon and in accordance with
ASSIGNEE's specific written instructions, and ASSIGNOR shall
have no authority, responsibility or discretion to perform
any tasks or functions with respect to the affected Leases
and other affected Property other than those which are
purely administrative or ministerial in nature, unless
otherwise specifically requested and authorized by ASSIGNEE
in writing;
(iv) ASSIGNEE shall obtain and continue to maintain and provide
at its cost the insurance coverages with minimum limits of
liability as set forth in Section 6.2.5 of this Agreement;
and
(v) If ASSIGNOR continues to operate the affected Leases and
other affected Property pending such approval, ASSIGNOR and
ASSIGNEE will have the rights and obligations with respect
to the operation of such Leases and other Property set forth
in Article 10.
5.4.4 Denial of Required Government Approvals. If the MMS or state of
Louisiana refuses to approve the lease assignments as
contemplated by this Section 5.4, or fails to do so within
eighteen (18) months after the Closing Date, ASSIGNOR may
continue to hold record title to the affected Leases and other
affected Property as ASSIGNEE's nominee or at ASSIGNOR's option
it may cancel and terminate this Agreement and all its
obligations hereunder as to the affected Leases and other
affected Property by giving thirty (30) days written notice to
ASSIGNEE. Upon such termination: (i) this Agreement shall be null
and void and terminated as to the affected Leases and other
affected Property, (ii) ASSIGNEE shall immediately reassign and
return to ASSIGNOR the Assignment Documents and any and all other
documents, materials and data previously delivered to ASSIGNEE
with respect to the affected Leases and other affected Property,
and (iii) ASSIGNOR shall return to ASSIGNEE the Allocated Value
of the affected Leases and other affected Property previously
paid to ASSIGNOR at Closing, without interest, less the proceeds
of production net of all expenses, overhead, royalties, and costs
of operations (including plugging and abandonment expenses but
excluding mortgage interest and any burdens, liens, or
encumbrances created by ASSIGNEE which must be released prior to
this payment) attributable to the affected Leases or other
affected Property from the Effective Date forward. In no event,
however, shall ASSIGNOR ever be required to reimburse ASSIGNEE
for any expenditures associated with workovers, recompletions, or
the drilling, completion or plugging and abandonment of ▇▇▇▇▇
drilled or work performed by ASSIGNEE. ASSIGNOR will not be
liable to ASSIGNEE if such MMS or state approvals are not
obtained, except as expressly provided in this Section 5.4.
5.4.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. This Agreement is subject in all respects to
and conditioned upon compliance by the parties with Title II of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (the
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), and rules and regulations promulgated
pursuant thereto, to the extent that said act, rules and
regulations are applicable to the transaction contemplated by
this Agreement. ASSIGNEE and ASSIGNOR agree to make such filings
with and provide such information to the Federal Trade Commission
and the Department of Justice with respect to the transaction
contemplated by this Agreement as are required in connection with
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act sufficiently in advance of the Closing
Date to permit the lapse of the initial waiting periods
prescribed in connection with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act before
the Closing Date.
5.5 Preferential Rights and Consents to Assign.
5.5.1 Notices to Holders.
(i) If any of the Property is subject to third party
preferential purchase rights, rights of first refusal, or
similar rights (collectively, "Preferential Rights"), or
third party consents to assign, lessor's approvals or
similar rights (collectively, "Consents"), ASSIGNOR shall
use reasonable efforts to (a) notify the holders of the
Preferential Rights and Consents that it intends to transfer
the Property to ASSIGNEE, (b) provide them with any
information about the transfer of the Property to which they
are entitled, and (c) in the case of Consents, ask the
holders of the Consents to consent to the assignment of the
affected Property to ASSIGNEE.
(ii) ASSIGNOR shall promptly notify ASSIGNEE whether (a) any
Preferential Rights are exercised, waived or deemed waived,
(b) any Consents are denied, or (c) the requisite time
periods have elapsed without any Preferential Rights being
exercised or Consents being received. ASSIGNOR will not be
liable to ASSIGNEE if any Preferential Rights are exercised,
or any Consents are denied, except as expressly provided in
this Section 5.5.
5.5.2 Remedies Before Closing. If ASSIGNOR is unable before Closing to
obtain the required Consents (other than Consents ordinarily
obtained after closing and Consents on hydrocarbon sales,
purchase, gathering, transportation, treating, marketing,
exchange, processing and fractionating agreements) and waivers of
all Preferential Rights, then as the sole pre-Closing remedy for
same:
(i) ASSIGNOR and ASSIGNEE by agreement may proceed with Closing
as to the Property affected by the unwaived Preferential
Rights or unobtained Consents, subject to the further
obligations of ASSIGNOR and ASSIGNEE set forth in Section
5.5.3 in the event that such Preferential Rights are validly
exercised or such Consents are ultimately denied after
Closing; or
(ii) ASSIGNOR and ASSIGNEE will exclude the affected portion of
the Property from the transaction under this Agreement,
adjust the Purchase Price by the Allocated Value of the
excluded Property, and proceed with Closing as to the rest
of the Property.
5.5.3 Remedies After Closing.
(i) Preferential Rights. After Closing, if (a) any holder of
Preferential Rights alleges improper notice of sale or other
defect in the notice, or (b) ASSIGNOR or ASSIGNEE discover,
or any third party alleges, the existence of additional
Preferential Rights, ASSIGNOR and ASSIGNEE will attempt to
obtain waivers of those Preferential Rights. If ASSIGNOR and
ASSIGNEE are unable to obtain waivers of such Preferential
Rights, or the third party ultimately establishes and
exercises its rights, and such exercise denies the Property
to ASSIGNEE, then ASSIGNEE shall satisfy all such
Preferential Rights obligations. ASSIGNEE shall be entitled
to receive (and ASSIGNOR hereby assigns to ASSIGNEE all of
ASSIGNOR's rights to) all proceeds received by ASSIGNOR in
connection with the sale, due to an exercise of Preferential
Rights, of any portion of the Property ASSIGNEE was to
receive under this Agreement. ASSIGNEE's receipt of proceeds
from the sale of the affected Property shall be ASSIGNEE's
sole remedy if undiscovered or alleged Preferential Rights
are established and exercised after Closing.
(ii) Consents. After Closing, if ASSIGNOR or ASSIGNEE discover,
or any third party alleges, the existence of additional
Consents, ASSIGNOR and ASSIGNEE will attempt to obtain
waivers of those Consents. If ASSIGNOR and ASSIGNEE are
unable to obtain waivers of such Consents (other than
Consents on hydrocarbon sales, purchase, gathering,
transportation, treating, marketing, exchange, processing
and fractionating agreements), and such unwaived Consents
deny the affected Property to ASSIGNEE, then ASSIGNOR and
ASSIGNEE will rescind the assignment of the affected
Property under this Agreement, after which ASSIGNOR shall
pay ASSIGNEE the Allocated Value of the affected Property,
and ASSIGNEE shall immediately reassign the affected
Property to the ASSIGNOR. Rescission of the assignment of
the affected Property and receipt of the Allocated Value of
the affected Property shall be ASSIGNEE's sole remedy if
undiscovered or alleged Consents are established and denied
after Closing.
5.6 Title Defects.
5.6.1 Definition of Title Defect. For the purposes of this Agreement, a
"Title Defect" means any impairment, encumbrance, encroachment,
irregularity, defect in, or dispute concerning ASSIGNOR's title
to the Property, and that in the opinion of ASSIGNEE would:
(i) Reduce, impair or prevent ASSIGNEE from receiving payment
from the purchasers of production from the Property;
(ii) Reduce ASSIGNEE's net revenue interest in all or a portion
of the Property;
(iii)Increase ASSIGNEE's working interest in all or a portion of
the Property without a corresponding increase in net revenue
interest; or
(iv) Restrict or extinguish ASSIGNEE's right to use the Property
as owner, lessee, licensee or permittee, as applicable.
Neither the environmental condition of the Property, any Pre-Sale
Hydrocarbon Imbalances, nor any failure to obtain Consents to the
transfer of Related Contracts will be considered a Title Defect
under this Section 5.6.
5.6.2 Notice of Title Defects. ASSIGNEE will review title to the
Property prior to Closing and notify ASSIGNOR in writing of any
Title Defect it discovers as soon as reasonably practicable after
its discovery, but in no event less than ten (10) business days
before the Closing Date. ASSIGNEE will be deemed to have
conclusively waived any Title Defect about which it fails to
notify ASSIGNOR in writing at least ten (10) business days before
the Closing Date.
5.6.3 Request to Cure Title Defects. If ASSIGNEE notifies ASSIGNOR of
a Title Defect as provided in Section 5.6.2, ASSIGNEE may request
ASSIGNOR to cure the Title Defect, but ASSIGNOR will have no
obligation to cure any Title Defect in the Property. If ASSIGNOR
agrees to attempt to cure a Title Defect, ASSIGNOR must cure the
Title Defect before Closing, unless the parties otherwise agree
in writing.
