Exhibit 10.34
THE PORTIONS OF THIS EXHIBIT 10.34 MARKED "*********" HAVE BEEN
OMITTED HEREFROM AND CONFIDENTIALLY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
PARTICIPATION AGREEMENT
By and Between
McMoRan Oil & Gas LLC and Halliburton Energy Services, Inc.
TABLE OF CONTENTS
Description Page
Article 1 - Subject Matter, Definitions, Exhibits and Construction
1.1 Purpose 2
1.2 Defined Terms 2
1.3 Exhibits 6
1.4 Rules of Construction 7
Article 2 - Term of Participation Agreement 7
Article 3 - Services Agreement
3.1 MOXY Obligation to Use HES Services; Exceptions 7
3.2 Market Rates; Prevailing Terms and Conditions 8
3.3 MOXY Audit Rights 10
Article 4 - Integration of HES Technical Personnel
4.1 Integration of HES Personnel 10
4.2 MOXY to Provide Office Space, Equipment; Conditions Binding
HES Personnel 11
4.3 HES/MOXY Master Consulting Agreement 11
Article 5 - Participation Provisions
5.1 Eligible Properties 11
5.2 Identification and Development of Prospects 11
5.3 Designation of Prospect, Election Point Notification 12
5.4 Exercise of Option, Issuance of Acceptance 13
5.5 HES Share of Prospect Costs and Revenues 13
5.6 Form of Operating Agreement, Elections by Parties 16
5.7 HES's Interest Not Reduced 17
5.8 HES's Obligations Regarding Prospects in Which it Has
Declined to Participate 18
5.9 Nature of HES's Interest 18
5.10 Drainage 19
Article 6 - Guaranty Provisions
6.1 Halliburton Guaranty of Tranche B Indebtedness 19
6.2 Amount Guaranteed 20
6.3 Reimbursement Obligations 21
6.4 Information to be Provided by MOXY to Halliburton 21
6.5 When Guaranty Amount Reduces to Zero; Election Rights Terminate 21
6.6 Halliburton Acknowledgement 21
6.7 Legal Opinion 22
6.8 Certificate to be Delivered to Agent 22
6.9 Representations and Warranties 22
6.10 Covenant With Respect to Brazos A-19 22
6.11 Covenant Relating to Brazos A-19 Non-Consent Options 22
Article 7 - Media Releases 23
Article 8 - Confidentiality
8.1 Confidentiality Obligations 24
8.2 Speculative Seismic Data 25
Article 9 - Governing Law 25
Article 10 - Force Majeure 25
Article 11 - Dispute Resolution 25
Article 12 - Termination
12.1 Termination 26
12.2 Loss of Rights to Eligible Properties 26
Article 13 - Indemnity 26
Article 14 - No Warranty 27
Article 15 - General Provisions
15.1 Further Actions 27
15.2 Amendments 28
15.3 Other Rights, Remedies Reserved 28
15.4 Waiver 28
15.5 Severability 28
15.6 Entire Agreement 28
15.7 Further Assurances 28
15.8 Surviving Obligation 28
15.9 Conflict of Terms 29
15.10 Notices 29
15.11 Change of Address 29
15.12 Tax Consideration 30
15.13 Expenses 30
15.14 No Assignment 30
15.15 Consequential Damages 30
15.16 Counterparts 30
Signatures 31
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT ("Agreement"), is made and entered
into this ____ day of June, 2000, by and between McMoRan Oil & Gas LLC, a
Delaware limited liability company ("MOXY") and Halliburton Energy Services,
Inc., a Delaware corporation ("HES"). MOXY and HES are sometimes hereinafter
referred to individually as "Party" and/or collectively as "Parties".
Halliburton Company, a Delaware corporation ("Halliburton") joins
herein solely for the purpose of agreeing to the provisions of Article 6 of
this Agreement.
WITNESSETH:
WHEREAS, MOXY is in the business of exploring for, developing,
and producing oil and gas in the Gulf of Mexico and other areas; has
demonstrated an ability to locate and develop commercial quantities of
hydrocarbons; and is willing to commit financial and personnel resources now
and in the future to explore for and develop commercial quantities of
hydrocarbons;
WHEREAS, HES is in the business of providing services in connection with
the exploration, development, and production of oil and gas;
WHEREAS, MOXY has expressed an interest in securing HES services in
connection with its exploration, development and production activities; has
expressed an interest in engaging HES technical personnel in connection with
the evaluation of certain oil and gas prospects; and, further, is willing to
grant HES the option to participate in certain oil and gas prospects that
MOXY determines to be capable of commercial development;
WHEREAS, Halliburton, the parent company of HES, in return for these
agreements and commitments by MOXY, is willing to guaranty a revolving credit
facility that MOXY intends to enter into with Lenders and, further, HES and
its Affiliates are willing to provide services and products to MOXY at market
rates, all on the terms more particularly set forth below; and
WHEREAS, the Parties and Halliburton want to establish their
understanding with respect to (i) the terms and conditions under which MOXY
will engage HES's services; (ii) the terms and conditions under which HES will
provide MOXY certain technical personnel; (iii) the terms and conditions under
which HES may elect to participate in certain development prospects that MOXY
identifies; and (iv) the Guaranty that Halliburton will provide for a revolving
credit facility in favor of MOXY.
NOW THEREFORE, for and in consideration of the mutual advantages and
benefits accruing to the Parties and Halliburton, the sufficiency of which
is hereby acknowledged, the Parties and Halliburton agree as follows:
ARTICLE 1
SUBJECT MATTER, DEFINITIONS, EXHIBITS AND CONSTRUCTION
1.1 Purpose
The purpose of this Agreement is to create an arrangement whereby
MOXY and HES each benefit from the particular resources and capabilities of
the other. HES and its Affiliates will provide Services to MOXY, at market
rates, in connection with MOXY's conduct of its oil and gas operations. HES
will also assign personnel to the integrated team described in Article 4
in order to assist MOXY with its exploration, development and producing
operations, to the extent that these exploration, development and producing
operations relate to Eligible Properties and Prospects hereunder. MOXY will
provide HES with the option of participating in oil and gas Prospects that
MOXY proposes to develop as hereinafter provided. Also, Halliburton will
guarantee the Tranche B Credit Facility to MOXY thereby assisting MOXY in the
funding of its oil and gas activities. The matters described in this
Section 1.1 are subject to all of the following terms and conditions of
this Agreement.
1.2 Defined Terms
For the purpose of this Agreement, including the Exhibits, except as
otherwise expressly provided or unless the context otherwise requires, the
terms defined in this Section 1.2 have the meanings assigned to them herein
and the capitalized terms defined elsewhere in the Agreement by inclusion in
quotation marks and parentheses have the meanings so ascribed to them.
Additionally, capitalized terms used in Article 6 shall have the meanings
assigned to them in the Tranche B Credit Facility, which agreement is defined
in Section 6.1(a).
(a) "Acceptance" shall mean HES's formal commitment to participate in a
Prospect in response to an Election Point Notification, as further described
in Section 5.4(a).
(b) "Affiliate" shall mean, with respect to any Party, any other entity
directly or indirectly controlling or controlled by, or under common control
with, such Party. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with") as applied to any Party, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management of such Party, whether through ownership of
voting securities, by contract or otherwise, and specifically with respect
to a corporation, partnership or limited liability company means ownership
of more than fifty percent (50%) of the voting stock in such corporation or
of the voting interest as a partner in such partnership or as a member of
such limited liability company.
(c) "Aggregate Investment Proceeds" shall mean (i) any and all cash raised
by MMR or MOXY following March 24, 2000 from the sale of equity securities,
(ii) loans to MMR or MOXY that are subordinated to the Tranche B Credit
Facility, or (iii) proceeds or financial commitments from the MOXY Program
Participants and Laid Off Interest Participants with respect to the exploration,
development or production of oil, gas and other hydrocarbons (but excluding the
expenditures or commitments of any other party). For purposes of determining
when certain financial commitments by MOXY Program Participants and Laid Off
Interest Participants qualify as Aggregate Investment Proceeds, the
following rules shall apply: (A) As to any MOXY Program Participant that
(x) has discretion with regard to those prospects or properties in which they
will participate and (y) has made a firm financial commitment to participate
in certain prospects or properties, such financial commitment shall qualify as
Aggregate Investment Proceeds as of the date that the MOXY Program Participant
makes such financial commitment; and (B) As to the financial commitment of
any Laid Off Interest Participant, the financial commitment shall qualify as
Aggregate Investment Proceeds (x) on the date of the financial commitment, for
any prospect in which an exploration well is scheduled to be spudded within
six months of the date of such commitment or for any prospect in which an
exploration well has been drilled, and (y) on the date of expenditure, for
any prospect in which an exploration well is scheduled to be spudded more than
six months following the date of such commitment. For purposes of determining
whether the proceeds or financial commitments raised under item (iii) above
qualify as Aggregate Investment Proceeds, the Parties agree that: (i) such
proceeds or commitments must be dedicated to (a) exploration activities
conducted during the Term hereof and/or (b) development activities the cost
of which is to be incurred during the Term hereof, and (ii) the agreements
with respect thereto must be in writing.
(d) "Development Plan" shall mean the plan describing the activities
and operations that MOXY anticipates for the development of a Prospect, as
further described in Section 5.3(b).
(e) "Election Point" shall mean, with respect to any Prospect, the date on
which HES receives the written proposal of MOXY for the development of
the oil, gas or other hydrocarbons that have been identified by an Initial
Test Well.
(f) "Election Point Notification" shall mean the written notice for
each Prospect that MOXY issues to HES, described in Section 5.3.
(g) "Eligible Properties" shall have the meaning ascribed to such term in
Section 5.1.
(h) "Established Book Prices" shall mean the most recent list of prices
and rates for products and services as issued on a regular basis in that
certain publication entitled Halliburton Price Schedule, General Price
Update or its successor publication.
(i) "Guaranty" shall mean that guaranty described in Article 6.
(j) "HES/MOXY Master Service Contract" shall mean the Master Service
Contract being entered into simultaneously with the execution of this
Agreement by HES and MOXY pursuant to the provisions of Article 3 of this
Agreement.
