PURCHASE AND SALE AGREEMENT
BETWEEN
SHELL WESTERN E&P INC.
AS SELLER
and
THE MERIDIAN RESOURCE EXPLORATION COMPANY
AS PURCHASER
DATED EFFECTIVE OCTOBER 1, 1997
GIBSON/HUMPHREYS AND TURTLE BAYOU FIELDS
TERREBONE PARISH, LOUISIANA
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PURCHASE AND SALE AGREEMENT
INDEX
1. PROPERTY BEING SOLD OR EXCHANGED........................................1
(a) LEASE...............................................................1
(b) FEE INTERESTS.......................................................2
(c) RIGHTS IN PRODUCTION................................................2
(d) RIGHTS; WORKING INTERESTS...........................................2
(e) EASEMENTS...........................................................2
(f) PERMITS.............................................................2
(g) WELLS...............................................................2
(h) FACILITIES..........................................................3
(i) EQUIPMENT...........................................................3
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(j) CONTRACTS...........................................................3
(k) EXCLUSIONS..........................................................3
2. SALE OR EXCHANGE........................................................4
3. PURCHASE PRICE..........................................................4
4. CLOSING.................................................................4
5. EXCHANGE ELECTION.......................................................4
(a) PAYMENT.............................................................5
(b) CONVEYANCE..........................................................5
(c) NON-FOREIGN AFFIDAVITS..............................................5
(d) SEISMIC LICENSE.....................................................5
6. SALE ELECTION...........................................................5
(a) PAYMENT.............................................................5
(b) CONVEYANCE..........................................................5
(c) NON-FOREIGN AFFIDAVITS..............................................6
(d) SEISMIC LICENSE.....................................................6
7. FURTHER ASSURANCES......................................................6
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8. CONVEYANCE EFFECTIVE DATE...............................................6
9. ACCESS BASELINE STUDY..................................................6
(a) ACCESS TO PROPERTY..................................................6
(b) BASELINE STUDY......................................................7
10. DISCLAIMERS/ACKNOWLEDGMENTS............................................7
(a) NO WARRANTY, EXPRESS OR IMPLIED.....................................7
(b) ACKNOWLEDGMENTS OF PURCHASER........................................7
11. INDEPENDENT EVALUATION.................................................9
12. CONSENTS; PREFERENTIAL RIGHTS.........................................10
13. TITLE.................................................................12
(a) TITLE EXAMINATION..................................................12
(b) PERSONAL PROPERTY INVENTORY LIST...................................12
14. REPRESENTATIONS BY SELLER.............................................13
(a) DUE ORGANIZATION...................................................13
(b) CORPORATE POWER....................................................13
(c) DULY EXECUTED......................................................13
(d) NO LITIGATION......................................................13
15. REPRESENTATIONS OF PURCHASER..........................................14
(a) DUE ORGANIZATION...................................................14
(b) CORPORATE POWER....................................................14
(c) DULY EXECUTED......................................................14
(d) NO LITIGATION......................................................14
(e) SECURITIES LAWS....................................................15
16. SELLER'S CONDITIONS...................................................15
(a) REPRESENTATIONS TRUE................................................15
(b) NO PENDING SUITS...................................................15
(c) NO ACT OF TERMINATION..............................................16
(d) MERGER CLOSING.....................................................16
17. PURCHASER'S CONDITIONS................................................16
(a) REPRESENTATIONS TRUE...............................................16
(b) NO PENDING SUITS...................................................16
(c) NO ACT OF TERMINATION..............................................16
(d) MERGER CLOSING.....................................................16
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8. OPERATIONS AND PRODUCTION AFTER THE EFFECTIVE DATE.....................17
(a) OPERATIONS BETWEEN THE EFFECTIVE DATE AND CLOSING..................17
(b) EXPENSES...........................................................18
(c) ALLOCATION OF PRODUCTION AND PROCEEDS..............................19
(d) INTERIM ACCOUNTING, PAYMENT AND COLLECTION SERVICES................19
(e) POST CLOSING SETTLEMENT............................................20
(f) AUDIT..............................................................20
(g) NO APPLICATION TO INCOME TAXES.....................................20
19. TAXES, COSTS AND FEES.................................................20
(a) TAXES..............................................................20
(b) NO BROKERS.........................................................21
20. OPERATIONS BY PURCHASER...............................................21
(a) COMPLIANCE WITH LAWS...............................................21
(b) ASSUMPTION OF OBLIGATIONS..........................................22
21. INDEMNIFICATION.......................................................23
(a) GENERAL INDEMNITY BY PURCHASER.....................................23
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(b) ENVIRONMENTAL INDEMNITY BY PURCHASER...............................24
(c) GENERAL INDEMNITY BY SELLER........................................25
(d) ENVIRONMENTAL INDEMNITY BY SELLER..................................26
(e) LIMITATIONS........................................................27
(f) DEFINITIONS........................................................28
(g) INDEMNIFIED PARTY'S PARTICIPATION..................................33
22. EXISTING CONTRACTS/IMBALANCES.........................................33
(a) ASSUMPTION OF CONTRACTS............................................34
(b) GAS IMBALANCES.....................................................34
23. NOTICES...............................................................34
24. PARTIES IN INTEREST...................................................35
25. COMPLETE AGREEMENT....................................................36
26. APPLICABLE LAW........................................................36
27. MISCELLANEOUS PROVISIONS..............................................36
(a) CAPTIONS...........................................................36
(b) PARTIAL INVALIDITY.................................................36
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(c) MODIFICATION.......................................................37
(d) ASSIGNMENT.........................................................37
(e) COUNTERPARTS.......................................................37
(f) EXPENSES...........................................................37
(g) SIGNS..............................................................37
(h) PRESS RELEASES.....................................................37
(i) RECORDING..........................................................38
(j) SURVIVAL...........................................................38
(k) EXHIBITS AND SCHEDULES.............................................38
(l) TIME OF ESSENCE....................................................38
(m) NO PARTNERSHIP.....................................................39
(n) FILE TRANSFERS.....................................................39
(o) ARBITRATION........................................................40
(p) DTPA WAIVER........................................................42
(q) NO PUNITIVE DAMAGES................................................43
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PURCHASE AND SALE AGREEMENT
SHELL WESTERN E&P INC., a Delaware corporation, herein referred to as
"SELLER," and THE MERIDIAN RESOURCE EXPLORATION COMPANY, a Texas corporation,
herein referred to as "PURCHASER" enter into this Purchase and Sale Agreement,
herein called the "AGREEMENT", in consideration of SELLER's agreement to sell
and PURCHASER's agreement to buy property described in this AGREEMENT, all
pursuant to the terms and conditions of this AGREEMENT. SELLER and PURCHASER may
also be referred to herein individually as a "Party" or, collectively, as the
"Parties."
1. PROPERTY BEING SOLD OR EXCHANGED. Subject to the terms and conditions
set forth hereinafter, SELLER agrees to convey to PURCHASER, without warranty of
title or assignability, the PROPERTY (as defined below) and PURCHASER agrees to
accept the PROPERTY, and tender consideration therefor, in the manner and of the
type and amount as hereinafter required. For purposes of this AGREEMENT,
PROPERTY shall mean all of SELLER's right, title and interest in and to (i) the
property and property interests described in EXHIBIT "A" hereto and (ii) all
property and property interests listed in subsections (a) through (j) of this
section 1, to the extent such property or property interests are a part of,
grant rights in, or with respect to, or are located on the property and property
interests described in EXHIBIT "A"; but excluding the property in subsection
(k).
(a) LEASES. Leasehold interests in oil, gas or other minerals,
including working interests, carried working interests, rights of
assignment and reassignment, and other interests under or in oil, gas or
mineral leases, and interests in rights to explore for and produce oil,
gas and other minerals.
(b) FEE INTERESTS. Fee interests to the surface and in oil, gas or
other minerals, including rights under mineral deeds, conveyances or
assignments.
(c) RIGHTS IN PRODUCTION. Royalties, overriding royalties,
production payments, net profits interests, rights to take royalties in
kind, or other interests in production of oil, gas or other minerals.
(d) RIGHTS; WORKING INTERESTS. Rights and interests in or derived
from unit agreements, orders, declarations or decisions of state and
federal regulatory authorities establishing units, joint operating
agreements, enhanced recovery and injection agreements, farmout agreements
and farmin agreements, options, drilling agreements, exploration
agreements, assignments of operating rights, working interests, and
subleases, except those contracts or agreements described in subsection
(k) below.
(e) EASEMENTS. To the extent transferable, rights-of-way, surface,
subsurface or ground leases, easements, servitudes and franchises located
on or granting rights to the property or property interests described in
EXHIBIT "A" hereto and acquired or used in connection with operations for
the exploration, production, processing and transportation of oil, gas or
other minerals with respect to the properties and interests described in
subsections (a)-(d) above.
(f) PERMITS. To the extent transferable, permits and licenses of any
nature owned, held or operated in connection with operations for the
exploration, production, processing and transportation of oil, gas or
other minerals.
(g) WELLS. Producing, non-producing, shut-in and abandoned oil and
gas wells, salt water disposal wells, injection wells and water wells
located on the property or property interests described in EXHIBIT "A"
hereto and used in connection with the properties or interests described
in subsections (a)-(f) above.
(h) FACILITIES. All facilities, buildings, improvements, fixtures,
gathering lines, flow lines, injection lines and pipelines and
appurtenances located on the real property and on lands included in, or
which are subservient to, the property and property interests described on
EXHIBIT "A".
(i) EQUIPMENT. All surface and down-hole equipment, fixtures,
machinery, inventory and personal property located on the property and
property interests described in EXHIBIT "A" hereto, and used in connection
with the properties or interests described in subsections (a)-(h) above.
(j) CONTRACTS. To the extent transferable, all contracts and
agreements to which the property described in subsections (a) - (i) above
is subject, except those contracts or agreements described in subsection
(k) below.
(k) EXCLUSIONS. The PROPERTY shall not include any rights-of-way,
surface or ground leases, easements, franchises, permits, licenses, or
other contracts or agreements which by their own terms are not
transferable, Proprietary Data (as defined in subsection 27(n), rental
equipment, any licensed software, and store stock left on consignment and
belonging to third parties and without limiting the generality of the
foregoing, those items of personal property, inventory or other property
or property interests specifically listed on SCHEDULE "1(k)" hereto.