5.6.4 Remedies for Uncured Title Defects. If ASSIGNEE notifies
ASSIGNOR of any Title Defect as provided in Section 5.6.2, and
ASSIGNOR refuses or is unable to cure the Title Defect before
Closing, then ASSIGNEE and ASSIGNOR will have the following
rights and remedies with respect to the uncured Title Defect(s)
in the Property, unless the parties otherwise agree in writing.
(i) ASSIGNEE may waive the uncured Title Defect and proceed with
Closing.
(ii) If an uncured, unwaived Title Defect reduces the value of
the portion of the Property affected by the Title Defect by
an amount less than two percent (2%) of the Allocated Value
of that Property, ASSIGNOR and ASSIGNEE will be obligated to
proceed with Closing as to the affected Property without
adjustment to the Purchase Price.
(iii)If an uncured, unwaived Title Defect reduces the value of
the portion of the Property affected by the Title Defect by
an amount equal to or more than two percent (2%) of the
Allocated Value of that Property, either ASSIGNOR or
ASSIGNEE may exclude the portion of the Property affected by
the Title Defect from the transaction under this Agreement,
in which case ASSIGNOR and ASSIGNEE will adjust the Purchase
Price by the Allocated Value of the excluded Property, and
proceed with Closing as to the rest of the Property.
(iv) In addition to the rights and remedies set forth in subparts
(i) through (iii) of this Section 5.6.4, ASSIGNOR and
ASSIGNEE will have the termination rights set forth in
Section 5.8.
5.6.5 Exclusive Remedy. The remedies set forth in this Section 5.6 are
the exclusive remedies under this Agreement for all Title Defect
matters, and ASSIGNOR shall have no other liability to ASSIGNEE
with respect to Title Defects.
5.6.6 Interest Additions. In the event it is determined prior to
Closing that ASSIGNOR owns a net revenue interest in any of the
Property that is greater than the net revenue interest set forth
in ASSIGNOR's offering memorandum or data room information for
the Property, the parties shall use their best efforts to reach
mutual agreement regarding an upward adjustment to the Purchase
Price on account of the greater interest. If the parties are
unable to agree on the amount of the upward adjustment, Closing
shall nevertheless occur and the dispute shall be resolved under
the dispute resolution provisions of Exhibit H.
5.7 Casualty Losses and Government Takings.
5.7.1 Notice of Casualty Losses. If, prior to the Closing Date, all or
part of the Property is damaged or destroyed by fire, flood,
storm, hurricane, named tropical disturbance, or other casualty
("Casualty Loss"), or is taken in condemnation or under the right
of eminent domain, or if proceedings for such purposes shall be
pending or threatened ("Government Taking"), ASSIGNOR must
promptly notify ASSIGNEE in writing of the nature and extent of
the Casualty Loss or Government Taking and ASSIGNOR's estimate of
the cost required to repair or replace that portion of the
Property affected by the Casualty Loss or value of the Property
taken by the Government Taking.
5.7.2 Remedies for Casualty Losses and Government Takings. With respect
to each Casualty Loss to or Government Taking of the Property,
ASSIGNOR and ASSIGNEE will have the following rights and
remedies.
(i) If the agreed cost to repair or replace the portion of the
Property affected by the Casualty Loss or the agreed value
of the Property taken in any Government Taking is less than
$ 50 million, the Purchase Price will be adjusted by the
agreed cost of the Casualty Loss or the agreed value of the
Property taken by the Government Taking, and the parties
will proceed with Closing.
(ii) If the agreed cost to repair or replace the portion of the
Property affected by the Casualty Loss or the agreed value
of the Property taken in any Government Taking equals or
exceeds $ 50 million, ASSIGNOR and ASSIGNEE by agreement may
adjust the Purchase Price by the agreed cost of the Casualty
Loss or the agreed value of the Property taken in any
Government Taking, and proceed with Closing.
(iii)In addition to the remedies set forth in subparts (i) and
(ii) of this Section 5.7.2, ASSIGNOR and ASSIGNEE will have
the termination rights in connection with Casualty Losses
and Government Takings set forth in Section 5.8.
5.7.3 Insurance Proceeds and Settlement Payments. If ASSIGNOR and
ASSIGNEE adjust the Purchase Price of the Property due to a
Casualty Loss or Government Taking, and proceed with Closing,
ASSIGNOR will be entitled to retain (i) all insurance proceeds
payable to ASSIGNOR with respect to any such Casualty Loss, (ii)
all sums paid to ASSIGNOR by third parties by reason of any such
Casualty Loss, and (iii) all compensation paid to ASSIGNOR with
respect to any such Government Taking.
5.7.4 Change in Condition. ASSIGNEE will assume all risk and loss with
respect to any change, between the Effective Date and the Closing
Date, in the condition of the Property resulting from production
of Hydrocarbons through normal depletion (including the
watering-out, casing collapse, or sand infiltration of any well)
and the depreciation of personal property through ordinary wear
and tear. None of the events or conditions set forth in this
Section 5.7.4 will be considered a Casualty Loss with respect to
the Property, nor will they be cause for any other reduction in
the Purchase Price, or give rise to any right to terminate this
Agreement.
5.8 Termination Due to Impairments to the Property.
5.8.1 Right to Terminate.
(i) If, on the Closing Date, the Allocated Value of all Property
to be excluded from the transaction contemplated by this
Agreement due to unwaived, uncured Title Defects or Adverse
Environmental Conditions on the Property exceeds twenty-five
percent (25%) of the total Allocated Value of all of the
Property, either ASSIGNOR or ASSIGNEE may terminate this
Agreement, and neither ASSIGNOR nor ASSIGNEE will have any
further obligation to conclude the transfer of the Property
under this Agreement.
(ii) If, on or before the Closing Date, a Casualty Loss or
Government Taking has occurred with respect to the Property,
and (a) ASSIGNOR and ASSIGNEE have been unable to agree on
the cost of the Casualty Loss or the value of the Property
taken in any Government Taking, or (b) the agreed cost to
repair or replace the portion of the Property affected by
the Casualty Loss or the agreed value of the Property taken
in any Government Taking equals or exceeds $ 50 million,
then either ASSIGNOR or ASSIGNEE may terminate this
Agreement, and neither ASSIGNOR nor ASSIGNEE will have any
further obligation to conclude the transfer of the Property
under this Agreement.
5.8.2 Notice of Termination. Any party exercising a right of
termination under this Section 5.8 must notify the other party in
writing no later than three (3) business days before the Closing
Date of its election to terminate this Agreement.
ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS
------------------------------------
6.1 Closing Date. The actions and events described in Section 6.3 are the
"Closing" of this transaction, which shall be held beginning at 9:00 a.m.
local time at ASSIGNOR's offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on December 31, 2001, or on such earlier or later date
or at such other place as the parties agree in writing ("Closing Date").
Time is of the essence in the performance of this Agreement. All events of
Closing shall each be deemed to have occurred simultaneously with the
other, regardless of when actually occurring, and each shall be a condition
precedent to the other. If the Closing occurs, all conditions of Closing
shall be deemed to have been satisfied or waived (but ASSIGNOR's and
ASSIGNEE's warranties and representations shall not be waived and shall
survive the Closing, to the extent provided in Section 11.5).
6.2 Conditions to Closing. ASSIGNOR and ASSIGNEE will not be obligated to close
the transaction described in this Agreement, and will have the right to
terminate this Agreement, unless each of the conditions to its performance
set forth in this Section 6.2 is satisfied as of the Closing Date, or it
waives in whole or part any such condition to its performance that is
unsatisfied as of the Closing Date. If a party elects to terminate this
Agreement because a condition to its performance is not satisfied, the
terminating party must give the other party written notice of termination
on or before the Closing Date, after which neither ASSIGNOR nor ASSIGNEE
will have any further obligation to conclude the transfer of the Property
under this Agreement. The inclusion in this Agreement of conditions to
ASSIGNOR's and ASSIGNEE's obligations at Closing shall not, in and of
itself, constitute a covenant of either ASSIGNOR or ASSIGNEE to satisfy the
conditions to the other party's obligations at Closing.
6.2.1 Representations and Warranties.
(i) ASSIGNOR will not be obligated to close if, as of the
Closing Date, any matter represented or warranted in this
Agreement by the ASSIGNEE is untrue, inaccurate or is
misleading in any material respect and has a material
adverse effect on the value, use or operation of the
Property.
(ii) ASSIGNEE will not be obligated to close if, as of the
Closing Date, any matter represented or warranted in this
Agreement by the ASSIGNOR is untrue, inaccurate or is
misleading in any material respect and has a material
adverse effect on the value, use or operation of the
Property.
6.2.2 Performance of Obligations.
(i) ASSIGNOR will not be obligated to close if, as of the
Closing Date, ASSIGNEE has not performed all material
obligations under this Agreement that ASSIGNEE is required
to perform on or before Closing.
(ii) ASSIGNEE will not be obligated to close if, as of the
Closing Date, ASSIGNOR has not performed all material
obligations under this Agreement that ASSIGNOR is required
to perform on or before Closing.
6.2.3 Legal Proceedings. Neither ASSIGNOR nor ASSIGNEE will be
obligated to close if, as of the Closing Date, any suit or other
proceeding is pending or threatened before any court or
governmental agency seeking to restrain, prohibit, or declare
illegal, or seeking substantial damages in connection with, the
transaction that is the subject of this Agreement, and/or there
is reasonable basis for any such suit or other proceeding.