(k) "HES/MOXY Master Consulting Agreement" shall mean the Master
Consulting Agreement being entered into simultaneously with the execution of
this Agreement by HES and MOXY pursuant to the provisions of Article 4 of
this Agreement.
(l) "HES Share" shall mean, with respect to those Prospects and operations
as to which HES elects to participate, the percentage of exploration,
development, and operating costs and expenses which HES shall pay and
the percentage of gross revenues to which HES shall be entitled, subject
to the provisions of Section 5.6(b). The term "HES Share" applies to
five specific categories of costs and revenues: acquisition and exploration
costs and expenses, as described in Section 5.5.1; development costs and
expenses before Prospect Pay-Out, as described in Section 5.5.2(a);
development costs and expenses after Prospect Pay-Out, as described in
Section 5.5.2(b); revenues before Prospect Pay-Out, as described in Section
5.5.3(a); and revenues after Prospect Pay-Out, as described in Section
5.5.3(b). Exhibit "D" gives two illustrations of how the HES Share is
computed, with respect to each of these categories.
(m) "Initial Participation Payment" shall mean those costs and expenses
for which HES is required to reimburse MOXY pursuant to Section 5.5.1.
(n) "Initial Test Well" shall mean any and all exploratory test wells
(including any substitute wells, replacement wells or additional wells)
to identify a Prospect, drilled by MOXY or in which MOXY participates,
prior to the Election Point.
(o) "Laid Off Interest Participant" shall mean a party other than a
MOXY Program Participant: (i) which agrees to bear a portion of MOXY's or
the MOXY Program Participants' exploration costs of a particular prospect
on a promoted or non-promoted basis where MOXY or the MOXY Program
Participants continue to hold a working interest and participate in such
exploration activity or (ii) which does not participate in the exploration
activity but which agrees to bear all or a portion of MOXY's or the MOXY
Program Participants' development costs of a particular prospect on a
promoted or non-promoted basis where MOXY or the MOXY Program Participants
continue to hold a working interest or a post-payout working interest
following recoupment of such development costs.
(p) "Lenders" shall mean those lenders under the Tranche B Credit Facility,
as further described in Article 6.
(q) "Letter of Intent" shall mean the agreement, effective March 24,
2000, by and between MOXY, MMR and Halliburton. The Letter of Intent
anticipated and provided for this Participation Agreement.
(r) "Market Rates" shall have the meaning set forth in Section 3.2.
(s) "MMR" shall mean McMoRan Exploration Co., a Delaware corporation.
(t) "MOXY Program Participants" shall mean MOXY and those other parties
participating through MOXY on a program-type basis in a significant portion
of MOXY's exploration activities at the time an Initial Test Well is drilled,
and specifically excluding the Laid Off Interest Participants.
(u) "Operating Agreement" means that form of Operating Agreement which is
attached hereto as Exhibit "E".
(v) "Participation Agreement" shall mean this Agreement, including all
Exhibits.
(w) "Plugging and Abandonment" means the plugging, replugging, abandonment,
removal, disposal, seafloor restoration and remediation obligations which
are required for wells drilled or other operations conducted pursuant to
this Agreement and the applicable Operating Agreement or Alternative
Operating Agreement hereunder. Such obligations shall include, but not be
limited to, all necessary and proper plugging and abandonment and/or removal
and disposal of the wells, structures, and equipment located on or associated
therewith, the necessary and proper capping and burying, if required, of all
associated flow lines, and any necessary disposal of all materials,
including, but not limited to, all hazardous and non-hazardous materials
and naturally occurring radioactive material.
(x) "Prospect" shall mean a certain portion(s) of the area covered
by an oil and gas lease(s) or mineral interest(s), described by vertical and
horizontal boundaries (i.e. such as a cube) that encompasses those discrete
geological formations and structures that MOXY, based on a reasonable
interpretation of geological and geophysical data, encounters in an
Initial Test Well and which MOXY identifies and proposes, during the
Term of this Agreement, to develop in accordance with this Agreement,
it being understood that such Prospect shall reasonably encompass all oil
and gas reserves that are anticipated to be developed pursuant to the
Development Plan for such Prospect; provided, however, if pursuant to the
provisions of Section 5.4 HES elects not to participate in one or more of
the exploration wells (including the associated incremental facilities)
described in the Development Plan for a Prospect, then such Prospect area
will be limited to the area(s) of the reservoir(s) discovered by the Initial
Test Wells and to be developed by the development wells in the Development
Plan and the areas of the reservoirs discovered in the exploration well(s)
in which HES has elected to participate. MOXY shall not be obligated to
issue an Election Point Notification with respect to (i) those MOXY-owned
working interests that contain commercial reserves of oil or gas that MOXY
has identified prior to the effective date of this Agreement as listed
in Exhibit "B", and (ii) any oil and gas rights that MOXY acquires
following the effective date of this Agreement, the value of which at the
time of acquisition is primarily associated with the value of the oil and
gas reserves thereon that are proved and probable.
(y) "Prospect Pay-Out" shall mean, with respect to any Prospect, 7:00 a.m.
on the day following the date on which HES has recovered from the proceeds
of the sale of HES's share of oil, gas, and other hydrocarbons produced from
the Prospect, after deduction of:
(i) royalties, overriding royalties, net profits interests and other such
burdens that also affect the interests of the MOXY Program Participants;
(ii) lease operating expenses (including, but not limited to, processing,
handling, and transportation fees and charges); and
(iii) severance, ad valorem and other similar taxes,
an amount equal to one hundred percent (100%) of the following costs that
HES incurs on the Prospect, namely (x) the Initial Participation Payment;
y) the additional costs and expenses of drilling, testing and completing
the Initial Test Well, and the costs and expenses of drilling, testing and
completing all wells in which HES has participated; and (z) the costs and
expenses of purchasing, constructing, installing, and operating all
platforms, jackets, caissons, pipelines, and other facilities, machinery,
equipment, and supplies used in producing oil, gas, and other hydrocarbons
from the Prospect (or a reasonably allocable share of such costs and expenses,
as appropriate, if any such items are serving Prospect wells and any other
wells), less the amount of any credits or payments that HES may receive or
be credited with as a result of insurance recoveries, the conduct of audits,
and other credit items related thereto. The inclusion of the costs and
expenses described in items (y) and (z) above shall be subject to the
provisions of Section 5.6(b).
(z) "Reimbursement Obligations" means the obligations of MOXY to HES
pursuant to Section 6.3(a).
(aa) "Security" shall mean a first priority lien on MOXY's right, title and
interest in and to Lease OCS-G 3936 covering Brazos Block A-19.
(bb) "Services" or "HES Services" shall mean the oilfield products and
services provided by HES and its Affiliates, as further described in Article
3 and in the HES/MOXY Master Service Contract.
(cc) "Shortfall" is a capitalized term used in Article 6 and has the
meaning assigned to it in the Tranche B Credit Facility referred to
therein.
(dd) "Term" shall have the meaning ascribed to it in Article 2.
(ee) "Tranche B Credit Facility" shall mean that revolving credit
facility that MOXY establishes with the Lenders, as further described in
Article 6. The principal balance of the Tranche B Credit Facility shall
not exceed an outstanding balance of the amount described in
Section 6.1(a).
1.3 Exhibits
The following Exhibits are attached hereto and incorporated herein by
reference:
(a) Exhibit "A" - Schedule of Existing Agreements That Prevent or Restrict
MOXY From Using HES Services
(b) Exhibit "B" - Schedule of Properties Containing Commercial Reserves,
As of the Date of This Participation Agreement.
(c) Exhibit "C" - Form of Election Point Notification and List of
Materials
(d) Exhibit "D" - Example Computations of the HES Share
(e) Exhibit "E" - Form of Operating Agreement
(f) Exhibit "F-1" - Form of Deed of Trust (Texas)
(g) Exhibit "F-2" - Form of Mortgage (Louisiana)
(h) Exhibit "G-1" - Form of Financing Statement (Texas)
(i) Exhibit "G-2" - Form of Financing Statement (Louisiana)
(j) Exhibit "H" - Dispute Resolution Procedure
1.4 Rules of Construction
For purposes of this Agreement:
(a) Unless the context otherwise requires: (1) "or" is not exclusive;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with accounting principles generally accepted in the United
States of America; (3) words in the singular include the plural, and words
in the plural include the singular; (4) words in the masculine include the
feminine, words in the feminine include the masculine and words with
appropriate correlative meanings include such correlative meanings; (5) any
date specified for any action that is not a business day shall be deemed to
mean the first business day after such date; (6) reference to a person
includes such person's successors and assigns and, in the case of
governmental bodies, persons succeeding to their respective functions and
capacities; and (7) any amounts due or payable under this Agreement shall
be paid in United States currency.
(b) References to "Articles" and "Sections" are, unless otherwise
specified, to the articles and sections of this Agreement. Neither the
captions to Articles or Sections thereof nor the Table of Contents
shall be deemed to be a part of this Agreement but are added for
convenience only.
(c) References herein to any other agreement or other instrument shall,
unless the context otherwise requires (or the definition thereof otherwise
specifies), be deemed references to the same as it may from time to time be
changed, modified, supplemented, amended or extended.
ARTICLE 2
TERM OF PARTICIPATION AGREEMENT
The Term of this Agreement shall run from March 24, 2000, the effective
date of the Letter of Intent, through December 31, 2003, unless terminated
sooner in accordance with Article 12 or extended by mutual agreement of
the Parties (such period of time being referred to as the "Term").