SELLER shall, to the extent possible, transfer to PURCHASER the beneficial
interest of any right-of-way, surface or ground lease, easement,
franchise, permit, license, or other contract or agreement which by its
own terms is not transferable upon written notice from PURCHASER that such
non-transferable interest is necessary for the continued operation of the
PROPERTY in the manner operated as of the Effective Date.
2. SALE OR EXCHANGE. SELLER will elect to effect all or part of the
required conveyances under this AGREEMENT through either a sale of the PROPERTY
to PURCHASER for cash or through an exchange of all or part of the PROPERTY with
a Qualified Intermediary pursuant to the like-kind exchange provisions of
section 1031 of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder. The term "Qualified Intermediary" shall
have the same meaning as prescribed in Treasury Regulations ss.
1.1031(k)-1(g)(4). On or before Closing, SELLER shall provide PURCHASER written
notice of such election, the choice being within the sole discretion of SELLER.
3. PURCHASE PRICE. As consideration for the PROPERTY, PURCHASER shall pay
to SELLER, or deliver to SELLER's nominees, at Closing, the sum of
$44,248,396.00 (the "Purchase Price")
4. CLOSING.
Closing shall occur on the Closing Date under the Agreement and Plan of
Merger by and among The Meridian Resource Corporation, LOPI Acquisition Corp,
Shell Louisiana Onshore Properties Inc. and Louisiana Onshore Properties Inc.
dated March 27, 1998 (the "Merger Agreement") (the "Closing Date"), at a time
and place to be designated by SELLER. "Closing" shall mean the consummation of
the sale or exchange by transfer of SELLER's ownership in the PROPERTY, deposit
or payment of the Purchase Price, and transfer of the operation and possession
of the PROPERTY.
5. EXCHANGE ELECTION. If on or before the Closing Date SELLER has notified
PURCHASER of its election to effect an exchange of the PROPERTY or portions of
the PROPERTY for properties of a like-kind pursuant to section 1031 of the
Internal Revenue Code of 1986, as amended, then at Closing:
(a) PAYMENT. PURCHASER shall make payment by wire transfer to
accounts designated by SELLER in an aggregate amount equal to the Purchase
Price, On or before Closing, SELLER will notify PURCHASER of the amounts
to be deposited in each designated account.
(b) CONVEYANCE. SELLER will convey the PROPERTY to PURCHASER by
executing and delivering (i) an Assignment and Conveyance and (ii) a
Personal Property Agreement and Bill of Sale, in substantially the form
attached hereto as EXHIBITS "B" and "C" respectively.
(c) NON-FOREIGN AFFIDAVIT. SELLER shall execute and deliver to
PURCHASER, a Non-foreign Affidavit in substantially the form attached
hereto as EXHIBIT "D".
(d) SEISMIC LICENSE. PURCHASER and SELLER shall execute and deliver
a seismic license granting PURCHASER the nonexclusive right to use
SELLER's proprietary seismic data for the Turtle Bayou field.
6. SALE ELECTION. If on or before Closing SELLER has notified PURCHASER of
its election to sell the PROPERTY:
(a) PAYMENT. PURCHASER shall make payment of the Purchase Price, by
wire transfer to an account or accounts to be designated by SELLER.
(b) CONVEYANCE. SELLER will convey the PROPERTY to PURCHASER by
executing and delivering (i) an Assignment and Conveyance and (ii) a
Personal Property Agreement and Bill of Sale in substantially the forms
attached hereto as EXHIBITS "B" and "C," respectively.
(c) NON-FOREIGN AFFIDAVIT. SELLER shall execute and deliver to
PURCHASER a Non-foreign Affidavit in substantially the form attached
hereto as EXHIBIT "D".
(d) SEISMIC LICENSE. PURCHASER and SELLER shall execute and deliver
a seismic license granting PURCHASER the nonexclusive right to use
SELLER's proprietary seismic data for the Turtle Bayou field.
7. FURTHER ASSURANCES. SELLER and PURCHASER each agree to execute and
deliver to the other Party all division orders, transfer orders and all other
documents necessary to fully vest in PURCHASER the rights, obligations and
benefits acquired pursuant to this AGREEMENT.
8. CONVEYANCE EFFECTIVE DATE. The conveyance from SELLER to PURCHASER
shall be effective as of October 1, 1997, at 7:00 a.m. local time where the
PROPERTY is located, herein called the "Effective Date."
9. ACCESS BASELINE STUDY.
(A) ACCESS TO PROPERTY. Upon reasonable notice, SELLER shall afford
PURCHASER and its representatives during normal business hours throughout
the period prior to Closing reasonable access to the PROPERTY to make
certain site visits and physical investigations. Such visits and
investigations shall be governed by and conducted in accordance with the
Agreement for Indemnification and Responsibility for Damages to the
Subject Properties in connection with Site Visits dated January 19, 1998,
by and between SELLER and The Meridian Resource Corporation.
(B) BASELINE STUDY. PURCHASER and SELLER hereby agree that the Phase
I environmental assessment report of the PROPERTY prepared by SELLER and
delivered to PURCHASER, limited to the assessments made and the scope of
the report, shall establish the true and correct condition of the PROPERTY
as of the Effective Date and such assessment report shall be used as the
only environmental, safety or other baseline study in the event a dispute
arises after Closing concerning the condition of the PROPERTY.
10. DISCLAIMERS/ACKNOWLEDGMENTS.
(a) NO WARRANTY, EXPRESS OR IMPLIED. CONVEYANCE OF THE PROPERTY SHALL BE
WITHOUT WARRANTY WHATSOEVER, EXPRESS, STATUTORY, OR IMPLIED AS TO TITLE,
DESCRIPTION, PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION,
THE ENVIRONMENTAL CONDITION OF THE PROPERTY) QUALITY, VALUE, FITNESS FOR
PURPOSE, MERCHANTABILITY, OR OTHERWISE. PURCHASER shall satisfy itself, prior to
the Closing, as to the type, condition, quality
and extent of the property and property interests which comprise the PROPERTY it
is receiving pursuant to this AGREEMENT and under this sale or exchange.
PURCHASER shall have the right of full substitution and subrogation to any and
all rights and actions of which SELLER has or may have against any and all
preceding owners or vendors of the PROPERTY other than Affiliates of SELLER.
(b) ACKNOWLEDGMENTS OF PURCHASER. PURCHASER hereby acknowledges and agrees
that: (i) PURCHASER has been given the opportunity to adequately inspect the
PROPERTY for all purposes prior to the execution of this AGREEMENT, (ii)
PURCHASER is aware that the PROPERTY has been used for the exploration,
development, production, treating and transporting of oil, gas and other
hydrocarbon products and that physical changes may have occurred as a result of
such use and that SELLER has disclosed, and PURCHASER is further aware, that
there exists the possibility that there could exist on the PROPERTY as a result
of such use or uses one or more detrimental environmental conditions, or that
there could have occurred from such use or uses one or more releases of
hazardous substances (as defined in CERCLA or RCRA) or releases of Chemical
Substances (as defined in subsection 21(f)(3) below) into, or other pollution or
contamination of or into, the ambient air, surface water, ground water, or land
surface and subsurface strata of any real property included in the PROPERTY and
of contiguous, or a series of contiguous, real properties not associated with
the PROPERTY; (iii) PURCHASER has entered into this AGREEMENT on the basis of
its own investigation of the physical condition of the PROPERTY and the land
related thereto (including the environmental condition of the PROPERTY); (iv)
PURCHASER WITH FULL KNOWLEDGE OF THE FOREGOING AND AFTER CONDUCTING THE ABOVE
DESCRIBED INVESTIGATION AND EVALUATION IS ACQUIRING THE PROPERTY ON A "WHERE IS"
AND "AS IS" BASIS; AND, EXCEPT WITH RESPECT TO SELLER'S INDEMNIFICATION
OBLIGATIONS SPECIFIED IN SUBSECTIONS 21(C) AND (D)
BELOW, PURCHASER, BY ACQUIRING THE PROPERTY ON A "WHERE IS" AND "AS IS" BASIS
WAIVES ANY OTHER CLAIMS OR RIGHTS OF INDEMNIFICATION, CONTRIBUTION OR RECOURSE
IT MAY HAVE AGAINST OR FROM SELLER WITH RESPECT TO THE CONDITION OF THE
PROPERTY, INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE
PROPERTY AND DAMAGE TO NATURAL RESOURCES ASSOCIATED WITH THE PROPERTY (INCLUDING
ANY LIABILITY UNDER CERCLA OR OTHER ENVIRONMENTAL LAWS), WHETHER CONTRACT, TORT
OR STATUTORY IN NATURE, REGARDLESS OF THE NEGLIGENCE, FAULT OR STRICT
(STATUTORY) LIABILITY OF SELLER; (V) PURCHASER SHALL FURTHER ACKNOWLEDGE THAT IT
HAS HAD THE FULL OPPORTUNITY TO REVIEW AND IS AWARE OF THE MATTERS WITH RESPECT
TO THE PROPERTY WHICH ARE IDENTIFIED IN THE LIMITED PHASE I ENVIRONMENTAL SITE
ASSESSMENT AND LIMITED NORM SURVEY FOR THE GIBSON FIELD, TERREBONNE PARISH,
LOUISIANA, DATED MAY 14, 1997, PREPARED BY R. M. "BO" DOUGLAS AND THE LIMITED
PHASE I ENVIRONMENTAL SITE ASSESSMENT AND LIMITED NORM SURVEY FOR THE TURTLE
BAYOU FIELD, TERREBONNE PARISH, LOUISIANA, DATED JULY 3, 1997, PREPARED BY R. M.
"BO" DOUGLAS (REFERRED TO HEREIN COLLECTIVELY AS THE "PHASE I ASSESSMENTS")
WHICH PURCHASER HAS RECEIVED AND REVIEWED; AND (VI) WITH RESPECT TO THOSE
MATTERS SET FORTH ON THE PHASE I ASSESSMENTS, PURCHASER ASSUMES ALL LIABILITY
WITH RESPECT THERETO WHETHER CONTRACT, TORT OR STATUTORY IN NATURE, REGARDLESS
OF THE NEGLIGENCE, FAULT OR STRICT (STATUTORY) LIABILITY OF SELLER.