6.2.4 FTC Consent. Neither ASSIGNOR nor ASSIGNEE will be obligated to
close if, as of the Closing Date, any necessary consent of the
Federal Trade Commission and any other state or federal
governmental authority or agency relating to the consummation of
the transaction contemplated by this Agreement (except for
approvals covered by Section 5.4) has not been obtained or
waived, or applicable waiting periods prescribed by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act have not elapsed or terminated.
6.2.5 ASSIGNEE's Insurance. ASSIGNOR will not be obligated to close if
ASSIGNEE, as of the Closing Date, does not have insurance
providing the following minimum insurance coverages with limits
of liability of not less than those set out below:
(i) Insurance which shall comply with all applicable Workers'
Compensation and Occupational Disease Laws and which shall
cover all of the ASSIGNEE's employees performing any work or
activities as to the Property. ASSIGNEE shall carry
insurance for all work performed offshore, including
insurance to cover Claims under the United States
Longshoremen's and Harbor Workers' Act extended to include
the Outer Continental Shelf;
(ii) Comprehensive/Commercial General Liability Insurance
(including contractual liability coverage) with a combined
bodily injury and property damage limit of not less than
$5,000,000 for each occurrence, together with Pollution
Liability Insurance with a coverage of not less than
$5,000,000 for each occurrence.
Such insurance shall include coverage for all liability assumed
by ASSIGNEE under the terms of this Agreement with limits not
less than those set out above. As to all comprehensive/commercial
general public and pollution liability insurance policies,
ASSIGNOR shall be named as an additional insured to the extent of
ASSIGNEE's liabilities and obligations hereunder. All such
insurance of ASSIGNEE hereunder shall be written on policy forms
and by insurance companies approved by ASSIGNOR. ASSIGNEE shall
furnish ASSIGNOR with certificates of insurance on forms approved
by ASSIGNOR, listing all such insurance policies. All such
certificates must be signed by authorized representatives of the
insurance companies and must provide for not less than ten (10)
days prior written notice to ASSIGNOR in the event of
cancellation or material change affecting ASSIGNOR's interest.
ASSIGNEE shall ensure that it and its contractors' insurers waive
all rights of recovery or subrogation against ASSIGNOR, its
parent, subsidiaries, affiliates, agents, directors, officers,
employees, servants, co-lessees or co-venturers. Neither failure
to comply, nor full compliance with the insurance provisions of
this Agreement, shall limit or relieve ASSIGNEE from its
indemnity obligations in accordance with this Agreement.
6.2.6 ASSIGNOR's Corporate Approvals. ASSIGNOR will not be obligated to
close if, as of the close of business October 10, 2001, final
corporate approval by the appropriate levels of its and
ASSIGNEE's management and board of directors has not been
obtained. Such approval is not assured, and if any requisite
level of such management and corporate approval is not
forthcoming for any reason whatsoever, ASSIGNOR shall not be
obligated to seek other such approvals. ASSIGNOR shall notify
ASSIGNEE in writing by close of business October 12, 2001,
whether such approval has been obtained.
6.2.7 ASSIGNEE's Corporate Approvals. ASSIGNEE will not be obligated
to close if, as of the close of business October 10, 2001, final
corporate approval by the appropriate levels of its and
ASSIGNOR's management and board of directors has not been
obtained. Such approval is not assured, and if any requisite
level of such management and corporate approval is not
forthcoming for any reason whatsoever, ASSIGNEE shall not be
obligated to seek other such approvals. ASSIGNEE shall notify
ASSIGNOR in writing by close of business October 12, 2001,
whether such approval has been obtained.
6.2.8 One Closing. ASSIGNOR will not be obligated to close if ASSIGNEE
has made an election under this Agreement or some other event has
occurred that will prevent ASSIGNOR from Closing on, or will
cause ASSIGNOR to be unable to close and convey, all of the
Property at one Closing and to receive at such Closing the entire
Purchase Price, adjusted as provided in Section 2.2, and to be
paid pursuant to Section 6.3.
6.2.9 Concurrent Closing. Neither ASSIGNOR nor ASSIGNEE will be
obligated to close if the closing of that certain Share and
Pipeline Purchase Agreement between them of even date herewith is
not closed concurrently with the Closing of this Agreement.
6.2.10 ASSIGNEE's Financial Information and Condition. ASSIGNOR will
not be obligated to close if (i) ASSIGNEE has not provided
ASSIGNOR, at least ten (10) business days in advance of Closing,
copies of ASSIGNEE's audited financial statements and any other
financial information reasonably requested by ASSIGNOR, (ii) such
information is not materially true and correct in all respects,
or (iii) any material adverse change in the financial condition
of ASSIGNEE has occurred between the Effective Date and the
Closing Date.
6.3 Closing. At Closing, the following events shall occur, and ASSIGNOR and
ASSIGNEE shall execute, acknowledge (if necessary), and exchange, as
applicable, the following items:
(i) Both parties at Closing shall execute a Closing Statement
evidencing the amounts to be wire transferred into the accounts
of each receiving party at Closing.
(ii) ASSIGNEE shall deliver to ASSIGNOR the Purchase Price, as
adjusted by the amount shown on the Preliminary Settlement
Statement, by wire transfer in immediately available funds to the
account of ASSIGNOR designated in writing by ASSIGNOR prior to
Closing.
(iii)If ASSIGNOR elects to return the Performance Deposit as provided
in Section 2.1.2, ASSIGNOR shall deliver to ASSIGNEE the
Performance Deposit without interest, by wire transfer in
immediately available funds to the account of ASSIGNEE designated
in writing by ASSIGNEE prior to Closing.
(iv) ASSIGNOR shall execute and deliver to ASSIGNEE the assignment
documents (in sufficient counterparts for recording) for the
assignment and conveyance of the Property to be transferred under
this Agreement in the forms set forth in Exhibit D, Schedules 1,
2, 3, and 4 (the "Assignment Documents");
(v) The parties shall execute and deliver the Assignment of Contracts
in the form of Exhibit E for the Related Contracts, together with
any other ratification and joinder instruments required to
transfer the rights, obligations and interests in applicable
Related Contracts and other Property;
(vi) ASSIGNOR shall execute the Nonforeign Affidavit in the form of
Exhibit F;
(vii)ASSIGNOR shall deliver to ASSIGNEE a photostatic copy of the
letters from ASSIGNOR to its co-owners in the portions of the
Property it operates resigning as operator for those portions of
the Property.
(viii) If ASSIGNEE is attempting to succeed ASSIGNOR as operator of
any of the Property, ASSIGNEE shall prepare and the parties shall
execute appropriate change of operator notices and any third
party ballots required under applicable operating agreements.
(ix) ASSIGNOR and ASSIGNEE shall execute, acknowledge (if necessary)
and exchange, as applicable, any applications necessary to
transfer to ASSIGNEE all transferable governmental or regulatory
permits to which the Property is subject, and which ASSIGNOR has
agreed to transfer under this Agreement.
(x) ASSIGNEE shall furnish ASSIGNOR with evidence acceptable to
ASSIGNOR that ASSIGNEE is qualified to hold title to the Leases
and other Property with the MMS and state of Louisiana, as
applicable, and to operate (should ASSIGNEE become the operator
of the Property or a portion thereof) the platforms, ▇▇▇▇▇,
pipelines and facilities associated therewith, including copies
of all ASSIGNEE's ownership, operational, and plugging bonds or
other supplemental security arrangements for the Property, as
provided in Section 5.4.
(xi) ASSIGNEE shall furnish ASSIGNOR with any additional bond as
required under Section 5.4.
(xii)ASSIGNEE shall furnish ASSIGNOR with Certificate(s) of Insurance
confirming the existence of the ASSIGNEE's insurance coverages
pursuant to Section 6.2.5.
(xiii) ASSIGNEE shall furnish ASSIGNOR with a certified resolution or
secretary's certificate of ASSIGNEE evidencing the authority of
ASSIGNEE to enter into this Agreement and close the transaction
contemplated hereby in a form and having content satisfactory to
ASSIGNOR.
(xiv)ASSIGNOR shall furnish ASSIGNEE with letters-in-lieu of transfer
orders directing all purchasers of production from the Property
to pay ASSIGNEE the proceeds of production produced from the
Property from and after the Effective Date.
(xv) ASSIGNEE, ASSIGNOR, and ASSIGNEE's surety will execute and
deliver the additional bond provided in Section 5.4.2.
(xvi)ASSIGNEE shall execute and deliver the release and litigation
dismissal described in Section 8.8, if applicable.
(xvii)The parties shall execute and deliver other appropriate
assignments, bills of sale, deeds or instruments necessary to
transfer the Property to ASSIGNEE or to effect and support this
transaction contemplated in this Agreement, including any
conveyances on official forms and related documentation necessary
to transfer the Property to ASSIGNEE in accordance with
requirements of governmental regulations.