ARTICLE 3
SERVICES AGREEMENT
3.1 MOXY Obligation to Use HES Services; Exceptions
(a) Where MOXY acts as operator of an oil and gas property, MOXY will
use HES Services exclusively during the Term hereof, provided that MOXY
shall not be required to utilize HES Services with respect to any service
or product which
(i) HES does not generally provide in the Gulf of Mexico and the Gulf
Coast area;
(ii) HES is unwilling or unable to deliver within a time frame which is
reasonably acceptable to MOXY;
(iii) is not in the best interest of economic and efficient recovery
of hydrocarbons, it being understood that the determination of the existence
of this condition shall not be based primarily on pricing considerations;
(iv) in MOXY's opinion, unless substantiated otherwise by HES in written
materials, will or has the potential to result in substandard performance or
higher costs which could adversely impact either productivity or financial
performance;
(v) has been proven to result consistently in substandard well productivity
and performance, or substandard wellbore evaluation;
(vi) is experimental or untested; or
(vii) applies to specific tasks to the extent of: (a) any existing
agreements that bind MOXY to use other products or services or limit or
prohibit the use of HES Services as provided herein (being those
agreements listed on Exhibit "A"), and (b) any new agreements entered
into by MOXY on new prospects, that limit or prohibit MOXY from utilizing
HES Services; provided, however, MOXY will use commercially reasonable
efforts to obtain waivers of such limitations and prohibitions wherever
practicable, and MOXY will not enter into new alliances with service
providers that conflict with the commitment made by MOXY under this
Article 3 to utilize HES Services. HES certifies that based on its
knowledge of the market, the Market Rates provided for herein are
fully competitive. MOXY believes that these Market Rates will satisfy
its obligation under the Texaco Joint Operating Agreement and other
agreements to use competitive rates (or similar general term) for
products and services. MOXY further agrees to use good faith efforts to
uphold such rates as competitive in any third party audits or claims
where the competitive nature of such pricing is an issue. The agreement
of MOXY as expressed above is not applicable to major construction or
other similar projects that are subject to requirements calling for the
use of formal bidding procedures.
(b) Notwithstanding the provisions of Section 3.1(a) above,
where MOXY acts as operator of an oil and gas property and plans to
conduct a drilling or other operation pursuant to a turnkey-type
contract, MOXY shall specify the use of HES Services under such
turnkey-type contract unless the use of such HES Services will have a
material adverse impact on the overall attractiveness of such
turnkey-type contract, it being understood that overall value as well as
pricing shall be taken into consideration.
3.2 Market Rates; Prevailing Terms and Conditions
HES and its Affiliates shall invoice MOXY for HES Services on the
basis of Market Rates, as follows:
(a) For all oilfield services (including but not limited to all wellbore
services) that Halliburton Energy Services (or other HES Affiliates)
routinely provides and that satisfy the requirements of Section 3.1, the
term "Market Rates" means Halliburton Energy Services' Established Book
Prices for the general area where the work is being performed (e.g., the
Gulf of Mexico, onshore Louisiana/Texas Gulf Coast, etc.), less *********.
The oilfield services covered by this subparagraph
(a) are listed in Part I of Exhibit "A" to the HES/MOXY Master Service
Contract. The ******* discount percentage for these oilfield
services using the above described Market Rates definition, for the period
from the effective date hereof through June 30, 2000, shall be as set
forth on Part I of Exhibit "A" to the HES/MOXY Master Service Contract.
HES shall provide MOXY, within thirty (30) days following the end of
each calendar quarter, with an update on the ******** discount for
all such oilfield services, in accordance with the above described Market
Rates definition, together with a written certification as to the
correctness of such discounts by a vice-president of Halliburton Energy
Services. Such discounts shall be effective as of the first day of the
second calendar month of the quarter in which the update is provided. Part
I of Exhibit "A" to the HES/MOXY Master Service Contract shall be revised
periodically to reflect changes in the listed Services and other
modifications, as appropriate.
(b) For all other Services that HES or its Affiliates provide and
that satisfy the requirements of Section 3.1, the term "Market Rates" means
the current competitive market rate *******, mutually agreed upon by HES, or
its designee, and MOXY, for the applicable Service. A listing of these
Services as contemplated at the time of execution of this Agreement, as well
as the Market Rates for these Services, for the period from the effective
date hereof through June 30, 2000, shall be as set forth in Part II of
Exhibit "A" to the HES/MOXY Master Service Contract. These Market Rates
will be renegotiated on a semi-annual basis (unless otherwise mutually
agreed) using the Market Rates standard described in this subparagraph
(b). With respect to any Services not listed in Part II of Exhibit "A"
to the HES/MOXY Master Service Contract, the Parties will negotiate a
competitive Market Rate for such Service at the time MOXY proposes the use
of the unlisted product or service. The rates recited in Part II of
Exhibit "A" to the HES/MOXY Master Service Contract shall be revised
whenever necessary to reflect all changes as provided for herein.
With respect to the negotiation of Market Rates described in
subparagraph (b) of this Section 3.2, HES and its Affiliates will act in
good faith with respect to the use of their knowledge of competitive
market rates that will exist from time to time during the Term, it being
intended that the Market Rates determined under Section 3.2(b) will
generally be at least as favorable to MOXY as the Market Rates
determined under Section 3.2(a) for oilfield services. Notwithstanding
the provisions of this Article 3, should the Parties fail to agree, after
good faith negotiations, on a negotiated or renegotiated Market Rate under
this Section 3.2(b) for particular Services of HES or any of its
Affiliates (including Brown & Root Energy Services), then MOXY shall not
be obligated to use such Services for the applicable semi-annual period(s).
(c) Except as otherwise provided herein, the terms and conditions
governing the performance of services by HES pursuant to this Article 3
are set forth in the HES/MOXY Master Service Contract. In the event
services are required of Affiliates of HES, the terms and conditions of
the HES/MOXY Master Service Contract shall be applicable to such services
pending the execution of a separate master services agreement with such
Affiliates, it being understood, however, that such Affiliate master
services agreement shall contain substantially the same terms and
conditions as the HES/MOXY Master Service Contract including application
of Market Rates. Notwithstanding the above, if the services to be provided
are of the type that customarily are covered by an agreement designed to
address the particular (and usually more complex) requirements for that
type of service, such as fabrication and installation services, unusually
hazardous services and turnkey services, where a master services agreement
is not customarily utilized, then the parties will utilize a mutually
acceptable form of agreement specifically addressing the particular
requirements for that service.
3.3 MOXY Audit Rights
MOXY will have the right, not more frequently than once per calendar quarter,
to engage an independent auditing firm (i) to audit the rates and conditions
that HES is charging for HES Services; and (ii) to verify whether these
rates and conditions are consistent with the terms of this Agreement,
including but not limited to the requirements of Section 3.2; provided,
however, such audit and verification of the Market Rates established by
negotiation pursuant to Section 3.2(b) hereof shall not include any
examination or audit of *********. The Parties agree that MOXY has the right
to utilize the same independent auditing firm that MOXY uses to audit its
own records to conduct the above-described audit. HES may require the firm
conducting such audit to agree to treat as confidential and not disclose to
MOXY *********. Upon completion of any such audit, the independent auditor
shall issue its report to MOXY and HES. In the event the independent auditor
determines that HES is not invoicing MOXY at rates or offering conditions
consistent with the terms hereof, the independent auditor shall, following
consultations with MOXY, advise the Parties of the value of the price
discrepancy and the details of the inconsistency. In such event, HES shall
have fifteen (15) days following receipt of such advice from the auditors
to either: (i) correct the discrepancy through a payment to MOXY and, as
appropriate, provide amendments to the applicable service
or supply agreements containing an appropriate adjustment of contractual
conditions, or (ii) notify MOXY in writing that it contests the findings of
the auditor including a detailed list of the items contested and an
appropriate explanation of the reasons for its disagreement. In the
case of a contest under (ii) above, the Parties will use diligent efforts
to promptly and fully resolve the contested items. The same procedures for
corrections or notifications that are described above shall apply to MOXY
in the event the independent auditor determines that a discrepancy exists
in favor of HES.
ARTICLE 4
INTEGRATION OF HES TECHNICAL PERSONNEL
4.1 Integration of HES Personnel
MOXY and HES will develop an organizational structure involving MOXY and
HES employees to manage the tasks associated with exploration, development
and producing operations on Prospects and Eligible Properties. MOXY and
HES will work together in an integrated team approach on a mutually
agreed basis, provided that MOXY shall maintain overall authority concerning
all operations and activities relating to such Eligible Properties and
Prospects. The provisions of this Article 4 shall apply solely to the
utilization of the HES personnel described in this Article 4 and not to
the personnel of HES and its Affiliates as described in Article 3 and the
HES/MOXY Master Service Contract.
4.2 MOXY to Provide Office Space, Equipment; Conditions Binding HES
Personnel
HES will provide its technical personnel to MOXY on a full time or part
time basis as needed by MOXY and mutually agreed by MOXY and HES. MOXY will
provide HES's personnel with office space in MOXY's New Orleans office or
in an office where work on Prospects, potential Prospects, or acreage
associated therewith is being conducted. In addition, MOXY will provide
the necessary office and other facilities, comparable to those provided to
MOXY employees and other MOXY consultants, conducting similar types of work,
in MOXY's New Orleans offices, in order to allow HES's personnel to work
with, consult or advise on matters directly related to the Prospects and
potential Prospects. The above described MOXY office space and facilities
shall be provided at MOXY's expense. At MOXY's request, HES will remove and
replace its personnel and will not remove or reassign key personnel assigned
to the work contemplated hereunder without MOXY's approval, which will not
be unreasonably withheld. Any HES personnel located in a MOXY designated
office will be subject to the rules, guidelines, policies and procedures
applicable to MOXY employees resident in MOXY's office. In addition, HES
shall require all such HES personnel to comply with the confidentiality
provisions of this Agreement (Section 8.1) and with the confidentiality
provisions of all farmouts, subleases and other agreements to which MOXY
is bound, and HES shall serve as guarantor of such personnel's compliance
with these confidentiality obligations. With respect to the provision of
services by HES personnel under this Article 4, the insurance and indemnity
provisions of the mutually agreed Master Service Contract described in
Section 3.2 shall be applicable.
4.3 HES/MOXY Master Consulting Agreement
The terms and conditions of the HES/MOXY Master Consulting Agreement,
including but not limited to the compensation provisions thereof, shall
govern the performance of such services.
ARTICLE 5
PARTICIPATION PROVISIONS
5.1 Eligible Properties
The oil and gas properties that are subject to this Agreement and which may
qualify as Prospects hereunder, shall include any exploration properties or
prospects in which MOXY holds, acquires, or obtains a right to acquire a
working interest during the term of this Agreement (other than as provided
in the final sentence of Section 1.2(x) (the "Eligible Properties").