11. INDEPENDENT EVALUATION. PURCHASER has made an independent evaluation
of the PROPERTY and acknowledges that SELLER has made no statements or
representations concerning the present or future value of the anticipated
income, costs, or profits, if any, to be derived from the PROPERTY, the physical
condition of the PROPERTY, the quantity and quality of any oil and gas or other
minerals that may be produced from the PROPERTY, or any other matter with
respect to the PROPERTY and THAT SELLER DOES NOT IMPLICITLY OR EXPRESSLY WARRANT
DESCRIPTION, TITLE, VALUE, QUALITY, PHYSICAL CONDITION OF THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE PROPERTY),
MERCHANTABILITY, OR FITNESS FOR PURPOSE OF ANY OF THE PROPERTIES OR THE WELLS,
EQUIPMENT, PIPELINES, FACILITIES, OR OTHER PROPERTY LOCATED THEREON OR USED IN
CONNECTION THEREWITH. PURCHASER further acknowledges that, in entering into this
AGREEMENT, it has relied solely upon its independent examination of the PROPERTY
and public records relating to the PROPERTY and its independent estimates,
computations, evaluations, reports and studies based thereon and has not relied
on any representation or statement made by SELLER. SELLER MAKES NO WARRANTY OR
REPRESENTATION AS TO THE ACCURACY, COMPLETENESS OR CORRECTNESS OF ANY
INFORMATION FURNISHED TO PURCHASER. ANY RELIANCE PURCHASER MAKES ON SUCH
INFORMATION IS AT PURCHASER'S SOLE RISK AND SELLER SHALL HAVE NO LIABILITY
WHATSOEVER TO PURCHASER IN CONNECTION THEREWITH.
12. CONSENTS; PREFERENTIAL RIGHTS. In the event any of the interests to be
conveyed or transferred to PURCHASER as part of the PROPERTY (i) are burdened
with a preferential right in a Third Party to purchase such interest or (ii)
require the consent of a Third Party to assign
SELLER's interest, then the conveyance or transfer of the interest subject to
such preference or consent shall be conditioned upon SELLER's obtaining the
necessary waiver or consent and this AGREEMENT shall not constitute an
assignment or attempted assignment thereof without such consent or waiver.
Provided, however, if such requirement for Third Party consent is subject to an
express or implied provision to the effect that such consent may not be
unreasonably withheld and SELLER, in its sole discretion, determines that such
consent is being unreasonably withheld, SELLER may, at its risk, assign such
interest to PURCHASER. Except for any liability of SELLER to a Third Party with
respect to an assignment pursuant to the preceding sentence, SELLER shall not be
liable to PURCHASER by reason of any inability or failure to obtain any such
waiver of preferential rights or consent to assignment. PURCHASER shall, at the
request of SELLER, nominate a value to each interest burdened by a preferential
right to purchase, and if such value is agreeable to SELLER, it shall become the
price to such Third Party. If SELLER is unable to obtain a required waiver or
consent, or if a preferential right to purchase is exercised or if SELLER
determines that such consent has been unreasonably withheld but elects not to
assign the interest, then such interest shall be excluded from the PROPERTY and
the Purchase Price shall be reduced by the amount, agreed upon by SELLER and
PURCHASER, as described in the preceding sentence, to account for such interest
unless: (i) PURCHASER AGREES TO ACCEPT THE INTEREST "AS IS", AND RELEASES SELLER
FROM ALL CLAIMS RELATED THERETO, or (ii) SELLER agrees to indemnify PURCHASER
against all losses, costs, expenses and liabilities with respect to such failure
to obtain consent to assign. If no agreed upon reduction in Purchase Price has
been reached and no agreement can otherwise be reached as to the disposition of
an interest for which consent to assign has not been obtained, then either Party
may give written notice to the other Party to terminate this AGREEMENT and upon
the giving of such notice, neither Party shall have any further rights or
obligations hereunder, except for PURCHASER's obligations and SELLER's rights
under the Confidentiality Agreement dated August 21, 1997. Notwithstanding the
above, it is understood and agreed that the prior termination or lapse of or a
requirement that any license, permit, right-of-way, pipeline franchise or
easement affecting any interests in or other portions of the PROPERTY is
non-transferable, must be renegotiated or is subject to consent upon a transfer
of ownership shall not entitle the PURCHASER to any remedy under this AGREEMENT.
13. TITLE.
(a) TITLE EXAMINATION. PURCHASER assumes the risk of description and
title to the PROPERTY and agrees to satisfy itself with respect thereto.
PURCHASER acknowledges and agrees that SELLER MAKES NO WARRANTY OF TITLE WITH
RESPECT TO THE PROPERTY OR ANY PORTION THEREOF, AND NONE SHALL BE IMPLIED.
Pursuant to the Process Description attached to SELLER's Bid Solicitation Letter
of September 4, 1997, SELLER has made available to PURCHASER for examination by
PURCHASER such title information and abstract coverage as may have been
available in SELLER's land and contract files located in Houston, Texas. SELLER
MAKES NO WARRANTY OR REPRESENTATION AS TO THE ACCURACY, COMPLETENESS OR
CORRECTNESS OF ANY TITLE INFORMATION OR OPINIONS FURNISHED TO PURCHASER. ANY
RELIANCE PURCHASER MAKES ON SUCH INFORMATION IS AT PURCHASER'S SOLE RISK AND
SELLER SHALL HAVE NO LIABILITY WHATSOEVER TO PURCHASER IN CONNECTION THEREWITH.
(b) PERSONAL PROPERTY INVENTORY LIST. If PURCHASER prepares an
inventory list of the personal property being conveyed or transferred hereunder,
such inventory list, if approved by SELLER, shall be controlling with respect to
the personal property listed therein and shall be attached to any Bill of Sale
or other document of conveyance utilized to transfer the personal property from
SELLER to PURCHASER under this AGREEMENT. If PURCHASER does not prepare such an
inventory list,
then the Bill of Sale or other document of conveyance will omit an inventory
list and recite generally the sale, transfer and conveyance of all of SELLER's
right, title and interest in all specified categories of personal property
located on or associated with the real property and lands subject to the
interests in real property included in the PROPERTY.
14. REPRESENTATIONS BY SELLER. SELLER represents to PURCHASER, each of
which representations shall survive Closing, that as of the date of this
AGREEMENT and as of Closing:
(a) DUE ORGANIZATION. SELLER is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Delaware.
(b) CORPORATE POWER. SELLER has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into this
AGREEMENT, and to perform its obligations under this AGREEMENT. The consummation
of the transactions contemplated by this AGREEMENT will not violate, nor be in
conflict with, (i) any provision of its charter or bylaws or (ii) any agreement
or instrument to which it is a party or is bound (except for preferential rights
to purchase and required Third Party consents to assignment, if any).
(c) DULY EXECUTED. This AGREEMENT has been duly executed and
delivered on behalf of SELLER, and at Closing, all documents and instruments
required hereunder to be executed and delivered by it shall have been duly
executed and delivered.
(d) NO LITIGATION. There are no pending or, to the best of SELLER's
knowledge, threatened claims, lawsuits, administrative proceedings, or
governmental investigations or inquiries involving SELLER's right to consummate
the sale contemplated hereunder except those claims, lawsuits, administrative
proceedings, and governmental investigations and inquiries that SELLER has
disclosed to PURCHASER in writing prior to Closing.
15. REPRESENTATIONS OF PURCHASER . PURCHASER represents to SELLER, each of
which representations shall survive Closing, that as of the date of this
AGREEMENT and as of Closing:
(a) DUE ORGANIZATION. PURCHASER is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Texas and
is duly qualified to do business in the State of Louisiana and has satisfied all
state bonding requirements, if any.
(b) CORPORATE POWER. PURCHASER has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into this
AGREEMENT, to purchase or exchange the PROPERTY on the terms described in this
AGREEMENT and to perform its other obligations under this AGREEMENT. The
consummation of the transactions contemplated by this AGREEMENT will not
violate, nor be in conflict with, (i) any provision of its charter or bylaws or
(ii) any agreement or instrument to which it is a party or is bound.
(c) DULY EXECUTED. This AGREEMENT has been duly executed and
delivered on behalf of PURCHASER, and at Closing, all documents and instruments
required hereunder to be executed and delivered by it shall have been duly
executed and delivered and the transactions contemplated hereby shall have been
duly and validly authorized by all requisite corporate action.
(d) NO LITIGATION. There are no pending or, to the best of
PURCHASER's knowledge, threatened claims, lawsuits, administrative proceedings,
or governmental investigations or inquiries involving PURCHASER's right to
consummate the sale contemplated hereunder except those claims, lawsuits,
administrative proceedings, and governmental investigations and inquiries that
PURCHASER has disclosed to SELLER in writing prior to Closing.
(e) SECURITIES LAWS. PURCHASER acknowledges that the solicitation of
an offer for, and the sale of the PROPERTY by SELLER have not been registered
under any securities laws.
PURCHASER intends to acquire the PROPERTY for its own benefit and account and is
not acquiring the PROPERTY with the intent of distributing fractional undivided
interests in the PROPERTY or otherwise selling the PROPERTY in a manner that
would be subject to regulation by federal or state securities laws. If PURCHASER
sells, transfers, or otherwise disposes of the PROPERTY or fractional undivided
interests therein in the future, it will do so in compliance with applicable
federal and state laws. PURCHASER represents that at no time has it been
presented with or solicited by or through any public promotion or other form of
advertising in connection with this transaction.
16. SELLER'S CONDITIONS. The obligations of SELLER to be performed at
Closing are subject to the satisfaction at or prior to Closing of the following
conditions, any of which may be waived
by SELLER:
(a) REPRESENTATIONS TRUE. All representations of PURCHASER contained
in this AGREEMENT shall be true in all material respects at and as of Closing as
if such representations were made at and as of Closing, and PURCHASER shall have
performed and satisfied in all material respects all obligations required by
this AGREEMENT to be performed and satisfied by it at or prior to Closing.
(b) NO PENDING SUITS. No suit or other proceeding shall be pending
or threatened before any court or governmental agency seeking to restrain,
prohibit or declare illegal, or seeking substantial damages in connection with,
the contemplated purchase or exchange.
(c) NO ACT OF TERMINATION. SELLER shall not have exercised any
rights it may have hereunder to terminate this AGREEMENT.
(d) MERGER CLOSING. Closing shall have occurred under the Merger
Agreement.
17. PURCHASER'S CONDITIONS. The obligations of PURCHASER to be performed
at Closing are subject to the satisfaction at or prior to Closing of the
following conditions, any of which may be waived by PURCHASER:
(a) REPRESENTATIONS TRUE. All representations of SELLER contained in
this AGREEMENT shall be true in all material respects at and as of Closing as if
such representations were made at and as of Closing, and SELLER shall have
performed and satisfied in all material respects all agreements required by this
AGREEMENT to be performed and satisfied by it at or prior to the Closing.