6.4 Post-Closing Obligations. ASSIGNOR and ASSIGNEE have the following
post-closing obligations:
6.4.1 Property Records. Within sixty (60) days after Closing, ASSIGNOR
shall deliver to ASSIGNEE the originals or legible copies of the
Property Records, at a location designated by ASSIGNEE. Any
transportation, postage or delivery costs from ASSIGNOR's offices
shall be at ASSIGNEE's sole cost, risk and expense. If ASSIGNOR
retains any original Property Records, ASSIGNEE shall have the
right to access and review those original Property Records during
normal business hours. ASSIGNEE agrees to maintain the Property
Records for seven (7) years after Closing. ASSIGNEE shall provide
ASSIGNOR and its representatives reasonable access to and the
right to copy such Property Records for the purposes of (i)
preparing and delivering any accounting provided under this
Agreement and adjusting, prorating and settling the charges and
credits provided in this Agreement; (ii) complying with any law,
rule or regulation affecting ASSIGNOR's interest in the Property
prior to the Closing Date; (iii) preparing any audit of the books
and records of any third party relating to ASSIGNOR's interest in
the Property prior to the Closing Date, or responding to any
audit prepared by such third parties; (iv) preparing tax returns;
(v) responding to or disputing any tax audit; or (vi) asserting,
defending or otherwise dealing with any claim or dispute under
this Agreement. ASSIGNEE shall notify ASSIGNOR in writing before
destroying any Property Records. ASSIGNOR agrees to use all
reasonable efforts, but without any obligation to incur any cost
or expense in connection therewith, to cooperate with ASSIGNEE's
efforts to obtain access to files, records and data relating to
the Property not provided by ASSIGNOR which are in the possession
of any third party operator of any of the Property.
6.4.2 Recording and Filing. ASSIGNEE, within thirty (30) days after
Closing, shall (i) record all Assignment Documents and all other
instruments that must be recorded to effectuate the transfer of
the Property; and (ii) file for approval with the applicable
government agencies all Assignment Documents and other state and
federal transfer documents required to effectuate the transfer of
the Property. ASSIGNEE shall provide ASSIGNOR a recorded copy of
each Assignment Document and other recorded instruments, and
approved copies of the Assignment Documents and other state and
federal transfer documents as soon as they are available.
6.4.3 Change of Operator Requirements. If ASSIGNEE is attempting to
succeed ASSIGNOR as operator of any portion of the Property,
ASSIGNEE shall promptly file all appropriate forms, declarations
or bonds with federal and state agencies relative to its
assumption of operations.
6.4.4 Further Assurances. ASSIGNEE and ASSIGNOR agree to execute and
deliver from time to time such further instruments and do such
other acts as may be reasonably requested and necessary to
effectuate the purposes of this Agreement.
ARTICLE 7. ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS
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7.1 ASSIGNEE's Rights After Closing. Upon and after Closing, ASSIGNEE will
receive and assume all of ASSIGNOR's right, title and interest in the
Property, with effect as of the Effective Date.
7.2 ASSIGNEE's Obligations After Closing.
7.2.1 Description of Obligations. Upon and after Closing, ASSIGNEE will
assume, pay and perform all the obligations, liabilities and
duties with respect to the ownership and (if applicable)
operation of the Property that are attributable to periods on and
after the Effective Date (the "ASSIGNEE's Assumed Obligations").
The ASSIGNEE's Assumed Obligations include:
(i) Responsibility for payment of all operating expenses and
capital expenditures related to the Property and
attributable to the period on and after the Effective Date;
(ii) Responsibility for performance of all express and implied
obligations and covenants under the terms of the Leases,
other instruments of record in the chain of title, the
Related Contracts and all other orders and contracts to
which the Property or the operation thereof is subject
arising on and after the Effective Date;
(iii)Responsibility for payment of all royalties, overriding
royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances
to which the Property is subject that are attributable to
periods on and after the Effective Date;
(iv) Responsibility for proper accounting for and disbursement of
production proceeds from the Property attributable to
periods on and after the Effective Date, including funds in
any suspense accounts received from ASSIGNOR;
(v) Responsibility for compliance with all applicable laws,
ordinances, rules and regulations pertaining to the
Property, and the procurement and maintenance of all permits
required by public authorities in connection with the
Property on and after the Effective Date;
(vi) The Plugging and Abandonment Obligations, the Environmental
Obligations, and all other obligations assumed by ASSIGNEE
under this Agreement; and
(vii)Responsibility for all obligations related to the Post-Sale
Hydrocarbon Imbalances.
7.2.2 Non-Operator's Obligations. With respect to (i) any part of the
Property for which ASSIGNEE is not duly elected operator, or (ii)
any non-operating interests in the Property, ASSIGNEE shall
assume full responsibility and liability for ASSIGNEE's Assumed
Obligations with respect to the non-operating interests being
conveyed and assigned under this Agreement.
7.3 ASSIGNOR's Obligations After Closing.
7.3.1 Description of Obligations. After Closing, ASSIGNOR will retain
responsibility for all liabilities, obligations and duties with
respect to the ownership and (if applicable) operation of the
Property that are attributable to periods before the Effective
Date, except as otherwise specifically provided in this Agreement
(the "ASSIGNOR's Retained Obligations"). The ASSIGNOR's Retained
Obligations include:
(i) Responsibility for the payment of all operating expenses and
capital expenditures related to the Property and
attributable to the period prior to the Effective Date;
(ii) Responsibility for performance of all express and implied
obligations and covenants under the terms of the Leases,
other instruments in the chain of title, the Related
Contracts and all other orders and contracts to which the
Property is subject arising before the Effective Date;
(iii) Responsibility for payment of all royalties, overriding
royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances
to which the Property is subject that are attributable to
periods before the Effective Date;
(iv) Responsibility for proper accounting for and disbursement of
production proceeds from the Property attributable to
periods before the Effective Date;
(v) Responsibility for the exclusions from the Plugging and
Abandonment Obligations described in Section 7.4.2, and the
exclusions from the Environmental Obligations described in
Section 7.5.2; and
(vi) Responsibility for all obligations related to the Pre-Sale
Hydrocarbon Imbalances.
7.3.2 Non-Operator's Obligations. With respect to (i) any periods of
time before the Effective Date during which ASSIGNOR was not
operator of the Property, or (ii) any non-operating interests in
the Property, ASSIGNOR retains full responsibility and liability
for ASSIGNOR's Retained Obligations with respect to the
non-operating interests being conveyed and assigned under this
Agreement.
7.4 Plugging and Abandonment Obligations.
7.4.1 ASSIGNEE's Obligations. Upon and after Closing, ASSIGNEE assumes
full responsibility and liability for the following plugging and
abandonment obligations related to the Property (the "Plugging
and Abandonment Obligations"), regardless of whether they are
attributable to the ownership or operation of the Property before
or after the Effective Date:
(i) The necessary and proper plugging, replugging and
abandonment of all ▇▇▇▇▇ on the Property, whether plugged
and abandoned before or after the Effective Date;
(ii) The necessary and proper removal, abandonment, and disposal
of all platforms, structures, pipelines, equipment,
abandoned property and junk located on or comprising part of
the Property, including junk on the sea floor at the Leases;
(iii) The necessary and proper capping and burying of all flow
lines associated with the ▇▇▇▇▇ and located on or comprising
part of the Property;
(iv) The necessary and proper restoration of the Property, both
surface, sea floor, and subsurface, as may be required by
applicable laws, regulation or contract;
(v) Any necessary clean-up or disposal of Property contaminated
by naturally occurring radioactive material ("NORM"), as may
be required by applicable laws, regulations or contract;
(vi) All obligations arising from contractual requirements and
demands made by courts, authorized regulatory bodies or
parties claiming a vested interest in the Property; and
(vii) Obtaining and maintaining all bonds, or supplemental or
additional bonds, that may be required contractually or by
governmental authorities.
7.4.2 Exclusions from ASSIGNEE's Obligations. ASSIGNEE's obligations
under this Section 7.4 do not include any civil or criminal fines
or penalties that may be levied against ASSIGNOR or ASSIGNEE by
any court or regulatory authority for non-compliance with
applicable laws, regulations or orders in connection with the
ownership or operation of the Property before the Effective Date.
7.4.3 Standard of Operations. ASSIGNEE shall conduct all plugging,
replugging, abandonment, removal, disposal and restoration
operations in a good and workmanlike manner and in compliance
with all applicable laws and regulations.
7.4.4 Non-Operator's Obligations. With respect to any non-operating
interests in the Property, ASSIGNEE shall assume full
responsibility and liability, from and after the Effective Date,
for the Plugging and Abandonment Obligations with respect to the
non-operating interests being conveyed and assigned under this
Agreement.
7.4.5 ASSIGNOR's Remedies. ASSIGNEE's liability and obligations under
this Section 7.4 are included in the liabilities and obligations
to be secured by the bonds, supplemental or additional bonds
and/or pledge of securities, as may be established pursuant to
Section 5.4. If ASSIGNEE defaults in the performance of its
obligations pursuant to this Section 7.4, ASSIGNOR, at its
option, and after reasonable notice, may complete, or have
completed, the plugging, replugging, abandonment, removal,
disposal, capping, burying, and restoration operations at
ASSIGNEE's expense. Exercise of ASSIGNOR's rights hereunder shall
in no way limit ASSIGNOR's rights to seek recovery for any
uncompensated damages resulting from such default or to exercise
any other legal rights and remedies under this Agreement.