5.2 Identification and Development of Prospects
During the Term hereof, MOXY will continue to evaluate Eligible Properties
for their commercial potential as Prospects. In this connection, MOXY will,
as it deems appropriate, develop and assess geological and geophysical data,
conduct exploration activities, acquire oil and gas interests (or the right
to do so), and drill Initial Test Wells.
5.3 Designation of Prospect, Election Point Notification
Subject to the provisions of Section 6.5 hereof, MOXY shall issue an
Election Point Notification to HES whenever during the Term hereof MOXY
proposes to develop a Prospect for the production of oil and/or gas.
MOXY's obligation to issue an Election Point Notification to HES shall
also extend to any Prospect where an Initial Test Well encounters commercial
hydrocarbons prior to the end of the Term and MOXY proposes to commence
development of the Prospect within six months following the expiration
of the Term. The Election Point Notification shall include:
(a) Description of the Prospect. A description of the Prospect
(in accordance with Section 1.2(x)), together with a summary of the
geological and geophysical data, well logs, production tests (if
applicable) and other information which MOXY deems relevant.
(b) Development Plan. A Development Plan that describes the required
scope of the development activities and operations that MOXY anticipates
to produce the Prospect hydrocarbons. The Development Plan may be amended
or supplemented, at any time, by mutual agreement of the Parties. The
Parties further acknowledge that the failure to agree on any amendment or
supplement of the Development Plan that represents a material alteration
thereof will not prevent MOXY from proposing or conducting further
operations respecting a Prospect, pursuant to the applicable Operating
Agreement, and HES's participation with respect thereto shall be governed
by Section 5.6(b). If the Development Plan includes one or more
exploration wells (and facilities related thereto), then MOXY shall
segregate and reasonably allocate for each such exploration well on an
incremental cost basis (including costs such as the cost of additional
platform slots or larger facilities), the costs thereof included within
such Development Plan.
(c) Estimate of Initial Participation Payment. A statement containing an
estimate of the total amount of the costs and expenses that will constitute
the Initial Participation Payment.
(d) Statement of Interests that MOXY Program Participants Hold in the
Prospect. A Statement of Interests that (i) advises HES of the interests
that MOXY Program Participants hold in the Prospect; and (ii) describes the
HES Share, as it would apply to exploration costs, development costs, and
revenues, both before Prospect Pay-Out and after Prospect Pay-Out.
Exhibit "C" contains a form of Election Point Notification. Prior to
issuing the Election Point Notification with accompanying materials to
HES on a Prospect, MOXY will make available to HES in MOXY's offices or
other mutually agreed location(s) all data and information in MOXY's
possession and control relating to the Prospect in order to assist HES in
making an informed decision regarding participation in such Prospect.
Notwithstanding the foregoing, HES acknowledges that MOXY has no
obligation to make available data or information that does not exist, is
unavailable or as to which MOXY is prohibited from disclosing to HES, and
that MOXY makes no representations or warranties relating to any geologic
maps or other materials reflecting interpretations by the personnel of MOXY,
its consultants or others. HES also acknowledges that MOXY shall not be
obligated to generate or produce data, information or materials that it is
not producing for its own purposes in connection with making its own
decision regarding development of the Prospect. The types of materials that
the Parties anticipate being made available, depending on the particular
Prospect involved, are shown on Part II of Exhibit "C".
5.4 Exercise of Option, Issuance of Acceptance
HES shall have ten (10) days from receipt of an Election Point Notification
(or thirty (30) days if the total cost to HES for participation in the
Development Plan (including the Initial Participation Payment) is more
than $20,000,000) to advise MOXY, in writing:
(a) that it will participate in the Prospect (the "Acceptance"), in which
event it will have the rights and obligations set forth below in this
Agreement as to the Prospect, including but not limited to, those described
in Sections 5.5 through 5.7; or
(b) that it will not participate in the Prospect, in which event HES
will have no rights or obligations as to such Prospect except that the
provisions of Article 5.8 will be applicable. Failure of HES to make
an election within the time period identified above shall constitute an
election not to participate.
Notwithstanding anything to the contrary contained in this Agreement, in
the event the Development Plan for a Prospect includes one or more
exploration wells (and facilities related thereto), HES may, at the same
time that it makes its primary election for the Prospect, elect to not
participate in the costs associated with one or more of such exploration
well(s) (including the facility costs allocated thereto). In the event of
such an election not to participate in one or more exploration well(s), HES
will have no rights or obligations with respect to such well(s) and
facilities and the production attributable thereto, with the Prospect in
which HES participates being defined by the proviso in Section 1.2(x).
5.5 HES Share of Prospect Costs and Revenues
Provided that HES has elected to participate in a Prospect in accordance
with the provisions of Article 5.4(a) above, HES shall pay the HES Share
of costs and expenses and shall receive the HES Share of revenues, as
follows:
5.5.1 The Initial Participation Payment
(a) HES shall pay MOXY for the HES Share of the costs and expenses for
lease acquisition, exploration, development and operating costs incurred
during all periods prior to the Election Point, regardless of whether MOXY
has received all invoices, which costs and expenses shall include but are
not limited to all payments or reimbursements made for: (i) the acquisition
of rights and interests in, and facilities and platforms associated with,
the Prospect (including all costs, expenses and financial obligations,
including without limitation, such items as lease bonuses or purchase costs
and rentals, bonds, and pre-paid reclamation costs but excluding such items
as debt service and related costs), (ii) the acquisition, licensing and/or
processing of geological, geophysical and other data and analyses obtained
by MOXY for its evaluation of the Prospect (including the actual retainers
for MOXY's technical consultants including but not limited to CLK Company,
L.L.C.); (iii) the conduct of surveys, site preparation and permitting;
(iv) the securing of access or surface or facilities use rights and/or
platform space; and (v) the drilling, logging, coring and testing, as
applicable, of the well(s) constituting the Initial Test Well including
temporary abandonment or completion costs. All prior exploration
expenditures, lease and land acquisition costs, seismic data costs and other
similar items relating to the lease(s) on which the Prospect is located
shall be charged to the Prospect unless MOXY has a prior or concurrent
development of proven reserves on a portion of the lease(s) that is not
part of the Prospect, in which event an appropriate allocation of costs
shall be made. With respect to the package of properties acquired by
MOXY from Shell Offshore Inc. in December 1999, MOXY shall, following
consultation with HES, make a reasonable and equitable allocation of the
costs of such acquisition to the properties covered thereby in accordance
with generally accepted accounting principles.
With respect to the amount of the reimbursements to which MOXY is entitled
in accordance with the foregoing provisions of this Section 5.5.1(a), to
the extent that HES is obligated to obtain a data use license for the
activities contemplated under this Agreement related to a Prospect with
respect to the same geophysical or seismic data as to which MOXY already
holds a license, and HES pays licensing fees in order to obtain the required
license, HES will receive a credit for the amount of such data license fees
up to but not exceeding the amount of the reimbursement to which MOXY would
otherwise be entitled for data license costs on the Prospect in question for
the same geophysical or seismic data.
MOXY shall issue an invoice(s) to HES following its Acceptance under
Section 5.4 for the costs and expenses described above and constituting the
Initial Participation Payment. Within ten (10) days following HES's
receipt of any such invoice, HES shall pay to MOXY or to the Collateral
Account for the benefit of MOXY as provided in Section 6.2(a)(ii), whichever
is appropriate, the amount of such invoice by wire transfer of immediately
available funds. In order to facilitate the calculation provided for in
Section 6.2(a)(ii), each MOXY invoice shall list separately: (i) the
development costs, and (ii) all other costs. The amounts invoiced by MOXY
under this paragraph shall be subject to adjustment to take into account
deferred billings by suppliers and service providers and other appropriate
adjustments following the issuance of the original invoice.
(b) The HES Share of these costs and expenses shall be equal to 20% of the
aggregate costs and expenses of all MOXY Program Participants, but without
reduction for the benefit of any disproportionate cost sharing by Laid Off
Interest Participants.
(c) HES shall have the right to audit the above described costs and
expenses in accordance with the provisions of the applicable COPAS
accounting procedure.
5.5.2 Development and Operating Costs
(a) Before Prospect Pay-Out, the HES Share shall be equal to 20% of the
aggregate costs and expenses incurred on behalf of all MOXY Program
Participants associated with the Prospect during all periods following the
Election Point, excluding costs and expenses allocable to (i) any parties
holding interests in the Prospect who are not MOXY Program Participants
and (ii) the working interest of a farm-out party who elects to participate
in the development of the Prospect. However, in any case, HES shall bear
only 6% of the Plugging and Abandonment costs relating to a Prospect that
are incurred on behalf of all MOXY Program Participants; except that where
such Plugging and Abandonment costs are incurred prior to Prospect Pay-Out,
HES shall bear 20% of the Plugging and Abandonment costs relating to any well
on the Prospect that are incurred on behalf of all MOXY Program Participants
and 6% of all other Plugging and Abandonment costs that are incurred on
behalf of all MOXY Program Participants.
(b) After Prospect Pay-Out, the HES Share of the costs and expenses shall
be reduced from 20% to 6% of any costs and expenses that are incurred on
behalf of all MOXY Program Participants.
5.5.3 Revenues
(a) Before Prospect Pay-Out, the HES Share of revenue shall be equal
to 20% of the revenue attributable to the working interests of all MOXY
Program Participants in the Prospect (subject to the royalties,
overriding royalties, net profits, and other burdens and conditions
applicable to such interests, including, but not limited to, the
overriding royalty payable to MOXY's technical consultant, CLK Company,
L.L.C.). However, the HES Share of revenue before Prospect Pay-Out
shall not be based on the revenue allocable to (i) any parties holding
interests in the Prospect who are not MOXY Program Participants; (ii)
any farm-out party who elects to participate in the development of the
Prospect; and (iii) a farm-out party having a working interest in the
Prospect, after payout is achieved under such farm-out (subject
to any applicable burdens and conditions).