(b) NO PENDING SUITS. No suit or other proceeding shall be pending
or threatened before any court or governmental agency seeking to restrain,
prohibit or declare illegal, or seeking substantial damages in connection with,
the contemplated purchase.
(c) NO ACT OF TERMINATION. PURCHASER shall not have exercised any
rights it may have hereunder to terminate this AGREEMENT.
(d) MERGER CLOSING. Closing shall have occurred under the Merger
Agreement.
18. OPERATIONS AND PRODUCTION AFTER THE EFFECTIVE DATE.
(a) OPERATIONS BETWEEN THE EFFECTIVE DATE AND CLOSING. As Closing will
occur subsequent to the Effective Date, SELLER will continue to operate the
PROPERTY, or cause the PROPERTY to be operated, at PURCHASER's sole risk and for
the account of PURCHASER, until Closing in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted. In no event
shall SELLER have any liability to PURCHASER for losses sustained or liabilities
incurred in the conduct of such activities except such as may result from
SELLER's gross negligence or willful misconduct. Upon Closing, PURCHASER shall
assume the risk of any change in the condition of the PROPERTY from the
Effective Date to the Closing Date, except to the extent any change in the
condition is attributable to the gross negligence or willful misconduct of
SELLER. Any casualty loss on or after the Effective Date shall be for the
account of PURCHASER. SELLER shall not take or commit to any material actions or
transactions that are not in the usual, regular and ordinary course of business
with respect to the PROPERTY, except with the prior written consent of
PURCHASER. SELLER shall consult with PURCHASER prior to electing to participate
or not to participate in any well, lease, or properties; and prior to electing
not to participate in any well, lease or properties shall give PURCHASER
reasonable opportunity to advise SELLER that PURCHASER wants SELLER to elect to
participate on behalf of PURCHASER on the same terms as SELLER would have
participated. If Closing is not consummated, (i) SELLER shall assign its working
interests in any such well, lease or properties to PURCHASER, (ii) PURCHASER
shall reimburse SELLER for any costs associated with the participation by
SELLER, and (iii) PURCHASER shall receive all the benefits and bear all the
detriments of any such participation, less any benefits that otherwise would be
earned by a non-consenting party in the form of an overriding royalty or similar
interest.
(b) EXPENSES. Subject to the provisions of section 21, SELLER shall
be responsible for payment of all Expenses (as defined below) related to the
PROPERTY prior to the Effective Date. PURCHASER shall be responsible for the
payment of all Expenses related to the PROPERTY after the Effective Date, and
for the cost and expenses resulting from the assumption of the obligations and
implied covenants as specified in section 20(b) incurred or accrued from and
after the Effective Date and for payments made by SELLER prior to the Effective
Date to the extent recouped or recoupable from production after the Effective
Date. "Expenses" as used in this section shall mean any expenses incurred or
accrued in connection with the operation, use, protection, maintenance or
ownership of the PROPERTY including, without limitation, expenses for or related
to all lease rentals, shut-in royalties, minimum royalties, payments in lieu of
production, production royalties (including royalties paid in kind), overriding
royalties, production payments, net profits payments, contractual payments,
operating costs, overhead charges as specified below, expenses, fees, vendor and
contractor invoices, billings, taxes, charges (including, without limitation,
any charges for overhead provided for in any operating agreements related to the
PROPERTY at the rates specified in such agreements), rental payments, franchise
fees,
permits and license fees, assessments and other indebtedness and obligations
due, payable, incurred, accrued or attributable to the ownership, operation,
use, protection or maintenance of or otherwise relating to or associated with
the PROPERTY.
The applicable overhead charge shall be $1.64 per barrel of oil
equivalent produced from the PROPERTY. Any reports or information provided to
PURCHASER at PURCHASER's request, which are not routinely generated by SELLER,
shall be billed to PURCHASER at SELLER's actual cost.
(c) ALLOCATION OF PRODUCTION AND PROCEEDS. All production from oil
and/or gas wells, and all proceeds from the sale thereof, including, without
limitation, proceeds from any imbalance and oil in storage above the pipeline
connection, and take-or-pay collections/rights and accounts receivable
attributable to production prior to the Effective Date and all other monetary
payments (including, without limitation, proceeds from the sale of mineral
production, credits, tax refunds, insurance proceeds, salvage payments and
reimbursement of joint operating costs and expenses) attributable to the
ownership, use or operation of the PROPERTY prior to the Effective Date shall be
the property of SELLER. All such above described production proceeds, and other
monetary payments attributable to production on and after the Effective Date
shall be the property of PURCHASER.
(d) INTERIM ACCOUNTING, PAYMENT AND COLLECTION SERVICES. From and
after the Effective Date until Closing, SELLER shall, for the account of and at
cost set forth in the last paragraph of subsection 18(b), provide all necessary
and appropriate financial accounting services for the PROPERTY and all related
operations and administration of the PROPERTY in the same manner and to the same
extent provided by SELLER prior to the Effective Date, taking into account and
acting consistent with the provisions of subsections 18(b) and 18(c) above.
SELLER shall, for the account of and at the cost set forth in the last paragraph
of subsection 18(b), pay all Expenses (as provided in
subsection 18(b)) which are the obligation of PURCHASER and collect all proceeds
and other monetary payments which are allocated to PURCHASER (as provided in
subsection 18(c)).
(e) POST CLOSING SETTLEMENT. Within sixty (60) business days after
Closing, SELLER and PURCHASER shall make a final post-Closing settlement to
account for all production proceeds and other monetary payments collected for
PURCHASER's account by SELLER and all Expenses, other costs and expenses and
taxes paid for PURCHASER's account by SELLER pursuant to this section 18 and the
True-Up Accounting Procedures and Principles attached as Schedule III to the
Merger Agreement.. In addition, SELLER and PURCHASER shall account for and
settle any payments made by SELLER prior to the Effective Date which are
recouped or recoupable from production after the Effective Date. SELLER and
PURCHASER agree to promptly remit any sum determined from such post-Closing
settlement to be owed to the other.
(f) AUDIT. Within six (6) months of the Closing, either Party may at
its own expense audit the other Party's books, accounts and records relating to
production proceeds, other monetary payments, Expenses, other costs and expenses
and taxes (other than income taxes) paid or received which may have been
adjusted on account of this transaction. Such audit shall be conducted so as to
cause a minimum of inconvenience to the audited Party.
(g) NO APPLICATION TO INCOME TAXES. All references in sections 18
and 19 to taxes and tax refunds shall not apply to income taxes and income tax
refunds.
19. TAXES, COSTS AND FEES.
(a) TAXES. PURCHASER shall be responsible for the economic burden
and payment of all taxes relating to the PROPERTY from and after the Effective
Date. SELLER shall be responsible for the economic burden and payment of all
taxes relating to the PROPERTY prior to the Effective Date. PURCHASER shall pay
to SELLER at Closing, in addition to and separate from the Purchase Price or
Exchange Value, an amount equal to all state and local taxes payable by SELLER
on the transfer of ownership of any tangible personal property calculated at the
then-current rates. PURCHASER SHALL INDEMNIFY SELLER AND HOLD SELLER HARMLESS
FROM ANY LIABILITY, INCLUDING WITHOUT LIMITATION, PENALTIES, INTEREST AND
ATTORNEY'S FEES, ARISING OUT OF PURCHASER'S FAILURE TO PAY TO SELLER AT CLOSING,
IN ADDITION TO AND SEPARATE FROM THE PURCHASE PRICE THE AMOUNT EQUAL TO ALL
STATE AND LOCAL TAXES PAYABLE BY SELLER ON THE TRANSFER OF OWNERSHIP OF ANY
TANGIBLE PERSONAL PROPERTY. PURCHASER shall pay all costs associated with
documentary transfer taxes, other transfer taxes and any recording costs
assessed by any federal, state, county or other governmental offices or other
transfer fees and SHALL INDEMNIFY AND HOLD SELLER HARMLESS FOR SUCH TRANSFER
TAXES, COSTS AND FEES.
(b) NO BROKERS. Each Party shall pay and indemnify and hold the
other Party harmless from any commission or brokerage fee it has incurred in
connection with this transaction.
20. OPERATIONS BY PURCHASER.
(a) COMPLIANCE WITH LAWS. PURCHASER shall comply with all applicable
laws, ordinances, rules and regulations, orders, terms of permits and
authorizations of any governmental body which may have jurisdiction with respect
to the PROPERTY to be transferred hereunder (including, without limitation, the
filing with such governmental bodies of any and all compliance reports, notices,
or other compliance documents which are due after the Closing Date regardless of
the period covered by such reports, notices or documents) and shall promptly
obtain and maintain all permits and bonds required by public authorities in
connection with the PROPERTY.
(b) ASSUMPTION OF OBLIGATIONS. Upon Closing, PURCHASER shall assume,
as of the Effective Date, and agree to perform, at PURCHASER's sole cost and
expense, (i) all current and future
obligations and implied covenants of SELLER and successor(s) relating to the
PROPERTY (whether such obligations and covenants are to a lessor, a governmental
body or any other person or entity), including, but not limited to, (1) any
obligations arising with respect to the plugging and abandonment of all existing
wells (whether or not such wells are active, inactive idle, or have been
previously abandoned as of the Effective Date), (2) any obligations to file or
submit compliance reports, notices and documents required by governmental
bodies, (3) the removal of related oil and gas equipment including, without
limitation, platforms, pipelines, sumps, concrete foundations, vessels, tanks
(above and below ground), and similar items of oil and gas field equipment and
facilities, whether the existence of same is known or unknown to the Parties at
Closing, and (4) the complete and lawful restoration and reclamation of the
lands used in connection with such wells and related equipment, platforms,
pipelines, sumps, concrete foundations, vessels, tanks (above and below ground),
and other similar items of oil and gas field equipment and facilities in
compliance with all federal, state and local laws, rules and regulations, and
(ii) all obligations under licenses, permits, franchises, easements, and
rights-of-ways associated with or included in the PROPERTY and (iii) any
obligations with respect to the reabandonment of previously abandoned wells on
lands included in the PROPERTY. This assumption of obligations and liabilities
by PURCHASER shall include SELLER's obligations and liabilities with respect to
net proceeds from production attributable to interests in the PROPERTY as
currently held in suspense because of a lack of identity or address of owners,
title questions, change of ownership or similar reasons (as identified on
SCHEDULE "20(b)" attached hereto). The amount of suspended funds shall be
credited to PURCHASER in the post-Closing settlement described in subsection
18(e). As set forth in subsection 21(a)(1), PURCHASER SHALL DEFEND, INDEMNIFY
AND HOLD SELLER HARMLESS WITH RESPECT TO THE PERFORMANCE OR FAILURE TO PERFORM
OF PURCHASER'S OBLIGATIONS UNDER THIS SECTION 20. UPON CLOSING,
PURCHASER EXPRESSLY ASSUMES SELLER'S STRICT AND STATUTORY LIABILITY WITH RESPECT
TO THE PROPERTY, INCLUDING ALL LIABILITY UNDER ANY ENVIRONMENTAL LAW, EXCEPT AS
EXPRESSLY PROVIDED OTHERWISE IN SUBSECTIONS 21(c) AND (d) HEREOF, AND PURCHASER
SHALL DEFEND, INDEMNIFY AND HOLD SELLER HARMLESS WITH RESPECT TO THE PERFORMANCE
OR FAILURE TO PERFORM OF PURCHASER'S OBLIGATIONS UNDER THIS SECTION 20,
REGARDLESS OF THE NEGLIGENCE, FAULT OR STRICT (STATUTORY) LIABILITY OF SELLER AS
SET FORTH IN SUBSECTIONS 21(a) AND 21(b).