7.5 Environmental Obligations.
7.5.1 ASSIGNEE's Obligations. Except as provided in Section 7.5.2, upon
and after Closing, ASSIGNEE assumes full responsibility and
liability for the following occurrences, events and activities on
or related to the Property (the "Environmental Obligations"),
regardless of whether arising from the ownership or operation of
the Property before or after the Effective Date, and regardless
of whether resulting from any acts or omissions of ASSIGNOR or
the condition of the Property when acquired:
(i) Environmental pollution or contamination, including
pollution or contamination of the soil, sea, groundwater or
air by oil, gas, condensate, distillate, other hydrocarbons,
brine, NORM or otherwise;
(ii) Underground injection activities and waste disposal onsite;
(iii)Clean-up responses, and the cost of remediation, control,
assessment or compliance with respect to surface, sea floor,
and subsurface pollution caused by spills, pits, ponds or
lagoons;
(iv) Failure to comply with applicable land use, surface
disturbance, licensing or notification requirements;
(v) Disposal on the Property of any hazardous substances,
wastes, materials and products generated by or used in
connection with the ownership or operation of the Property
before or after the Effective Date; and
(vi) Non-compliance with environmental or land use rules,
regulations, demands or orders of appropriate state or
federal regulatory agencies.
7.5.2 Exclusions from ASSIGNEE's Obligations. ASSIGNEE's Environmental
Obligations do not include:
(i) Any civil or criminal fines or penalties that may be levied
against ASSIGNOR by any court or regulatory authority for
any such violation of any laws, rules or regulations in
connection with the ownership or operation of the Property
before the Effective Date, all of which shall remain the
responsibility of ASSIGNOR; and
(ii) Disposal offsite from the Property before the Effective Date
of any hazardous substances, wastes, NORM, materials and
products generated by or used in connection with the
ownership or operation of the Property before the Effective
Date.
7.5.3 Non-Operator's Obligations. With respect to any non-operating
interests in the Property being transferred to ASSIGNEE under
this Agreement, ASSIGNEE agrees to assume full responsibility and
liability, from and after the Effective Date, for the
Environmental Obligations with respect to the non-operating
interests being conveyed and assigned under this Agreement.
ARTICLE 8. INDEMNITIES
-----------
8.1 Definition of Claims. As used in this Agreement, the term "Claims" means
any and all losses, liabilities, damages, punitive damages, obligations,
expenses, fines, penalties, costs, claims, causes of action and judgments
for: (i) breaches of contract; (ii) loss or damage to property, injury to
or death of persons, and other tortious injury; and (iii) violations of
applicable laws, rules, regulations, orders or any other legal right or
duty actionable at law or equity. The term "Claims" also includes
reasonable attorneys fees, court costs, and other reasonable costs of
litigation resulting from the defense of any claim or cause of action
within the scope of the indemnities in this Agreement.
8.2 Application of Indemnities.
8.2.1 Covered Claims and Parties. All indemnities set forth in this
Agreement extend to the officers, directors, employees and
affiliates of the party indemnified. Unless this Agreement
expressly provides to the contrary, the indemnities set forth in
this Agreement apply regardless of whether the indemnified party
(or its employees, agents, contractors, successors or assigns)
causes, in whole or part, an indemnified Claim, including
indemnified Claims arising out of or resulting, in whole or part,
from the condition of the Property or the indemnified party's (or
its employees', agents', contractors', successors' or assigns')
sole or concurrent negligence, strict liability or fault.
However, the indemnities set forth in this Agreement do not
extend to any part of an indemnified Claim that (i) is the result
of the gross negligence, willful misconduct or fraud of the
indemnified party, (ii) is the result of the imposition of
punitive damages on the indemnified party arising from the acts
of the indemnified party, or (iii) is the result of the
imposition of civil or criminal fines or penalties by any court
or regulatory authority on the indemnified party due the
indemnified party's failure to comply with applicable laws,
regulations or orders.
8.2.2 Other Limitations. The indemnities of the indemnifying party in
this Agreement do not cover or include any amounts that the
indemnified party may legally recoup from other third party
owners under applicable joint operating agreements or other
agreements, or for which the indemnified party is reimbursed by
any third party. The indemnities in this Agreement do not relieve
the parties to this Agreement from any obligations to third
parties. The indemnities of the parties in this Agreement do not
relieve the indemnified party from, or extend to cover, any
obligations of the indemnified party under the terms of any
operating agreement or other cost-sharing arrangement which is
applicable to any Claim. There will be no upward or downward
adjustment in the Purchase Price as a result of any matter for
which ASSIGNEE or ASSIGNOR is indemnified under this Agreement.
8.3 ASSIGNEE's Indemnity. ASSIGNEE shall indemnify, defend and hold ASSIGNOR
harmless from and against any and all Claims caused by, resulting from or
incidental to:
8.3.1 ASSIGNEE's Assumed Obligations, including the Plugging and
Abandonment Obligations, the Environmental Obligations (except as
provided in Section 8.4), and the Post-Sale Hydrocarbon
Imbalances;
8.3.2 If applicable, ASSIGNOR's operation of the Property and any
assistance in the transition of operations under Article 10,
except to the extent caused by ASSIGNOR's gross negligence or
willful misconduct;
8.3.3 Any obligations for brokerage or finder's fee or commission
incurred by ASSIGNEE in connection with its purchase of the
Property;
8.3.4 Any violation by ASSIGNEE of state or federal securities laws,
or ASSIGNEE's dealings (including any dealings in breach of
ASSIGNEE's warranties and representations in Section 3.3.3) with
its partners, investors, financial institutions, assignees and
other third parties in connection with the transaction under this
Agreement, or any subsequent sale or other disposition of the
Property (or portion thereof) by ASSIGNEE, its affiliates or
assignees;
8.3.5 ASSIGNEE's ownership or operation of any portion of the Property
reconveyed or reassigned to ASSIGNOR pursuant to Sections 5.4.4
or 5.5.3(ii) due to failure to obtain requisite Consents or
government approvals, except to the extent any such Claim is the
direct result of ASSIGNOR's ownership or operation of the
Property before the Effective Date; and
8.3.6 ASSIGNEE's inspection of the Property under Section 5.2 and any
other provisions of this Agreement, to the extent provided in
Section 5.2.
8.4 ASSIGNOR's Indemnity. Subject to Section 8.6, ASSIGNOR shall indemnify,
defend and hold ASSIGNEE harmless from and against any and all Claims
caused by, resulting from or incidental to:
8.4.1 ASSIGNOR's Retained Obligations, including the exclusions from
the Plugging and Abandonment Obligations, the exclusions from the
Environmental Obligations assumed by ASSIGNEE in the ASSIGNEE's
Assumed Obligations, and the Pre-Sale Hydrocarbon Imbalances;
8.4.2 Claims against ASSIGNEE by third parties (and third parties
only, including governmental agencies) of which ASSIGNEE notifies
ASSIGNOR in writing within one (1) year after Closing, to the
extent those Claims result from Environmental Obligations that
arise from ASSIGNOR's ownership or operation of the Property
prior to the Effective Date, but ASSIGNOR shall have no
obligation to ASSIGNEE under this Section 8.4 for any such Claim
of which ASSIGNOR is not notified in writing by ASSIGNEE within
one (1) year after Closing.
8.4.3 If applicable, ASSIGNOR's operation of the Property and any
assistance in the transition of operations under Article 10, to
the extent caused by ASSIGNOR's gross negligence or willful
misconduct; and
8.4.4 ASSIGNOR's access to the Property after Closing for the purposes
described in Sections 10.1 and 11.4, except to the extent caused
by ASSIGNEE's gross negligence or willful misconduct.
8.5 Notices and Defense of Indemnified Claims. Each party shall immediately
notify the other party of any Claim of which it becomes aware and for which
it is entitled to indemnification from the other party under this
Agreement. The indemnifying party shall be obligated to defend at the
indemnifying party's sole expense any litigation or other administrative or
adversarial proceeding against the indemnified party relating to any Claim
for which the indemnifying party has agreed to indemnify and hold the
indemnified party harmless under this Agreement. However, the indemnified
party shall have the right to participate with the indemnifying party in
the defense of any such Claim at its own expense.
8.6 ASSIGNOR's Indemnity Limit. Notwithstanding anything herein to the
contrary, (i) in no event shall ASSIGNOR be required to indemnify ASSIGNEE
for any Claim or pay any other amount in connection with or with respect to
the transactions contemplated in this Agreement in any amount exceeding in
the aggregate twenty-five percent (25 %) of the Purchase Price as adjusted
pursuant to Section 2.2 and (ii) in no event shall ASSIGNOR be required to
indemnify ASSIGNEE for any Claim covered by ASSIGNOR's indemnity under
Section 8.4, if ASSIGNOR does not receive written notice of the Claim as
provided in Section 8.5 within one (1) year after the Closing Date.