(b) After Prospect Pay-Out, the HES Share of revenue shall be 6% of the
revenue attributable to the working interests of all MOXY Program
Participants in the Prospect (subject to such royalties, overriding
royalties, net profits, and other burdens and conditions applicable to
such interests). However, the HES Share of revenue after Prospect Pay-Out
shall not be based on the revenue allocable to (i) any parties holding
interests in the Prospect who are not MOXY Program Participants;
(ii) any farm-out party who elects to participate in the development of
the Prospect; and (iii) a farm-out party having a working interest in the
Prospect, after payout is achieved under such farm-out (subject to any
applicable burdens and conditions). As used in this Section 5.5.3, the
words "burdens and conditions" shall be those burdens and conditions
affecting MOXY's ownership interest in the Prospect.
5.5.4 Reinstatement of Prospect Pay-Out
The Parties acknowledge the possibility of a situation where Prospect
Pay-Out occurs prior to the completion of a significant portion of the
development activities contemplated in the Development Plan for a Prospect.
In the event this situation occurs and MOXY has previously advised HES of
the possibility of such occurrence in the Development Plan, the pre-
Prospect Pay-Out status and interests of the Parties shall be reinstated
and the further costs will be assessed against Prospect Pay-Out, and the
subsequent revenues (including the revenues from both the original
development, as well as the new development) will be combined for Prospect
Pay-Out purposes.
5.5.5 Plugging and Abandonment Costs For Certain Properties
In the event that HES elects to participate in a Prospect on Eugene Island
Block 193, Eugene Island Block 208, or Eugene Island Block 215 (the
"Blocks"), HES shall bear 20% of the aggregate costs and expenses of all
MOXY Program Participants (but without reduction for the benefit of any
disproportionate cost sharing by Laid Off Interest Participants) of the
Plugging and Abandonment costs that MOXY has obligated itself to incur
in connection with the acquisition from Texaco of rights in these Blocks,
it being understood and agreed that, as to these Blocks: i) the HES Share
of any Plugging and Abandonment costs is in the nature of the acquisition
costs described in Section 5.5.1(a)(i), and ii) MOXY shall charge HES
for these Plugging and Abandonment costs (based upon MOXY's book value
of the Plugging and Abandonment liability in accordance with
generally accepted accounting principles at the time of the HES election)
as part of the amounts included in the invoice(s) for the Initial
Participation Payment. HES shall be relieved of all further
responsibility for Plugging and Abandonment costs associated with
any such wells, platforms or other facilities upon its payment of its
share thereof through its Initial Participation Payment. The Parties will
apply the same formula with respect to the Plugging and Abandonment costs
of any wells, platforms or other facilities existing at the time of
acquisition on Prospects where all or a substantial part of the
consideration for acquisition is MOXY's agreement to assume Plugging
and Abandonment costs associated with such wells, platforms or other
facilities.
5.6 Form of Operating Agreement, Elections by Parties
(a) The Operating Agreement, attached hereto as Exhibit "E", as
appropriately modified to conform to the requirements of each Prospect,
shall apply to the development of those Prospects in which HES has
elected to participate. However, for those Prospects where another
form of operating agreement is otherwise applicable (an "Alternative
Operating Agreement"), then the terms of such Alternative Operating
Agreement shall apply as between MOXY and HES, and HES shall have the
right to exercise elections thereunder, except as otherwise provided
in this Agreement. The Parties acknowledge that HES will never be a direct
party to any Alternative Operating Agreement and that, in the case of a
Prospect where an Alternative Operating Agreement applies, HES's rights
and obligations will be defined by this Agreement and the Alternative
Operating Agreement. Moreover, as between MOXY and HES, to the extent
that the terms of this Agreement conflict with the terms of the Operating
Agreement or an Alternative Operating Agreement, the terms of this
Agreement shall control.
(b) HES commits to participate in any and all operations that relate to
the implementation of the Development Plan (as originally proposed or as
revised by the Parties) for the Prospects in which HES has elected to
participate, except (i) where a proposed operation represents a material
alteration in the scope of the Development Plan (as originally proposed or
as revised by the Parties) or (ii) where the expenditures on any operation
that are approved by an AFE exceed the original AFE amount by 100% or more.
For clarification, the drilling of any well, the setting of any facilities,
the re-working or re-completion of any well, or similar significant
expenditures which are proposed to be carried out prior to Prospect Pay-Out
and were not included in the Development Plan (as originally proposed or
as revised by the Parties) shall be deemed to be a material alteration to
the scope of the Development Plan. In those cases, HES shall be entitled
to non-consent the additional expenditures for such operation. Where HES
determines to non-consent pursuant to (i) or (ii) above, it automatically
forfeits and shall be deemed to have assigned to MOXY, without
compensation, its interest in such operation (though not in the Prospect).
Where HES's decision to non-consent is based on the option provided in
sub-part (ii) above, then the amount that HES expended on the operation,
before it made the non-consent election, shall not constitute a part of
the total expenditures for purposes of calculating Prospect Pay-Out.
Notwithstanding the above, HES shall be obligated to participate in those
operations for which a non-consent election is not applicable under the
applicable Operating Agreement or Alternative Operating Agreement,
including, but not limited to, Plugging and Abandonment operations.
In the event that (i) an Alternative Operating Agreement applies, and
(ii) MOXY advises HES that it plans to decline to participate in an
operation thereunder, then MOXY shall offer HES the opportunity to
participate in such operation in accordance with the terms of the
Alternative Operating Agreement by bearing and paying the share of costs
of such operation attributable to the interests of both HES and MOXY
(excluding the interests of any MOXY Program Participants who may be
separately participating in such operation). Should HES elect
to participate on this basis before Prospect Pay-Out, then MOXY shall,
on HES's behalf, elect to participate in such operation under the
Alternative Operating Agreement, and MOXY shall automatically forfeit
and shall be deemed to have assigned to HES, without compensation, its
interest in such operation only. The costs of such operation incurred by
HES and the revenues therefrom shall not be credited toward Prospect
Pay-Out for that Prospect. Should HES elect to participate on this
basis after Prospect Pay-Out, then MOXY shall, on HES's behalf, elect to
participate in such operation under the Alternative Operating Agreement,
and the applicable non-consent penalty shall apply with respect to that
operation as between MOXY and HES.
For purposes of this Section 5.6(b), the term "operations" means any
activity (including any purchase) that is customarily subject to
approval under an Authority for Expenditure under the applicable Operating
Agreement.
(c) Except as otherwise expressly provided in this Agreement, the rights
and obligations of HES under this Agreement as well as the above provisions
regarding the conditions associated with the ownership of oil and gas
interests shall be subject to the provisions of all agreements entered
into between MOXY and third parties governing such interests. The
foregoing language of this paragraph (c) is not intended to allow MOXY to
take actions which benefit MOXY while adversely affecting the interests of
HES.
5.7 HES's Interest Not Reduced
After commencement of drilling of any Initial Test Well, MOXY shall
not reduce the ********* (as described in Section 5.9) in the
Prospect to which HES would be entitled at the time of an Election
Point Notification without HES's prior written approval, unless required to
do so by agreements existing at the time of such commencement; provided,
however, if that Initial Test Well does not establish oil or gas reserves
sufficient for commercial development (using MOXY's generally applicable
parameters for commercial development), then the above described protection
of HES's Share will no longer be applicable; and provided further that HES's
Share shall not be reduced for the interest of a Laid Off Interest
Participant whose status is determined under Section 1.2(o)(ii).
5.8 HES's Obligations Regarding Prospects in Which it Has Declined to
Participate
For all Prospects in which HES declines to participate, HES will: (i)
continue to maintain the confidentiality of all data and information
provided or to which it has had access, as set forth in Section 8.1, and
(ii) not acquire any interests in such Prospect without offering such
interest to MOXY at HES's actual cost, for a period of three years
following the termination of this Agreement. However, subpart (ii)
above shall not apply with respect to any such Prospect for which (x) HES
has declined to participate and (y) HES wishes to undertake an "integrated
solutions" project which would enable HES to acquire an interest in such
Prospect; provided that HES obtains MOXY's written concurrence that such
arrangement will not cause MOXY to violate the terms of any agreements that
are binding on MOXY, which concurrence shall not be unreasonably withheld
by MOXY.
5.9 Nature of HES's Interest
HES shall hold a ********* with respect to those portions
of any lease(s) included in a Prospect in which HES elects to participate
and makes the Initial Participation Payment. Notwithstanding the fact
that HES may not hold legal title to its interest in said lease(s), HES
will acquire *********. In addition, HES shall look only to the mineral
proceeds and income from its ******** for the return of its
investment. This ********* is intended to be an economic
interest, as defined in U.S. Treasury Regulation Section 1.611-1(b).
Notwithstanding HES's ********* pursuant to the terms of the
applicable operating agreement, HES designates MOXY as its marketing agent
for the time being. Pursuant to this agency, MOXY shall have full
authority to administer each such interest for the benefit of HES,
including, but not limited to, the authority to (i) market and sell the oil,
gas, and other hydrocarbons attributable to such interest in accordance
with sound oil and gas marketing practices and consistent with the
standards upon which it markets and sells its own production of like quantity
and quality and under similar circumstances; (ii) hold in trust for, and
remit to HES any proceeds it receives attributable to the sale of such
hydrocarbons in the month following the month that MOXY receives the
proceeds; and (iii) provide access to HES to review all contracts, agreements
or other documents executed under the authority granted in this Agreement
and to audit such activities at such time as requested by HES. MOXY
will obtain HES's consent prior to entering into any sales contract that
has a term exceeding one year.
In connection with HES's ********* as set forth above, and to better
assure HES that its ********* will be protected from MOXY's creditors, MOXY
agrees that such ********* shall be secured by a first priority lien on such
********* in favor of HES. Such lien shall be evidenced by a Deed of Trust
or Mortgage in the forms attached hereto as Exhibit "F-1" and Exhibit
"F-2", as appropriate, with a Financing Statement in the form attached
hereto as Exhibit "G-1" or Exhibit "G-2", as appropriate. Said
Deed of Trust/Mortgage and Financing Statement shall be executed by MOXY
and delivered to HES simultaneous with the receipt by MOXY of the Initial
Participation Payment for the Prospect and may be recorded immediately
thereafter by HES. The foregoing provisions of this paragraph shall be
inapplicable to Prospects where MOXY ********* working interest
to HES rather than HES holding a *********.