21. INDEMNIFICATION. Capitalized terms used in this section 21 which are
not defined elsewhere in this AGREEMENT are defined in subsection 21(f) below.
(a) GENERAL INDEMNITY BY PURCHASER. TO THE FULLEST EXTENT PERMITTED
BY LAW, BUT NO FURTHER, PURCHASER SHALL INDEMNIFY AND HOLD HARMLESS SELLER, ITS
AFFILIATES, SUCCESSORS AND ASSIGNS, AND THE RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS OF EACH (THE "SELLER INDEMNIFIED PARTIES"), FROM ANY AND
ALL CLAIMS WHICH (A) DIRECTLY OR INDIRECTLY ARISE (AS DEFINED IN SUBSECTION
21(f)(2)) OR RESULT FROM OR ARE CAUSED BY THE USE, OPERATION, MAINTENANCE,
OCCUPATION, OWNERSHIP OR ABANDONMENT OF THE PROPERTY ON OR AFTER THE EFFECTIVE
DATE OR (B) ARE NOT SUBJECT TO SELLER'S OBLIGATIONS OF INDEMNITY UNDER
SUBSECTION 21(c) OR (d), IRRESPECTIVE OF WHEN THE CLAIMS ARISE (BEFORE, ON, OR
AFTER THE EFFECTIVE DATE), EVEN THOUGH SUCH CLAIMS MAY HAVE BEEN CONTRIBUTED TO
OR CAUSED BY THE NEGLIGENCE OR FAULT OF SELLER OCCURRING PRIOR TO CLOSING
(EXCEPT FOR (i) ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL CLEANUP LIABILITY AS
PROVIDED FOR IN SUBSECTION 21(b) BELOW). THE FOREGOING OBLIGATION SHALL APPLY
REGARDLESS OF THE NEGLIGENCE, FAULT OR THE STRICT OR STATUTORY
LIABILITY OF SELLER UNDER ANY LAW (INCLUDING STATUTORY, REGULATORY AND CASE
LAW), REGARDLESS OF WHETHER SUCH LAW WAS IN EXISTENCE AS OF THE EFFECTIVE DATE.
PURCHASER FURTHER COVENANTS AND AGREES TO DEFEND ANY SUIT(S) OR ADMINISTRATIVE
PROCEEDING(S) BROUGHT AGAINST SELLER INDEMNIFIED PARTIES ON ACCOUNT OF ANY SUCH
CLAIMS INDEMNIFIED HEREUNDER AND TO PAY OR DISCHARGE THE FULL AMOUNT OR
OBLIGATION OF SUCH CLAIMS INCURRED BY, ACCRUING TO OR IMPOSED ON SELLER
INDEMNIFIED PARTIES RESULTING FROM ANY SUCH SUIT(S) OR PROCEEDING(S) OR ANY
AMOUNTS RESULTING FROM THE SETTLEMENT OR RESOLUTION OF SUCH SUIT(S) OR
PROCEEDING(S). IN ADDITION, PURCHASER SHALL PAY TO SELLER INDEMNIFIED PARTIES AS
APPLICABLE, ALL ATTORNEYS' FEES INCURRED BY SELLER INDEMNIFIED PARTIES AS
APPLICABLE, IN ENFORCING PURCHASER'S INDEMNITY IN THIS SUBSECTION 21(A).
(b) ENVIRONMENTAL INDEMNITY BY PURCHASER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BUT NO FURTHER, PURCHASER SHALL INDEMNIFY AND HOLD HARMLESS
SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL ENVIRONMENTAL CLAIMS OR
ENVIRONMENTAL CLEANUP LIABILITY WHICH (A) ARISE DIRECTLY OR INDIRECTLY FROM THE
USE, OPERATION, MAINTENANCE, OCCUPATION, OWNERSHIP OR ABANDONMENT OF THE
PROPERTY ON OR AFTER THE EFFECTIVE DATE OR (B) ARE NOT SUBJECT TO SELLER'S
OBLIGATIONS OF INDEMNITY UNDER SUBSECTION 21(c) OR (d), IRRESPECTIVE OF WHEN THE
ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL CLEANUP LIABILITY ARISE (BEFORE, ON, OR
AFTER THE EFFECTIVE DATE), EVEN THOUGH CAUSED, OR CONTRIBUTED TO, BY THE
NEGLIGENCE OR FAULT OF SELLER.
THE FOREGOING OBLIGATION SHALL APPLY REGARDLESS OF THE NEGLIGENCE, FAULT OR THE
STRICT OR STATUTORY LIABILITY OF SELLER UNDER ANY LAW (INCLUDING STATUTORY,
REGULATORY AND CASE LAW), REGARDLESS OF WHETHER SUCH LAW WAS IN EXISTENCE AS OF
THE EFFECTIVE DATE. PURCHASER FURTHER COVENANTS AND AGREES TO DEFEND ANY SUIT(S)
OR
ADMINISTRATIVE PROCEEDING(S) BROUGHT AGAINST SELLER INDEMNIFIED PARTIES ON
ACCOUNT OF ANY SUCH ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL CLEANUP LIABILITY AND
TO PAY OR DISCHARGE THE FULL AMOUNT OR OBLIGATION OF SUCH ENVIRONMENTAL CLAIMS
OR ENVIRONMENTAL CLEANUP LIABILITY INCURRED BY, ACCRUING TO OR IMPOSED ON SELLER
INDEMNIFIED PARTIES, AS APPLICABLE, RESULTING FROM ANY SUCH SUIT(S) OR
PROCEEDING(S) OR ANY AMOUNTS RESULTING FROM THE SETTLEMENT OR RESOLUTION OF SUCH
SUIT(S) OR PROCEEDING(S). IN ADDITION, PURCHASER SHALL PAY TO SELLER INDEMNIFIED
PARTIES, AS APPLICABLE, ALL ATTORNEYS' FEES INCURRED BY SELLER INDEMNIFIED
PARTIES, AS APPLICABLE, IN ENFORCING PURCHASER'S INDEMNITY IN THIS SUBSECTION
21(b).
(C) GENERAL INDEMNITY BY SELLER. TO THE FULLEST EXTENT PERMITTED BY
LAW BUT NO FURTHER AND SUBJECT TO THE LIMITATIONS SET FORTH IN SUBSECTION 21(E)
BELOW, SELLER SHALL INDEMNIFY AND HOLD HARMLESS PURCHASER, ITS AFFILIATES,
SUCCESSORS AND ASSIGNS, AND THE RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS OF EACH (THE "PURCHASER INDEMNIFIED PARTIES"), FROM ANY AND ALL THIRD
PARTY CLAIMS (EXCEPT FOR (i) ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL CLEANUP
LIABILITY AS PROVIDED FOR IN SUBSECTION 21(d) BELOW; AND (ii) ANY SUCH THIRD
PARTY CLAIMS TO THE EXTENT CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
OF PURCHASER) FOR WHICH A CLAIM NOTICE IS DELIVERED TO SELLER WITHIN ONE (1)
YEAR AFTER THE CLOSING DATE HEREUNDER AND (i) WHICH ARISE, RESULT FROM OR ARE
CAUSED BY THE USE, OPERATION, MAINTENANCE, OCCUPATION AND OWNERSHIP OF THE
PROPERTY BY SELLER ACCRUED AND ATTRIBUTABLE UP TO, BUT NOT ON OR AFTER THE
EFFECTIVE DATE, (ii) ARE BASED ON LAW (INCLUDING STATUTORY, REGULATORY AND CASE
LAW) EXISTING AT THE EFFECTIVE DATE AND (iii) WHICH EXCEEDS $1,000,000.00.
SELLER FURTHER COVENANTS AND AGREES TO DEFEND ANY SUIT(S) OR ADMINISTRATIVE
PROCEEDING(S) BROUGHT AGAINST PURCHASER INDEMNIFIED PARTIES ON ACCOUNT OF ANY
SUCH THIRD PARTY CLAIMS INDEMNIFIED HEREUNDER AND TO PAY OR DISCHARGE THE FULL
AMOUNT OR OBLIGATION OF ANY SUCH THIRD
PARTY CLAIMS INCURRED BY, ACCRUING TO OR IMPOSED ON PURCHASER INDEMNIFIED
PARTIES RESULTING FROM ANY SUCH SUIT(S) OR PROCEEDING(S) OR ANY AMOUNTS
RESULTING FROM THE SETTLEMENT OR RESOLUTION OF SUCH SUIT(S) OR PROCEEDING(S). IN
ADDITION, SELLER SHALL PAY TO PURCHASER INDEMNIFIED PARTIES ALL ATTORNEYS' FEES
INCURRED BY PURCHASER INDEMNIFIED PARTIES IN ENFORCING SELLER'S INDEMNITY IN
THIS SUBSECTION 21(c).