8.7 NORM. ASSIGNEE ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL.
SCALE FORMATION OR SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON
EQUIPMENT, MATERIALS AND OTHER PROPERTY. SOME OR ALL OF THE EQUIPMENT,
MATERIALS AND OTHER PROPERTY SUBJECT TO THIS AGREEMENT MAY HAVE LEVELS OF
NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH
THIS EQUIPMENT, MATERIALS AND OTHER PROPERTY BY REASON THEREOF. THEREFORE,
ASSIGNEE MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN HANDLING THIS EQUIPMENT,
MATERIALS AND OTHER PROPERTY.
8.8 Pending Litigation and Claims. Notwithstanding anything in this Agreement
to the contrary, ASSIGNEE shall indemnify, defend and hold ASSIGNOR
harmless from and against any Claims resulting from the litigation and
claims listed on Exhibit C under the section entitled "ASSIGNEE's
Responsibility," except as may otherwise be expressly provided in that
Exhibit. ASSIGNOR shall indemnify, defend and hold ASSIGNEE harmless from
and against any Claims resulting from the litigation and claims listed on
Exhibit C under the section entitled "ASSIGNOR's Responsibility," except as
may otherwise be expressly provided in that Exhibit. Furthermore, if
ASSIGNEE is a party in any of the litigation listed on Exhibit C against
ASSIGNOR, ASSIGNEE shall release ASSIGNOR from its Claims and dismiss such
litigation with prejudice. These matters shall not constitute an Adverse
Environmental Condition or a Title Defect.
8.9 Waiver of Consequential and Punitive Damages; Data Room Matters. NEITHER
ASSIGNEE NOR ASSIGNOR SHALL BE ENTITLED TO RECOVER FROM THE OTHER,
RESPECTIVELY, AND EACH PARTY RELEASES THE OTHER PARTY FROM, ANY LOSSES,
COSTS, EXPENSES, OR DAMAGES ARISING UNDER THIS AGREEMENT OR IN CONNECTION
WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT ANY
AMOUNT IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES SUFFERED BY SUCH PARTY.
ASSIGNEE AND ASSIGNOR BOTH WAIVE, AND RELEASE THE OTHER FROM, ANY RIGHT TO
RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING IN
CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS
AGREEMENT; PROVIDED, HOWEVER, ANY SUCH DAMAGES RECOVERED BY A THIRD PARTY
(OTHER THAN SUBSIDIARIES, AFFILIATES OR PARENTS OF A PARTY) FOR WHICH A
PARTY OWES THE OTHER PARTY AN INDEMNITY UNDER THIS ARTICLE 8 SHALL NOT BE
WAIVED. ASSIGNEE hereby fully and unconditionally releases ASSIGNOR and
their affiliates and subsidiaries and their officer, directors and
employees, from any and all Claims, causes of action or damages, if any,
arising in favor of ASSIGNEE from ASSIGNOR's data room process and proposal
procedures in connection with its sale of the Property.
ARTICLE 9. TAXES AND EXPENSES
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9.1 Recording Expenses. ASSIGNEE shall pay all costs of recording and filing
the Assignment Documents for the Property, all other state and federal
transfer documents, and any other instruments that must be filed to
effectuate the transfer of the Property.
9.2 Ad Valorem, Real Property and Personal Property Taxes. All Ad Valorem
Taxes, Real Property Taxes, Personal Property Taxes, and similar
obligations ("Property Taxes") on the Property are ASSIGNOR's obligation
for periods before the Effective Date and ASSIGNEE's obligation for periods
after the Effective Date. If Property Taxes for the current tax year have
not been assessed and paid as of the Closing Date, the ASSIGNEE shall file
all required reports and returns incident to the Property Taxes and pay the
Property Taxes for the current tax year and subsequent periods. The
ASSIGNOR will reimburse the ASSIGNEE promptly for the ASSIGNOR's
proportionate share of these taxes, prorated as of the Effective Date, upon
receipt of evidence of the ASSIGNEE's payment of the taxes. If Property
Taxes for the current tax year have been assessed and paid as of the
Closing Date, the ASSIGNEE will reimburse the ASSIGNOR for its
proportionate share of these taxes, prorated as of the Effective Date, as a
closing adjustment to the Purchase Price, as provided in Section 2.2.
9.3 Severance Taxes. ASSIGNOR shall bear and pay all severance or other taxes
measured by Hydrocarbon production from the Property, or the receipt of
proceeds therefrom, to the extent attributable to production from the
Property before the Effective Date. ASSIGNEE shall bear and pay all such
taxes on production from the Property on and after the Effective Date.
ASSIGNOR shall withhold and pay on behalf of ASSIGNEE all such taxes on
production from the Property between the Effective Date and the Closing
Date, if the Closing Date follows the Effective Date, and the amount of any
such payment shall be reimbursed to ASSIGNOR as a closing adjustment to the
Purchase Price pursuant to Section 2.2. If either party pays taxes owed by
the other, upon receipt of evidence of payment the nonpaying party will
reimburse the paying party promptly for its proportionate share of such
taxes.
9.4 Tax and Financial Reporting.
9.4.1 IRS Form 8594. If the parties mutually agree that a filing of
Form 8594 is required, the parties will confer and cooperate in
the preparation and filing of their respective forms to reflect a
consistent reporting of the agreed upon allocation of the value
of the Property.
9.4.2 Financial Reporting. ASSIGNOR and ASSIGNEE agree to furnish to
each other at Closing or as soon thereafter as practicable any
and all information and documents reasonably required to comply
with tax and financial reporting requirements and audits.
9.4.3 Intangible Drilling Cost Recapture. ASSIGNOR and ASSIGNEE agree
to furnish to each other, at Closing or as soon as practicable
thereafter, data relative to deductions claimed, pursuant to
Section 263(c) of the Internal Revenue Code of 1986, for
intangible drilling costs related to the Property, and any other
relevant data to allow each party to calculate the carryover
intangible drilling costs associated with the Property that is
subject to potential recapture under Section 1254(a) of the
Internal Revenue Code of 1986.
9.5 Sales and Use Taxes. ASSIGNEE shall be responsible for and pay all federal,
state, or local sales, transfer, gross proceeds, use and similar taxes
incident or applicable to the Property it receives under this Agreement, or
caused by the transfer of the Property to ASSIGNEE under this Agreement. If
ASSIGNOR is required to pay such sales, use or similar taxes on behalf of
ASSIGNEE, ASSIGNEE will reimburse ASSIGNOR at Closing for all sales and use
taxes due and payable on the transfer of the Property to ASSIGNEE.
9.6 Income Taxes. Each party shall be responsible for its own state and federal
income taxes, if any, as may result from this transaction.
9.7 Incidental Expenses. Each party shall bear its own respective expenses
incurred in connection with the negotiation and Closing of this
transaction, including its own consultants' fees, attorneys' fees,
accountants' fees, and other similar costs and expenses.
ARTICLE 10. OPERATIONS AFTER CLOSING
------------------------
10.1 ASSIGNOR-Operated Properties. With respect to any of the Property operated
by ASSIGNOR, after Closing and until such time as a successor operator of
the Property has been selected in accordance with the applicable operating
agreements and approved as operator of the Property by the MMS or state of
Louisiana, as applicable (the "Interim Period"), ASSIGNOR shall continue to
operate the Property. Such continued operations by ASSIGNOR during the
Interim Period shall be for the account of ASSIGNEE and be conducted
subject to ASSIGNEE's sole direction and right of control. In addition,
ASSIGNOR's operation of the Property during the Interim Period shall be at
the sole cost, risk and expense of ASSIGNEE, and such continued operations
by ASSIGNOR shall be covered by ASSIGNEE's indemnity set forth in Section
8.3. In connection with the continued operation of the Property by ASSIGNOR
during the Interim Period, ASSIGNOR shall be reimbursed by ASSIGNEE for all
costs and expenses incurred by ASSIGNOR with respect thereto, including a
charge for overhead in the same manner as provided in the applicable joint
operating agreement, except that for any of the Property of which ASSIGNOR
is one hundred percent (100%) owner, all attributable costs of production
including overhead shall be computed in accordance with ASSIGNOR's existing
accounting practices. ASSIGNOR will have no obligation to make capital
expenditures or extraordinary operating expenditures in connection with the
Property during the Interim Period. Additionally, ASSIGNOR may require
ASSIGNEE to prepay on a monthly basis any and all expenses that ASSIGNOR
estimates it will pay or incur in connection with the operation of the
Property. If ASSIGNEE is ultimately selected as operator of the Property,
ASSIGNEE will additionally reimburse ASSIGNOR for the amounts of any unpaid
operating expenses and capital expenditures of other working interest
owners paid or incurred by ASSIGNOR and attributable to operations during
the Interim Period. ASSIGNOR will be entitled to retain any overhead
payments received from other working interest owners and attributable to
operations during the Interim Period. All costs and expenses incurred by
ASSIGNOR in conjunction with such continued operations of the Property
during the Interim Period shall be reimbursed to ASSIGNOR through an upward
adjustment to the Purchase Price in the Final Settlement Statement. To the
extent ASSIGNOR continues to operate the Property after the Final
Settlement Statement, ASSIGNEE shall reimburse ASSIGNOR periodically upon
receipt of ASSIGNOR's invoice therefor (unpaid invoices shall bear simple
annual interest at the maximum allowed by the state of Louisiana). It is
further expressly agreed and understood that once ASSIGNEE has been
approved as operator of the Property by the MMS or other applicable agency,
and the provisions of Section 5.4 have been complied with, ASSIGNOR shall
not be obligated to continue operating any of the Property and ASSIGNEE
will immediately assume full responsibility therefore and assume all
operations thereon. After ASSIGNEE assumes operations of the Property,
ASSIGNOR shall be granted access and reasonable ingress and egress onto and
across the Property without any requirement of payment by ASSIGNOR to
ASSIGNEE but otherwise at ASSIGNOR's sole risk, cost and expense to allow
ASSIGNOR to remove from the Property any of its property excluded from this
Agreement under Section 1.2, and any such access, ingress and egress shall
be covered by ASSIGNOR's indemnity set forth in Section 8.4. ASSIGNOR shall
make its personnel available to ASSIGNEE as may be reasonably necessary to
assist in the transition of operations, and any such assistance shall be
covered by ASSIGNEE's indemnity set forth in Section 8.3. ASSIGNOR does not
warrant or guarantee that ASSIGNEE will become the operator of the Property
or any portion thereof, as such matter will be controlled by the applicable
operating agreement(s) and MMS or state of Louisiana regulatory
requirements and approval. ASSIGNEE shall comply with all balloting
procedures under such operating agreement(s) for the election of the
successor operator to ASSIGNOR.