Notwithstanding any of the foregoing, in the event a preferential
right to purchase is determined to exist with respect to HES's interest
hereunder in a Prospect and such preferential right is exercised on any
Prospect in which HES has elected to participate, all revenues received
by MOXY from the exercise of such preferential right to purchase shall be
paid to HES, BUT ONLY TO THE EXTENT required to reimburse HES for the amount
of the Initial Participation Payment made by HES and for other costs and
expenses subsequently paid by HES under the Participation Agreement or
applicable operating agreement for such Prospect and, in the event HES
has decided to participate in the Prospect where MOXY has either
provided insufficient information to HES regarding the applicable
preferential right to purchase or where MOXY has provided HES with a
misinterpretation of the applicable preferential right provision(s),
MOXY shall also pay to HES interest on the above described reimbursable
amounts calculated from the date such amounts were paid by HES through
the date of reimbursement by MOXY at the published prime commercial
lending rate of Chase Manhattan Bank for loans in New York in effect from
time to time (such rate to be adjusted simultaneously with each change
in such prime commercial lending rate) and calculated on the basis of
a 365-day year; and MOXY shall have no other obligation or liability to
HES with respect to any such Prospect or as a result of the exercise of
such preferential right to purchase.
5.10 Drainage
Should MOXY participate in a well or wells outside the Prospect area
(such well or wells being referred to as "Drainage Well(s)") which
Drainage Well(s) are completed in a zone or zones that are producing or
are behind pipe in a Prospect well and in which HES owns rights hereunder,
then MOXY and HES shall, in good faith, agree on measures which protect
HES's interest in the reserves which would have been produced from the
Prospect well in the absence of the Drainage Well(s) (for instance, the
formation of a unit that includes both wells with participation based on
the individual well reserves).
ARTICLE 6
GUARANTY PROVISIONS
6.1 Halliburton Guaranty of Tranche B Indebtedness
(a) Commitment. Halliburton is guaranteeing on a senior basis
(the "Guaranty"), MOXY's obligations, including principal, interest and
fees thereof, under Annex I (the "Tranche B Credit Facility") of the
Amended and Restated Credit Agreement dated as of the date of this
Agreement among MOXY, Chase Bank of Texas, National Association
(together with successor agents, the "Agent") and the Lenders (the
"Lenders") signatory thereto (the "Credit Agreement"). The principal
balance of the Tranche B Credit Facility shall not exceed an outstanding
balance of the lesser of $50,000,000 or the amount determined in
accordance with Section 6.2. The Tranche B Indebtedness will be
subordinated to MOXY's Senior Debt (initially the Tranche A Indebtedness)
on the basis set forth in the Tranche B Credit Facility. Halliburton agrees
that it will not amend, modify or consent to any waiver of the Guaranty
without the prior written consent of MOXY, if such amendment, modification
or waiver would reduce the amount available to MOXY under the Tranche
B Credit Facility.
(b) Guaranty Fee. While the Guaranty is in effect, MOXY shall pay to
Halliburton, within fifteen days of the end of each calendar quarter, a
guaranty fee equal to the product of (a) the sum of (i) one percent
(1%) per annum on the average outstanding balance of the Tranche B
Indebtedness during such quarter plus (ii) one half percent (1/2%) per
annum on the average available but unused portion of the Aggregate
Tranche B Commitments, during such quarter, and (b) a number, the
numerator of which is the number of days in the quarter and the
denominator of which is 360. MOXY will provide Halliburton with such
information as is necessary to substantiate the calculation of the fee.
6.2 Amount Guaranteed
(a) Aggregate Tranche B Commitments Reduction. The Aggregate Tranche B
Commitments will be reduced in each of the following circumstances:
(i) If MOXY makes voluntary reductions to the Aggregate Tranche B
Commitments pursuant to Section 2.03(b) of the Tranche B Credit Facility.
(ii) Each time HES pays to MOXY (or to the Collateral Account for the
benefit of MOXY) an Initial Participation Payment in accordance with Article
5, MOXY shall reduce the Aggregate Tranche B Commitments by the amount of
such Initial Participation Payment reduced by the amount attributable to
development costs. MOXY hereby directs HES to make such payments to the
Collateral Account described in Section 2.07(c) of the Tranche B Credit
Facility.
(iii) On the fourth Business Day following December 31, 2001, the
Aggregate Tranche B Commitments shall be reduced to an amount equal to
the Aggregate Maximum Tranche B Credit Amounts on such date.
(iv) Notwithstanding anything herein to the contrary, the Aggregate
Tranche B Commitments shall be reduced by MOXY to zero on December 31, 2003.
(b) Aggregate Maximum Tranche B Credit Amount Adjustment. The
Aggregate Maximum Tranche B Credit Amount will be adjusted within four (4)
Business Days after each Shortfall Measurement Date to an amount equal
to $50,000,000 minus the Shortfall, if any, on the date of such calculation
minus the amount by which the Aggregate Tranche B Commitments have been
reduced as of such date by (i) MOXY's voluntary reduction or termination
of Aggregate Tranche B Commitments under Section 2.03(b) of the
Tranche B Credit Facility, and (ii) amounts HES has paid to MOXY under
Section 2.03(c) of the Tranche B Credit Facility.
(c) Mandatory Repayments of the Tranche B Indebtedness. In the event the
aggregate principal amount outstanding under the Tranche B Indebtedness
ever exceeds either the Aggregate Maximum Tranche B Credit Amount or
the Aggregate Tranche B Commitments, MOXY agrees to promptly pay to
the Lenders of the Tranche B Indebtedness any amounts required such
that the aggregate principal amount outstanding under the Tranche B
Indebtedness does not exceed either the Aggregate Maximum Tranche B Credit
Amount as adjusted pursuant to Subsection (b) above or the Aggregate
Tranche B Commitments as reduced pursuant to Subsection (a) above.
6.3 Reimbursement Obligations
Upon the terms and subject to the conditions set forth in that
certain Indemnity Agreement by and between MOXY and Halliburton of even
date herewith, MOXY agrees to pay Halliburton an amount equal to any
amount paid by Halliburton pursuant to the Guaranty plus costs and interest
on such amounts as specified in the Tranche B Credit Facility.
6.4 Information to be Provided by MOXY to Halliburton
Until the Tranche B Credit Facility is terminated, MOXY, at its expense,
shall provide to Halliburton: (a) copies of all material,
correspondence and documentation that MOXY provides to the agent or
the lenders pursuant to any Senior Debt and the Tranche B Credit Facility,
(b) all correspondence and documentation received by MOXY from the agent
or lenders pursuant to any Senior Debt and the Tranche B Credit
Facility, (c) a written report which sets forth the principal balance
outstanding and the letter of credit exposure under both any Senior Debt
and the Tranche B Credit Facility as of each calendar month, including
the borrowings and repayments during such month, and (d) notice of any
borrowings under any Conventional Senior Debt that results in amendment
of the Tranche B Credit Facility Articles VIII and IX covenants and any
modification of Conventional Senior Debt covenants incorporated into the
Tranche B Credit Facility and copies of all such covenants and amendments.
The documents required by (a) and (b) will be mailed within three business
days of dispatch or receipt of the original correspondence, as applicable.
The report required by (c) will be delivered on the third business
day of the month succeeding the month for which the report is prepared.
The notice and copies required by (d) will be delivered within three
business days of the applicability of the Conventional Senior Debt
covenants to the Tranche B Credit Facility or the amendment of such
covenants.
6.5 When Guaranty Amount Reduces to Zero; Election Rights Terminate
Notwithstanding anything in this Agreement to the contrary,
MOXY's obligation to offer to HES and HES's right to make Elections
shall terminate on the earlier of: (i) the expiration of the Term
(as extended for purposes only of MOXY's obligations to issue Election
Point Notifications on certain Prospects, where applicable, by the six
month extension period described in the introductory paragraph of
Section 5.3 and, in connection therewith, for purposes of HES's
participation rights arising out of any such Election Point Notifications),
or (ii) the date following the date on which the maximum Guaranty amount
reduces to zero by operation of Section 6.2, if applicable.
6.6 Halliburton Acknowledgement
Halliburton expressly acknowledges that it has reviewed the
Tranche B Security Documents and the Tranche B Credit Facility,
including, without limitation, Sections 12.04, 12.19 and Sections 3.03
through 3.18 thereof, that it agrees to all such provisions and that it
authorizes and consents to the waivers and releases provided in
Sections 3.12 and 12.04(b)(i) of the Tranche B Credit Facility by the
Agent and the Lenders without the need for any further consent, approval
or other action on the part of Halliburton.
6.7 Legal Opinion
As a condition precedent to the execution and delivery by Halliburton
of the Guaranty, MOXY will cause Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P. to deliver to Halliburton a legal opinion
addressed to Halliburton in the form delivered to the Agent and the
Lenders pursuant to the Credit Facility.
6.8 Certificates to be Delivered to Agent
MOXY covenants and agrees to deliver to the Agent under the Tranche B
Credit Facility in a timely manner all certificates required by Section
2.03(c) and (d) of the Tranche B Credit Facility.
6.9 Representations and Warranties.
MOXY represents and warrants that on the date hereof, (x) there are
no wells being drilled, deepened, plugged back or reworked, and no other
operations are being conducted with respect to Brazos A-19 for which
consent is required under the applicable operating agreement (or for
which operations other than normal operations of existing wells
on Brazos A-19 are being conducted); and (y) there are no
proposals currently outstanding (whether made by MOXY or any other
party) to drill, deepen, plug back or rework wells, or to conduct
any such other operations, or to abandon any wells on Brazos A-19
(nor are there any such proposals that have been approved either by
MOXY or any other party, with respect to which the operations covered
thereby have not been commenced).