(d) ENVIRONMENTAL INDEMNITY BY SELLER. TO THE FULLEST EXTENT
PERMITTED BY LAW BUT NO FURTHER AND SUBJECT TO THE LIMITATIONS SET FORTH IN
SUBSECTION 21(e) BELOW, SELLER SHALL INDEMNIFY AND DEFEND PURCHASER INDEMNIFIED
PARTIES FROM AND AGAINST ANY AND ALL ENVIRONMENTAL CLAIMS AND ENVIRONMENTAL
CLEANUP LIABILITY FOR WHICH A CLAIM NOTICE IS DELIVERED TO SELLER WITHIN ONE (1)
YEAR AFTER THE CLOSING DATE AND (i) WHICH ARISES OUT OF THE USE, OPERATION,
MAINTENANCE, OCCUPATION OR OWNERSHIP OF THE PROPERTY BY SELLER ACCRUED AND
ATTRIBUTABLE UP TO, BUT NOT ON OR AFTER THE EFFECTIVE DATE, AND (ii) WHICH ARE
BASED ON ENVIRONMENTAL LAW (INCLUDING STATUTORY, REGULATORY AND CASE LAW) IN
EFFECT AT THE EFFECTIVE DATE HEREUNDER AND (iii) WHICH EXCEEDS ONE MILLION
DOLLARS ($1,000,000.00). SELLER FURTHER COVENANTS AND AGREES TO DEFEND ANY
SUIT(S) OR ADMINISTRATIVE PROCEEDING(S) BROUGHT AGAINST PURCHASER INDEMNIFIED
PARTIES ON ACCOUNT OF ANY SUCH ENVIRONMENTAL CLAIMS OR ENVIRONMENTAL CLEANUP
LIABILITY AND TO PAY OR DISCHARGE THE FULL AMOUNT OR OBLIGATION OF ANY SUCH
ENVIRONMENTAL CLAIM OR ENVIRONMENTAL CLEANUP LIABILITY INCURRED BY, ACCRUING TO
OR IMPOSED UPON PURCHASER INDEMNIFIED PARTIES RESULTING FROM ANY SUCH SUIT(S) OR
PROCEEDING(S) OR ANY AMOUNTS RESULTING FROM THE SETTLEMENT OR RESOLUTION OF SUCH
SUIT(S) OR PROCEEDING(S). IN ADDITION, SELLER SHALL PAY TO PURCHASER INDEMNIFIED
PARTIES ALL ATTORNEYS' FEES INCURRED BY PURCHASER INDEMNIFIED PARTIES IN
ENFORCING SELLER'S INDEMNITY IN THIS SUBSECTION 21(d).
(e) LIMITATIONS. The indemnification obligations of SELLER contained
in subsections 21(c) and (d) shall be subject to the following limitations and
conditions:
(1) Such indemnification obligations shall not limit the
disclaimers of warranties and acknowledgments of PURCHASER with respect to the
PROPERTY as specified in section 10 above, and the indemnities contained herein
shall have no application to matters of description, title (including, without
limitation, the existence of non-existence of easements, licenses,
rights-of-way, permits, franchises, liens, leases, unit agreements or other
encumbrances or other agreements or the failure to procure governmental or
necessary Third Party consents or approvals of assignment of the PROPERTY),
quality, value, fitness for purpose or merchantability of the PROPERTY;
(2) Such indemnification obligations shall not limit
PURCHASER's obligations (including indemnification obligations) under section 20
hereof with respect to removal and abandonment of facilities and wells located
on the PROPERTY including, without limitation, the plugging and abandoning of
wells, removal of concrete foundations, sumps, pipelines, vessels, tanks and
similar items of oil field equipment and facilities, and restoration of the
PROPERTY and the indemnities by SELLER contained herein shall have no
application to any costs, losses or liabilities incurred by PURCHASER in
connection with fulfilling such removal, abandonment and restoration
obligations;
(3) Such indemnification obligations shall not limit any
indemnification and reimbursement obligations of PURCHASER specified in the
Confidentiality Agreement dated August 21, 1997 or the Agreement for
Indemnification and Responsibility for Damages dated January 19, 1998;
(4) SELLER's combined financial obligations under subsections
21(c) and (d) shall not exceed, in the aggregate, 25% of Purchase Price;
(5) No Claim Notice may be delivered to SELLER by PURCHASER,
and SELLER shall have no financial obligations under said subsections 21(c) and
(d) unless and until
PURCHASER has first paid fifty thousand dollars ($50,000.00) with respect to
each individual Third Party Claim, Environmental Claim or Environmental Cleanup
Liability for which PURCHASER seeks to deliver a Claim Notice; and
(6) Such indemnification obligations shall be limited to the
extent any costs, losses or liabilities incurred by PURCHASER result from
PURCHASER's acquisition of the PROPERTY from SELLER; accordingly, SELLER shall
not indemnify PURCHASER for any costs, losses or liabilities incurred by
PURCHASER on account of PURCHASER's ownership of an interest in the PROPERTY
which PURCHASER acquired from a Third Party.
(f) DEFINITIONS. For purposes of this Agreement:
(1) "Affiliate(s)" shall mean a Party's "Parent Company" and
"Affiliated Companies". "Parent Company", "Affiliated Companies" and
"Controlling Interest" shall have the following meanings:
(i) A Party's "Parent Company" shall mean an entity
having a direct or indirect "Controlling Interest" in such Party;
(ii) A Party's "Affiliated Companies" shall mean any
and all entities in which the Party or the Parent Company of such Party has a
direct or indirect "Controlling Interest;" and
(iii) "Controlling Interest" shall mean a legal or
beneficial ownership of fifty percent (50%) or more of the voting stock or other
voting rights in an entity.
(2) "Arises." An Environmental Claim or Environmental Cleanup
Liability shall be deemed to arise upon (i) each discrete, operationally-related
Release of Chemical Substance, as measured on a daily basis, or (ii) each
discrete, operationally-related occurrence of pollution, contamination or
migration, as measured on a daily basis.
(3) "Chemical Substances" shall mean any chemical substance,
including, but not limited to, any sort of pollutants, contaminants, chemicals,
raw materials, intermediates, products, industrial, solid, toxic or hazardous
substances, materials, wastes, or petroleum products, including crude oil or any
component thereof, salt water, brine, asbestos, or NORM.
(4) "Claims" shall mean any and all claims, demands, loss,
liability, liens, demands, judgments, settlements, suits, causes of action,
fines, penalties, compliances, costs, and any costs, expenses and fees
associated with the investigation, defense and resolution of the foregoing,
including without limitation, reasonable attorney's fees. Claims may be based on
any theory of tort, contract, strict liability, statutory liability (including,
without limitation, fines, penalties, obligations or requirements) or any other
basis for liability and shall include, without limitation, any Claims arising,
occurring or resulting from, related to or based on the injury, disease, or
death of any persons (including, without limitation, the indemnifying Party's
employees, agents and representatives) or damage to, loss or destruction of any
property, real or personal (including, without limitation, the indemnifying
Party's property).
(5) "Claim Notice" shall mean a notice delivered to SELLER, in
writing, that the PURCHASER has received a claim or demand from a Third Party or
been served with process by or on behalf of a Third Party asserting Claims,
Environmental Claims or Environmental Cleanup Liability indemnified hereunder.
(6) "Environmental Claim" shall mean any claim, demand,
action, suit or proceeding for the personal injury, disease or death of any
person (including, without limitation, the indemnifying Party's employees,
agents and representatives), property damage, damage to the environment, or
damage to natural resources made, asserted or prosecuted by or on behalf of any
Third Party (whether based on negligent acts or omissions, statutory liability,
or strict liability without fault or
otherwise) arising or alleged to arise under any Environmental Law.
Environmental Claim includes any damages, settlement amounts, fines and
penalties assessed or costs of complying with any orders or decrees of courts,
administrative tribunals or other governmental entities (other than such
compliance costs related to Environmental Cleanup Liability) associated with
resolving such claims, demands, actions, suits or proceedings and any costs,
expenses and fees, including, without limitation, reasonable attorneys' fees
incurred in the investigation, defense and resolution of such claims, demands,
actions, suits and proceedings.
(7) "Environmental Cleanup Liability" shall mean any cost or
expense of any nature whatsoever incurred (in order to comply with the
provisions of any Environmental Law or the provisions of any order or decree of
any court or administrative or regulatory tribunal or agency enforcing any
Environmental Law) to contain, remove, remedy, respond to, clean up, or abate
any Release of Chemical Substances or other contamination or pollution of the
air, surface water, groundwater, land surface or subsurface strata related to
the operation, use, maintenance and ownership of the PROPERTY, whether such
Release, contamination or pollution is located on, within, under or above real
property included in the PROPERTY ("on site") or is located off site, including,
but not limited to, any Release of Chemical Substances or other contamination or
pollution arising out of or resulting from the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce, or
on site or off site use, treatment, handling, storage, disposal, or
transportation of any Chemical Substances. Environmental Cleanup Liability
includes, without limitation, any judgments, damages, settlements, costs or
expenses (including, without limitation, attorneys', consultants' and experts'
fees and expenses) incurred with respect to (i) any investigation, study,
assessment, legal representation, cost recovery by a governmental agency or
Third Party, or monitoring or testing in connection therewith, (ii) the PROPERTY
as a result of actions or measures necessary to implement or effectuate any such
containment, removal, remediation, response, cleanup or abatement, and (iii) the
resolution of such liabilities.
(8) "Environmental Law" means any statutes, rules,
regulations, controlling judicial decisions or legal requirements relating to or
regulating the pollution, protection or cleanup of the environment or damage to
or remediation of damage to real property and natural resources (including, but
not limited to, ambient air, surface water, groundwater, and land surface or
subsurface strata) including, without limitation, legal requirements contained
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601 et seq., as amended (CERCLA); the Resources
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901, et seq., as amended
(RCRA); the Superfund Amendments and Reauthorization Act of 1986, Pub. L.
99-499, as amended (SARA); the Clean Air Act, 42 U.S.C. ss. 7401, et seq., as
amended; Federal Water Pollution Control Act, 33 U.S.C. ss. 2601 et seq., as
amended; National Environmental Policy Act, 42 U.S.C. ss. 4321, et seq., as
amended (NEPA); and the Safe Drinking Water Act, 42 U.S.C., ss. 300 j-l, et
seq., as amended; and/or any other federal, state or local laws, statutes,
ordinances, rules, regulations or orders (including decisions of any court or
administrative body) relating to the pollution, protection or cleanup of the
environment as specified above. Environmental Law shall also mean the Toxic
Substance Control Act, 25 U.S.C. ss. 1502, et seq., as amended (TOSCA) and/or
any other federal, state (including, without limitation, laws with respect to
trespass, nuisance and other torts or similar legal theories which may be
applied to establish liability or responsibility for Environmental Cleanup or
Environmental Claims) or local laws, statutes, ordinances, rules, regulations or
orders (including decisions of any court or administrative body) relating to (i)
release, containment, removal, remediation, response, cleanup or abatement of
any sort of Chemical Substance, (ii) the manufacture, generation, formulation,
processing, labeling, distribution, introduction into commerce, use, treatment,
handling, storage, disposal or transportation of any Chemical Substance,
(iii) exposure of persons, including employees of SELLER or PURCHASER, to any
Chemical Substance and other occupational safety or health matters, or (iv) the
physical structure or condition of a building, facility, fixture or other
structure, including, without limitation, those relating to the management, use,
storage, disposal, cleanup or removal of asbestos, asbestos-containing
materials, polychlorinated biphenyls or any other Chemical Substance.