10.2 ASSIGNEE's Approval. In conducting operations after the Closing Date,
ASSIGNOR shall have no duty to ASSIGNEE other than to follow ASSIGNEE's
explicit instructions, except that ASSIGNOR shall (other than for emergency
action taken in the face of serious risk of life, property or the
environment), (i) obtain ASSIGNEE's prior written approval of all
expenditures and proposed contracts and agreements, or amendments to
existing contracts and agreements relating to the Property that involve
individual commitments of more than $50,000 net to ASSIGNEE's interest in
the Property; and (ii) obtain ASSIGNEE's written approval before voting
under any operating, unit, joint venture or similar agreement. ASSIGNOR
shall notify ASSIGNEE of any emergency action taken, and to the extent
reasonably practicable, obtain ASSIGNEE's prior approval of such actions.
However, except for emergency action that must be taken in the face of
serious risk of life, property or the environment, ASSIGNOR will have no
obligation to undertake any actions with respect to the Property that are
not required in the course of the normal operation of the Property.
ARTICLE 11. MISCELLANEOUS
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11.1 Preferential Right to Purchase and Process Production.
11.1.1 ASSIGNOR's Right and Option. ASSIGNOR reserves and shall have
the ongoing preferential right and option, but not the
obligation, to purchase oil, condensate or other liquid
Hydrocarbons ("Liquid Hydrocarbons") produced from the Property,
and payment for such Liquid Hydrocarbons shall be at the same
price and under the same terms and conditions offered to ASSIGNEE
in any bona fide offer from a third party purchaser. If ASSIGNEE
does not have a bona fide offer from a third party purchaser,
then payment for such Liquid Hydrocarbons shall be at ASSIGNOR's
posted price as specified in ASSIGNOR's posted price bulletin in
effect on the delivery date for Liquid Hydrocarbons of like kind
and quality to that produced from the Property (currently
Conoco's South Louisiana Sweet (Onshore) posting), less per
barrel taxes and transportation deductions. If ASSIGNOR does not
have a posted price for Liquid Hydrocarbons from the Property,
then payment for such Liquid Hydrocarbons shall be based on the
published price of another major oil company on which ASSIGNOR
and ASSIGNEE mutually agree, in effect on the delivery date for
Liquid Hydrocarbons of like kind, quality, and location, less per
barrel taxes and transportation deductions. ASSIGNOR also
reserves and shall have the preferential right and option to
purchase or process natural and casinghead gas, or other gaseous
Hydrocarbons ("Gaseous Hydrocarbons") produced from the Property,
with payment for the Gaseous Hydrocarbons purchased and/or gas
products recovered to be at the same price and under the same
terms and conditions offered to ASSIGNEE in any bona fide offer
from a third party purchaser. If ASSIGNEE does not have a bona
fide offer from a third party purchaser, then the price will be
determined on the basis of an agreement between ASSIGNOR and
ASSIGNEE containing terms generally acceptable in the area.
11.1.2 Third-Party Offers. If ASSIGNEE receives from a responsible,
unaffiliated third-party a bona fide offer acceptable to ASSIGNEE
to purchase Liquid Hydrocarbons or purchase and/or process
Gaseous Hydrocarbons from the Property it receives, ASSIGNEE
shall furnish ASSIGNOR a copy of this offer as written on the
letterhead of the third-party offeror. ASSIGNOR shall then have
one (1) day (or such shorter period as may be mutually agreeable
to the parties) after receiving a copy of the offer to either
waive its right or elect to purchase and/or process the Liquid
Hydrocarbons or Gaseous Hydrocarbons, as applicable, on terms
substantially equivalent to those offered to ASSIGNEE by the
third-party offeror or on more favorable terms and conditions to
ASSIGNEE. Failure to timely reply to ASSIGNEE's notice will be a
one-time waiver of ASSIGNOR's preferential rights under this
Section 11.1. Once waived, and if ASSIGNEE accepts the
third-party offer, the preferential rights under this Section
11.1 will not be enforceable during the term of any sale or
processing contract between ASSIGNEE and the third-party offeror.
However, ASSIGNEE agrees not to enter into any sale or processing
contract with a third-party offeror with a term in excess of six
months in duration.
11.1.3 Miscellaneous.
(i) The preferential rights in this Section 11.1 shall be
subject to the expiration of any existing contracts for the
purchase of Liquid Hydrocarbons or Gaseous Hydrocarbons from
the Property between ASSIGNOR and third-party purchasers
that are assigned to ASSIGNEE as part of the Related
Contracts.
(ii) The failure of ASSIGNOR to exercise its preferential rights
to purchase Liquid Hydrocarbons or Gaseous Hydrocarbons from
the Property under this Section 11.1 at any time or times
shall not constitute a waiver of those preferential rights.
(iii)For the purposes of this Agreement, any exchange or other
disposition of Liquid Hydrocarbons or Gaseous Hydrocarbons
from the Property will be considered a sale under this
Section 11.1 and subject to ASSIGNOR's preferential rights
under this Section 11.1.
(iv) The preferential rights in this Section 11.1 shall be a
covenant running with the land.
11.2 Dispute Resolution. Any dispute concerning this Agreement (other than
Claims by a third party in litigation for which a party to this Agreement
is claiming indemnity) shall be resolved under the mediation and binding
arbitration procedures set forth in Exhibit H. Compliance with this Section
11.2 and the procedures set forth in Exhibit H shall constitute a condition
precedent to either party seeking judicial enforcement of any provisions of
this Agreement. The parties agree that the provisions of Exhibit H are a
severable, independent arbitration agreement separately enforceable from
the remainder of this Agreement.
11.3 Suspense Accounts. At ASSIGNOR's option and as soon as practical after the
Closing, ASSIGNOR shall transfer to ASSIGNEE all funds held by ASSIGNOR in
suspense related to proceeds of production and attributable to third
parties' interests in the Leases or Hydrocarbon production from the Leases
(but not including any suspended funds relating to any Claims described in
Exhibit C), including funds suspended awaiting minimum disbursement
requirements, funds suspended under division orders and funds suspended for
title and other defects. If such funds are transferred to ASSIGNEE,
ASSIGNEE agrees to administer all such accounts and assume all payment
obligations relating thereto in accordance with all applicable laws, rules
and regulations, and shall be liable for the payment thereof to the proper
parties.
11.4 ASSIGNOR's Marks and Logos; Post-Closing Inspections. With respect to any
of the Property that ASSIGNOR operates, ASSIGNEE agrees that within thirty
(30) days after Closing or within thirty (30) days after operations are
actually transferred, whichever is later, it will remove or cause to be
removed the names and marks used by ASSIGNOR and all variations and
derivatives thereof and logos relating thereto from the Property and will
not thereafter make any use whatsoever of such names, marks and logos. If
ASSIGNEE fails to comply with this Section 11.4, ASSIGNOR shall have access
to the Property in order to remove such names, marks, and logos, all at
ASSIGNEE's expense. ASSIGNOR shall also have the right, during reasonable
business hours, to audit all records (excepting federal tax records and
records subject to the attorney/client privilege) of ASSIGNEE pertaining to
the Property for a period of two years from Closing. ASSIGNOR at its sole
cost shall have the right at any time after Closing to reasonable access to
the Property for the purpose of inspecting ASSIGNEE's compliance with the
terms of this Agreement; provided, however, ASSIGNOR shall repair any
damage to the Property resulting from such inspections and any such access
shall be covered by ASSIGNOR's indemnity set forth in Section 8.4.
11.5 Survival of Representations and Warranties. All of the representations,
warranties, covenants, indemnities and agreements of or by the parties to
this Agreement will survive the Closing, the execution and delivery of the
Assignment Documents and other instruments under this Agreement, and the
transfer of the Property between the parties; and they shall not be merged
into or superseded by the Assignment Documents or other documents delivered
at Closing. However, neither party to this Agreement will be entitled to
make a Claim against the other party in connection with the inaccuracy of
the representations and warranties of the other party in this Agreement
unless the other party is notified of that Claim in writing within one (1)
year after the Closing Date.