6.10 Covenant With Respect to Brazos A-19.
From the date hereof until the earlier of: (a) the payment
in full of the Tranche B Indebtedness and the termination of
all Tranche B Commitments, or (b) the release or subordination of
the Liens on Brazos A-19 securing the Tranche B Indebtedness in accordance
with the final two sentences of Section 12.19 of the Credit Agreement,
MOXY will not, without prior written consent of HES, initiate
any proposal to abandon any well producing from Brazos A-19
(or any property unitized therewith) so long as such well is
capable (or is subject to being made capable through drilling, reworking
or other operations in such well that would be commercially feasible to
conduct based upon MOXY's reasonable judgment which in turn shall
be based upon an economic evaluation of Brazos A-19 and the particular
operation being considered) of producing oil, gas or other hydrocarbons
or other minerals in commercial quantities (as determined in
consultation with HES). In any case, the above described covenant
of MOXY is not applicable to the permanent abandonment of the
Brazos Block A-19 JC No. 1 Well.
6.11 Covenant Relating to Brazos A-19 Non-Consent Options.
(a) From the date hereof until the earlier of: (a) the payment in
full of the Tranche B Indebtedness and the termination of all
Tranche B Commitments, or (b) the release or subordination of the
Liens on Brazos A-19 securing the Tranche B Indebtedness in accordance
with the final two sentences of Section 12.19 of the Credit Agreement,
for any operation relating to the drilling or completion of a well on
Brazos A-19 (or any property unitized therewith) for which MOXY has
determined to non-consent pursuant to the applicable operating or other
agreement governing Brazos A-19 (the "Option"), MOXY shall, no later
than ten (10) days (or no later than 24 hours in the event a rig is
on location) prior to the expiration of the Option, notify HES of
MOXY's intent not to exercise the Option (such declaration of intent
not to exercise the option being hereinafter referred to as a
"Notice of Non-Consent"). Upon receipt of a Notice of Non-Consent,
HES shall have the right to elect to participate in the operation to
the extent of MOXY's interest therein (an "Election to Consent"),
subject to HES's obligation to fund the operation to the full extent
of MOXY's funding requirements under the applicable operating agreement.
HES may exercise an Election to Consent by providing notice of its
Election to Consent to MOXY not later than 2 business days
(i.e. excluding Saturdays, Sundays and Federal holidays) (or no
later than 12 hours in the event a rig is on location) prior to the
expiration of the Option. If HES fails to provide notice to MOXY of
its Election to Consent prior to the applicable deadline above, HES
shall be deemed to have elected not to exercise the Election to
Consent for that drilling or completion operation. Upon timely
receipt of HES's notice of Election to Consent, MOXY shall promptly
exercise its Option with regard to the applicable drilling or
completion operation for the benefit of HES as set forth below.
(b) Subject to any operating agreements governing Brazos A-19,
in the event HES exercises an Election to Consent, HES will at all
times be responsible (i) for all obligations to make payments to the
Operator for all funds required to be paid with respect to MOXY's
interest in the drilling or completion operation in which HES has
elected to participate, including, without limitation, any continuing
costs, such as workover costs and reclamation costs (collectively, the
"Operations"), and (ii) to fully indemnify and hold harmless MOXY for
any and all liabilities in connection with or arising out of the
Operations or MOXY's interest therein, whether such liabilities arise
in contract, quasi contract, tort or otherwise. Provided that if HES
complies with these obligations, HES shall be entitled to receive an
amount of revenue applicable to MOXY's interest in the Operations
associated with the Election to Consent that is equal to the amount
that a consenting party would be entitled to receive with respect to a
non-consenting party's interest under the applicable non-consent
provisions of the applicable operating agreement.
ARTICLE 7
MEDIA RELEASES
Except as required by the rules of a stock exchange upon which a
Party's or its Affiliate's shares are listed or by applicable law,
neither Party shall publish or release any information of any kind
concerning or relating to this Agreement, unless such materials have
first been reviewed and approved by the other Party, which approval
will not be unreasonably withheld.
ARTICLE 8
CONFIDENTIALITY
8.1 Confidentiality Obligations
HES acknowledges that MOXY may be restricted in its ability to
grant HES access to certain data and information under the provisions
of certain agreements to which MOXY is a party, including, without
limitation, the Texaco Exploration Agreement and any applicable
speculative data licensing agreements; provided, however, MOXY shall
make reasonable efforts to allow HES to have access to such information.
Where MOXY obtains permission for HES to have access to data and
information under agreements that MOXY has entered into with third
parties, HES shall comply with the confidentiality and non-use
requirements of such third party agreements. HES agrees that
until December 31, 2006, or until such later date as may be
required by third party agreements to which MOXY is bound, HES
will (and will cause its Affiliates to) take all reasonable steps
to keep secret and confidential and not disclose to any third party,
geological or geophysical data, progress reports or other
information which it may receive in connection with the activities
and operations carried out under this Agreement; provided, however,
that these restrictions shall not apply to information which
(i) is in, or has entered into, the public domain without breach
of the provisions of this Article 8; (ii) is in the possession of
HES as a result of prior receipt thereof from another party
not a party to this Agreement) prior to the time of such receipt
under this Agreement, (iii) may lawfully be obtained as a matter
of right by HES from another source, or (iv) is required to be
disclosed by law or the rules of any governmental agency or an
applicable stock exchange, by HES or its Affiliates. Where such
information is furnished, pursuant hereto, to HES or HES Affiliates,
or to bona fide prospective purchasers, mortgagees, prospective
mortgagees, lenders, prospective lenders or consultants of HES for
evaluation purposes, any such person furnished information shall
agree not to communicate such information to any other party or
to use it for their own benefit in a manner adverse to the
interests of the MOXY Program Participants or the working interest
owners in the property(ies) involved. Notwithstanding the
foregoing, the Parties recognize that from time to time
information (such as logs) may be acquired by MOXY which must
not be disclosed to anyone other than those persons who must have
such information. HES shall require its employees and others
obtaining information hereunder through HES, to be bound by the
provisions of this paragraph in the same manner as it is bound
hereunder and, in this connection, HES guarantees their compliance
with the provisions hereof.
MOXY acknowledges that HES and its Affiliates are involved
in widespread oil field activities and that HES and its Affiliates
receive information and data related to oil field drilling and
completion tools, techniques, practices, processes and procedures
("Well Construction Technologies") from many different sources.
Notwithstanding anything contained in this Section 8.1 to the contrary,
unless specifically agreed in a separate writing HES and its Affiliates
will not be precluded from utilizing any of the Well Construction
Technologies and information related to such Well Construction
Technologies (other than information which relates to the geology or
hydrocarbon potential or other particular qualities of a specific
property in which MOXY has rights) that are developed on wells
hereunder in the rendering of materials, equipment, tools, services
or otherwise to any other customer.
8.2 Speculative Seismic Data
HES will not have access to speculative seismic data which
has been acquired by MOXY under any licensing agreement which
prohibits such access. If HES requires such access, it shall obtain
a waiver of the prohibition or acquire an appropriate license at
its cost.
ARTICLE 9
GOVERNING LAW
The terms and conditions of this Agreement shall be governed
and interpreted under the LAWS OF THE STATE OF NEW YORK excluding,
however, any provisions of New York law which might direct or refer
such determination to the laws of any other jurisdiction.
ARTICLE 10
FORCE MAJEURE
Should MOXY or HES be prevented from complying with any obligations
of this Agreement (other than the obligation to make monetary payments
as and when due) by reason of "force majeure", as hereinafter defined,
the obligations so affected shall automatically be extended so long
as the cause or causes for such delays or interruptions continue and
for an additional sixty (60) days following the cessation of such
delay or interruption. "Force majeure" is herein defined as an act of
God, adverse weather conditions, inability to obtain materials in the
open market or transportation thereof, war, strikes, lockouts, riots,
insurrections or any other conditions or circumstances not wholly
within the control of MOXY or HES (other than financial) or any
federal, state or municipal law, order, permit, rule or regulation.
Neither Party shall be liable to the other in damages for failure to
perform as required hereunder or to comply with any covenant,
agreement or requirement hereof during the time either is relieved
from its obligations hereunder, provided that the affected Party has
given written notice to the other Party within thirty (30) days after
the occurrence of the cause relied upon to suspend the obligations of
the affected Party. Provided further that no Party shall be required
to settle a labor dispute against its will. The provisions of this
Article 10 are not applicable to the Guaranty and the Tranche B Credit
Facility repayment obligations of the Parties and Halliburton hereunder.
ARTICLE 11
DISPUTE RESOLUTION
Notwithstanding anything contained heretofore in this Agreement
to the contrary, the Parties specifically acknowledge and agree that
any claim, controversy or dispute arising out of, relating to, or in
connection with this Agreement, including the interpretation,
validity, termination or breach thereof, shall be resolved solely in
accordance with the Dispute Resolution Procedure set forth
Exhibit "H".
ARTICLE 12
TERMINATION
12.1 Termination
Unless terminated pursuant to another provision in this Agreement,
this Agreement shall remain in effect from March 24, 2000, through
December 31, 2003, at which time it shall automatically terminate
without any other action by any Party hereto. Notwithstanding the
termination of this Agreement, each Party shall continue to be
obligated to fulfill its existing commitments, obligations,
liabilities and undertakings theretofore incurred hereunder or
incurred under the terms of those agreements. Unless the Parties
agree otherwise, MOXY's obligation to use HES Services, as
stipulated in Article 3, and MOXY's integration of HES personnel, as
stipulated in Article 4, shall terminate in connection with the
termination of this Agreement, even with respect to Prospects for
which HES has made an election prior to the termination hereof.
12.2 Loss of Rights to Eligible Properties
Although MOXY will use its good faith efforts to monitor
ongoing activities on the Eligible Properties, MOXY shall not be
liable to HES for the loss of rights to any of the Eligible
Properties during the term of this Agreement.
ARTICLE 13
INDEMNITY
As respects MOXY's obligations to HES as to operations
and activities under this Agreement, the indemnity provisions
provided below will be applicable. However, such indemnity
provisions will not be applicable to the Services provided by
HES and its Affiliates under Articles 3 and 4, it being
understood that the indemnities that shall be applicable with
respect to the Services provided by the personnel of HES and
its Affiliates under Articles 3 and 4 shall be as set forth in
the applicable Master Service Contract, the Master Consulting
Agreement, or any other applicable agreement.