(9) "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, escaping, leaching, dumping or
disposing of any Chemical Substance into the environment (including, but not
limited to, the ambient air, surface water, groundwater and land surface or
subsurface strata) of any kind whatsoever (including also the abandonment or
discarding of barrels, containers, tanks or other receptacles containing or
previously containing any Chemical Substance).
(10) "Third Party" shall mean any person (other than a Party
or its Affiliates) including, without limitation, any such natural person,
business entity (corporation, partnership, trust, sole proprietorship or other
business entity), any federal, state or local governmental entity, agency or
administrative body, employee of PURCHASER or of SELLER, former employee of
PURCHASER or of SELLER, or their respective legal representatives, heirs,
beneficiaries or estates.
(g) INDEMNIFIED PARTY'S PARTICIPATION. Any indemnified Party shall
have the right at all times, if it so elects and without relieving the
indemnifying Party of its obligations to defend hereunder, to participate in the
preparation for and conducting of any hearing or trial related to these
indemnification provisions, as well as the right to appear on its own behalf at
any such hearing or trial. Any such participation or appearance by an
indemnified Party shall be at its sole cost and expense.
An indemnified Party shall not execute a consent order nor
accept any settlement regarding an indemnified matter without the indemnifying
Party's prior written approval, which approval shall not be unreasonably
withheld. The indemnified Party shall cooperate fully with the indemnifying
Party in the defense of any matter hereunder by the indemnifying Party and shall
take those actions reasonably, within its power to take which are reasonably
necessary to preserve any legal defenses to indemnified matters hereunder until
the indemnifying Party has assumed the defense of the matter.
22. EXISTING CONTRACTS/IMBALANCES.
(a) ASSUMPTION OF CONTRACTS.The sale or exchange contemplated
hereunder shall be made subject to any and all existing operating agreements,
unit agreements, and unit orders, transportation agreements, and gas balancing
agreements, as well as any and all other agreements, permits, franchises,
leases, licenses, easements and rights-of-way including, without limitation,
overage/shortage agreements and exchange agreements to which the PROPERTY is
subject. To the extent such agreements may be assigned and delegated, as of
Closing, SELLER shall be deemed to have assigned and delegated such agreements
to PURCHASER and PURCHASER shall assume and be responsible for all obligations
of SELLER accruing under such agreements. PURCHASER agrees to seek any necessary
consents or approvals for the assignment and transfer of such agreements from
SELLER to PURCHASER. If such agreements may not be assigned or delegated, SELLER
may, at its sole discretion, perform such agreements on behalf of PURCHASER and
PURCHASER shall promptly, upon notice, reimburse SELLER for its respective
costs, expenses and obligations incurred in performing such agreements.
(b) GAS IMBALANCES. PURCHASER shall accept all gas and oil
imbalances that exist on the PROPERTY as of the Effective Date (as identified on
SCHEDULE "22(b)" attached hereto) and shall assume all responsibility to settle
with other interest owners for any over or short gas or oil imbalances that
exist on the PROPERTY. If the gas or oil imbalance on a particular PROPERTY
interest is a net liability, PURCHASER shall indemnify SELLER for that net
liability.
23. NOTICES. All notices and communications required or permitted under
this AGREEMENT shall be in writing, delivered to or sent by U. S. Mail or
nationally recognized commercial courier service, postage or delivery charges
prepaid, or by telecopy, addressed as follows (or such other address as may be
specified by ten (10) days prior written notice to the other Party):
SELLER
Shell Western E&P Inc.
ATTN Y. N. Youssef
200 North Dairy Ashford
Houston, TX 77079
Phone: (281) 544-3077
Fax: (281) 544-4393
THE MERIDIAN RESOURCE EXPLORATION COMPANY
15995 N. Barkers Landing,
Suite 300
Houston, TX 77079
Attn: Joseph A. Reeves, Jr., CEO
Phone: (281) 558-8080
Fax: (281) 558-5595
cc: Gary A. Messersmith
Fouts & Moore, L.L.P.
1300 Post Oak Blvd., 20th Floor
Houston, TX 77056-3013
Phone: (713) 986-7216
Fax: (713) 986-7299
Notice shall be deemed to have been duly given when delivered to or sent to the
other Party in the manner prescribed herein and actually received by the Party
to whom the notice is given.
24. PARTIES IN INTEREST. Subject to subsection 27(d) below, this AGREEMENT
shall inure to the benefit of and be binding upon SELLER and PURCHASER and their
respective successors and assigns. However, no assignment by any Party shall
relieve any Party of any duties or obligations under this AGREEMENT.
25. COMPLETE AGREEMENT. When executed by the authorized representatives of
SELLER and PURCHASER, this AGREEMENT, together with the executed copies of the
exhibits hereto and documents referred to herein, shall supersede all prior
written or oral and all contemporaneous oral agreements and understandings
between the Parties, including without limitation, all and any bid solicitation,
bid offer and bid acceptance letters, and shall constitute the complete
agreement between the Parties regarding the purchase and sale, or exchange, of
the PROPERTY.
26. APPLICABLE LAW. THIS AGREEMENT, OTHER DOCUMENTS EXECUTED AND DELIVERED
PURSUANT HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH RESPECT TO
THIS AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAWS;
PROVIDED, THAT THE VALIDITY OF THE VARIOUS CONVEYANCES TRANSFERRING TITLE TO
REAL PROPERTY AND REAL PROPERTY INTERESTS UNDER THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH
REAL PROPERTY OR REAL PROPERTY INTERESTS ARE LOCATED.
27. MISCELLANEOUS PROVISIONS.
(a) CAPTIONS. Captions have been inserted for reference purposes
only and shall not define or limit the terms of this AGREEMENT.
(b) PARTIAL INVALIDITY. If any provision of this AGREEMENT is held
invalid, such invalidity shall not affect the remaining provisions.
(c) MODIFICATION. This AGREEMENT cannot be modified or amended
except by a written instrument duly executed by SELLER and PURCHASER.
(d) ASSIGNMENT. Neither SELLER nor PURCHASER, without the prior
written consent of the other Party, shall assign any right or obligation under
this AGREEMENT prior to Closing, or attempt to delegate any duty to be performed
under this AGREEMENT, except that SELLER may make such an assignment and/or
delegation to an Affiliate or to a Qualified Intermediary without the consent of
PURCHASER. Consent to assign shall not be unreasonably withheld by either Party.
Any attempted assignment or delegation without such consent shall be void and of
no effect.
(e) COUNTERPARTS. This AGREEMENT may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
(f) EXPENSES. Except as otherwise expressly provided herein, all
expenses incurred by each Party in connection with the transaction contemplated
herein, including, without limitation, attorney's fees, are for the account of
the Party incurring the same and the Party incurring such expenses shall defend,
indemnify and hold harmless the other Party from and against such expenses.
(g) SIGNS. SELLER shall have the right, but not the obligation, to
remove all of SELLER's signs, placards, notices, or other posted documents or
information and any other like property which refers to SELLER's ownership of
the PROPERTY or responsibility for the operations conducted thereon.
(h) PRESS RELEASES. No information in connection with this sale or
exchange shall be released to the public, including, without limitation, through
press releases, without the express written permission of SELLER, unless
required by applicable federal, state or local laws.
(i) RECORDING. SELLER shall record this AGREEMENT with the
Assignment and Conveyance and Personal Property Agreement and Bill of Sale in
the appropriate governmental offices and land records in the Parishes and State
of Louisiana at PURCHASER's expense.
(j) SURVIVAL. All representations, indemnifications, covenants,
obligations and promises of the Parties set forth in this AGREEMENT shall
survive Closing. All documents conveying, transferring or assigning the PROPERTY
shall incorporate by reference the terms and conditions of this AGREEMENT.
(k) EXHIBITS AND SCHEDULES. The Exhibits and Schedules listed below
are attached to this AGREEMENT:
EXHIBIT "A" Property and Property Interests Subject To This AGREEMENT
EXHIBIT "B" Assignment and Conveyance
EXHIBIT "C" Personal Property Agreement and Bill of Sale
EXHIBIT "D" SELLER Non-foreign Affidavit
SCHEDULE "1(k)" Specifically Listed Exclusions
SCHEDULE "20(b)" Suspense Items
SCHEDULE "22(b)" Oil and Gas Imbalances
(l) TIME OF ESSENCE. Time is of the essence in the performance of
this AGREEMENT.
(m) NO PARTNERSHIP. Nothing contained in this AGREEMENT shall be
deemed to create a joint venture, partnership, tax partnership or agency
relationship between the Parties.
(n) FILE TRANSFERS. Within a reasonable time after Closing, SELLER
will transfer to PURCHASER, subject to SELLER's continuing right of access as
hereinafter set forth, the following original SELLER files, records, documents
and data relating to the PROPERTY: oil, gas and mineral lease, fee, easement and
right of way, surface lease, operating agreement, farmout, unitization and
pooling and land abstract files and records as well as original well record
files on all active wells (i.e., all existing wells situated on the PROPERTY
which have not been plugged and abandoned as of the Closing Date)
but save, less and except therefrom all Proprietary Data which for the purposes
of this AGREEMENT, shall include (i) all data that is confidential or legally
privileged, (ii) any interpretive geological and geophysical information which
would reveal the methods used by SELLER in interpreting geological and
geophysical information, economic analysis, and any information or other similar
proprietary data which would reveal SELLER's economic guidelines or other
methods or systems by which SELLER conducts its economic analysis, and (iii) any
similar data or information.
SELLER retains the right of complete access to the above files
and records, which right of access may be exercised by SELLER at reasonable
times, upon giving PURCHASER reasonable notice and which shall include, at
SELLER's sole cost and expense, the right to copy or duplicate any and all
contents therein. Should SELLER be required by a governmental rule or order to
produce the original of any document described in this subsection, PURCHASER
will, to the best of its ability, make such document available to enable SELLER
to comply with said rule or order upon receiving proper assurance that such
document will be promptly returned to PURCHASER.