11.6 Public Announcements. Neither party may make press releases or other public
announcements concerning this transaction, without the other party's prior
written approval and agreement to the form of the announcement, except as
may be required by applicable laws or rules and regulations of any
governmental agency or stock exchange.
11.7 Notices. All notices under this Agreement must be in writing. Any notice
under this Agreement may be given by personal delivery, facsimile
transmission, U.S. mail (postage prepaid), or commercial delivery service,
and will be deemed duly given when received by the party charged with such
notice and addressed as follows:
If to ASSIGNOR: CONOCO INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager, Acquisitions and Divestitures
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
CONOCO OFFSHORE PIPE LINE COMPANY
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇, Vice President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to: CONOCO INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager, Real Property Administration
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to ASSIGNEE: STONE ENERGY CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, Land
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.
11.8 Effective Date. The Effective Date of this Agreement will be 11:59 p.m.,
local time, where the Property is located, on December 31, 2001.
11.9 Binding Effect; Assignment. Except as expressly provided in Section 2.7,
prior to the later of the Closing Date or the Effective Date neither party
may assign its rights or obligations under this Agreement without the prior
written consent of the other, which may be withheld for any reason
including convenience. If ASSIGNEE sells, transfers or assigns all or a
portion of the Property, (i) this Agreement shall remain in effect between
ASSIGNEE and ASSIGNOR as to all the Property regardless of such sale or
assignment (and ASSIGNEE will remain obligated hereunder), and (ii)
ASSIGNEE shall require its successors and assigns expressly to assume its
obligations under this Agreement, to the extent related or applicable to
the Property or portion thereof acquired by them.
11.10Entire Agreement and Amendment. This Agreement, together with any relevant
confidentiality agreement referred to in Section 5.1, constitutes the
entire understanding between the parties, replacing and superseding all
prior negotiations, discussions, arrangements, agreements and
understandings between the parties regarding the subject transaction and
subject matter hereof (whether written or oral), excepting any written
agreements that may be executed by the parties concurrently or after the
execution of this Agreement. No other agreement, statement or promise made
by any party, or to any employee, officer or agent of any party, which is
not contained in this Agreement shall be binding or valid. This Agreement
may be supplemented, altered, amended, modified or revoked by writing only,
signed by the parties hereto.
11.11Interpretation. The parties stipulate and agree that this Agreement shall
be deemed and considered for all purposes to have been jointly prepared by
the parties, and shall not be construed against any one party (nor shall
any inference or presumption be made) on the basis of who drafted this
Agreement or any particular provision hereof, who supplied the form of
Agreement, or any other event of the negotiation, drafting or execution of
this Agreement. Each party agrees that this Agreement has been purposefully
drawn and correctly reflects its understanding of the transaction that it
contemplates. In construing this Agreement, the following principles will
apply.
11.11.1 Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
11.11.2 The word "includes" and its derivatives means "includes, but
is not limited to" and corresponding derivative expressions.
1.11.3 A defined term has its defined meaning throughout this
Agreement and each Appendix, Exhibit and Schedule to this
Agreement, regardless of whether it appears before or after the
place where it is defined.
11.11.4 If there is any conflict or inconsistency between the
provisions of the main body of this Agreement and the provisions
of any Appendix, Exhibit, Schedule or executed Assignment
Document, the provisions of this Agreement shall take precedence.
If there is any conflict between the provisions of any pro forma
Assignment Document or other transaction documents attached to
this Agreement as an Appendix, Exhibit or Schedule and the
provisions of any Assignment Documents and other transaction
documents actually executed by the parties, the provisions of the
executed Assignment Documents and other executed transaction
documents shall take precedence.
11.11.5 The omission of certain provisions of this Agreement from the
Assignment Documents does not constitute a conflict or
inconsistency between this Agreement and the Assignment
Documents, and will not effect a merger of the omitted
provisions. To the fullest extent permitted by law, all
provisions of this Agreement are hereby deemed incorporated into
the Assignment Documents by reference.
11.11.6 The underlined Article, Section and Exhibit references in this
Agreement refer to the Articles, Sections and Exhibits of this
Agreement. The headings and titles in this Agreement are for
convenience only and shall have no significance in interpreting
or otherwise affect the meaning of this Agreement.
11.11.7 The plural shall be deemed to include the singular, and vice
versa
11.11.8 The term "knowledge" as applied to either party, shall mean
the actual knowledge of such party's officers and directors, and
its employees, agents, or representatives at a supervisory level
and above.
11.12Third-Party Beneficiaries. It is understood and agreed that there shall be
no third-party beneficiary of this Agreement, and that the provisions
hereof do not impart enforceable rights, benefits, or remedies in anyone
who is not a party or a successor or assignee of a party hereto.
11.13Successors and Assigns. This Agreement binds and inures to the benefit of
the parties hereto their respective permitted successors and assigns, and
all the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be
enforceable by the parties hereto and their respective permitted successors
and assigns.
11.14Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision will
be deemed modified to the extent necessary to make it valid and enforceable
and if it cannot be so modified, it shall be deemed deleted and the
remainder of the Agreement shall continue and remain in full force and
effect.
11.15Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
11.16Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH
DETERMINATIONS.
11.17Exhibits. The Appendices, Exhibits and Schedules attached to this
Agreement are incorporated into and made a part of this Agreement and,
prior to Closing, ASSIGNOR and ASSIGNEE agree to revise or supplement the
Appendices, Exhibits and Schedules, as and if necessary to more accurately
describe the information mutually intended by the parties to be reflected
thereon.
11.18Waiver. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly
provided in this Agreement, the failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect
such party's right to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant,
representation or warranty contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.
11.19 Default and Remedies.
11.19.1 ASSIGNOR's Remedies. Upon failure of ASSIGNEE to perform any
of the obligations under this Agreement to be performed by
ASSIGNEE prior to and on the Closing Date, ASSIGNOR, at
ASSIGNOR's sole option, may (i) enforce specific performance, or
(ii) terminate this Agreement and retain the Performance Deposit
as agreed liquidated damages and not as a penalty. The remedies
set forth in this Section 11.19.1 shall be ASSIGNOR's sole and
exclusive remedies for any such default, and ASSIGNOR hereby
expressly waives and releases all other remedies (except as
provided in Section 11.19.4).
11.19.2 ASSIGNEE's Remedies. Upon failure of ASSIGNOR to perform any
of the obligations to be performed by ASSIGNOR prior to and on
the Closing Date, ASSIGNEE, at ASSIGNEE's sole option, may (i)
enforce specific performance, or (ii) terminate this Agreement
and receive back the Performance Deposit (without interest) from
ASSIGNOR. The remedies set forth in this Section 11.19.2 shall be
ASSIGNEE's sole and exclusive remedies for such default, and
ASSIGNEE hereby expressly waives and releases all other remedies
(except as provided in Section 11.19.4).
11.19.3 Effect of Termination. Notwithstanding anything to the
contrary in this Agreement (except Section 11.19.4), in the event
of termination of this Agreement, the transaction shall not close
and this Agreement shall become void and have no further effect
whatsoever, and neither ASSIGNEE nor ASSIGNOR shall have any
further liability, obligations, right or duty to the other under
this Agreement, except as provided in Sections 11.19.1, 11.19.2,
and 11.19.4, as applicable.
11.19.4 Other Remedies. Notwithstanding the provisions of Sections
11.19.1, 11.19.2 and 11.19.3, termination of this Agreement shall
not prejudice or impair ASSIGNOR's or ASSIGNEE's rights and
obligations under Sections 5.1 (and the confidentiality
agreements referenced therein), 5.2 (ASSIGNEE's inspections),
5.3.2 (confidentiality of environmental data), and 11.2 (dispute
resolution), and such other portions of this Agreement as are
necessary to the enforcement and construction of Sections 5.1,
5.2, 5.3.2, and 11.2.
IN WITNESS WHEREOF, the authorized representatives of Conoco, COPL and Stone
execute this Agreement on the dates stated below.
CONOCO INC. STONE ENERGY CORPORATION
(formerly Continental Oil Company,
Charter Number 0917525)
By: /s/ W.E. ▇▇▇▇▇▇▇ By: /s/ D. ▇▇▇▇▇ ▇▇▇▇▇
____________________________ _____________________________
Name: W. E. ▇▇▇▇▇▇▇ Name: D. ▇▇▇▇▇ ▇▇▇▇▇
____________________________ _____________________________
Title: Attorney-in-Fact Title: President and CEO
____________________________ _____________________________
Date: October 8, 2001 Date: October 8, 2001
____________________________ _____________________________
Witnesses: ________________________ Witnesses:_____________________________
________________________ _____________________________
CONOCO OFFSHORE PIPE LINE COMPANY
By: /s/ ▇.▇. ▇▇▇▇▇
______________________________
Name: ▇.▇. ▇▇▇▇▇
______________________________
Title: Vice-President
______________________________
Date: October 8, 2001
______________________________
Witnesses: ___________________________
___________________________