(a) As between MOXY and HES, the personnel and property
of HES and its subcontractors shall be the sole responsibility
of HES, except to the extent of personal injury, death or
property damage that is caused by any act or omission of
MOXY constituting gross negligence or willful misconduct.
HES shall, and does hereby agree to, defend, indemnify and
hold harmless MOXY from and against all losses, including
third party claims, suffered or incurred as a result of:
(a) injury to or death of any personnel of HES or its
subcontractors; or (b) any loss or damage to the property of
HES or its subcontractors, except to the extent that any such
losses result from any act or omission of MOXY constituting
gross negligence or willful misconduct.
(b) As between HES and MOXY, the personnel and
property of MOXY and its subcontractors shall be the sole
responsibility of MOXY, except to the extent of personal injury,
death or property damage that is caused by any act or
omission of HES constituting gross negligence or willful misconduct.
MOXY shall, and does hereby agree to, defend, indemnify and hold
harmless HES from and against all losses, including third party
claims, suffered or incurred as a result of: (a) injury to or
death of any personnel of MOXY or its subcontractors; or (b) any
loss or damage to the property of MOXY or its subcontractors,
except to the extent that any such losses result from any act or
omission of HES constituting gross negligence or willful misconduct.
ARTICLE 14
NO WARRANTY
THIS AGREEMENT IS MADE WITHOUT ANY WARRANTY WHATSOEVER,
EXPRESS, STATUTORY OR IMPLIED, AS TO TITLE, MERCHANTABILITY,
CONDITION, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO
ANY PROPERTIES OR PROSPECTS COVERED BY THIS AGREEMENT,
INCLUDING, BUT NOT LIMITED TO THE WELL BORES, EQUIPMENT AND
FACILITIES UTILIZED BY MOXY HEREUNDER, OR ANY OTHER SORT OF
WARRANTY AND IS WITHOUT RECOURSE AGAINST MOXY WHATSOEVER WITH
RESPECT TO SUCH PROPERTIES AND PROSPECTS, EVEN AS TO THE
RETURN OF CONSIDERATION. MOXY MAKES NO REPRESENTATIONS OR
WARRANTIES REGARDING HES'S RIGHT OF INGRESS TO AND EGRESS
FROM THE PROPERTIES AND PROSPECTS COVERED HEREUNDER,
ACROSS, ADJACENT, OR ADJOINING LANDS.
MOXY SPECIFICALLY DISCLAIMS, AND HES EXPRESSLY WAIVES ANY
IMPLIED WARRANTY OF TITLE WITH RESPECT TO THE PROPERTIES AND
PROSPECTS COVERED HEREUNDER. HES ACKNOWLEDGES THAT THIS
WAIVER HAS BEEN SPECIFICALLY BROUGHT TO ITS ATTENTION AND
THAT IT HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER.
THE PARTIES AGREE THAT FOR THE PURPOSES OF THIS WAIVER OF THE
IMPLIED WARRANTY OF TITLE, MOXY AND ITS AFFILIATES SHALL BE
CONSIDERED AS THE SELLER HEREUNDER AND HES EXPRESSLY WAIVES
ALL RIGHTS OF SUBROGATION IN WARRANTY OF THE SELLER AGAINST
OTHER PERSONS GRANTED TO A BUYER BY APPLICABLE STATE LAW.
HES ACKNOWLEDGES THAT (i) IT IS A SOPHISTICATED
INVESTOR IN THE OIL AND GAS BUSINESS; (ii) IT UNDERSTANDS THE
RISKS INVOLVED IN OIL AND GAS EXPLORATION AND DEVELOPMENT; AND
(iii) IT UNDERSTANDS THAT ITS PARTICIPATION IN THIS AGREEMENT
IS A HIGHLY RISKY UNDERTAKING AND THAT HES MIGHT NOT RECOVER
ANY OF ITS INVESTMENT MADE HEREUNDER.
ARTICLE 15
GENERAL PROVISIONS
15.1 Further Actions
From and after the execution hereof, each of the Parties hereto,
without further consideration, shall use their best efforts to
execute, deliver, submit, gain approvals of, and record (or
cause to be executed, delivered, submitted, approved, and recorded)
good and sufficient permits, designations, other regulatory
documents, and instruments of conveyance and transfer (as
applicable), and take such other action as may be reasonably
required to carry out the purposes of this Agreement and to give
effect to the covenants, stipulations and obligations of
the Parties hereto.
15.2 Amendments
This Agreement shall not be modified or amended except by
mutual agreement of the Parties in writing. No action or failure
to act on the part of either Party hereto shall be construed as a
modification or amendment to, or a waiver of, any of the
provisions of this Agreement.
15.3 Other Rights, Remedies Reserved
No provision contained herein providing for the termination
of this Agreement shall be construed as precluding, nor shall
it preclude, either Party from asserting its respective rights
to specific performance, damages, or any other rights or remedies
to which it may be entitled.
15.4 Waiver
Any provision of this Agreement may be waived by the
Party or Parties entitled to the benefit of such provision with
respect to any Prospect. Any such waiver shall constitute a waiver
only with respect to the specific matter waived for the specific
Prospect involved, and shall not constitute a waiver of the same
or any other provision of this Agreement as to any other
Prospect.
15.5 Severability
Every provision in this Agreement is intended to be
severable. If any term or provision hereof is held by a court of
competent jurisdiction to be illegal or invalid for any reason
whatsoever, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect.
15.6 Entire Agreement
This Agreement constitutes the entire understanding between
the Parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and prior agreements and
understandings relating to the subject matter hereof,
including the Letter of Intent.
15.7 Further Assurances
Each Party agrees to execute and deliver all such additional
documents, instruments and assurances and to perform such
additional acts as may be necessary or appropriate to effectuate
and perform all of the terms and conditions of this Agreement.
15.8 Surviving Obligation
THE TERMINATION OF THIS AGREEMENT SHALL NOT RELIEVE ANY PARTY
HERETO FROM ANY EXPENSE, LIABILITY OR OTHER OBLIGATION OR ANY
REMEDY THEREFOR WHICH HAS ACCRUED OR ATTACHED PRIOR TO THE DATE
OF SUCH TERMINATION INCLUDING, WITHOUT LIMITATION, THE INDEMNITY
OBLIGATIONS SET FORTH IN ARTICLE 13 AND THE CONFIDENTIALITY
OBLIGATIONS SET FORTH IN ARTICLE 8.
15.9 Conflict of Terms
In the event of any conflict between the main body of this
Agreement and the attached Exhibits, the provisions of the main
body of this Agreement shall control.
15.10 Notices
All notices authorized or required between the parties by
any of the provisions of this Agreement, unless otherwise
specifically provided, shall be in writing and delivered in person or
by United States mail, overnight express delivery, courier service,
telegram or facsimile (with receipt confirmed), postage or
charges prepaid, and addressed to such Parties at the addresses set
forth below:
Halliburton Energy Services, Inc. McMoRan Oil & Gas LLC
and Halliburton Company 1615 Poydras, Suite 500 (70112)
Pan American Building, Suite 1500 P.O. Box 60004
601 Poydras Street New Orleans, Louisiana 70160
New Orleans, Louisiana 70130
Attention: Mr. Joe F. Nations, Attention: Mr. Glenn A. Kleinert,
Asset Manager Senior Vice President
Copy to:
Halliburton Energy Services, Inc. McMoRan Oil & Gas LLC
4100 Clinton Drive (77020-6299) 1615 Poydras, Suite 500 (70112)
P.O. Box 3 P.O. Box 60004
Houston, Texas 77001-0003 New Orleans, Louisiana 70160
Attention: Vice President, Treasur Attention: Treasurer
Any originating notice and/or response thereto given
under any provision hereof shall be deemed given only when
received by the Party to whom such notice is directed, except that;
(1) any notice or response by certified U.S. mail, return receipt
requested, properly addressed pursuant to this Section 15.10, and
with all postage and charges prepaid, shall be deemed received on
the date that the Party to whom it was directed has received it,
and (2) any notice or response given by overnight express delivery
or courier shall be deemed received upon actual receipt by the
party to whom it was directed, or within 72 hours of delivery of
such notice whichever is sooner.
15.11 Change of Addresses
Each Party shall have the right to change its address at
any time, and from time to time, by giving prior written notice
thereof to the other Party in the manner set forth in 15.10.
15.12 Tax Consideration
If HES determines that a tax partnership is necessary to
properly reflect the intended tax treatment of each Party's share
of the costs and revenues attributable to the Prospects, the
Parties will enter into a Tax Partnership Agreement (covering
all Prospects in which HES elects to participate) that
allocates the costs and revenues in a manner that reflects
each Party's contribution to such costs and share of such
revenues.
15.13 Expenses.
Each Party hereto shall be responsible for the payment
of all expenses incurred by it in entering into the
Letter of Intent and this Agreement, including, without
limitation, the fees and expenses of its counsel and its
financial and other advisors.
15.14 No Assignment.
This Agreement and the rights of HES to participate
in Prospects hereunder may not be assigned by any party
hereto without the prior written consent of the other
Party hereto (which consent shall not be unreasonably
withheld or delayed), except in connection with the sale
of all or substantially all of the assets or stock of a
Party.
15.15 Consequential Damages
In no event shall either HES or MOXY be liable to each
other for special, incidental, indirect, punitive or
consequential damages.
15.16 Counterparts
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute
one and the same instrument and any of the parties hereto may
execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, this Agreement is executed by the
duly authorized representatives of the parties as of the
date first above written.
McMoRan Oil & Gas LLC Halliburton Energy Services, Inc.
By: _________________________________ By: ________________________________
Name: James H. Lee Name: Lester L. Coleman
Title: Senior Vice President Title: Vice President
Halliburton Company joins in the execution of this Agreement solely for the
purpose of expressing its agreement to be bound by the provisions of Article
6 hereof.
Halliburton Company
By: _________________________________
Name: Lester L. Coleman
Title: Executive Vice President and
General Counsel