After Closing, SELLER shall grant PURCHASER the right of
access to the following SELLER files, records, documents and data relating to
the PROPERTY: division order, transfer order, letters-in-lieu, regulatory,
accounting, environmental, pipeline, maintenance, transportation, [processing,]
production and engineering files and records not conveyed and transferred to
PURCHASER; however, this right of access shall not extend to or cover
Proprietary Data as defined above in this subsection 27(n). PURCHASER's right of
access may be exercised at reasonable times, upon giving SELLER reasonable
notice and shall include, at PURCHASER's sole cost and expense, the right to
copy any and all contents therein not otherwise excluded subject to the
following: (1) only division of interest sheets, division orders, transfer
orders, letters-in-lieu, title opinions and title curative material may be
copied from division order files and (2) only gas contracts and amendments or
agreements relating thereto and pertinent outside correspondence may be copied
from gas files. Should PURCHASER be required by a governmental rule or order to
produce the original of any document to which the right of access has been
granted by this subsection, SELLER will, to the best of its ability, make such
document available to enable PURCHASER to comply with said rule or order upon
receiving proper assurance that such document will be promptly returned to
SELLER.
(O) ARBITRATION. ANY CONTROVERSY OR CLAIM, WHETHER BASED ON
CONTRACT, TORT, STATUTE OR OTHER LEGAL OR EQUITABLE THEORY (INCLUDING BUT NOT
LIMITED TO ANY CLAIM OF FRAUD, MISREPRESENTATION OR FRAUDULENT INDUCEMENT OR ANY
QUESTION OF VALIDITY OR EFFECT OF THIS AGREEMENT INCLUDING THIS CLAUSE) ARISING
OUT OF OR RELATED TO THIS AGREEMENT (INCLUDING ANY AMENDMENTS OR EXTENSIONS AND
ANY AGREEMENTS ATTACHED AS EXHIBITS HERETO), OR THE BREACH OR TERMINATION
THEREOF SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE THEN CURRENT CPR
INSTITUTE FOR DISPUTE RESOLUTION RULES FOR NON-ADMINISTERED ARBITRATION OF
BUSINESS DISPUTES, AND THIS PROVISION. THE ARBITRATION SHALL BE GOVERNED BY THE
UNITED STATES ARBITRATION ACT, 9 U.S.C. SS.SS. 1-16 TO THE EXCLUSION OF ANY
PROVISION OF STATE LAW INCONSISTENT THEREWITH OR WHICH WOULD PRODUCE A DIFFERENT
RESULT, AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATORS MAY BE ENTERED
BY ANY COURT HAVING JURISDICTION.
THE ARBITRATION SHALL BE HELD IN HOUSTON, TEXAS, OR AT SOME
OTHER LOCATION AS MUTUALLY AGREED UPON BY THE PARTIES.
THERE SHALL BE THREE ARBITRATORS. SELLER AND PURCHASER SHALL
EACH SELECT AN ARBITRATOR, AND THOSE ARBITRATORS SHALL SELECT THE THIRD
ARBITRATOR. TO THE EXTENT THE PARTIES' DISPUTE(S) CONCERN MATTERS OF (I) OIL AND
GAS LAW, GEOLOGY AND/OR PETROLEUM ENGINEERING AND/OR (II) ENVIRONMENTAL LAW
AND/OR ENVIRONMENTAL SCIENCE, THEN EACH ARBITRATOR MUST BE TRAINED AND
KNOWLEDGEABLE IN SUCH MATTERS.
THE ARBITRATORS SHALL DETERMINE THE CLAIMS OF THE PARTIES AND
RENDER A FINAL AWARD. THE ARBITRATORS SHALL SET FORTH THE REASONS FOR THE AWARD
IN WRITING.
ALL STATUTES OF LIMITATIONS AND DEFENSES BASED UPON PASSAGE OF
TIME APPLICABLE TO ANY CLAIM OF A DEFENDING PARTY (INCLUDING ANY COUNTERCLAIM OR
SET-OFF) SHALL BE TOLLED WHILE THE ARBITRATION IS PENDING.
THE OBLIGATION TO ARBITRATE ANY CLAIM SHALL EXTEND TO THE
SUCCESSORS, ASSIGNS AND THIRD PARTY BENEFICIARIES OF THE PARTIES.
THE ARBITRATORS SHALL ORDER THE PARTIES TO PROMPTLY EXCHANGE
COPIES OF ALL DOCUMENTS REGARDING THE MATERIALS IN DISPUTE, POTENTIAL FACTS,
WITNESS LISTS AND EXPERT WITNESS LISTS, AND, IF REQUESTED BY A PARTY, TO PRODUCE
OTHER RELEVANT DOCUMENTS, TO ANSWER UP TO TEN (10) INTERROGATORIES (INCLUDING
SUBPARTS), TO RESPOND TO UP TO TEN (10) REQUESTS FOR ADMISSIONS (WHICH SHALL BE
DEEMED ADMITTED IF NOT DENIED) AND TO PRODUCE FOR DEPOSITION AND, IF REQUESTED,
AT THE HEARING ANY OR ALL LISTED WITNESSES, BOTH FACT AND EXPERT, WITHIN SUCH
PARTY'S CONTROL. ANY ADDITIONAL DISCOVERY SHALL ONLY OCCUR BY AGREEMENT OF THE
PARTIES OR AS ORDERED BY THE ARBITRATORS UPON A FINDING OF GOOD CAUSE.
EACH PARTY SHALL BEAR ITS OWN COSTS, EXPENSES AND ATTORNEY'S
FEES; PROVIDED THAT IF COURT PROCEEDINGS TO STAY LITIGATION OR COMPEL
ARBITRATION ARE NECESSARY, THE PARTY WHO UNSUCCESSFULLY OPPOSES SUCH PROCEEDINGS
SHALL PAY ALL REASONABLE ASSOCIATED COSTS, EXPENSES, AND ATTORNEY'S FEES IN
CONNECTION WITH SUCH COURT PROCEEDING.
IN ORDER TO PREVENT IRREPARABLE HARM, THE ARBITRATORS SHALL
HAVE THE POWER TO GRANT TEMPORARY OR PERMANENT INJUNCTIVE OR OTHER EQUITABLE
RELIEF. PRIOR TO THE APPOINTMENT OF AN ARBITRATOR A PARTY MAY, NOTWITHSTANDING
ANY OTHER PROVISION OF THIS AGREEMENT, SEEK TEMPORARY INJUNCTIVE RELIEF FROM ANY
COURT OF COMPETENT JURISDICTION;
PROVIDED THAT THE PARTY SEEKING SUCH RELIEF SHALL (IF ARBITRATION HAS NOT
ALREADY BEEN COMMENCED) SIMULTANEOUSLY COMMENCE ARBITRATION. SUCH COURT ORDERED
RELIEF SHALL NOT CONTINUE MORE THAN TEN (10) DAYS AFTER THE APPOINTMENT OF THE
ARBITRATORS (OR IN ANY EVENT FOR LONGER THAN SIXTY (60) DAYS). EXCEPT AS
REQUIRED BY LAW (AND THEN ONLY AFTER PRIOR NOTICE TO THE OTHER PARTY), NO PARTY
SHALL DISCLOSE THE FACTS OF THE UNDERLYING DISPUTE OR THE CONTENTS OR RESULT OF
THE ARBITRATION WITHOUT THE PRIOR CONSENT OF ALL PARTIES.
IF ANY PART OF THIS ARBITRATION PROVISION IS HELD TO BE
UNENFORCEABLE, IT SHALL BE SEVERED AND SHALL NOT AFFECT EITHER THE DUTY TO
ARBITRATE OR ANY OTHER PART OF THIS PROVISION.
(P) DTPA WAIVER. PURCHASER HEREBY WAIVES, TO THE EXTENT (IF ANY)
APPLICABLE, THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT (OTHER THAN THE PROVISIONS OF SECTION 17.555 THEREOF, WHICH ARE
NOT WAIVED). PURCHASER ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE
ESSENTIAL ELEMENTS OF THE BARGAIN WITH SELLER AND THAT, BUT FOR THEM, SELLER
WOULD NOT HAVE ENTERED INTO THIS AGREEMENT.
PURCHASER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT (I)
PURCHASER HAS HERETOFORE GIVEN TO SELLER, PURCHASER'S MOST RECENT FINANCIAL
STATEMENTS, WHICH WERE PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, (II) ACCORDING TO PURCHASER'S MOST RECENT FINANCIAL STATEMENTS,
PURCHASER HAS ASSETS OF FIVE MILLION ($5,000,000) OR MORE, (III) PURCHASER HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION, AND (IV) PURCHASER IS NOT IN
A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
PURCHASER SHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS
SELLER, THEIR OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS FROM ALL CLAIMS, COSTS,
LIABILITIES, LOSSES AND EXPENSES ARISING OUT OF OR RELATING TO THE BREACH BY
PURCHASER OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SUBSECTION
27(P).
(Q) NO PUNITIVE DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY,
NO PARTY SHALL BE ENTITLED TO RECOVER FROM ANY OTHER AGREEMENT OR IN CONNECTION
WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT IN ANY
AMOUNT IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES, ARBITRATION COSTS AND
REASONABLE ATTORNEY FEES AND EXPENSES TO ENFORCE THIS AGREEMENT, SUFFERED BY
SUCH PARTY. ALL PARTIES WAIVE ANY RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY
AND CONSEQUENTIAL DAMAGES
ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT. HOWEVER, THE FOREGOING SHALL NOT
LIMIT ANY INDEMNIFICATION OBLIGATIONS HEREUNDER OR PRECLUDE ONE PARTY FROM BEING
INDEMNIFIED BY ANOTHER PARTY AGAINST SUCH OBLIGATIONS.
EXECUTED by the Parties hereto as indicated below by the signatures of
their respective representatives; however, for identification purposes, this
AGREEMENT shall be deemed dated as of the date the last Party hereto signs this
AGREEMENT.
WITNESSES: SHELL WESTERN E&P INC.
By: /s/ YOUSSEFF YOUSSEFF
Attorney-in-Fact
Date:
WITNESSES: THE MERIDIAN RESOURCE
EXPLORATION COMPANY
By: /s/ JOSEPH A. REEVES, JR.
Joseph A. Reeves, Jr., Chairman
Date: