PURCHASE AND SALE AGREEMENT
CASTEX ENERGY 1995, L.P. AND CASTEX ENERGY, INC.
AS SELLER
AND
ENERGY PARTNERS, LTD. AND EPL OF LOUISIANA, L.L.C.
AS BUYER
TABLE OF CONTENTS
Page
ARTICLE 1.
Purchase and Sale; Purchase Price and
Adjustments; Accounting.
1.1 Purchase and Sale.....................................................1
1.2 Purchase Price........................................................1
1.3 Purchase Price Adjustment.............................................1
1.4 Gas Imbalances........................................................3
1.5 Preliminary Accounting Statement......................................4
1.6 Final Accounting Settlement...........................................4
1.7 Allocation............................................................5
ARTICLE 2.
Representations and Warranties of Seller.
2.1 Organization and Good Standing........................................5
2.2 Authority.............................................................5
2.3 No Litigation.........................................................6
2.4 No Violations.........................................................6
2.5 Brokers...............................................................6
2.6 Bankruptcy............................................................6
2.7 Payment of Taxes and Royalties........................................6
2.8 Sale of Hydrocarbons..................................................6
2.9 Preferential Rights and Consents to Assign............................7
2.10 Real Property Interests...............................................7
2.11 Contracts.............................................................7
2.12 Wells.................................................................7
2.13 Obligations...........................................................7
ARTICLE 3.
Representations and Warranties of Buyer.
3.1 Organization and Good Standing........................................8
3.2 Authority.............................................................8
3.3 No Litigation.........................................................8
3.4 No Violations.........................................................8
3.5 Brokers...............................................................9
3.6 Bankruptcy............................................................9
3.7 Sufficient Resources..................................................9
3.8 Independent Evaluation................................................9
3.9 Securities Laws.......................................................9
3.10 Dealings with Seller's Employees.....................................10
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ARTICLE 4.
Conditions of the Subject Interests; Acknowledgments,
Waivers and Disclaimers.
4.1 Review of Records....................................................10
4.2 Special and Limited Title Warranty...................................10
4.3 Title Waivers........................................................10
4.4 Disclaimers and Waivers of Representations, Warranties
and Information.....................................................10
4.5 Disclaimer Regarding Lands...........................................13
4.6 Title Defects........................................................13
4.7 Seller's Election to Cure............................................14
4.8 Downward Defect Adjustment...........................................14
4.9 Upward Adjustments...................................................15
4.10 Preferential Rights..................................................15
4.11 Consents to Assignment...............................................16
4.12 Casualty Loss........................................................17
4.13 Transfer of Operatorship.............................................17
ARTICLE 5.
Environmental Matters.
5.1 Environmental Review.................................................17
5.2 Environmental Defects................................................19
5.3 Remedies for Environmental Defect....................................19
5.4 Post-Closing Environmental Indemnification by Buyer..................20
5.5 Condition of the Assets and Specific Buyer Indemnification
with Respect to NORM and Other Hazardous Substances.................21
5.6 Waiver...............................................................21
ARTICLE 6.
Pre-Closing Obligations of Seller and Buyer.
6.1 Pre-Closing Obligations of Seller....................................22
6.2 Pre-Closing Obligations of Buyer.....................................24
ARTICLE 7.
The Closing.
7.1 Conditions to Seller's Obligations to Close..........................25
7.2 Conditions to Buyer's Obligations to Close...........................25
7.3 Closing..............................................................26
7.4 Obligations of Seller at Closing.....................................26
7.5 Obligations of Buyer at Closing......................................27
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ARTICLE 8.
Termination.
8.1 Right of Termination.................................................28
8.2 Effect of Termination................................................28
ARTICLE 9.
Post-Closing Obligations.
9.1 Buyer's Release, Indemnity and Assumption of Obligations.............29
9.2 Seller's Retention of Liability and Indemnity........................30
9.3 Limitations on Seller's Indemnity Obligations; Buyer's Release.......31
9.4 Procedure for Claims.................................................32
9.5 Waiver and Limitation of Indemnities and Certain Damages.............33
9.6 Records..............................................................33
9.7 Confidentiality......................................................34
9.8 Transfer of Operatorship.............................................34
9.9 Conveyance Costs.....................................................36
9.10 Revenues, Expenses and Capital Expenditures..........................36
9.11 Taxes................................................................36
9.12 Further Assurances...................................................37
9.13 Transfers............................................................37
9.14 Survival of Representations, Warranties and Obligations..............37
9.15 Reservation of Claims Against Third Parties..........................38
9.16 Default..............................................................38
9.17 Conflict of Interest.................................................39
9.18 Nominations and Accounting Responsibilities..........................39
9.19 Reasonable Access....................................................39
ARTICLE 10.
Miscellaneous.
10.1 Notices..............................................................40
10.2 Public Announcements.................................................41
10.3 Amendments...........................................................41
10.4 Headings.............................................................41
10.5 Governing Law........................................................41
10.6 No Partnership Created...............................................41
10.7 Successors and Assigns...............................................41
10.8 No Third Person Beneficiaries........................................42
10.9 Not Construed Against Drafter........................................42
10.10 Conspicuousness of Provisions........................................42
10.11 Execution in Counterparts............................................42
10.12 Entire Agreement.....................................................42
10.13 Waiver...............................................................42
10.14 Waiver of Trial by Jury..............................................42
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10.15 Waiver of Consumer Rights............................................42
10.16 Expenses of Sale.....................................................43
10.17 Exhibits.............................................................43
10.18 Severability.........................................................43
10.19 Dispute Resolution and Binding Arbitration...........................43
ARTICLE 11.
Definitions.
11.1 Definitions..........................................................44
EXHIBITS
Exhibit "A": Leases
Exhibit "A-1": Lands
Exhibit "B": Wells
Exhibit "C": Other Assets
Exhibit "D": Contracts
Exhibit "E": Excluded Assets
Exhibit "F": Form of Assignment
Exhibit "G-1": Assignments, Leases and Other Instruments Due to Seller
Exhibit "G-2": Assignments, Leases and Other Instruments Owed by Seller
Exhibit "H": Working Interests, Net Revenue Interests and Allocated Amounts
Exhibit "I": Excluded Litigation and Claims
Exhibit "J": Liens, Mortgages and Encumbrances
Exhibit "K": AFEs and Other Commitments
Exhibit "L": Non-Foreign Person Affidavit
Exhibit "M": Gas Imbalances
Exhibit "N": Non-Consent Penalties
Exhibit "O": Preferential Rights
Exhibit "P": Consents
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Exhibit "Q": Bonds
Exhibit "R": South Bourg Field
Exhibit "S": Prospect Areas
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement"), dated as of December
16, 2004, is made by and between
Castex Energy 1995, L.P. ("1995"), a Texas limited partnership and
Castex Energy, Inc. ("Inc."), a Texas corporation, each with an office
at 333 No. Sam Houston Parkway East, Suite 1060, Houston, Texas 77060
(collectively "Seller")
and
Energy Partners, Ltd. ("Energy"), a Delaware corporation, and EPL of
Louisiana, L.L.C. ("EPL"), a Louisiana limited liability company, each
with its principal office at 201 St. Charles Avenue, Suite 3400, New
Orleans, Louisiana 70170 (collectively "Buyer").
In consideration of the provisions below and other good and valuable cause
and consideration, the receipt, adequacy and validity of all of which are
acknowledged and confirmed, Seller and Buyer agree as follows:
ARTICLE 1.
Purchase and Sale; Purchase Price and
Adjustments; Accounting.
1.1 Purchase and Sale. At the Closing, effective as of the Effective Time
and subject to the provisions herein, Seller shall sell and convey the Subject
Interests to Buyer and Buyer shall purchase, pay for and accept the Subject
Interests from Seller.
1.2 Purchase Price. The purchase price for the Subject Interests is One
Hundred Fifty Million and No/100 United States Dollars ($150,000,000.00) (the
"Purchase Price"), subject to adjustment in accordance with this Agreement. Upon
executing this Agreement, Buyer shall pay by wire transfer in immediately
available funds delivered to the following account the sum of Five Million and
No/100 Dollars ($5,000,000.00) (the "Deposit"). At Closing, Buyer shall pay or
cause to be paid the remainder of the Purchase Price, subject to adjustment in
accordance with this Agreement, in immediately available funds delivered at the
Closing to the following account (or such other account as Seller may designate
before the Closing):
Bank: Compass Bank
City: Houston, Texas
ABA No. 113010547
Account No. 12216645
Acct. Holder Castex Energy, Inc.
1.3 Purchase Price Adjustment. The Purchase Price shall be adjusted as
follows (the Purchase Price as so adjusted, the "Adjusted Purchase Price").
Nonetheless, even if any single item of income or expense can be categorized
under more than one of the following categories, such item shall be counted only
once for purposes of making adjustments to the Purchase Price. The Purchase
Price shall be adjusted in accordance with this Section 1.3, but,
notwithstanding any other provision of this Agreement, shall not be adjusted
for: (i) actual or projected changes in production rates, (ii) alternate
interpretations of reserves and (iii) the condition of the Equipment.
(a) The Purchase Price shall be adjusted upward by the following
amounts:
1) the amount of all expenditures actually paid by Seller in
connection with the operation of the Assets which are, in accordance
with GAAP, attributable to the period of time after the Effective
Time, including without limitation royalties, rentals and other
charges; ad valorem, property, production, excise, severance, and any
other Taxes (other than income Taxes) based upon or measured by the
ownership of property or the production of Hydrocarbons or the receipt
of proceeds therefrom, in each case attributable to the Assets and not
deducted or netted from proceeds under Section 1.3(b), as well as
expenses properly incurred under applicable operating agreements,
including any charges incurred by Seller as a non-operator, including
without limitation geological and land costs and costs of drilling,
testing, treating, completing, reworking, deepening, side-tracking,
and plugging and abandoning wells;
2) the amount of (i) gross proceeds actually received by Buyer,
or offset by third parties against amounts owed by Buyer, from the
sale of Hydrocarbons that are produced from or attributable to the
Assets prior to the Effective Time, net of royalties that are owed to
a Third Person, severance taxes, and marketing costs (including
without limitation transportation, compression, gathering and
processing fees) not reimbursed to Buyer or Seller by the purchaser of
such Hydrocarbons, and (ii) any other income and proceeds actually
received by Buyer, or offset by third parties against amounts owed by
Buyer, with respect to the Assets, which are, in accordance with GAAP,
attributable to the period of time prior to the Effective Time;
3) the value of all Hydrocarbons in storage as of the Effective
Time that is credited to the Assets, such value to be the actual price
received for such Hydrocarbons upon the first sale thereof, or absent
a sale, then such value shall be based upon the average market price
posted in the area for Hydrocarbons of similar quality and grade in
effect as of the Effective Time, in each case net of royalties that
are owed to a Third Person, severance taxes, and marketing costs
(including without limitation transportation, compression, gathering
and processing fees) not reimbursed by the purchaser of such
Hydrocarbons;
4) all Taxes for which Buyer is responsible under Section 9.11,
to the extent they are paid by or on behalf of Seller;
5) the amount for any underproduced gas position of Seller as
described in Section 1.4(b);
6) the amount of the Negative Balance Suspense Accounts as of the
Effective Time;
7) all additional amounts mutually agreed upon in writing by
Buyer and Seller; and
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8) an amount equal to the sum of any Upward Adjustment provided
for in Section 4.9.
(b) The Purchase Price shall be adjusted downward by the following amounts:
1) all revenues and related receivables (i) paid to Seller before it
submits its Final Accounting Settlement under Section 1.6(a) and (ii)
related to or arising out of the ownership, operation or use of the Subject
Interests at or after the Effective Time;
2) all amounts due by Seller under any Contract that (i) are
attributable to the ownership, operation or use of any Subject Interest
before the Effective Time, (ii) are paid by Buyer and (iii) are identified
by Buyer to Seller before Seller submits its Final Accounting Settlement
under Section 1.6(a);
3) the amount of any overproduced gas position of Seller as described
in Section 1.4(a);
4) the Downward Defect Adjustment (subject to the provisions of
Section 4.7(b));
5) the Allocated Amount of any Subject Interests deemed "Excluded
Assets" under Section 4.10(a) (except as provided in and subject to Section
4.10(b) or Section 4.11(c);
6) any Purchase Price adjustment agreed to by the Buyer and Seller
pursuant to the provisions of Section 5.2(b); and
7) all additional amounts mutually agreed in writing to by Buyer and
Seller.
1.4 Gas Imbalances. To the best of Seller's Knowledge, the volume of
any gas imbalance of Seller with respect to the Subject Interests, Leases, Wells
and Units as of the Effective Time and whether at the wellhead, platform or
otherwise are set forth on Exhibit "M" hereto (collectively the "Imbalance").
(a) If pursuant to the Imbalance any gas volumes are due and owing by
Seller to one or more underproduced Persons as of the Effective Time, Seller
shall pay to Buyer (or credit Buyer for) an amount equal to the product of the
Imbalance Price times such volume (in MMBtu's), net of any royalties, overriding
royalties or other burdens, in order to reflect the estimated value and
liability of such overproduction as of the Effective Time.
(b) If pursuant to the Imbalance any gas volumes are due and owing to
Seller by one or more overproduced Persons as of the Effective Time, Buyer shall
pay to Seller an amount equal to the product of the Imbalance Price times such
volume (in MMBtu's), net of any royalties, overriding royalties or other
burdens, in order to reflect the estimated value and liability of such
underproduction as of the Effective Time.
The parties acknowledge and agree that (a) the Imbalance reflects the
estimated amount of any gas imbalance owed to or by Seller and (b) the Imbalance
Price reflects their estimated value of any underproduced or overproduced gas
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position of Seller in connection with any Subject Interest as of the Effective
Time, net of royalties, Taxes, overriding royalties and other burdens.
1.5 Preliminary Accounting Statement. At least three (3) Business Days
before the anticipated Closing, Seller shall prepare and present to Buyer a
"Preliminary Accounting Statement" reflecting all then-applicable upward and
downward adjustments to the Purchase Price as provided in Section 1.3,
determined in accordance with GAAP as used in the oil and gas industry and using
the best information then available. Seller and Buyer shall negotiate in good
faith to resolve any disputes involving the Preliminary Accounting Statement. To
the extent that the parties do not agree to any such amounts at or before
Closing, such amounts shall be accounted for in, and in accordance with, the
Final Accounting Settlement.
1.6 Final Accounting Settlement.
(a) Within ninety (90) Days after Closing but not earlier than sixty (60)
days after Closing, Seller shall deliver to Buyer a statement (the "Final
Accounting Settlement") setting forth (1) a detailed calculation of the Adjusted
Purchase Price and (2) the net amount owing by Seller to Buyer or by Buyer to
Seller, as appropriate.
(b) Within thirty (30) Days after Buyer receives the Final Accounting
Settlement, Buyer may submit to Seller a written notice (an "Objection Notice")
that (1) sets forth each item in Seller's Final Accounting Settlement that Buyer
contends does not comply with this Agreement, (2) provides the basis for each
such objection, (3) provides supporting documentation for each such objection
and (4) sets forth, based on all such objections, both the amount that Buyer
contends equals the Adjusted Purchase Price and the net amount that Buyer
contends is owing by Seller to Buyer or by Buyer to Seller, as appropriate. If
Buyer does not timely deliver an Objection Notice in accordance with the
preceding sentence, the Final Accounting Settlement, in the form delivered by
Seller, shall be deemed to be true and correct and shall be final and binding on
the parties.
(c) If Buyer timely delivers an Objection Notice in accordance herewith,
the parties shall use reasonable efforts to meet as soon as reasonably
practicable to attempt to resolve all objections set forth in the Objection
Notice.
(d) If the parties fail to amicably resolve each objection in a timely
Objection Notice, the disputed items in the Final Accounting Settlement shall be
resolved by submitting the same to the Referee in Houston, Texas. But no
objection shall be submitted to the Referee until at least twenty (20) Business
Days after the meeting prescribed in Section 1.6(c). Each party giving any
notice or submission to the Referee shall simultaneously provide a copy thereof
to the other party. The Referee shall resolve the dispute(s) within twenty (20)
Business Days after having the relevant materials submitted for review. The
Referee shall act as an arbitrator for the limited purpose of determining the
specific disputed matters submitted by either party and may not award damages or
penalties to either party with respect to any matter. The decision of the
Referee shall be binding on the parties and non-appealable. In determining the
proper amount of the Adjusted Purchase Price, the Referee shall not fix the
Adjusted Purchase Price at an amount more than the amount proposed by Seller in
its Final Accounting Settlement nor at an amount less than the amount proposed
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by Buyer in its Objection Notice. The Referee shall not consider any objection
to Seller's Final Accounting Settlement that is not set forth in a timely
Objection Notice. Each party shall each bear its own legal fees and other costs
of presenting its case. The fees and expenses of the Referee shall be borne
fifty percent (50%) by Buyer and fifty percent (50%) by Seller; each party shall
pay its proportionate share of the Referee's fees and expenses within ten (10)
Business Days of the later of (a) the date when the Referee's decision is issued
or (b) the receipt by such party of an itemized statement of such fees and
expenses.
(e) Within five (5) Business Days after the final determination of the
Adjusted Purchase Price (whether by agreement or deemed agreement between the
parties or by decision of the Referee), each party shall pay all net amounts
reflected in the Final Accounting Settlement as being due and payable to the
other party. Such net amounts shall bear legal interest from and after, but not
before, such due date.
1.7 Allocation. The Allocated Amounts (which shall be mutually agreed upon
by the parties) are to be used solely (a) to adjust the Purchase Price in
accordance with Title Defects, Environmental Defects and Preferential Rights. To
the extent that the transactions contemplated by this Agreement are subject to
the reporting requirements of Section 1060 of the Internal Revenue Code of 1986,
as amended, the parties will confer and cooperate in the preparation and filing
of their respective federal and state tax reporting forms to reflect a
consistent reporting of the agreed upon allocation.
ARTICLE 2.
Representations and Warranties of Seller.
Seller represents and warrants to Buyer on the date hereof and as of the
Closing as follows:
2.1 Organization and Good Standing. Inc. 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 and own immovable property in the state of
Louisiana. 1995 is a limited partnership duly formed under the Laws of the state
of Texas. Inc. is the sole general partner of 1995.
2.2 Authority. Seller has all requisite corporate or partnership power and
authority to own the Subject Interests owned by it, to execute and deliver this
Agreement, to consummate the transactions contemplated herein and to perform its
obligations under this Agreement. The execution and delivery of this Agreement
by Seller, the performance by Seller of all obligations to be performed by it
and the consummation by Seller of the transactions contemplated herein have been
duly authorized and approved by all necessary corporate and partnership action
on behalf of Seller. This Agreement has been duly executed and delivered by
Seller and constitutes the valid and binding obligation of Seller, enforceable
against Seller in accordance with this Agreement's terms, except as such
enforceability may be limited by bankruptcy, insolvency or other Laws relating
to or affecting the enforcement of creditors' rights and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).
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2.3 No Litigation. Except as listed on Exhibit "I" hereto, no demand,
action, suit, arbitration, proceeding or Governmental Authority investigation
against Seller has been served on Seller or, to the best of Seller's Knowledge,
is pending or threatened against Seller related to the Assets or that challenges
or may have the effect of delaying, making illegal or otherwise interfering with
the transactions contemplated by this Agreement.
2.4 No Violations. The execution and delivery of this Agreement by Seller
does not, and the fulfillment and compliance with the provisions of this
Agreement and the consummation by Seller of the transactions contemplated herein
will not,
(a) violate or conflict with any provision of the articles of
incorporation, bylaws or partnership agreement (or similar organizational
documents) of Seller;
(b) require any filing or registration by Seller with, or any permit,
consent or approval for Seller from, any Governmental Authority (assuming
receipt of all consents and approvals of Governmental Authorities customarily
obtained, or not required to be obtained until, after the sale or transfer of
title, operatorship or control); or
(c) conflict with, result in a breach of, constitute a default under,
constitute an event that with notice or lapse of time would constitute a default
under, accelerate or permit the acceleration of the performance required by or
require any consent, authorization or approval under any order, judgment or
decree of any Governmental Authority.
2.5 Brokers. Neither Seller nor any of its Related Persons has incurred any
obligation or liability (direct, contingent or otherwise) for brokers' fees,
finders' fees, agents' commissions or other similar compensation in connection
herewith for which Buyer has any responsibility.
2.6 Bankruptcy. There are no bankruptcy, reorganization or liquidation
proceedings served on, filed by or being contemplated by Seller or, to the best
of Seller's Knowledge, threatened or pending against Seller.
2.7 Payment of Taxes and Royalties. Except as listed on Exhibit "I" hereto,
to the best of Seller's Knowledge, (a) all Taxes relating to the Scheduled
Interests, or any production or revenues attributable thereto, that were
previously due and payable by Seller have been paid, except to the extent Seller
is contesting the same in good faith and (b) all royalties and other similar
payments relating to the Scheduled Interests that were previously due and
payable by Seller under any Real Property Interest (other than such payments
that are being held in suspense in any Suspense Account or as the result of
title or ownership uncertainty, inadequate payor information or any other matter
for which mineral or other proceeds may be suspended in the ordinary course of
business) have been paid, except to the extent Seller is contesting the same in
good faith.
2.8 Sale of Hydrocarbons. To the best of Seller's Knowledge, the Scheduled
Interests are not subject to any Hydrocarbon purchase or sale agreements that
are neither terminable, without penalty, upon sixty (60) Days' notice or less
nor listed on Exhibit "D" hereto. To the best of Seller's Knowledge, no portion
of such proceeds attributable to the interests of Seller in the Real Estate
Interests is being held in suspense, subject to a claim for refund by the
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purchaser, used as an offset or as collateral for other obligations (whether
disputed or undisputed) or otherwise not being paid to Seller as it becomes due
in the ordinary course of business.
2.9 Preferential Rights and Consents to Assign. To the best of Seller's
knowledge and except as otherwise reflected in Exhibit "O" or Exhibit "P"
hereto, none of the Real Property Interests or Contracts is subject to a
preferential right to purchase, an option of purchase, a Third Person consent to
assignment requirement, or similar right or restriction.
2.10 Real Property Interests. To Seller's knowledge, (a) the Real Property
Interests have been operated during Seller's period of ownership in compliance
with all applicable Laws, including Environmental Laws, except for such
noncompliance as would not individually or in the aggregate, have a Material
Adverse Effect and (b) neither Seller nor any Third Person is in material breach
or material default, and there has occurred no event, fact or circumstance that,
with the lapse of time or the giving of notice, or both, would constitute such a
breach or default by Seller, with respect to any of its obligations under any
Real Property Interest.
2.11 Contracts. The Contracts described on Exhibit "D" hereto, together
with those contained in the public records, include all material and substantial
contracts and agreements necessary to operate the Real Property Interests in
substantially the same manner as they were being operated on the Effective Date.
To the extent that Seller has been designated the operator of any Real Property
Interest, Seller has, to the best of Seller's Knowledge, substantially fulfilled
all requirements for filings, certificates, consents, approvals, disclosures,
and similar matters contained in or under the Leases, the Contracts, and
applicable Law, except for such noncompliance as would not, individually or in
the aggregate, have a Material Adverse Effect. To Seller's knowledge, neither
Seller nor any Third Person is in material breach or material default, and there
has occurred no event, fact or circumstance that, with the lapse of time or the
giving of notice, or both, would constitute such a breach or default by Seller,
with respect to any of its obligations under any Contract described on Exhibit
"D" hereto.
2.12 Wells. To Seller's knowledge, all wells drilled on the Real Property
Interests during Seller's period of ownership have been drilled and, if
completed, have been completed (i) within the boundaries of the Real Property
Interests, or within the limits otherwise permitted by agreement or contract,
pooling or unit agreement, by orders issued by a Governmental Authority, or by
Laws, and (ii) in compliance with all applicable Law, except for such
noncompliance as would not individually or in the aggregate, have a Material
Adverse Effect.
2.13 Obligations. There are no material operations on the Real Property
Interests under any of the Contracts with respect to which either Seller or to
the best of Seller's knowledge, any other Person elected or was deemed to have
elected pursuant to the terms of such Contract to be a non-consenting party
where such non-consent recoupment is still ongoing, except for those operations
set forth on Exhibit "N" hereto, the effects of which operations on Seller's
interests, if any, are reflected in the working interests and net revenue
interests set forth in Exhibit "H" hereto.
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ARTICLE 3.
Representations and Warranties of Buyer.
Buyer represents and warrants to Seller on the date hereof and as of
the Closing as follows:
3.1 Organization and Good Standing. Energy is a corporation duly organized,
validly existing and in good standing under the Laws of the state of Delaware
and is duly qualified to do business in the state of Louisiana and EPL is a
limited liability company duly formed and validily existing under the Laws of
the state of Louisiana. Buyer is duly qualified to do business and own immovable
property in the state of Louisiana. Energy is the sole member of EPL.
3.2 Authority. Buyer has all requisite corporate and company power and
authority to own and lease the Subject Interests, to execute and deliver this
Agreement, to consummate the transactions contemplated herein and to perform its
obligations under this Agreement. The execution and delivery of this Agreement
by Buyer, the performance by Buyer of all of the obligations to be performed by
it and the consummation by Buyer of the transactions contemplated herein have
been duly authorized and approved by all necessary corporate and company action
on behalf of Buyer. This Agreement has been duly executed and delivered by Buyer
and constitutes the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with this Agreement's terms, except as such enforceability
may be limited by bankruptcy, insolvency or other Laws relating to or affecting
the enforcement of creditors' rights and general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).
3.3 No Litigation. There is no demand, action, suit, arbitration,
proceeding or Governmental Authority investigation pending or, to the best of
Buyer's Knowledge, threatened against Buyer that, if determined adversely to
Buyer, would have a Material Adverse Effect on the value or operation of the
Subject Interests upon or after the Closing or that challenges or may have the
effect of delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.
3.4 No Violations. The execution and delivery of this Agreement by Buyer
does not, and the fulfillment and compliance with the provisions of this
Agreement and the consummation by Buyer of the transactions contemplated herein
will not,
(a) violate or conflict with any provision of the articles of
incorporation, bylaws or operating agreement (or similar organizational
documents) of Buyer;
(b) require any filing or registration by Buyer with, or any permit,
consent or approval for Buyer from, any Governmental Authority (assuming receipt
of all consents and approvals of Governmental Authorities customarily obtained,
or not required to be obtained until, after the sale or transfer of title,
operatorship or control); or
(c) conflict with, result in a breach of, constitute a default under,
constitute an event that with notice or lapse of time would constitute a default
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under, accelerate or permit the acceleration of the performance required by or
require any consent, authorization or approval under any order, judgment or
decree of any Governmental Authority.
3.5 Brokers. Neither Buyer nor any of its Related Persons has incurred any
obligation or liability (direct, contingent or otherwise) for brokers' fees,
finders' fees, agents' commissions or other similar compensation in connection
herewith for which Seller has any responsibility.
3.6 Bankruptcy. There are no bankruptcy, reorganization or liquidation
proceedings pending, served on or being contemplated by Buyer or, to the best of
Buyer's Knowledge, threatened against Buyer.
3.7 Sufficient Resources. At and after the Closing, Buyer will have
sufficient cash, available lines of credit or other sources of immediately
available funds (as well as sufficient financial resources, personnel and
technical expertise) to pay the Adjusted Purchase Price and to assume the
Assumed Obligations and otherwise to fulfill its obligations under this
Agreement.
3.8 Independent Evaluation. Buyer is a sophisticated, experienced and
knowledgeable purchaser, owner and operator of oil and gas properties and
related facilities, is able to bear the economic risks of acquiring and owning
the Subject Interests and assuming the Assumed Obligations and Buyer's
obligations under this Agreement, is able to evaluate (and has in fact
evaluated) the Subject Interests for purchase and the merits and risks of
acquiring and owning the Subject Interests and is not a "consumer" within the
meaning of the Texas Deceptive Trade Practices-Consumer Protection Act, Tex.
Bus. & Com. Code art. 17.41 et seq., the Louisiana Unfair Trade Practices and
Consumer Protection Law, La. R.S. 51:1401 et seq., or any comparable Law. In
making its decision to consummate the transaction contemplated herein, Buyer (a)
will conduct its own independent investigation, evaluation, appraisal and
judgment of the Subject Interests, (b) will satisfy itself, based upon its
independent investigation, as to the physical and environmental condition of the
Subject Interests and as to title to those Subject Interests that are not
Scheduled Interests, (c) will rely on no representations or warranties of Seller
(other than as expressly set forth in Article 2 and in the Special and Limited
Title Warranty in Section 4.2), (d) will rely on no representations or
warranties of any Related Person of Seller, and (e) will satisfy itself before
Closing, based upon its independent investigation, as to title to the Scheduled
Interests. Buyer has, with its legal counsel and other advisers, carefully
reviewed all of the provisions of this Agreement and fully understands the
factual background and legal effects of this Agreement, including without
limitation the meaning and effect of each provision of this Agreement.
Notwithstanding the foregoing in this Section 3.8, Buyer is expressly entitled
to rely on the representations and warranties by Seller expressly set forth in
Article 2 and in the Special and Limited Title Warranty by Seller in Section 4.2
and shall be entitled to all available recourse should any of such
representations or warranties be inaccurate, subject, however, to applicable
limitations set forth in Article 9 below.
3.9 Securities Laws. Buyer acknowledges that neither the solicitation of an
offer for, nor the sale of, the Subject Interests by Seller has been registered
under any securities Laws. Buyer intends to acquire the Subject Interests for
its own benefit and account and is not acquiring the Subject Interests with the
intent of distributing fractional undivided interests in any Subject Interest
(or otherwise selling any Subject Interest) in a manner that would be subject to
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regulation under any federal or state securities Laws. If Buyer Transfers any
Subject Interest or fractional undivided interests therein in the future, it
will do so in compliance with all applicable Laws. At no time has Buyer been
presented with or solicited by or through any public promotion or other form of
advertising in connection with this transaction. Buyer is an "accredited
investor" (as defined in Regulation D of the federal Securities Act of 1933, as
amended).
3.10 Dealings with Seller's Employees. Buyer has not entered into any
financial, employment, contractor or agency arrangement, understanding,
agreement or discussion with, or granted or promised any gift to, any director,
officer or employee of Seller or any of its Related Persons.
ARTICLE 4.
Conditions of the Subject Interests; Acknowledgments,
Waivers and Disclaimers.
4.1 Review of Records. Commencing on the date this Agreement is executed
and until 5 pm on January 7, 2005 (the "Review Period"), Seller shall make
available to Buyer during regular business hours the Records. During the Review
Period, Buyer shall have the right, at its sole cost, risk and expense, to
inspect such Records and to reasonably request copies of any and Records. Upon
such request, Seller shall provide to Buyer at Buyer's expense requested copies
made by Seller or, at either party's option, by a Third Person approved by Buyer
and Seller.
4.2 Special and Limited Title Warranty. Seller makes no warranty of title
whatsoever; except that, upon and after Closing and subject to the provisions of
Article 9 and the other provisions of this Agreement, Seller shall defend Buyer
(up to, but not exceeding, the net revenue interest for such Subject Interest as
listed on Exhibit "H" hereto and for no more than the Allocated Amount of such
Subject Interest) against the lawful Claims of any Third Person claiming an
interest in a Subject Interest by, through or under Seller, except (a) by,
through or under any Assignment, (b) for any Permitted Encumbrance or (c) for a
Title Defect for which the Purchase Price is reduced, a Title Defect which was
waived or deemed waived by Buyer or a Title Defect which the Seller cured
pursuant to this Agreement (the "Special and Limited Title Warranty").
4.3 Title Waivers. Buyer irrevocably waives for all purposes (a) all title
limitations, defects and objections that do not relate to a Scheduled Interest
or that otherwise do not constitute a Title Defect, (b) any Title Defect (1)
that Seller cures in accordance with this Agreement, (2) for which the Purchase
Price is reduced pursuant to Sections 4.6-4.8 or (3) that does not meet the
thresholds of Section 4.7 and (c) except for the Special and Limited Title
Warranty, all Title Defects not identified in a Title Defect Notice. Buyer shall
have no right to seek an adjustment to the Purchase Price, make a Claim against
Seller or any of its Related Persons or seek contribution, indemnity or defense
(in accordance with Article 9 or otherwise) from Seller or any of its Related
Persons in connection with any such matter waived above in this Section 4.3.
4.4 Disclaimers and Waivers of Representations, Warranties and Information.
Buyer represents and agrees that any of the Records or other information
(written, oral or otherwise) previously, now or hereafter furnished or otherwise
made available to Buyer or any other Person by Seller or any of its Related
Persons is provided as a convenience only and shall not create or give rise to
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any liability against Seller or any of its Related Persons; that any reliance on
or use of same shall be at Buyer's sole peril and risk to the maximum extent
permitted by Law; that Buyer is not relying on Seller's skill or judgment in
selecting any Subject Interest (even if Seller may know or have reason to know
of Buyer's particular purpose for buying any Subject Interest) or on any
warranty or representation by any Related Person of Seller; and that, upon
Closing, the Subject Interests shall be sold and conveyed from Seller to Buyer
"as is", "where is" and with all faults in their condition and state of repair
as of Closing, without recourse. Except as expressly provided in this Agreement:
(a) Buyer represents that it is relying solely on its own examination and
inspection of the Subject Interests and Assets for title, environmental and all
other purposes and is buying the Subject Interests at its sole peril and risk;
(b) Seller negates and disclaims any and all (and Buyer represents that it
is not relying on, and that, except as expressly stated in Article 2 above and
as to the Special Limited Title Warranty, Seller has not made, any)
representations and warranties (express, statutory, implied or otherwise),
including without limitation concerning this Agreement, any Assignment or any
Subject Interest, Asset or Assumed Obligation; and
(c) Seller negates and disclaims any and all liability and responsibility
for or associated with and any and all representations and warranties concerning
(and Buyer acknowledges that it is not relying on and that Seller has not made
any representations or warranties concerning) the quality, accuracy,
completeness or materiality of any Records or other information previously, now
or hereafter furnished or otherwise made available (electronically, orally, by
video, in writing or by or through any other medium or means) to Buyer or any
other Person; and
(d) Except and only to the extent so provided in Article 9 for those
matters for which Seller agrees to indemnify Buyer and Buyer's Related Persons
pursuant to Section 9.2 below, Buyer irrevocably waives, and releases Seller,
each prior owner of any Subject Interest and their Related Persons from and
against, all Claims (whether currently asserted or unasserted, accrued or
unaccrued, known or unknown or foreseen or unforeseen and whether direct,
indirect, contingent or otherwise) based on, related to or arising out of (in
whole or in part in any way) this Agreement, any Assignment or any Subject
Interest, Asset or Assumed Obligation, whether or not arising at any time
before, at or after the Effective Time and whether or not caused or contributed
in whole or in part by the negligence, fault or strict liability (whether
active, passive, sole, simple, concurrent, contingent or otherwise) of, or
breach of contract or violation or Law by, Seller or any other Person and
whether based on, related to or arising out of (in whole or in part in any way)
any theory of liability or fault whether in tort, contract, quasi-contract,
strict liability, unseaworthiness of any vessel, misrepresentation, equity,
indemnity, contribution, violation or operation of any Law or any other cause
whatsoever.
Without limiting the generality of the foregoing, these negations and
disclaimers by Seller and these waivers, releases of Claims and representations
by Buyer relate without limitation to:
1) other than the Special and Limited Title Warranty, title,
ownership, consideration, status, peaceable possession, eviction
(under Louisiana Civil Code article 2500 or otherwise) or non-declared
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encumbrances (under Louisiana Civil Code article 2500 or otherwise);
2) the geographic, geologic or geophysical characteristics
associated with any or all of the Real Property Interests and Wells,
including without limitation the existence, quality, quantity or
recoverability of prospects or Hydrocarbon reserves;
3) the costs, expenses, liabilities, status, revenues, receipts
or economic value associated with, the continued productivity or
financial viability of, the contractual, economic or financial data
associated with or the rights or obligations (including without
limitation the federal, state or local income or other Tax
consequences) associated with this Agreement, any Assignment, any or
all portions of the Subject Interests, Assets or agreements to which
any Subject Interest is subject;
4) the operatorship of any or all portions of the Assets or any
other Wells, Units or property;
5) fitness for Buyer's intended use or purpose, for any other
particular use or purpose or for ordinary use (under Louisiana Civil
Code article 2475 or 2524 or otherwise) or merchantability;
6) freedom from, diminution in value because of or the presence
or absence of redhibitory or other defects or vices (under Louisiana
Civil Code article 2520 et seq. or otherwise), whether known or
unknown and whether apparent, patent, latent, hidden or otherwise;
7) the environmental or physical condition or state of repair
(whether or not arising out of any environmental damage or defect or
any violation of any Environmental Law or other Law) of any or all of
the Assets or the protection of the environment or of human health or
safety;
8) the past or current presence or absence of NORM, asbestos,
pollution, naturally occurring waste, hazardous or toxic materials or
the costs, requirement or need (under any Environmental Laws or
otherwise) for Plugging and Abandonment or any investigation, study,
assessment, repair, clean-up, decommissioning, detoxification,
remediation, removal, transportation or disposal (including without
limitation for any such materials, any waste disposal or Hydrocarbon
facility or any or all portions of the Assets);
9) conformity with models or samples of materials;
10) the cost, expense or ability to copy, transmit or use any
electronic data;
11) return or reduction of the Purchase Price or the Adjusted
Purchase Price;
12) rescission by Buyer of this Agreement or any Assignment; or
13) any Environmental or Non-Environmental Claim previously, now
or hereafter asserted.
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NOTWITHSTANDING THE FOREGOING IN THIS SECTION 4.4, BUYER IS EXPRESSLY
ENTITLED TO RELY ON THE REPRESENTATIONS AND WARRANTIES BY SELLER EXPRESSLY SET
FORTH IN ARTICLE 2 AND THE SPECIAL AND LIMITED TITLE WARRANTY AND SHALL BE
ENTITLED TO ALL AVAILABLE RECOURSE SHOULD ANY OF SUCH REPRESENTATIONS OR
WARRANTIES BE INACCURATE, SUBJECT, HOWEVER, TO APPLICABLE LIMITATIONS SET FORTH
IN ARTICLE 9 BELOW. FURTHERMORE, IN THE EVENT OF ANY CONFLICT BETWEEN ANY
PROVISION OF THIS SECTION 4.4 AND ANY OTHER PROVISION OF THIS AGREEMENT OR ANY
PROVISION OF ANY ASSIGNMENT, SUCH OTHER PROVISION OF THIS AGREEMENT OR PROVISION
OF AN ASSIGNMENT SHALL CONTROL.
4.5 Disclaimer Regarding Lands.
(a) Buyer expressly acknowledges that Buyer is aware that the Lands are
largely marsh lands, and there are numerous water covered areas within the
boundaries of such lands, which may be susceptible to a claim by the State of
Louisiana that the beds of such water covered areas are owned by the State of
Louisiana as the beds of navigable waterbodies. Seller does hereby exclude any
contractual, implied or other warranty or representation regarding whether water
covered areas are navigable or not navigable, and whether the beds of such water
covered areas are owned by Seller or, alternatively, owned by the State of
Louisiana; provided, however, nothing contained in these statements is intended
to limit in any manner Buyer's right to dispute any claim of ownership which may
be asserted, in litigation or otherwise, by the State of Louisiana respecting
any claim to the ownership of the beds of water covered areas, and Buyer's right
to assert that the beds of such water covered areas are owned by Buyer because
such water covered areas are, in fact, not navigable.
(b) Buyer further acknowledges that Seller has made no representations or
shall be making no warranties concerning the acreage content and/or depth
restrictions of Seller's interest in the Lands, regarding the location of the
boundaries of the Lands, concerning any encroachments upon the Lands, regarding
the existence of Seller's rights in the Lands (including but not limited to the
term(s) of Seller's rights) and the application of the laws of liberative
prescription thereto, and especially that Seller has made no representations or
warranties concerning whether portions of the Lands may have eroded into or
subsided beneath adjacent water covered areas (and hence such areas may have
become subject to a claim of ownership by the State of Louisiana).
4.6 Title Defects. By written notice delivered to Seller during the period
commencing on the date of this Agreement and ending at 11:59 p.m. Central Time
on January 8, 2005 (the "Objection Period") (each such timely notice, a "Title
Defect Notice"), Buyer may notify Seller of the existence of any matter that it
believes constitutes a Title Defect. To constitute a proper Title Defect Notice,
such notice must include with respect to each asserted Title Defect (1) the
nature of, and a detailed legal explanation with respect to, such Title Defect,
(2) a description of each Scheduled Interest affected, (3) the Allocated Amount
of each such Scheduled Interest, (4) the amount by which Buyer believes such
Allocated Amount has been reduced as a result of such Title Defect (which amount
must comply with Section 4.8), (5) the computations and information upon which
Buyer's belief is based and (6) supporting documentation necessary for Seller to
analyze Buyer's computations and the existence and amount of such Title Defect.
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If and when Buyer believes that a Title Defect may exist, Buyer shall use
reasonable efforts to notify Seller of such possible Title Defect and furnish
available information concerning such possible Title Defect and, from time to
time thereafter as Buyer obtains more information, shall provide Seller, as soon
as practicable, with such additional information.
4.7 Seller's Election to Cure. As to each Scheduled Interest for which
Buyer asserts an alleged Title Defect in a Title Defect Notice during the
Objection Period, the following provisions shall apply:
(a) If Seller agrees to the existence of a Title Defect, Seller may elect
to cure any Title Defect. A Title Defect shall be deemed cured if Seller
delivers to Buyer curative material that, in Buyer's judgment, is sufficient to
cure the Title Defect. Such material delivered by 11:59 p.m. on January 13, 2005
shall be deemed sufficient and acceptable to Buyer unless by 5:00 p.m. on
January 17, 2005 Seller receives from Buyer written notice that the curative is
not acceptable.
(b) If Seller fails to cure a Title Defect in accordance with the
provisions of Section 4.7(a), notwithstanding anything herein to the contrary,
the Purchase Price shall not be reduced for a Title Defect (i) unless the
Downward Defect Adjustment (as determined in accordance with the provisions of
Section 4.8) for such Title Defect exceeds Fifty Thousand and No/100 Dollars
($50,000) or (ii) unless and until the aggregate of all such Downward Defect
Adjustments (which satisfy subpart (a)) exceeds $200,000.00 (which amount shall
be a threshold, not a deductible). As to any asserted Title Defect for which
there is no reduction of the Purchase Price by virtue of the preceding sentence,
for which Seller cures same, or for which there is a reduction in the Purchase
Price or, (x) Seller shall have no further obligation with respect to such Title
Defect, (y) Buyer shall be deemed to have waived such Title Defect and (z) the
Subject Interest shall be conveyed to Buyer subject to such Title Defect.
(c) At Closing, Seller may add to Exhibit "D" and Exhibit "E" hereto any
assignments or other agreements or instruments obtained, and any textual changes
necessary, (a) to cure any Title Defect and (b) to reflect any additional
Excluded Assets under this Section.
4.8 Downward Defect Adjustment. The value attributable to such uncured
Title Defects ("Downward Defect Adjustment") shall be determined as follows:
1) Where Seller agrees with the value of the Title Defect as set
forth in Buyer's Title Defect Notice, that value shall be the value of
the Title Defect.
2) If the Title Defect is a lien, encumbrance or other charge
upon the Scheduled Interest which is undisputed and liquidated in
amount, then the Downward Defect Adjustment shall be the amount
necessary to be paid to the obligee to remove the Title Defect from
Buyer's proportionate interest in the affected Scheduled Interest;
provided, however, that if the Title Defect affects more than Seller's
interest in the affected Scheduled Interest, then the value of the
Title Defect will be reduced proportionately to the extent of Seller's
interest in the affected Scheduled Interest.
3) If the Title Defect represents a uniform discrepancy for the
entire Scheduled Interest for the life of same from the net revenue
interest for any Schedule Interest stated on Exhibit "H", then the
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Downward Defect Adjustment for such Title Defect shall be the product
of the Allocated Amount of such Scheduled Interest on Exhibit "H"
multiplied by a fraction, the numerator of which is the net revenue
interest decrease and the denominator of which is the net revenue
interest stated on Exhibit "H".
4) If the Title Defect represents an obligation, encumbrance,
burden or charge upon or other defect in title to the Scheduled
Interest of a type not described in subsections (1), (2) or (3) above,
the Downward Defect Adjustment for the Title Defect shall be
determined by taking into account the Allocated Amount of the
Scheduled Interest so affected, the portion of the Scheduled Interest
affected by the Title Defect, the legal effect of the Title Defect,
the potential economic effect of the Title Defect over the life of the
affected Scheduled Interest, and such other factors as are necessary
to make a proper evaluation.
Buyer and Seller agree that in no event shall a Downward Defect Adjustment
for a Scheduled Interest exceed the Allocated Amount thereof.
4.9 Upward Adjustments.
(a) If, during the Review Period, either Seller or Buyer determines that
there is any inaccuracy that results in Seller conveying or assigning to Buyer
at Closing a net revenue interest in a Scheduled Interest which is higher than
that reflected on Exhibit "H", such party shall, as soon as practicable, notify
the other party of such inaccuracy (an "Additional Interest"). Such notice shall
include: (i) a description of the affected Scheduled Interest (or interest
therein or portion thereof); and (ii) a description of the Additional Interest
with supporting documentation. If Buyer agrees that the net revenue interest in
such Scheduled Interest is higher and desires to purchase such Additional
Interest, then the Purchase Price shall be adjusted as follows: in the event of
the identification of an Additional Interest, Seller and Buyer shall endeavor in
good faith to agree upon the amount of such increase in value occasioned by such
inaccuracy which, for increases in net revenue interest, shall be based upon the
proportionate increase in the net revenue interest multiplied by the Allocated
Amount of such Scheduled Interests. The full amount of increased value
attributable to the sum of the Additional Interest is called an "Upward
Adjustment." If Buyer does not desire to purchase the Additional Interest, then
such Additional Interest shall be retained by Seller. If necessary, the parties
shall enter into such additional agreements and instruments as are required to
affect such exclusion of such Additional Interests from the transfer of the
Assets. Notwithstanding anything in this Section 4.9(a) to the contrary, no
Upward Adjustment shall be made to the Purchase Price if the corresponding
Working Interest for the affected Scheduled Interest increases by an amount
greater than the Additional Interest.
(b) The aggregate amount of Upward Adjustments under the preceding
subsection (a) shall be applied to increase the Purchase Price pursuant to
Section 1.3(a)(7).
4.10 Preferential Rights. Seller shall send to the holder of each right
listed in Exhibit "O" (each a "Preferential Right") written notice offering to
sell to such holder, in accordance with the contractual provisions applicable to
such Preferential Right, such Subject Interest on the terms of this Agreement
and for the total Allocated Amount for such Subject Interest. Seller shall
deliver to Buyer copies of all such notices and any responses thereto.
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(a) If, before Closing, a holder of a Preferential Right notifies Seller
that it intends to exercise its Preferential Right with respect to a Subject
Interest to which the Preferential Right applies (as determined in accordance
with the agreement in which the Preferential Right arises) or if the election
period for a Preferential Right has not expired before Closing, then subject to
Section 4.10(b), (i) the Subject Interest covered by the Preferential Right
shall be deemed to constitute an "Excluded Asset" and shall be excluded from the
Subject Interests to be conveyed to Buyer at Closing and (ii) the Purchase Price
shall be reduced by the Allocated Amount of such Subject Interest.
(b) If, with one hundred twenty (120) days following the Closing, the
holder of the Preferential Right fails to exercise the Preferential Right within
the election period thereunder, or fails to purchase the Subject Interest
subject to the Preferential Right, Seller shall so notify Buyer. Within ten (10)
Business Days after Buyer's receipt of such notice, Seller shall sell to Buyer,
and Buyer shall purchase from Seller, such Subject Interest under the terms of
this Agreement for a price equal to the Allocated Amount thereof (and such
Subject Interest shall no longer constitute an "Excluded Asset" by virtue of
Section 4.10(a)).
4.11 Consents to Assignment. As between Buyer and Seller, Seller shall be
responsible for exercising reasonable efforts to obtain those necessary consents
and approvals which must be obtained prior to Closing and for giving all
necessary notices of assignment of the Subject Interests from Seller to Buyer
(each a "Consent", which include but are not limited to those on Exhibit "P"
hereto which are customarily obtained prior to Closing). Nonetheless, before and
following Closing, Buyer and Seller shall use reasonable efforts (which efforts
shall not require either to incur any monetary or non-monetary obligations) to
obtain these consents and approvals required for, and in giving all notices of,
the transfer of any Subject Interest to Buyer.
(a) If, before Closing, a Consent has not been obtained, satisfied or
waived (if the parties mutually agree to such waiver), then subject to Sections
4.11(b) and (c), (i) the Subject Interest covered by the Consent shall be deemed
to constitute an "Excluded Asset" and shall be excluded from the Subject
Interests to be conveyed to Buyer at Closing and (ii) the Purchase Price shall
be reduced by the Allocated Amount of such Subject Interest.
(b) If, within one hundred twenty (120) days following the Closing, the
Consent is obtained or otherwise satisfied, Seller shall so notify Buyer. Within
ten (10) Business Days after Buyer's receipt of such notice, Seller shall sell
to Buyer, and Buyer shall purchase from Seller, such Subject Interest under the
terms of this Agreement for a price equal to the Allocated Amount thereof (and
such Subject Interest shall no longer constitute an "Excluded Asset" by virtue
of Section 4.11(a)).
(c) If, before Closing, a Consent concerning an Asset in the South Bourg
Field (which is defined to include all Assets pertaining to the Leases and other
interests described on Exhibit "R" hereto) has not been obtained, satisfied, or
waived (if the parties mutually agree to such waiver) then (i) each and every
Asset pertaining to or covering the South Bourg Field shall be excluded from the
Subject Interests to be conveyed to Buyer at Closing and (ii) the Purchase Price
shall be reduced by the Allocated Amount of such Subject Interests.
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(d) For any Subject Interest as to which Buyer waives the obtaining of a
Consent at or before Closing, (i) such Subject Interest shall not constitute an
"Excluded Asset"; (ii) the Purchase Price shall not be reduced for any reason
related to such Consent; and (iii) notwithstanding anything to the contrary,
Buyer shall indemnify, protect, defend and hold Seller, each prior owner of the
Subject Interest and their Related Persons harmless from and against any Claim
arising out of or related to any failure to obtain such Consent.
4.12 Casualty Loss. If a Casualty Loss exists at Closing (a) Buyer shall
purchase the Subject Interest affected by the Casualty Loss notwithstanding the
Casualty Loss and without any adjustment to the Purchase Price therefor and (b)
Seller shall at the Closing pay to Buyer any sums paid to Seller by reason of
the Casualty Loss and shall assign, transfer and set over unto Buyer all of the
right, title and interest of Seller in and to any unpaid insurance proceeds,
awards and other payments for such Casualty Loss.
4.13 Transfer of Operatorship. Seller makes no representations or
warranties to Buyer as to the transferability (or assignability) of the
operatorship of any Subject Interest or Asset. Buyer acknowledges that the
rights and obligations associated with such operatorship are governed by the
applicable Laws, regulatory authorities and agreement(s) and that such
operatorship following the Closing will be determined in accordance therewith.
ARTICLE 5.
Environmental Matters.
5.1 Environmental Review. Subject to the following provisions and until
5:00 p.m. on January 17, 2005, Buyer may inspect the Assets operated by Seller
and environmental data in Seller's files pertaining to the Assets and at Buyer's
request, Seller shall contact the operators of Assets not operated by Seller to
arrange for review and inspection of such Assets and of the data, information,
documentation, books, and records pertaining thereto (collectively,
"environmental data" for the purposes of this Section 5.1), at Buyer's sole
cost, risk and expense. Buyer specifically acknowledges that (a) any access to
Seller operated Assets or Seller's data is given as an accommodation only, at
Buyer's sole cost, risk and expense; (b) Seller makes no representations
whatsoever as to the accuracy, completeness, or reliability of any such
environmental data or information derived from Buyer's review and inspection, or
otherwise disclosed to or obtained by Buyer; and (c) Buyer relies and depends on
and uses any and all such environmental and information derived from Buyer's
review or inspection exclusively and entirely at its own risk and without any
recourse to Seller whatsoever. Seller shall cooperate with Buyer to facilitate
the performance by Buyer of any environmental testing that Buyer wishes to
conduct at Buyer's sole cost and risk prior to Closing, which testing shall be
conducted in a manner so as not to unreasonably interfere with Seller's or
operator's operation of the Assets, and Seller and Buyer shall cooperate to
ensure that such testing is performed on an expedited and confidential basis
before Closing. Results of any such tests shall be treated as confidential,
except to the extent disclosure is required under applicable Law.
(a) To the fullest extent permitted by applicable Law, Buyer shall
indemnify, defend and hold harmless Seller and its Related Persons from any and
all Claims caused by, occurring from or in association with, arising out of or
resulting from the activities of Buyer or any of its Related Persons in
connection with said site visits and physical investigations of the Assets
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(including without limitation Claims for injury to or death of any individual or
for damage to or contamination of any property, natural resources or the
environment), even if such indemnified act, omission, event or occurrence is
caused in whole or in part by the negligence, fault or strict liability of any
Seller, but not to the extent that any such indemnified event or occurrence is
caused by or the result of the gross negligence or willful misconduct of Seller.
(b) In addition to the foregoing indemnification obligations, Buyer assumes
full responsibility for all damage to the Assets and/or to operations conducted
by Seller or other operators associated with the Assets that is caused by,
results from or arises from the activities of Buyer or its Related Persons in
connection with said site visits and physical investigations of the Assets
(including without limitation environmental remediation and response costs and
damage to natural resources located on, in, under or above any real property
that is part of or associated with the Assets), even if such damage is caused
by, results from or arises out of the negligence, fault or strict liability of
Seller, but not to the extent such damage is caused by, results from, or arises
out of the gross negligence or willful misconduct of Seller. Upon Seller's
request, Buyer shall immediately reimburse Seller for all such damages.
(c) Buyer shall provide Seller with at least two (2) Business Days written
notice before its desired date for testing the Assets and at least one (1)
Business Day written notice before its desired time for assessing the Assets and
will specify in the notice the desired locations to be tested or assessed.
Seller will have the right for itself or its designee(s) to be present during
any testing or other assessments and retains the right to prohibit Buyer from
conducting any such testing or assessment, which is not reasonable and customary
in a transaction such as the one contemplated hereby.
(d) If Buyer undertakes an environmental assessment, both the consultant
(if any consultant is employed) and the scope of the proposed assessment,
including testing protocols, must be approved by Seller before the work may
begin, which approval shall not be unreasonably withheld and/or delayed. If
Buyer takes samples from the Assets, Seller may require Buyer to split any
sample so that Seller may retain a sufficient split of such sample for its own
testing or use. Buyer shall promptly furnish to Seller a copy of any assessment
resulting from such inspection, including without limitation any reports,
results, data, analyses, results and conclusions thereof (collectively with any
assessment, "Assessment Information").
(e) Buyer shall provide Seller with a copy of any preliminary report and
access to all drafts of all reports and other Assessment Information produced or
obtained by Buyer as a result of any environmental assessment or testing before
a final version of any report is issued. Before the final version of any report
is issued, Seller shall also have a reasonable opportunity to provide Buyer with
comments and additional information, which Buyer agrees to review and consider
before the final version of any report is issued. Upon completion of any final
report, Buyer shall provide Seller with a copy of such report and any other
written Assessment Information and shall also provide Seller access to all
Assessment Information produced or obtained by Buyer as a result of any
environmental assessment or testing.
(f) Buyer shall not disclose (or permit any Related Person to disclose) any
Assessment Information, or any information reviewed during such assessment, to
any Third Person without the prior written consent of Seller, unless such
disclosure is required by a lawful subpoena or order of a Governmental
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Authority. In the event disclosure is sought pursuant to a subpoena or order of
a Governmental Authority, Buyer shall (a) notify Seller in writing at least five
(5) days before such disclosure (b) use commercially reasonably efforts to
undertake reasonable efforts to restrict any further disclosure in the form of a
protective order, confidentiality agreement or other similar device; and (c) use
reasonable efforts to assist Seller in any efforts to have, and shall not oppose
any efforts by Seller to have, any such subpoena quashed or any such order
vacated or modified.
If Buyer does not acquire the Assets for any reason, then upon request by Seller
it shall deliver to Seller all Assessment Information and all materials prepared
or obtained by Buyer or any Related Person that constitute or contain any
Assessment Information pertaining to the Assets.
5.2 Environmental Defects.
(a) By written notice delivered to Seller during the time period prior to 5
p.m. on January 17, 2005 ("Environmental Objection Period"), Buyer shall notify
Seller if Buyer believes that the environment associated with a Scheduled
Interest contains an "Environmental Defect", which is defined as a violation or
alleged violation of Environmental Laws or if Buyer believes there is an actual
or threatened exposure of any person or natural resource to Wastes to the
extent, as to each individual Environmental Defect, that: (a) prosecution, if
instituted, would be reasonably likely to result in a penalty, fine or damage
payment of One hundred thousand and No/100 Dollars ($100,000.00) or more, or (b)
performance of corrective work in respect of such Environmental Defect required
by Environmental Laws would be reasonably likely to result in expenditures of
One hundred thousand and No/100 Dollars ($100,000.00) or more. Such notification
(the "Environmental Defect Notice") shall include: (i) a description of such
Environmental Defect, (ii) a copy of any environmental data pertaining to such
Defect, and (iii) Buyer's calculation of the amount by which such Defects have
diminished the value of the Scheduled Interests, which amount shall be
determined by Buyer in good faith and in a reasonable manner ("Asserted Defect
Value"). The value of all Environmental Defects must exceed one percent (1%) of
the Purchase Price ("Environmental Defect Minimum Threshold") before there shall
be any Purchase Price Adjustment or further action required of Seller under
Section 5.3 with respect to an Environmental Defect.
(b) As to any Environmental Defect for which there is no further action or
adjustment, (x) Seller shall have no further obligation with respect to such
Environmental Defect, (y) Buyer shall be deemed to have waived such
Environmental Defect and (z) the Subject Interest shall be conveyed to Buyer
subject to such Environmental Defect.
(c) If and when Buyer believes that an Environmental Defect may exist,
Buyer shall use reasonable efforts to notify Seller of such possible
Environmental Defect and furnish available information concerning such possible
Environmental Defect and, from time to time thereafter as Buyer obtains more
information, shall provide Seller, as soon as practicable, with such additional
information.
5.3 Remedies for Environmental Defect. With respect to each Environmental
Defect asserted by Buyer in an Environmental Defect Notice, if Seller requests,
Seller and Buyer shall discuss and agree whether a particular matter constitutes
an Environmental Defect. As to each claim of an Environmental Defect made by
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Buyer during the Environmental Objection Period (and upon satisfaction of the
Environmental Defect Minimum Threshold set forth in Section 5.2 above), Buyer
and Seller shall endeavor to agree upon one of the following three options, with
option 5.3(c) being the default selection (subject to Buyer's election to
proceed under Section 5.3(b)) in the event the parties are unable to agree upon
subparts (a) or (b) below:
(a) Prior to or at Closing, Seller and Buyer may mutually agree in writing
separate and apart from this Agreement that Seller shall correct or make
arrangements for the correction of such Environmental Defect, and Closing shall
proceed without reduction of the Purchase Price and with Seller making such
correction and, subject to the provisions of Sections 9.3 and 9.4 (including
without limitation the provisions limiting this indemnification to any Claims
for which Seller has received a proper Claim Notice in accordance with Section
9.4 within One (1) Year after the Effective Time, defending, indemnifying and
holding Buyer and its Related Persons harmless against all Claims made by a
Third Person attributable to such Environmental Defect; or
(b) At Buyer's option, Buyer may elect to make corrections of or make
arrangements for the correction of such Environmental Defect after Closing, and
the parties shall proceed to Closing with a reduction of the Purchase Price in
an amount mutually agreed to by the parties and with Buyer defending,
indemnifying and holding Seller and its Related Persons harmless against all
Claims attributable to such Environmental Defect; or
(c) Buyer shall accept the Assets subject to any such Environmental Defect,
the parties shall proceed to Closing without adjustment of the Purchase Price,
and Seller shall, subject to the provisions of Sections 9.3 and 9.4 (including
without limitation the provisions limiting this defense and indemnification to
any Claims for which Seller has received a proper Claim Notice in accordance
with Section 9.4 within one year after the Closing Date), defend, indemnify and
hold Buyer and its Related Persons harmless against all Claims asserted by a
Third Person with respect to such Environmental Defects, up to, but in no event
to exceed, five percent (5%) of the Adjusted Purchase Price (such amount being
cumulative for any and all claims of Environmental Defect made by Buyer). In the
event of a claim asserted by a Third Person attributable to an Environmental
Defect and a demand for indemnification by Buyer hereunder, Seller reserves the
right to jointly negotiate with Buyer and the agency or party, if any, making
such claim and the right of access to the affected site, the use of temporary
storage and resources at such site, to the full extent held by Buyer, and the
right to perform assessment, removal and remedial operations for such
Environmental Defect, at its cost and risk, and any sums so expended by Seller
shall be a credit against Seller's indemnity obligation, if any, under this
Section 5.3(c).
Each party shall cooperate with the other party's reasonable corrective
work, and any operations unreasonably interfering with the corrective work shall
cease until correction is completed.
5.4 Post-Closing Environmental Indemnification by Buyer. As of the Closing,
but subject to the provisions of Sections 5.3(a) and (c), Buyer specifically
assumes and shall be responsible for all environmentally-related duties and
obligations of Seller and its Related Persons with respect to the Assets and
shall protect, defend, indemnify and hold Seller and the Seller's Related
Persons harmless from and against any and all Claims under any Environmental Law
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(hereafter defined) with respect to the Assets, including without limitation any
environmentally-related duties, conditions and obligations existing prior to or
as of the Effective Time or relating to periods arising before the Effective
Time. The term "Environmental Law(s)" as used here and elsewhere in this
Agreement includes the Resource Conservation and Recovery Act, 42 U.S.C.A. ss.
6901, et seq.; the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C.A. ss. 9601, et seq.; the Clean Water Act, 33 U.S.C.A.
ss.1251 et seq.; the Clean Air Act, 42 U.S.C.A. ss. 7401, et seq.; the Safe
Drinking Water Act, 42 U.S.C.A. ss.3001, et seq.; the Toxic Substances Control
Act, 15 U.S.C.A. ss. 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.A.
ss.2701 et seq.; and all rules, regulations and orders adopted under the
foregoing statutes, applicable state statutes addressing similar matters, or
state or federal statutes enacted after the date of this Agreement applicable to
any waste material, produced water, tank bottoms, sludge, or constituents
thereof, radioactive materials (excluding NORM, as defined in Section 5.5), or
hazardous substances (individually or collectively, "Wastes") on or included
with the Assets or the presence, disposal, release or threatened release of all
Wastes on, included with, or emanating from or through the Assets into the
atmosphere or in or upon land or any water course or body of water, whether
above or below the ground, and all other federal, state and local environmental
and oil and gas laws and regulations, as well as all acts, laws, and regulations
amendatory or supplemental thereto.
5.5 Condition of the Assets and Specific Buyer Indemnification with Respect
to NORM and Other Hazardous Substances. Except and to the extent as otherwise
provided in this Agreement, Buyer specifically assumes the risk of the condition
of the Assets and shall inspect the Assets prior to Closing, or hereby expressly
waives such inspection right, if not timely exercised. Any such inspection, if
made, shall cover, but not be limited to, the physical and environmental
condition, both surface and subsurface, of the Assets. It is expressly
recognized by Buyer that the lands and/or water bottoms, along with surface
facilities and production equipment located thereon, having been used in
connection with oil, gas, and water production, treatment, storage, and disposal
activities, may contain naturally occurring radioactive materials ("NORM"),
asbestos and other hazardous substances as a result of these operations. The
generation, formation, or presence of NORM, asbestos or other hazardous
substances in or on the Assets shall be the sole responsibility of Buyer, and
Buyer and successors of Buyer shall defend, indemnify and hold Seller and
Seller's Related Persons harmless from any and all Claims (except and to the
extent otherwise provided in this Agreement), including without limitation,
attorneys fees, court costs, and expenses associated with investigation of
claims, testing and assessment, whether based on any theory of negligence, tort,
breach of contract, breach of warranty, strict liability, regulatory liability
or statutory liability, regardless of the sole, joint or concurrent negligence,
breach of contract, breach of warranty, strict liability, regulatory liability,
statutory liability, or other fault or responsibility of Seller or any other
Person or party in any way arising from, resulting from or related to the
presence of NORM, asbestos or other hazardous substances, whether such NORM,
asbestos or other hazardous substance was in place before or after the Effective
Time. Additionally, Buyer agrees to comply with all provisions of such laws,
orders, rules or regulations applicable to Real Property Interests, such lands
and/or water bottoms, the Wells, and the Equipment.
5.6 Waiver. Unless raised by proper notice within the applicable time
period set forth in Section 5.2, Buyer waives for all purposes all objections
associated with the environmental, physical, and other condition of the Assets
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(including Environmental Defects), and Buyer (on behalf of itself and the
Buyer's Related Persons and their successors and assigns) irrevocably waives any
and all Claims, (except subject to the limitations set forth in Section 9.3 and
9.4, Claims covered under Seller's indemnities pursuant to Section 5.3 (a) and
(c)), that they may now or hereafter have asserted against Seller associated
with the same.
ARTICLE 6.
Pre-Closing Obligations of Seller and Buyer.
6.1 Pre-Closing Obligations of Seller.
(a) Operations. During the Interim Period, Seller shall (except as
otherwise provided in this Agreement):
1) maintain and keep (or in the case of any Subject Interests
that are operated by a Third Person, use reasonable efforts (which
efforts shall not require Seller to incur any monetary or non-monetary
obligations) to cause the operator of such Subject Interests to
maintain and keep) the Subject Interests in a condition and working
order consistent with its past practices and fully and timely perform
all obligations imposed upon Seller (or in the case of any Subject
Interests that are operated by a Third Person, use reasonable efforts
(which efforts shall not require Seller to incur any monetary or
non-monetary obligations) to cause the operator of such Subject
Interests to perform all obligations imposed on such operator) in
respect of any Subject Interests, including without limitation payment
of royalties, shut-in royalties and any and all other required
payments accruing through the Closing;
2) pay timely (or in the case of any Scheduled Interests that are
operated by a Third Person, use all reasonable efforts (which efforts
shall not require Seller to incur any monetary or non-monetary
obligations) to cause the operator of such Scheduled Interests to pay
timely) all costs and expenses incurred in connection with the
Scheduled Interests, except to the extent such costs and expenses are
contested in good faith;
3) keep in full force and effect insurance (including without
limitation producing well and producing facilities coverages)
comparable in amount and scope of coverage to that maintained by
Seller for the Scheduled Interests at the time of execution of this
Agreement and in the event of a Casualty Loss to use reasonable
efforts to pursue such Claim; and
4) promptly notify Buyer of each Casualty Loss about which Seller
obtains Knowledge during the Interim Period.
(b) During the Interim Period, Seller as operator on Buyer's behalf shall
have no liability to Buyer for losses, Claims or damages sustained or
liabilities incurred as a result of such interim operations conducted by Seller
as operator, regardless of the sole, joint or concurrent negligence, strict
liability, regulatory liability, statutory liability, breach of contract, breach
of warranty, or other fault or responsibility of Seller or any other person or
party, except only to the extent any such loss, Claim, damage or liability is
caused by, results from or arises out of the gross negligence or willful
misconduct of Seller. Seller shall not be obligated for any expenditures after
the Effective Time, and shall be entitled to recover any charges and expenses
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incurred in the course of such interim operations as part of the Final
Accounting Settlement, including without limitation those items set forth in
Exhibit "K" hereto.
(c) Refrain from Certain Actions. During the Interim Period, and except as
provided on Exhibits "G-1", "G-2" and "K" Seller shall refrain from taking (or
in the case of any Subject Interests operated by a Third Person, use reasonable
efforts (which efforts shall not require Seller to incur any monetary or
non-monetary obligations) to prevent such operator from taking) any of the
following actions without the prior written consent of Buyer (which shall not be
unreasonably withheld):
1) except as required under a Real Property Interest or Contract,
sell or assign any interest in any Real Property Interest;
2) voluntarily waive or release any material rights with respect
to any Scheduled Interest, voluntarily relinquish Seller's position as
operator with respect to any Scheduled Interest or voluntarily permit
any Leases or other material rights with respect to any Scheduled
Interest to expire (Seller shall have the obligation hereunder to pay
any delay or Pugh clause rentals and shall immediately notify Buyer of
the need to commence any operations to extend any mineral lease,
mineral servitude or other agreement beyond its initial or primary
term);
3) enter into any contract or approve an authorization for
expenditures requiring an expenditure net to Seller's interests in
excess of Fifty Thousand and No/100 Dollars ($50,000) attributable to
any Subject Interest except as a result of an emergency;
4) enter in any contract for the sale or other disposition, or
any call or option for such purchase, of Hydrocarbons produced or to
be produced from the Scheduled Interests that is not terminable
without penalty on Sixty (60) Days' notice or less;
5) supplement, modify or amend in any material respect any
instrument relating to or affecting immovable property to the extent
such immovable property relates to the Subject Interests;
6) commence any drilling, reworking, completion or similar
operations on the Subject Interests (except emergency operations,
operations required under presently existing contractual obligations
or operations that Seller determines necessary or prudent to prevent
the expiration, in whole or part, of any Lease or other agreement)
estimated to cost more than Fifty Thousand and No/ 100 Dollars
($50,000) net to Seller's interest;
7) voluntarily compromise, settle or adjust any amounts payable
by reason of any Casualty Loss;
8) commit to do any of the foregoing; or
9) amending the Apache Agreement to extend the term thereof.
(d) Notice of Defaults. Seller shall promptly notify Buyer of any written
notice received by Seller during the Interim Period of (1) default under any
Asset with respect to the Subject Interests or (2) any demand, action, suit,
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arbitration, proceeding or Governmental Authority investigation of the type
described in Section 2.3 or 2.6.
(e) Representations and Warranties. During the Interim Period, Seller shall
use reasonable efforts to cause all representations and warranties of Seller
contained in this Agreement to remain true and correct in all respects and shall
promptly notify Buyer of any fact or circumstance about which Seller has or
obtains Knowledge that would make any representation or warranty of Seller
untrue, incorrect or misleading; provided, however, such notice to Buyer
pursuant to this Section 6.1(e) shall not excuse Seller from liability for the
inaccuracy or breach of any representation or warranty made herein.
(f) Closing Conditions. During the Interim Period, Seller shall use
reasonable efforts to satisfy the conditions to Closing set forth in Section
6.1, to the extent same are within Seller's control.
6.2 Pre-Closing Obligations of Buyer.
(a) Corporate Status. Buyer shall use reasonable efforts to maintain its
corporate status and to assure that as of the Closing it will not be under any
material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of the transactions contemplated by this
Agreement.
(b) Notice of Defaults. Buyer shall promptly notify Seller of any written
notice received by Buyer during the Interim Period of any demand, action, suit,
arbitration, proceeding or Governmental Authority investigation of the type
described in Section 3.3 or 3.6.
(c) Buyer's Confidentiality Obligation. Concerning information (whether
written, oral or otherwise) provided previously, now or hereafter by or on
behalf of Seller to or for Buyer in connection with this Agreement or the
transactions contemplated hereby, Buyer shall (1) use such information only for
Buyer's investigation of the Subject Interests in accordance herewith, (2) hold
such information in confidence, using that maximum degree of care that Buyer or
any of its Related Persons uses in protecting its own proprietary materials of a
like kind, (3) not use (and not cause or permit any Third Person to use) such
information for any other purpose and (4) not provide such information to any
Related Person who is not an officer, director or employee of Buyer or to any
other Third Person (other than potential or actual partners, investors, lenders
or consultants of Buyer who before disclosure agree in writing to be bound by
these confidentiality provisions). The obligations under this Section 6.2(c) as
to any information shall not terminate until the earliest to occur of (i) the
Closing; (ii) the time at which such information becomes available to and
generally known by the public other than as a result of any disclosure made or
facilitated by Buyer or its Related Persons; (iii) the time at which such
information becomes available to Buyer from a source other than Seller or its
Related Persons or any Person bound by an obligation of confidentiality to
Seller or its Related Persons; and (iv) the time at which disclosure is
compelled by a final order issued by a court of competent jurisdiction.
(d) Representations and Warranties. During the Interim Period, Buyer shall
use reasonable efforts to cause all representations and warranties of Buyer
contained in this Agreement to remain true and correct in all material respects.
Buyer shall promptly notify Seller of any fact or circumstance about which Buyer
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has or obtains Knowledge that would make any representation or warranty of Buyer
untrue, incorrect or misleading.
(e) Closing Conditions. Buyer shall use reasonable efforts to satisfy the
conditions to Closing set forth in Section 6.2, to the extent same are within
Buyer's control.
ARTICLE 7.
The Closing.
7.1 Conditions to Seller's Obligations to Close. Seller's obligation to
Close is subject to the waiver by Seller or satisfaction of the following
conditions at or before the Closing:
(a) Representations and Warranties. The representations and warranties of
Buyer contained herein shall be true and correct in all material respects at the
Closing as though made at and as of the Closing.
(b) Performance. Buyer shall have performed and satisfied in all material
respects the obligations, covenants and agreements required hereunder to be
performed and satisfied by Buyer at or before the Closing.
(c) Pending Matters. No suit, action or other proceeding by a Governmental
Authority or other Third Person shall be pending or threatened that seeks
substantial damages from Seller in connection with, or seeks to restrain, enjoin
or otherwise prohibit the consummation of this Agreement or any transactions
contemplated hereunder.
(d) Bonds. Buyer shall obtain from any Governmental Authority or Third
Person the release of and shall return to Seller the bonds, letters of credit,
certificates of deposit and similar security instruments identified on or
referred to on Exhibit "Q" hereto (collectively the "Bonds") and shall provide
to each such Governmental Authority and other Third Person such bonds, letters
of credit, certificates of deposit and similar security interests as are
required or necessary to secure the release of and return to Seller the Bonds
and to fulfill any commitments or obligations in connection with the Bonds.
7.2 Conditions to Buyer's Obligations to Close. Buyer's obligation to Close
is subject to the waiver by Buyer or satisfaction of the following conditions at
or before the Closing:
(a) Representations and Warranties. The representations and warranties of
Seller contained herein shall be true and correct in all material respects at
the Closing as though made at and as of the Closing.
(b) Performance. Seller shall have performed and satisfied in all material
respects the obligations, covenants and agreements required hereunder to be
performed and satisfied by Seller at or before the Closing.
(c) Pending Matters. No suit, action or other proceeding by a Governmental
Authority or other Third Person shall be pending or threatened that seeks
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substantial damages from Buyer in connection with, or seeks to restrain, enjoin
or otherwise prohibit the consummation of, the transactions contemplated by this
Agreement.
(d) Release of Scheduled Liens. Recordable releases for those items listed
on Exhibit "J" hereto shall have been delivered at or before Closing.
(e) Termination of Commodity Price Hedge. Evidence, reasonably satisfactory
to Buyer, of the unwinding and termination of that certain Transaction
Confirmation #200410-6380 dated October 12, 2004 between Seller and
ConocoPhillips Company, including without limitation a release of the security
interest created in paragraph 10 of such Transaction Confirmation and of any
setoff rights with respect to production from the Lapeyrouse Field existing
under either the Base Contract between Seller and ConocoPhillips dated March 1,
2003 or the ISDA 2000 Master Agreement dated October 12, 2004 referred to in
such Transaction Confirmation, shall have been provided to Buyer at or before
Closing. Contemporaneously with the termination of that certain Transaction
Confirmation #200410-6380 dated October 12, 2004 between Seller and
ConocoPhillips Company, Buyer agrees to execute a Transaction Confirmation with
ConocoPhillips to sell gas to ConocoPhillips from January 1, 2005 through March
31, 2005 pursuant to the terms contained in paragraph 4 and for the price
contained in paragraph 1 of that certain Transaction Confirmation #200410-6380
dated October 12, 2004 between Seller and ConocoPhillips Company.
7.3 Closing. The Closing shall be held at 10:00 a.m. on January 20, 2005 in
Seller's offices in Houston, Texas, or at such other date or time, or in such
other location, as Seller and Buyer may mutually agree in writing. Each party's
obligations at Closing are each a condition precedent to the other's obligations
at Closing and each shall be deemed to have occurred simultaneously.
7.4 Obligations of Seller at Closing. At or before Closing, Seller shall
deliver to Buyer:
(a) multiple originals (as requested by Buyer), duly executed and
acknowledged by or on behalf of Seller, of one or more Assignments that
collectively convey to Buyer or Buyer's designee all the Subject Interests to be
conveyed hereunder;
(b) an executed statement certifying that Seller is not a foreign person
within the meaning of Internal Revenue Code of 1986, as amended, substantially
in the form attached as Exhibit "L" hereto;
(c) multiple original (as requested by Buyer) division orders, transfer
orders, letters in lieu thereof or joint directions to purchasers or pipeline
transporters, as appropriate, necessary to inform same of the consummation of
the transactions contemplated hereby;
(d) the Preliminary Accounting Statement, duly executed by Seller;
(e) to the extent necessary, one or more change-of-operator forms
(Louisiana Office of Conservation Form MD-10-R-AO) or other instruments (duly
executed and acknowledged by Seller (or its designee)) required by any
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Governmental Authority to transfer from Seller (or its designee) to Buyer (or
its designee) the operatorship of any Well, Unit or Lease (or portion thereof)
operated by Seller (or its designee) as of the date of Closing; and
(f) a certificate duly executed by the secretary or any assistant secretary
of Seller, on behalf of Seller, dated as of the Closing, (1) attaching, and
certifying on behalf of Seller as complete and correct, a copy of the
resolutions authorizing the execution, delivery and performance by Seller of
this Agreement and of the transactions contemplated hereby and (2) certifying on
behalf of Seller the incumbency of each Person executing this Agreement, or any
document delivered in connection with the Closing, on behalf of Seller.
7.5 Obligations of Buyer at Closing. At or before Closing, Buyer shall
deliver to Seller:
(a) a wire transfer effected and completed in accordance with Section 1.2
for the Purchase Price (adjusted pursuant to the Preliminary Accounting
Statement under Section 1.5), less the Deposit;
(b) multiple originals, duly executed and acknowledged by Buyer, of each
Assignment referenced in Section 7.4(a);
(c) one or more letters in lieu of transfer orders or joint directions to
purchasers or pipeline transporters, as appropriate, necessary to inform same of
the consummation of the transactions contemplated hereby;
(d) the Preliminary Accounting Statement, duly executed by Buyer;
(e) to the extent necessary, one or more change-of-operator forms
(Louisiana Office of Conservation Form MD-10-R-AO) or other instruments required
by any Governmental Authority for the transfer of the operatorship of any well,
unit or lease (or portion thereof) from Seller (or its designee) to Buyer (or
its designee), duly executed and acknowledged by Buyer (or its designee);
(f) a certificate duly executed by the secretary or any assistant secretary
of Buyer, on behalf of Buyer, dated as of the Closing, (1) attaching, and
certifying on behalf of Buyer as complete and correct, a copy of the resolutions
authorizing the execution, delivery and performance by Buyer of this Agreement
and of the transactions contemplated hereby and (2) certifying on behalf of
Buyer the incumbency of each Person executing this Agreement, or any document
delivered in connection with the Closing, on behalf of Buyer; and
(g) Evidence (reasonably satisfactory to Seller's counsel) of compliance
with or exemption from all requirements, if any, of all Governmental Authorities
for the posting of plugging or other applicable bonds or other security (whether
under a Lease, Contract, Louisiana Administrative Code 43:XIX.104 or otherwise)
relating to the ownership, operation or use of any or all of the Subject
Interests, Leases, Units and Wells.
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ARTICLE 8.
Termination.
8.1 Right of Termination. This Agreement may be terminated at any time at
or before Closing by notice given at or before the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller if any of the conditions in Section 7.1 has been neither
waived by Seller nor satisfied by the time of the Closing; (c) by Buyer if any
of the conditions in Section 7.2 has been neither waived by Buyer nor satisfied
by the time of the Closing;
(d) by Seller if there has been a material breach by Buyer of any of its
representations, warranties or obligations contained in this Agreement that is
not cured before the earlier of the time for Closing and five (5) Business Days
after Buyer receives written notice of such breach;
(e) by Buyer if there has been a material breach by Seller of any of its
representations, warranties or obligations contained in this Agreement that is
not be cured before the earlier of the time for Closing and five (5) Business
Days after Seller receives written notice of such breach; or
(f) by Seller or Buyer if the aggregate of (i) downward reductions in the
Purchase Price under Sections 4.8 and 5.3(b) (before and exclusive of any other
adjustments to the Purchase Price and (ii) the sum of the Asserted Defect Values
on those Environmental Defects subject to Section 5.3(c) is equal to or exceeds
five percent (5%) of the Purchase Price.
(g) by Buyer if Preferential Rights are exercised with respect to (i) Real
Property Interests with aggregate Allocated Values equal to or in excess of
Thirty Million and No/100 United States Dollars or (ii) at least two (2) of such
prospect areas (without regard to Allocated Values, if any, therefore), of the
prospect areas described in Exhibit "T" hereto. In the event of (ii), Seller
will have the option to present drilling opportunities of similar kind and
nature to Buyer for the purpose of substituting prospect(s) for those lost to
the preferential rights exercise. At Buyers sole discretion, Buyer may elect to
accept such substitute prospect(s). If by the close of business on January 17,
2005 Buyer has not agreed to accept such substitute prospect(s) then Buyer shall
provide written notice to Seller of Termination.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, this Agreement shall become void and of no further force or effect
except as follows:
(a) the provisions of this Article 8, and Sections 2.5, 3.5, 5.1 and 6.2(c)
shall survive such termination and continue in full force and effect.
(b) termination of this Agreement shall not affect or terminate the
Confidentiality Agreement, which shall remain in full force and effect in
accordance with its terms.
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(c) if this Agreement is terminated for any reason whatsoever, Buyer shall
promptly deliver to Seller all information furnished by or on behalf of Seller
to Buyer or any of its Related Persons in connection with this Agreement or
Buyer's investigation of the Subject Interests, together with all copies,
extracts, excerpts or compilations of such information.
(d) if Seller terminates this Agreement in accordance with Section 8.1(d)
or for failure of the conditions stated in Section 7.1(a) or 7.1(b), then (1)
Seller shall accept the Deposit (with all interest accrued thereon) as
liquidated damages and as its sole and exclusive legal and equitable remedy for
Buyer's failure to perform and (2) neither party shall have any further
liability or obligation to the other (except as provided in Section 8.2(a)-(c)).
The parties acknowledge and stipulate that, by executing this Agreement, Seller
loses substantial investment opportunity to market the Subject Interests to
Third Persons during the Interim Period; that damages for Buyer's breach of this
Agreement or failure to satisfy the conditions in Section 7.1(a) or 7.1(b) (as
well as the value of Seller's investment opportunities without this Agreement)
are difficult or incapable of accurate estimation and that the Deposit (with all
interest accrued thereon) is a reasonable forecast of just compensation for any
harm that might be caused by Buyer's breach or failure to satisfy these
conditions.
(e) if the parties jointly terminate this Agreement under Section 8.1 (a),
if Buyer terminates this Agreement in accordance with Section 8.1(c), 8.1 (e),
8.1(f) or 8.1 (g) or if Seller terminates this Agreement for any reason other
than as set forth in Section 8.1 (a), 8.1 (b) or 8.1 (d), then (1) the Deposit
shall be refunded to Buyer and (2) neither party shall have any further
liability or obligation to the other (except as provided in Section 8.2
(a)-(c)).
ARTICLE 9.
Post-Closing Obligations.
9.1 Buyer's Release, Indemnity and Assumption of Obligations.
Notwithstanding anything to the contrary in Section 9.2 or elsewhere herein,
Buyer and its successors and assigns hereby release Seller, each prior owner of
any Subject Interest and their Related Persons from all Assumed Obligations and,
upon and after Closing, shall assume each and every Assumed Obligation, timely
pay all costs and expenses associated with each and every Assumed Obligation and
duly and timely perform and discharge (in accordance with this Agreement, all
Contracts and all applicable Laws and Permits and to the reasonable satisfaction
of Seller, all applicable Governmental Authorities and all applicable
landowners) each and every Assumed Obligation. Further, notwithstanding anything
to the contrary in Section 9.2 or elsewhere herein, Buyer and its successors and
assigns shall, upon and after Closing, fully protect, indemnify, defend and hold
harmless Seller, each prior owner of any Subject Interest and their Related
Persons from and against any and all Claims arising out of or in connection with
the following:
(a) any and all Assumed Obligations; and
(b) any and all Claims related to or arising out of (1) any inaccuracy in
any representation or the breach of any warranty of Buyer set forth in this
Agreement or (2) any failure of Buyer to perform or observe any obligation to be
performed or observed by Buyer under this Agreement (unless waived or deemed
waived by Seller).
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Neither Seller nor its Related Persons shall incur any liability for
Buyer's failure to properly perform or discharge any Assumed Obligation. Except
to the extent of any Retained Liabilities, neither Buyer nor its Related Persons
shall be entitled to claim a breach of Seller's obligations under this Agreement
or to seek indemnity or defense on the grounds that any prior operations,
including without limitation any Plugging and Abandonment operations are not
properly complete or that additional costs will be required to properly complete
such operations. THE PROVISIONS OF THIS SECTION 9.1 APPLY TO ANY AND ALL ASSUMED
OBLIGATIONS (WHETHER CURRENTLY ASSERTED OR UNASSERTED, ACCRUED OR UNACCRUED,
KNOWN OR UNKNOWN OR FORESEEN OR UNFORESEEN AND WHETHER DIRECT, INDIRECT,
CONTINGENT OR OTHERWISE WHETHER OR NOT ARISING AT ANY TIME BEFORE, AT OR AFTER
THE EFFECTIVE TIME AND WHETHER OR NOT CAUSED OR CONTRIBUTED IN WHOLE OR IN PART
BY THE NEGLIGENCE, FAULT OR STRICT LIABILITY (WHETHER SUCH NEGLIGENCE, FAULT OR
STRICT LIABILITY IS ACTIVE, PASSIVE, SOLE, SIMPLE, CONCURRENT, CONTINGENT OR
OTHERWISE) OF, OR BY BREACH OF CONTRACT OR VIOLATION OF LAW BY SELLER OR ANY
OTHER PERSON AND WHETHER OR NOT BASED ON, RELATED TO OR ARISING OUT OF (IN WHOLE
OR IN PART IN ANY WAY) ANY THEORY OF LIABILITY OR FAULT WHETHER IN TORT,
CONTRACT, QUASI CONTRACT, STRICT LIABILITY, UNSEAWORTHINESS OF ANY VESSEL,
MISREPRESENTATION, EQUITY, INDEMNITY, CONTRIBUTION, VIOLATION OR OPERATION OF
ANY LAW OR ANY OTHER CAUSE WHATSOEVER. NONETHELESS, THIS SECTION 9.1 SHALL NOT
APPLY TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILFULL MISCONDUCT OF SELLER.
9.2 Seller's Retention of Liability and Indemnity. Notwithstanding anything
to the contrary in Section 9.1 or elsewhere herein, but subject to the other
provisions of this Agreement (including without limitation this Section 9.2 and
Sections 9.3 and 9.4), Seller and its successors and assigns
(a) hereby release Buyer and its Related Persons from all Retained
Liabilities and, upon and after Closing, shall timely pay all costs and expenses
associated with each and every Retained Liability and duly and timely perform
and discharge each and every Retained Liability; and
(b) shall, upon and after Closing, fully protect, indemnify, defend and
hold harmless Buyer and its Related Persons from and against any and all Claims
arising out of or in connection with the following:
1) any and all Non-Environmental Claims that (i) are asserted by
a Third Person who is not a Related Person of Buyer; (ii) Seller
received written notice of within one year of the Effective Time,
(iii) relate to or arise out of any Subject Interest and (iv) pertain
to acts, omissions or events that occurred solely before the Effective
Time;
2) any Environmental Defects specifically assumed by Seller
pursuant to the provisions of Section 5.3(a) or (c); and
3) any and all Claims related to or arising out of (i) any
inaccuracy in any representation, or the breach of any warranty, of
Seller set forth in this Agreement or (ii) any failure of Seller to
perform or observe any obligation to be performed or observed by
Seller under this Agreement (unless waived or deemed waived by Buyer).
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Neither Buyer nor its Related Persons shall incur any liability for Seller's
failure to properly perform or discharge any Retained Liability. THE PROVISIONS
OF THIS SECTION 9.2 APPLY TO ANY AND ALL RETAINED LIABILITIES (WHETHER CURRENTLY
ASSERTED OR UNASSERTED, ACCRUED OR UNACCRUED, KNOWN OR UNKNOWN OR FORESEEN OR
UNFORESEEN AND WHETHER DIRECT, INDIRECT, CONTINGENT OR OTHERWISE).
9.3 Limitations on Seller's Indemnity Obligations; Buyer's Release.
Notwithstanding anything to the contrary in Section 9.2 or elsewhere herein, (i)
Seller shall have no obligation under this Agreement or otherwise to release
Buyer and its Related Persons, timely pay, perform and/or discharge and protect,
indemnify, defend or hold harmless Buyer or any of its Related Persons from or
against any one or more of the following Claims and (ii) Buyer releases Seller,
each prior owner of any Subject Interest and their Related Persons from and
waives each of the following Claims:
(a) any and all Claims based on, related to or arising out of (in whole or
in part in any way) (1) Environmental Claims or Environmental Laws (less and
except any such matters specifically assumed by Seller pursuant to the
provisions of Section 5.3(a) or (c) and only to the extent so assumed), (2) the
prior operations (including, but not limited to any plugging and abandonment
operations) of any or all portions of the Subject Interests, Leases, Units,
Equipment and Wells, (3) any underproduced or overproduced gas position with
respect to any or all portions of the Subject Interests, Leases, Real Property
Interests, Units and Wells, (4) any Suspense Account, (5) any Claim described in
Section 9.1, (6) any obligation, duty or liability assumed by Buyer under this
Agreement (whether under Section 9.1 or otherwise) or (7) any matter within the
scope of any express waiver or release by Buyer or disclaimer by Seller in this
Agreement; and
(b) any and all Claims (with the exception of Claims relating to the
Retained Liabilities) for which Seller has not received a Claim Notice in
accordance with Section 9.4 within one (1) year after the Effective Time.
THIS SECTION 9.3 SHALL BE GIVEN FULL AND EXPRESS EFFECT EVEN IF, AS A RESULT
THEREOF, SELLER, EACH PRIOR OWNER OF ANY SUBJECT INTEREST OR ANY OF THEIR
RELATED PERSONS WOULD BE INDEMNIFIED AGAINST ITS OWN NEGLIGENCE, FAULT OR STRICT
LIABILITY (WHETHER SUCH NEGLIGENCE, FAULT OR STRICT LIABILITY IS ACTIVE,
PASSIVE, SOLE, SIMPLE, CONCURRENT, CONTINGENT OR OTHERWISE) OR FROM ITS BREACH
OF CONTRACT OR VIOLATION OF LAW AND WHETHER OR NOT BASED ON, RELATED TO OR
ARISING OUT OF (IN WHOLE OR IN PART IN ANY WAY) ANY THEORY OF LIABILITY OR FAULT
WHETHER IN TORT, CONTRACT, QUASI-CONTRACT, STRICT LIABILITY, UNSEAWORTHINESS OF
ANY VESSEL, MISREPRESENTATION, EQUITY, INDEMNITY, CONTRIBUTION, VIOLATION OR
OPERATION OF ANY LAW OR ANY OTHER CAUSE WHATSOEVER. NONETHELESS, THIS SECTION
9.3 SHALL NOT APPLY TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILFULL MISCONDUCT
OF SELLER.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement, Seller's cumulative indemnity obligations to Buyer and the its
Related Persons under this Agreement shall not exceed the Adjusted Purchase
Price.
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9.4 Procedure for Claims. The following provisions shall apply for a party
(a "Claimant") to assert a Claim under or arising out of this Agreement or any
Assignment (whether for protection, indemnity, defense, warranty, breach of this
Agreement or otherwise) against the other party (the "Respondent"). The
following provisions shall also apply for a Related Person of a party (also, a
"Claimant") to assert a Claim under or arising out of this Agreement or any
Assignment for protection, indemnity or defense.
(a) To assert a Claim, the Claimant shall give to the Respondent a written
notice (a "Claim Notice") that includes (1) the specific details of the Claim
and (2) specific basis under this Agreement for the Claim. In the event that the
Claim is by a Third Person against the Claimant (a "Third Person Claim"), the
Claimant shall submit its Claim Notice promptly after the Claimant has actual
knowledge of the Third Person Claim and shall enclose a copy of all papers (if
any) served or otherwise received with respect to the Third Person Claim.
Nonetheless, the failure of a party or any of its Related Persons to give notice
of a Third Person Claim as required by this Section 9.4(a) shall not relieve the
other party of its defense and indemnity obligations under this ARTICLE 9 except
to the extent such failure materially prejudices the other party's ability to
defend effectively against the Third Person Claim.
(b) In the case of a Claim based upon a Third Person Claim, the Respondent
shall notify the Claimant within ten (10) Business Days from Respondent's
receipt of the Claim Notice whether the Respondent admits or denies its
obligation to indemnify and defend the Claimant against the Third Person Claim.
If the Respondent does not notify the Claimant within such ten (10) Business Day
period whether the Respondent admits or denies its obligation, the Claims for
which the Claimant is seeking indemnity and defense shall be conclusively deemed
an obligation of the Respondent hereunder. The Claimant is authorized, prior to
and during such ten (10) Business Day period, to file any paper (and take any
action) that it shall deem necessary or appropriate to protect its interests.
(c) If the Respondent admits, or is deemed to have admitted, its obligation
to indemnify and defend the Claimant against the Third Person Claim, it shall
defend diligently, at its sole cost and expense, the Third Person Claim and
shall have full control of such defense and proceedings, including without
limitation any compromise or settlement thereof, [subject, however, to the
limitations set forth below in this Section 9.4(c)]. If requested by the
Respondent, the Claimant shall cooperate with any actions reasonably necessary
to contest any Third Person Claim that the Respondent elects to contest
(provided, however, that no Claimant shall be required to bring any counterclaim
or cross-complaint against any Person). A Claimant may at its sole cost and
expense participate in, but not control, any defense or settlement of any Third
Person Claim controlled by the Respondent. Without the written consent of the
Claimant, which consent shall not be unreasonably withheld, the Respondent shall
not settle any Third Person Claim against a Claimant or consent to the entry of
any judgment with respect thereto that (1) does not result in a final resolution
of the Claimant's liability with respect to the Third Person Claim (including
without limitation, in the case of a settlement, an unconditional written
release of the Claimant), (2) imposes on the Claimant any material non-financial
obligation, or any financial obligation outside the scope of the Respondent's
indemnity obligations under this Agreement or (3) imposes on the Claimant a
financial obligation that the Respondent is unable or unwilling to immediately
satisfy.
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(d) If the Respondent does not admit its obligation or admits its
obligation but fails to diligently defend or settle the Third Person Claim, then
the Claimant shall have the right to defend against the Third Person Claim at
the sole cost and expense of the Respondent, with counsel of the Claimant's
choosing, reserving to the Claimant all rights granted hereunder or otherwise
against the Respondent, but subject to the right of the Respondent to admit its
obligation and assume the defense of the Third Person Claim at any time prior to
settlement or final determination thereof. If the Respondent has not yet
admitted its obligation for indemnity and defense with respect to a Third Person
Claim, the Claimant shall send written notice to the Respondent of any proposed
settlement and the Respondent shall have the option for five (5) Business Days
following receipt of such notice to (1) admit in writing its obligation for
indemnity and defense with respect to such Third Person Claim and (2) if its
obligation is so admitted, assume the defense of the Third Person Claim,
including without limitation the power to reject the proposed settlement. If the
Claimant settles any Third Person Claim over the objection of the Respondent
after the Respondent has timely admitted its obligation in writing and assumed
the defense of the Third Person Claim, the Claimant shall be deemed to have
waived any right to indemnity therefor.
(E) NOTWITHSTANDING ANY OTHER PROVISION, A CLAIM (LESS AND EXCEPT ANY CLAIM
ARISING OUT OF RETAINED LIABILITIES) AGAINST SELLER (WHETHER FOR INDEMNITY,
DEFENSE, BREACH OF THIS AGREEMENT OR OTHERWISE) SHALL NOT BE VALID OR
ENFORCEABLE IF SELLER DOES NOT RECEIVE A PROPER CLAIM NOTICE FOR SUCH CLAIM
WITHIN ONE (1) YEAR OF THE EFFECTIVE TIME.
9.5 Waiver and Limitation of Indemnities and Certain Damages.
(a) In no event shall Respondent have any obligations to indemnify or
defend a Claimant if the Claim for which indemnity or defense is sought was
caused by the gross negligence or willful misconduct of the Claimant. Nor shall
any indemnity provisions in this Agreement apply to matters affecting properties
(real, personal or mixed) and appurtenant rights (contractual or otherwise)
other than those that are covered by this Agreement.
(b) Each party (for itself and its Related Persons), along with any Person
asserting a Claim under this Agreement, waives and agrees not to seek indirect,
consequential, punitive, incidental, special or exemplary damages of any kind
with respect to any Claim based on, related to or arising out of (in whole or in
part in any way) this Agreement, any transaction contemplated hereby or any
breach hereof or thereof (whether arising before, at or after any Closing).
However, this provision does not diminish or otherwise affect the parties'
rights and obligations to be indemnified against, and provide indemnity for,
indirect, consequential, incidental, special, punitive or exemplary damages
awarded to any Third Person for which indemnification is provided in this
Agreement or Seller's right to receive liquidated damages, including without
limitation the Deposit, pursuant to the provisions of Section 8.2(d).
9.6 Records. As soon as reasonably practicable following the Closing, but
in no event later than thirty (30) Days thereafter, Seller shall furnish to
Buyer all Records. Nonetheless, Seller shall have the right, at its expense
before delivery of such Records to Buyer, to make and retain copies of such
Records. Buyer shall maintain the Records received from Seller for a period of
at least seven (7) years after the Closing and at reasonable times shall afford
Seller full access to the Records as reasonably requested by Seller for review
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and for making and retaining copies thereof at Seller's expense. If any portion
of the Records is desired to be destroyed, Buyer shall use reasonable efforts to
provide Seller with written notice and the reasonable opportunity to take
possession of any or all of the same before such destruction.
9.7 Confidentiality. The Confidentiality Agreement shall terminate
effective as of the Closing only as to the Assets conveyed to Buyer.
9.8 Transfer of Operatorship. Except as prohibited by Law or applicable
Contracts, Buyer shall, upon and after Closing, assume operatorship of (a) the
Assets (or portions thereof) operated by Seller (or its designee) at 7:00 a.m.
on February 1, 2005. Seller shall use reasonable efforts (which efforts shall
not require Seller to incur any monetary or non-monetary obligations) to assist
and cooperate with Buyer in connection with its efforts to secure operatorship
of all Assets (or portions thereof). As promptly as practicable, Buyer shall
file with all pertinent Governmental Authorities all pertinent
change-of-operatorship forms and similar applications and instruments.
(a) Strictly as an accommodation to Buyer, Seller agrees to operate the
Subject Interests (limited to those for which either Buyer or Seller is the
designated operator) for the account of the Buyer for a period not to extend
past February 1, 2005, or such earlier date as may be mutually agreed to by
Seller and Buyer. The date when Seller ceases to assist in the operation of the
Subject Interests shall be referred to hereafter as the "Termination Date".
While acting as operator on Buyer's behalf, Seller shall make good faith efforts
to operate the Subject Interests in a manner substantially similar as they were
being operated prior to Closing and in material compliance with all applicable
laws, ordinances, rules and regulations, orders, terms of permits and
authorizations by any Governmental Authority which may have jurisdiction over
the Subject Interests. Seller's duties as operator for Buyer during this period
shall include marketing (and applicable production reporting for the subject
period) of produced oil and gas consistent with past field practices. In the
case of an oil spill, blowout, explosion, fire, storm, hurricane or any other
emergency situation, Seller shall have the right to make any necessary decisions
or expenditures it deems appropriate in good faith as a prudent operator to
operate the Subject Interests, and in addition to any other expenditures
attributable to the period of time subsequent to the Effective Time, Buyer shall
reimburse Seller for any such expenditures. In addition, from the date of
Closing to the Termination Date, Seller shall endeavor to (i) assist Buyer in
the training of personnel in the operation of the Subject Interests, and (ii)
attempt to retain existing contract staff familiar with the operation of the
Subject Interests (which endeavors shall not require Seller to incur any
monetary or non-monetary obligations).
(b) Seller further agrees to perform the accounting functions for the
Subject Interests in a manner consistent with the performance of such accounting
functions prior to the Effective Time for a period ending February 28, 2005, or
such earlier date mutually agreed to by the Parties, at which date Buyer shall
assume all accounting functions (the "Accounting Closing Date"). In order for
Seller to perform the functions set forth in this Section, Buyer shall ensure
that all revenues, proceeds and joint interests billings attributable to all
production prior to 11:59 pm on the Accounting Closing Date shall continue to be
made to Seller. From the date of Closing to the Accounting Closing Date, Seller
shall endeavor to make royalty payments that are due, pay appropriate rental
payments and handle revenue and expenditure accounting, as to the Subject
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Interests. For purposes of this section, revenue accounting functions shall
include disbursement of revenue proceeds to all working interest, royalty and
overriding royalty owners as well as all rental and right of way payments.
Seller will complete revenue accounting for hydrocarbons produced during the
period between the Closing and the Accounting Closing Date, it being further
understood that this will entail the Seller performing revenue settlement
functions for such period after the Accounting Closing Date, but no longer than
ninety (90) days after Closing, unless mutually agreed to by the parties.
Expenditure accounting functions will include the payment of all expenditures
and subsequent billing of same to all working interest owners. Seller will
complete expenditure accounting functions for the calendar months falling
between the Closing and Accounting Closing Date. With regard to Buyer's interest
in the Subject Interests, Seller shall prepare and deliver to Buyer a detailed
monthly statement of operating revenues and expenditures, including but not
limited to operating costs, capital expenditures, production and ad valorem
taxes (hereinafter referred to as "Net Cash Flow"). The form and content of such
statement will be determined by the parties and will be issued as soon as
practicable. From the Closing through Accounting Closing Date, Seller shall
remit to Buyer the Net Cash Flow from the Subject Interests on a monthly basis.
Such payments will be made by wire transfer as soon as practicable, but in no
event later than forty-five (45) days following the month of production.
(c) The Parties hereby further agree that Seller shall have no liability to
Buyer, or any third party or Governmental Authority and Buyer shall release,
defend, and indemnify Seller from, any Claims, actions, suits, proceedings,
loss, costs, expenses, liability, property or environmental damage, or other
damages to or incurred by Buyer, Seller, any Third Person or Governmental
Authority which are attributable to, caused by or related to the use, ownership,
operatorship or Seller's operation of the Subject Interests from the Closing to
the Termination Date or accounting or other activities conducted by Seller from
Closing to the Accounting Closing Date, and with respect to the revenue
settlement functions after the Accounting Closing Date, regardless of the sole,
joint or concurrent negligence (ordinary or gross, sole or partial), strict
liability, regulatory liability, statutory liability, breach of contract, breach
of warranty, or other fault or responsibility of Seller or any other person or
party, except to the degree caused by the willful misconduct of Seller.
(d) Seller shall not be obligated for any expenditures after the Effective
Time, and shall be entitled to recover any charges and expenses incurred in the
course of such operations or accounting efforts. Buyer, as of the Effective
Time, assumes responsibility for all costs and expenses associated with
ownership and operation of the Subject Interests, including but not limited to
operations, maintenance, repairs, recompilations, reconditioning, modifications,
capital expenditures, abandonments and salvage. As payment, Buyer shall pay to
Seller an amount equal to (on an 8/8ths basis)all COPAS overheads for all wells
to cover for Seller's general and administrative overhead hereunder for the
month of January 2005. Subsequent to the month of January 2005 Buyer shall pay
$15,000.00 per month to Seller for Seller's performance of accounting functions
as described in subsection (b). This payment shall be made to Seller for each
month in which Seller performs the functions set forth above in Section 9.8(b)
until completion of the revenue settlement functions. Except as provided in this
subsection (d), Seller shall not be entitled to any compensation for its
operation of the Subject Interests pursuant to this Section.
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9.9 Conveyance Costs. Buyer shall pay all transfer, sales and use Taxes, if
any, from or arising out of the sale of the Subject Interests. Buyer is
obligated to obtain and shall be solely responsible for filing and recording
documents, and obtaining all necessary consents and approvals from Governmental
Authorities or other Third Persons that are customarily obtained post-closing
related to the transfer of the Subject Interests from Seller to Buyer (including
without limitation IRS Form 1099-S and State Mineral Board Form B and for the
transfer of operatorship of any Assets (or portions thereof) from Seller or its
designee to Buyer or its designee) and for all costs, fees, obligations and
liabilities associated therewith. Without limiting the foregoing, Buyer shall
file each Assignment for recordation in the conveyance records of each Louisiana
parish in which any Leases or Units subject to such Assignment are located and
shall make all necessary filings with any Governmental Authority. Buyer shall
file and record all such documents as promptly as practicable after the Closing
and, as promptly as practicable after such recording or filing, shall furnish
Seller with all recording data and a certified copy (or other evidence
acceptable to Seller) of all such filings.
9.10 Revenues, Expenses and Capital Expenditures.
(a) Except for the Imbalance, Seller shall be entitled to all revenues,
credits, refunds, deposits and accounts receivable attributable to, or arising
out of, the ownership, operation or use of, the Subject Interests before the
Effective Time, no matter when received.
(b) Except as otherwise provided in Section 6.1(b), Buyer shall be
responsible for, and shall pay or cause to be paid when due, all costs,
expenses, expenditures, payments and payables (including without limitation
capital expenditures, royalties, rentals, Taxes, deposits, advanced billings
paid under an operating agreement and all prepaid insurance premiums, utility
charges, processing, gathering or transportation charges) and Claims
attributable to, or based on, related to or arising out of (in whole or in part
in any way) (i) the ownership, operation or use of any Subject Interest at or
after the Effective Time and (ii) the Imbalance, no matter when such arises,
whether before, at or after the Effective Time.
9.11 Taxes.
(a) Subject to Sections 9.1, 9.3 and 9.11(d), Seller shall be responsible
for, and shall pay or cause to be paid when due, all Taxes related to or arising
out of the ownership, operation or use of the Subject Interests before the
Effective Time.
(b) Subject to Section 9.11(d), Buyer shall be responsible for, and shall
pay or cause to be paid when due, all Taxes related to or arising out of the
ownership, operation or use of the Subject Interests at or after the Effective
Time (excluding Seller's income Taxes from its sale of the Subject Interests
hereunder).
(c) Buyer shall be solely responsible for, and shall pay or cause to be
paid when due, all transfer, sales, use or similar Taxes resulting from or
associated with the transactions contemplated under this Agreement and all
documentary, filing and recording fees required in connection with the filing,
recording and approval of the Assignments.
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(d) Ad valorem and other property Taxes due in respect of the Subject
Interests for the tax period covering the Effective Time shall be prorated
between Buyer and Seller as of the Effective Time. To the extent that Seller has
paid any such Taxes before Closing, Buyer will reimburse Seller for the portion
of such Taxes that is attributable to the period after the Effective Time. Buyer
shall pay or cause to be paid prior to delinquency, and shall be responsible
for, all such Taxes not paid before Closing, and Seller will reimburse Buyer for
the portion of such Taxes that is attributable to the period before the
Effective Time.
(e) The party responsible for a particular Tax shall be entitled to all
deductions, credits and refunds pertaining to such Tax, no matter when received.
9.12 Further Assurances. From and after Closing, at the request of Seller,
but without further consideration, Buyer shall execute and deliver or use
reasonable efforts to cause to be executed and delivered such other instruments
of conveyance and take such other actions as Seller reasonably may request to
more effectively put Seller in possession of any property that was not intended
by the parties to be conveyed, or should not have been conveyed, to Buyer
(including without limitation reassignment from Buyer to Seller of any Subject
Interests that were conveyed in violation of a valid Preferential Right or
consent to assignment). From and after Closing, at the request of Buyer but
without further consideration, Seller shall execute and deliver or use
reasonable efforts to cause to be executed and delivered such other instruments
of conveyance and take such other actions as Buyer reasonably may request to
more effectively put Buyer in possession of the Subject Interests intended to be
conveyed. If any of the Subject Interests are incorrectly described, the
description shall be corrected upon proof of the proper description. From and
after the Closing, Buyer and Seller shall each execute, acknowledge and deliver
to the other such further instruments and take such further actions as may be
reasonably requested by the other party in order to more effectively assure to
the other party the full beneficial use and enjoyment of the Subject Interests
and otherwise to accomplish the purposes of the transaction contemplated by this
Agreement.
9.13 Transfers. The parties acknowledge and agree that Buyer's obligations
under this Agreement and under each Assignment are real obligations and run with
the land and with each subsequent Transfer of the Subject Interests. Any
Transfer by Buyer (or any successor or assign thereof) of any right, title or
interest in or to any or all portions of the Subject Interests or any Assignment
shall be void and unenforceable unless such Transfer specifically references,
and is made subject to, this Agreement and such Assignment and specifically
provides that each Person acquiring under such Transfer expressly assumes (to
the extent of the interest acquired) Buyer's obligations under this Agreement
and such Assignment. The parties understand and agree that neither any such
Transfer nor any delegation of any or all portions of Buyer's obligations
hereunder shall relieve or release Buyer (or any successor or assign thereof) of
any obligations to Seller under this Agreement unless Buyer (or any successor or
assign thereof) is expressly relieved or released thereof in writing by Seller
in its sole and absolute discretion.
9.14 Survival of Representations, Warranties and Obligations. THE
REPRESENTATIONS AND WARRANTIES BY SELLER HEREUNDER AND ALL OBLIGATIONS,
COVENANTS AND AGREEMENTS OF SELLER (OTHER THAN IN SECTIONS 4.2 AND 9.11), SHALL
TERMINATE ONE (1) YEAR AFTER THE EFFECTIVE TIME AND THEREAFTER NO ACTION MAY BE
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COMMENCED (EITHER IN COURT, IN ARBITRATION OR OTHERWISE) BASED UPON A BREACH OF
THOSE REPRESENTATIONS, WARRANTIES, OBLIGATIONS, COVENANTS AND AGREEMENTS. All
other representations, warranties, indemnities, covenants and agreements and the
disclaimers and waivers contained in this Agreement shall, except as expressly
provided herein, survive the Closing indefinitely. The parties have made and
make no representations or warranties except those expressly set forth in this
Agreement.
9.15 Reservation of Claims Against Third Parties. Except to the extent
otherwise reimbursed to Seller under this Agreement, Seller shall be entitled to
all amounts included or described within the Excluded Assets, including without
limitation the claims or disputes described on Exhibit "I".
9.16 Default. Seller shall notify Buyer in the event that Seller becomes
aware that Buyer or Buyer's successors or assigns have failed to satisfy one or
more post-Closing obligations assumed by Buyer pursuant to the terms of this
Agreement, the Assignments, and/or any amendments thereto (any such failures
hereinafter referred to as a "Default"). Buyer shall correct or redress or
respond to or begin to correct or redress or respond to any Default within
thirty (30) days after receipt of such written notice or such lesser or greater
time as may be dictated by any emergency situation or as required by applicable
agreements or any Law.
(a) Failure to Respond. If (i) within such time as defined hereinabove,
Buyer does not correct or redress or respond to or begin to correct or redress
or respond to any Default, or (ii) after beginning such efforts Buyer does not
correct or redress such Default within a reasonable amount of time and within
the time required by any applicable agreements or any Law, or (iii) Seller is
unable to locate Buyer in order to notify Buyer after reasonable efforts to do
so, Seller, at its option, may endeavor to and shall be authorized to plug and
abandon well(s), remove facility(ies) or equipment or restore the surface
area(s), or otherwise correct such Default, or cause such to be done. Seller
shall exercise reasonable discretion and endeavor to accomplish only that
necessary to remedy such Default, all at the entire cost, risk and expense of
Buyer. Compliance with the notice requirements under this Agreement shall be
considered as sufficient notice to Buyer under this Section 9.16(a).
(b) Seller Not Obligated to Remedy Buyer's Defaults. Seller shall in no
event be obligated to satisfy any Default by Buyer or its successors or assigns.
(c) Invoicing and Recoupment by Seller. Within a reasonable period of time
after any such efforts by Seller to correct or redress such Defaults, Seller
shall furnish Buyer at its last known address with detailed invoices and
supporting documentation for expenses incurred by Seller in the efforts to
correct such Defaults, including without limitation appropriate charges for
overhead, salaries, legal costs, permits, penalties, interest, and other losses
and expenses incurred for or by Seller for the purpose of correcting or
redressing such Defaults. In the event that Buyer does not pay Seller within 15
days after the mailing of said invoices and supporting documentation, Seller
shall be entitled to [recover the relevant amount from Buyer together with
interest thereon from the date due to, but not including, the date paid at five
percent (5%) per annum on the basis of a year of three hundred sixty five (365)
or three hundred sixty six (366) days, as the case may be.]
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(d) Other Remedies Reserved. Seller's right to proceed in the manner above
described to correct or redress Defaults of Buyer or its successors or assigns
is not intended to be, nor shall it limit or be, exclusive of any other right or
remedy, whether personal or in "rem", available to Seller under this Agreement,
the Assignments, and/or any amendments thereto, or otherwise by Law, all of
which remedies are expressly and fully ratified, granted to and reserved to
Seller.
9.17 Conflict of Interest. Conflicts of interest related to this Agreement
are strictly prohibited. Each party, for itself and for its respective
directors, partners, employees, and agents warrants, covenants and represents to
the other that, except as otherwise expressly provided in this Agreement,
neither it nor any of its directors, employees, partners or agents has given to
or received from the other party, or such party's directors, partners, employees
or agents, any commission, fee, rebate, gift or other thing or service in
connection with this Agreement. Likewise, neither Buyer nor any director,
employee or agent of Buyer shall enter into any material business relationship
with any director, employee or agent of Seller (or of any affiliate of Seller),
unless such Person is acting for and on behalf of Seller, without prior written
notification thereof to Seller. Buyer and Seller each agree that their
respective books and records shall be subject to reasonable audit by the other
as may be required to verify compliance with this provision.
9.18 Nominations and Accounting Responsibilities. From the first day of the
first production month following Closing, Seller is relieved of all
responsibility for, and Buyer will (a) bear, and commence payment of, all
burdens, fees and Taxes on or relating to the Assets (other than as described
herein), and (b) perform all nomination, marketing, accounting, royalty payment,
reporting, and other administrative responsibilities relating to the Assets.
9.19 Reasonable Access. Seller shall assist Buyer in Buyer's preparation of
a statement of revenues and direct operating expense (including exploration and
dry hole costs) for the assets to be sold for the fiscal year ended December 31,
2003 for the sole purpose of determining the significance of the acquisition to
Buyer under Securities and Exchange Commission (SEC) rules. Seller shall also
afford Buyer and its counsel, internal and independent accountants and any other
authorized representatives reasonable access during normal business hours to
necessary internal documents (including, without limitation, to their financial
accounting, books, records and accountant work papers relating to their assets
to be sold, including, without limitation, all accountants work papers) and key
employees such that Buyer and its accountants can perform the required audit of
the revenues and direct operating expenses of the assets to be sold pursuant to
SEC Regulation S-X 210.3-05. Such audit must be completed within 60 days of
Closing. If the parties can mutually agree upon the contents of same, then
Seller shall provide a signed representative letter to the independent auditor.
In no event, however, shall Seller be required to submit any statement or letter
hereunder as to the value, amount or existence of any hydrocarbon reserves.
Further, in no event shall this Section 9.19 alter the disclaimers and waivers
in Sections 4.3-4.5; in the event of any conflict between this Section 9.19 on
the one hand and Sections 4.3-4.5 on the other hand, the provisions in Sections
4.3-4.5 shall control.
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ARTICLE 10.
Miscellaneous.
10.1 Notices. All notices and other communications required, permitted or
desired to be given hereunder must be in writing and sent to the appropriate
addresses below by (a) pre-paid U.S. registered or certified mail, (b) hand
delivery or (c) facsimile (telecopier) transmission (provided that any facsimile
transmission shall be followed within one (1) Business Day by pre-paid U.S.
registered or certified mail or by hand delivery). Any such notice or
communication shall be deemed given and received effective upon actual receipt
by the addressee; nonetheless, if such date is not a Business Day, then such
notice or communication shall be deemed given and received on the next date that
is a Business Day.
If to Buyer:
c/o Energy Partners, Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, Louisiana 70170
Attn: L. Keith Vincent
Telephone: (504) 799-1983
Facsimile: (504) 569-1874
with a copy to
Phillip Gobe
Energy Partners, Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, Louisiana 70170
Telephone:
Facsimile:
If to Seller:
c/o Castex Energy, Inc.
333 North Sam Houston Parkway East
Suite 1060
Houston, Texas 77060
Telephone: 281-447-8601
Fax: 281-447-1009
Attention: John Stoika
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with a copy to:
Cynthia A. Nicholson
Gordon, Arata, McCollam, Duplantis & Eagan, L.L.P.
201 St. Charles Avenue, 40th Floor
New Orleans, Louisiana 70170-4000
Telephone: (504) 582-1111
Facsimile: (504) 582-1121
Each party may change its address by notifying the other party in writing
in accordance with this Section 10.1.
10.2 Public Announcements. Seller and Buyer shall consult with each other
with regard to all press releases and other written announcements issued prior
to, at or after the Closing concerning this Agreement or the transaction
contemplated hereby. Except as may be required by applicable Laws or the
applicable rules or regulations of any stock exchange, neither Buyer nor Seller
shall issue any such press release or formal public announcement without the
prior written consent of the other party. Further, except as may be required by
applicable Laws or the applicable rules or regulations of any stock exchange, no
press release or other formal public announcement by Buyer shall disclose the
identity of Seller without the prior consent of Seller.
10.3 Amendments. No amendments or other changes to this Agreement shall be
effective or binding on a party unless the same shall be in writing and signed
by that party.
10.4 Headings. The titles and headings set forth in this Agreement are
included solely for ease of reference and shall not be considered in
interpreting or construing this Agreement.
10.5 Governing Law. This Agreement, each Assignment and all other documents
executed pursuant hereto and any Claims based on, related to or arising out of
(in whole or in part in any way) this Agreement, the Subject Interests, any
Assignment or any other document executed pursuant hereto shall be governed by
and construed under the Laws of the State of Louisiana (excluding any
choice-of-laws or conflict-of-laws rules that may direct the application of the
Laws of another jurisdiction).
10.6 No Partnership Created. It is not the purpose or intent of the parties
to create (and this Agreement shall not be construed as creating) a joint
venture, partnership or any type of association. Neither Seller nor Buyer is
authorized to act as agent or principal for the other with respect to any matter
related hereto.
10.7 Successors and Assigns. This Agreement shall be binding upon Seller,
Buyer and their respective successors and assigns. This Agreement shall inure
solely to the benefit of Seller and its successors and assigns and Buyer and its
successors and assigns (and, solely to the extent expressly provided for in
Section 9.13 and subject to all other limitations herein, Buyer's other Related
Persons and Seller's other Related Persons). Before Closing, Buyer shall not
Transfer to any Third Person without the prior written consent of Seller any
right, title or interest in or to any portion of this Agreement or the
Confidentiality Agreement.
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10.8 No Third Person Beneficiaries. Nothing in this Agreement, express or
implied, shall entitle any Person (other than Seller or its successors or
assigns or Buyer or its successors or assigns or, solely to the extent expressly
provided for in Sections 9.13 and 10.7 and subject to all other limitations
herein, Buyer's other Related Persons or Seller's other Related Persons) to any
Claim, remedy or right of any kind whatsoever.
10.9 Not Construed Against Drafter. Each party acknowledges that it has had
an adequate opportunity to review each and every provision in this Agreement and
to submit the same to counsel and other consultants for review and comment and
that the parties jointly drafted this Agreement. No provision of this Agreement
or any Assignment shall be construed more strictly against one party than the
other party by reason that one or the other party proposed, drafted or modified
such provision or any other existing or proposed provision.
10.10 Conspicuousness of Provisions. The parties acknowledge that the
provisions in this Agreement or any Assignment that appear in "bold" or in
CAPITAL LETTERS satisfy the requirement of any applicable express negligence
rule and any other requirement at Law or in equity that provisions contained in
a contract be conspicuously marked or highlighted. Nonetheless, by such
acknowledgment, neither party concedes that any other provisions are not
conspicuous.
10.11 Execution in Counterparts. This Agreement may be executed in multiple
originals or counterparts, each of which shall be deemed to be an original, but
all of which when taken together shall constitute one and the same valid and
binding agreement.
10.12 Entire Agreement. This Agreement (together with the Confidentiality
Agreement) supersedes all prior and contemporaneous negotiations,
understandings, discussions and agreements (whether oral, written or otherwise)
between Buyer and Seller relating to the Assets and Assumed Obligations and the
purchase and sale of the Subject Interests and constitutes the entire
understanding and agreement between the parties with respect to the Assets and
Assumed Obligations and the subject matter hereof.
10.13 Waiver. No waiver of any right herein shall be effective unless set
forth in a writing duly executed by the party against whom such waiver is sought
to be enforced. No waiver of any provision of this Agreement shall be deemed or
constitute a waiver of any other provisions hereof (whether or not similar). No
waiver shall constitute a continuing waiver unless otherwise expressly provided
in such written waiver.
10.14 Waiver of Trial by Jury. Without in any manner negating the
provisions of Section 10.19 below, the parties irrevocably waive, to the fullest
extent permitted by Law, any and all right to a trial by jury in any action,
suit or other legal proceeding based on, related to or arising out of (in whole
or in any part in any way) this Agreement, any transaction contemplated hereby
or any breach hereof or thereof.
10.15 Waiver of Consumer Rights. As partial consideration for the parties
agreeing to enter into this Agreement, the parties each can and do expressly
waive those provisions, if any, of the Texas Deceptive Trade Practices-Consumer
Protection Act, Texas Business and Commerce Code Article 17.41 et seq., or the
Louisiana Unfair Trade Practices and Consumer Protection Law, Louisiana Revised
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Statute 51:1401 et seq. (or any similar Law that gives consumers special rights
and protection) that apply to this Agreement or the transaction contemplated
hereby and may be waived by the parties. It is not the intent of the parties to
waive, and the parties shall not waive, any applicable provision thereof that is
prohibited by Law from being waived. Each party represents that it has had an
adequate opportunity to review the preceding waiver provision (including the
opportunity to submit the same to legal counsel for review and comment) and,
after consultation with an attorney of its own selection, voluntarily consents
to this waiver and understands the rights being waived herein.
10.16 Expenses of Sale. Except as specifically provided otherwise herein,
each party shall be solely responsible for all expenses incurred by it in
connection with the negotiation, execution and delivery of, and the transaction
contemplated by, this Agreement (including without limitation fees and expenses
of its agents, brokers, representatives, counsel, accountants and consultants).
10.17 Exhibits. All exhibits attached to this Agreement are incorporated
into and made a part of this Agreement.
10.18 Severability. If, for any reason and for so long as, any provision of
this Agreement or any Assignment is invalid, illegal or incapable of being
enforced by any rule of Law or public policy, all other provisions of this
Agreement and any Assignment shall nevertheless remain in full force and effect
and this Agreement and any Assignment shall be construed as if the invalid,
illegal or unenforceable provision had never been included. Upon a determination
that any provision is illegal, invalid or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement or any applicable
Assignment so as to effect the parties' intent as closely as possible in a
mutually acceptable manner so that the transaction contemplated hereby be
consummated as originally contemplated to the fullest possible extent.
10.19 Dispute Resolution and Binding Arbitration.
(a) Sole and Exclusive Method for Resolution of Disputes. Unless otherwise
expressly provided herein, any dispute arising out of, in connection with or
relating to this Agreement shall be resolved in accordance with the procedures
specified in this Section 10.19, which shall be the sole and exclusive
procedures for the resolution of any such disputes. To the extent, however, that
the dispute involves a claim for indemnity otherwise covered by Article 9 of
this Agreement, the provisions of this Section 10.19 shall apply in addition to,
not in lieu of, the provisions of Article 9.
(b) Negotiations Between Executives. The parties shall attempt to resolve
any dispute arising out of or relating to this Agreement promptly by negotiation
between executives who have authority to settle the controversy and who are at a
higher level of management than the Persons with direct responsibility for
administration of this Agreement. Either party may give the other party written
notice of any dispute not resolved in the normal course of business. Within
fifteen (15) days after delivery of the notice, the receiving party shall submit
a written response to the other party. The notice and response shall include:
(a) a statement of that party's position and a summary of arguments supporting
that position, and (b) the name and title of the executive who will represent
that party and of any other Person who will accompany the executive. Within
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thirty (30) days after delivery of the initial notice, the executives of both
parties shall meet at a mutually acceptable time and place, and thereafter
continue to meet as often as they reasonably deem necessary, to attempt to
resolve the dispute. All negotiations pursuant to this clause are confidential
and shall be treated as compromise and settlement negotiations for purposes of
applicable rules of evidence.
(c) Arbitration. If the dispute has not been resolved by negotiation as
provided herein within sixty (60) days after delivery of the initial notice of
negotiation described in Section 10.19(b), or if the parties failed to meet
within thirty (30) days after delivery of such notice, then either party may
initiate arbitration as the exclusive means to finally resolve such dispute.
Arbitration shall be conducted in accordance with the CPR Rules for
Non-Administered Arbitration ("CPR Rules") then currently in effect and shall be
presided over by a tribunal consisting of three arbitrators. Pursuant to the CPR
Rules, each party shall have the right to appoint an arbitrator, and the two
party-appointed arbitrators shall appoint the third arbitrator, who shall chair
the tribunal. All arbitrators shall be knowledgeable in the oil and gas industry
(one of whom must be an attorney licensed to practice law in the state of
Louisiana) and possess a minimum of fifteen (15) years experience handling
matters pertaining to the subject matter of the dispute. The venue of the
arbitration hearing shall be Houston, Texas. In resolving the dispute, the
arbitrators are not empowered to award damages in excess of compensatory
damages, and each party expressly waives and forgoes any right to indirect,
consequential, incidental, special, punitive, exemplary or similar damages. The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss.
1-16 and by the parties' choice of law as provided in Section 10.5 of this
Agreement, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
ARTICLE 11.
Definitions.
11.1 Definitions. Unless expressly otherwise provided elsewhere in this
Agreement, (a) all defined terms have the meanings set forth or otherwise
referenced in this Article and include the singular and plural and the
masculine, feminine and neuter, (b) all references herein to Articles refer to
articles in this Agreement, (c) all references herein to Sections refer to
sections in this Agreement and (d) the terms "hereby", "herein", "hereof",
"hereto" and "hereunder" as used in this Agreement refer to the entirety of this
Agreement.
"Additional Interest" has the meaning set forth in Section 4.9.
"Adjusted Purchase Price" has the meaning set forth in Section 1.3.
"Agreement" has the meaning set forth in the preamble hereof.
"Allocated Amount" for a Subject Interest means the dollar amount that
Buyer and Seller mutually agreed be allocated to that Subject Interest as set
forth on Exhibit "H" hereto. The Allocated Amount for any Subject Interest not
listed on Exhibit "H" hereto is $0.00.
"Apache Agreement" means that certain Exploration Agreement dated as of
December 16, 2002 by and between Seller and Apache Corporation, et al, as same
may have been amended.
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"Assessment Information" has the meaning set forth in Section 5.1(d).
"Assets" means the following described assets (LESS AND EXCEPT the Excluded
Assets):
(a) all right, title and interest of Seller in and to the mineral
interests in the lands described in the attached Exhibit "A-1" (hereinafter
referred to as the "Lands"), it being Seller's intent to sell, assign and
convey all of Seller's interest in the Lands;
(b) all right, title and interest of Seller in and to the oil, gas and
mineral leases described in Exhibit "A" (the "Leases") or production of
Hydrocarbons under the terms thereof, including without limitation, working
interests, overriding royalty interests, production payments, net revenue
interests, reversionary interests, carried interests, net profits
interests, and any other interests of a similar nature, (all of which are
hereinafter referred to as the "Leasehold Interests" and the lands affected
by the Leasehold Interests are herein referred to as the "Leasehold
Lands"), it being Seller's intent to sell, assign and convey all of
Seller's interest in the Leases, Leasehold Interests and the Leasehold
Lands, whether or not specifically described in Exhibit "A" (the Leases,
Leasehold Interests and the Leasehold Lands and Lands being collectively
referred to as the "Real Property Interests" and individually referred to
as a "Real Property Interest";
(c) all wells (whether producing, plugged and abandoned, temporarily
abandoned, shut-in, injection, disposal, water supply or otherwise) that
(1) are or were situated on or producing from the Real Property Interests
or lands pooled or unitized therewith or (2) are listed on Exhibit "B"
hereto (collectively, the "Wells");
(d) all units, pools and communitization areas that relate to any
portions of the Real Property Interests (including without limitation all
voluntary units formed by unitization, pooling, communitization or spacing
designations, declarations or agreements and all compulsory units formed by
the Louisiana Commissioner of Conservation or other Governmental Authority)
(collectively, the "Units");
(e) all movable or personal property, improvements, fixtures,
platforms, facilities, gathering lines, flow lines, injection lines,
pipelines, processing or separating systems and plants, tanks, pits,
boilers, buildings, machinery, equipment (surface and downhole), inventory,
utility lines, power lines, telephone lines, roads and other appurtenances
to the extent the same are situated on, across, under, over or within the
Real Property Interests as of the Effective Time or the Closing and used in
connection therewith (collectively, the "Equipment");
(f) all assets specifically described on Exhibit "C" hereto;
(g) all Hydrocarbons and other substances (1) produced on or after the
Effective Time from or allocated to the Real Property Interests or (2)
present or stored in treating equipment, separation equipment, lines, pipe,
tanks and vessels on or under the Real Property Interests (including
without limitation any and all line fill downstream or upstream of any
custody transfer point) as of the Effective Time;
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(h) all prepaid items for which Buyer reimburses Seller pursuant to
Sections 1.3(a)(1) and 9.10(b);
(i) all agreements, instruments and other matters identified or
described in Exhibit "D" hereto, (2) all agreements, instruments and
contract rights (including without limitation all Hydrocarbon purchase and
sales agreements, gathering, compression, transportation and processing
agreements, balancing agreements, joint venture agreements, easements,
rights-of-way, servitudes, road, canal and surface use agreements, permits,
licenses, franchises, options, mineral, surface and subsurface leases,
farm-out and farm-in contracts, dry hole agreements, area of mutual
interest agreements, acreage contribution agreements, operating,
exploration and participation agreements, division orders, equipment
leases, salt water disposal agreements, servicing agreements and
unitization, pooling, communitization or spacing designations,
declarations, agreements and orders) to the extent and only to the extent
they relate to any of the assets described in clauses (a) through (h) above
and (3) all agreements and instruments referenced in any Real Property
Interest or in any agreement or instrument under item (1) or (2) above
(items (1), (2) and (3) collectively, the "Contracts");
(j) all suspense accounts maintained by or on behalf of Seller (i)
into which have been placed mineral or other proceeds owed to third parties
from or attributable to any or all portions of the Real Property Interest
(whether pertaining to a period of time before, at or after the Effective
Time) as a result of title or ownership uncertainty, lack of adequate payor
information or any other matter for which mineral or other proceeds are
customarily suspended in the ordinary course of business or (ii) that have
a negative balance reflecting an account payment owing to Seller by reason
of an overpayment of mineral or other proceeds from or attributable to any
or all portions of the relevant Real Property Interest ("Negative Balance")
and (2) all proceeds or accounts payable or receivable related to the
suspense accounts described in item (1) above (items (1) and (2)
collectively, the "Suspense Accounts" and that portion of the Suspense
Accounts relating to the Negative Balance shall be referred to as the
"Negative Balance Suspense Accounts").
(k) all warranties, to the extent assignable, from Third Persons to
Seller regarding the assets described in clauses (a) through (j) above; and
(l) all of Seller's books, records, files, data and information
(including without limitation all lease files, title files, title opinions,
curative reports, abstracts, division order files, unitization files,
contract files, maps, land and mineral owner correspondence, joint
operating agreement files, environmental and regulatory files, operational
files, engineering, well, production, geological, paleontological and
geochemical files and other files and records of a similar nature) that
relate to the assets described in clauses (a) through (k) above but do not
relate to or constitute Excluded Assets, less and except any books,
records, files, data and information that is subject to attorney-client
privilege (specifically excepting any title opinions and/or title
correspondence) or unwaived confidentially agreements (collectively, the
"Records").
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"Assignment" means a document by which the Assets are to be assigned by
Seller to Buyer, such assignment shall be made subject to the terms of the Real
Property Interests and the Contracts and shall be substantially in the form of
Exhibit "F" hereto and executed and delivered at and for the Closing. It is
agreed and acknowledged by Buyer that if on or before Closing all of the items
identified in Exhibit "G-2" have not been satisfied, then a specific exception
shall be made in each Assignment for those such interests.
"Assumed Obligations" means any and all past, existing or future
obligations, duties, liabilities, costs and expenses (including without
limitation those of Seller or any prior owner of any Subject Interest) and all
Claims (including without limitation those against Seller, any prior owner of
any Subject Interest or any of their Related Persons), based on, related to or
arising out of (in whole or in part in any way) any or all of the following
(whether or not any clause below may overlap with any one or more other clauses
below and whether any such obligation, duty, liability, cost, expense or Claim
is currently asserted or unasserted, accrued or unaccrued, known or unknown or
foreseen or unforeseen or is direct, indirect, contingent or otherwise):
(a) the ownership, operation, use or existence of (or any acts,
omissions, events, injuries or damages relating to) any or all portions of
the Assets at or after the Effective Time;
(b) except for any matter specifically assumed by Seller pursuant to
the provisions of Sections 5.3(a) or (c) and only to the extent assumed
thereunder, any Environmental Claim (no matter when arising whether before,
at or after the Effective Time) based on, related to or arising out of (in
whole or in part in any way) ownership, operation or use of any or all
portion of the Assets;
(c) the obligation for Plugging and Abandonment or attempted plugging,
abandonment or site restoration (no matter when arising whether before, at
or after the Effective Time), of any or all portions of the Assets (whether
or not the Louisiana Office of Conservation or any other Governmental
Authority reflects such Well, Unit or other property as having been
previously plugged, abandoned or remediated for regulatory purposes or
otherwise);
(d) any underproduced or overproduced gas position at or after the
Effective Time with respect to any or all portions of the Assets (including
without limitation with respect to Taxes or royalties due or payable on the
value of any such underproduced or overproduced gas);
(e) any fact or circumstance referenced in any Defect Notice, except
those cured or deemed cured by Seller;
(f) any and all Suspense Accounts (including without limitation for
paying or disbursing or, in the event of a negative balance, recouping any
Suspense Account, for administering any Suspense Account, for any duties,
obligations or Claims based on, related to or arising out of (in whole or
in part in any way) any Suspense Account and for any reports and payments
concerning unclaimed properties with respect to any Suspense Account,
whether under the Louisiana Unclaimed Property Act or any other Law);
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(g) the ownership, operation, use or existence of (or any acts,
omissions, events, injuries or damages relating to) any or all portions of
the Assets (no matter when arising whether before, at or after the
Effective Time) for which Seller has not received a proper Claim Notice in
accordance with Article 9 within one (1) year after the Effective Time;
(h) the obligation to comply with those matters identified in Sections
11.58(u), (v) and (x).
(i) the Preferential Rights and the Consents and the obligations
assumed pursuant to Section 4.10;
(j) any Environmental Defect specifically assumed by Buyer pursuant to
the provisions of Section 5.3(b);
(k) all obligations assumed pursuant to the provisions of Section 5.5;
(l) all other items assumed by Buyer herein or deemed to be assumed by
Buyer pursuant to the terms of this Agreement;
(m) the obligation to execute, deliver and/or receive (as appropriate)
the assignments, leases, joint operating agreements and any other matters
identified in Exhibit "G-1";
(n) all obligations assumed pursuant to Section 4.5;
(o) all Casualty Losses; and
(p) any Consent waived by Buyer.
"Bonds" has the meaning set forth in Section 7.1(e).
"Business Day" means a Day excluding Saturdays, Sundays and federal or
State of Louisiana legal holidays.
"Buyer" has the meaning set forth in the preamble hereof.
"Casualty Loss" means any material damage or destruction to any Subject
Interest during the Interim Period by fire, blowout or other casualty or any
actual or threatened taking of any Subject Interest during the Interim Period by
condemnation or the right of eminent domain.
"Claim" means any and all claims, demands, disputes, suits, actions,
proceedings, investigations, payments, liens, settlements, offsets, adjustments,
causes of action, losses, debts, obligations, arbitration or other awards,
settlements, judgments, damages, liabilities, fines, sanctions, penalties,
expenses and costs (including without limitation attorneys' fees, experts' fees
and costs of litigation and investigation), whether based on, related to or
arising out of (in whole or in part in any way) tort, contract, quasi-contract,
strict liability, unseaworthiness of any vessel, misrepresentation, equity,
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indemnity, contribution, violation or operation of any Law or any other cause
whatsoever.
"Claim Notice" has the meaning set forth in Section 9.4 (a).
"Claimant" has the meaning set forth in Section 9.4.
"Close" or "Closing" means the consummation of the principal transactions
hereunder for the transfer of the Subject Interests, as described in ARTICLE 7.
"Confidentiality Agreement" means that certain confidentiality agreement,
dated October 12, 2004, by and between Seller (or a Related Person thereof) and
Buyer
"Consents" has the meaning set forth in Section 4.11.
"Contracts" has the meaning set forth in the definition of "Assets".
"CPR Rules" has the meaning set forth in Section 10.19(c).
"Day" means a calendar day consisting of twenty-four (24) hours from
midnight to midnight.
"Default" has the meaning set forth in Section 9.16.
"Deposit" has the meaning set forth in Section 1.2.
"Downward Defect Adjustment" has the meaning set forth in Section 4.8.
"Effective Time" means November 1, 2004, at 7:00 a.m. Central Time.
"environmental data" has the meaning set forth in Section 5.1.
"Environmental Claims" mean any or all Claims based on, related to or
arising out of (in whole or in part in any way) (a) pollution of, damage to or
remediation of the soil, ground water or air, (b) liabilities arising out of
underground injection activities or waste disposal, (c) violations of or
liabilities based on, related to or arising out of (in whole or in part in any
way) any Environmental Laws, (d) NORM or asbestos, (e) hazardous or toxic
materials, (f) environmental defects, (g) Plugging and Abandonment of any well,
unit or other movable or immovable property, (h) personal injury or property
damage, and (i) all Environmental Defects (less and except only those
specifically retained by Seller pursuant to Section 5.3 (a) and (c)).
"Environmental Defect" has the meaning set forth in Section 5.2(a).
"Environmental Defect Minimum Threshold" has the meaning set forth in
Section 5.2(a).
"Environmental Laws" has the meaning set forth in Section 5.4.
"Environmental Objection Period" has the meaning set forth in Section
5.2(a).
-49-
"Equipment" has the meaning set forth in the definition of "Assets".
"Excluded Assets" mean, and the assets to be sold under any Assignment
exclude, the following:
(a) any asset described on Exhibit "E" hereto;
(b) any and all well logs, geophysical and geological maps and other
engineering, production, geological, geochemical and geophysical data that
Seller does not have the unrestricted right to transfer and sell to Buyer;
(c) any and all seismic data and seismic licenses less and except that
particularly described on Exhibit "C" hereto;
(d) any and all intellectual property of Seller, including without
limitation proprietary computer software, patents, trade secrets,
copyrights, names, marks and logos;
(e) any and all vehicles, trucks (including associated tools), boats,
vessels and trailers;
(f) any and all tools, pulling machines, warehouse stocks, microwave
equipment, computer equipment and remote terminal units;
(g) any bonds filed with or delivered or payable to any Governmental
Authority or other Third Person by or on behalf of Seller or any of its
Related Persons and any letters of credit, certificates of deposit and
similar security instruments on behalf of Seller or any of its Related
Persons;
(h) any Subject Interest deemed under Section 4.10(a) to constitute an
"Excluded Asset" (except as provided in and subject to Section 4.10(b));
(i) any and all accounts receivable, notes receivable, other
receivables, insurance or settlement proceeds, awards, credits, refunds,
income, loss carry forwards, funds, revenue (including without limitation
deposits, cash, checks or drafts in process of collection and cash
equivalents), rights and Claims in favor of Seller (including without
limitation from damage, destruction or condemnation of any Subject
Interest, under any policy or agreement of insurance or indemnity, under
any bond, from reductions or adjustments in insurance premiums, from audits
under operating agreements, from the payment of cash calls in excess of the
amount spent to perform the operations relating thereto, from the payment
of joint interest billings in excess of the amount properly chargeable to
the account under applicable agreements, from refunds or credits of Taxes,
under any Contract or from any litigation or Claim listed on Exhibit "I"
hereto) with respect to (1) any act, omission or event occurring before the
Effective Time or (2) any asset described in any of clauses (a) through (i)
above; and
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(j) any and all of Seller's books, records, files, data and
information related to (1) any past, present or future offers, bids,
economic analyses or due diligence associated with the purchase, sale or
exchange of any or all portions of the Assets, (2) proprietary information,
(3) interpretive information, (4) reserve information and reports, (5)
internal communications, (6) personnel information, (7) corporate,
financial or Tax information, (8) auditor's reports or review, (9)
information covered by a legal privilege or immunity, (11) legal files,
(12) information that Seller is prohibited by Law or agreement from
disclosing or delivering to Buyer or (13) any assets described in any of
clauses (a) through (j) above.
"Final Accounting Settlement" has the meaning set forth in Section 1.6.
"GAAP" means generally accepted accounting principles in effect in the
United States at the Effective Time.
"Governmental Authority" means any federal, state, parish, local,
municipal, foreign or other (a) government or political subdivision; (b)
governmental or quasi-governmental authority of any nature (including without
limitation any governmental agency, branch, department, authority, commission,
commissioner, official or entity, any tribal authority and any court or other
tribunal); or (c) body exercising or entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hydrocarbons" mean oil, natural gas, casinghead gas, condensate, other
hydrocarbons and any other substances produced with any of the foregoing as well
as any components and by-products of any of the foregoing.
"Imbalance Price" means 4.50 ($4.50) per MMBtu.
"Imbalance" has the meaning set forth in Section 1.4.
"Inc." has the meaning set forth in the preamble hereof.
"Interim Period" means that period of time from the execution of this
Agreement up to the Closing.
"Knowledge" with respect to Seller means the actual knowledge of any
officer, director or shareholder of Inc. and with respect to Buyer means the
actual knowledge of any current officer of Buyer.
"Lands" has the meaning set forth in the definition of "Assets".
"Law" means any law, statute, ordinance, permit, decree, order, judgment,
rule, regulation, controlling judicial or administrative decision or legal
requirement that is promulgated, issued or enacted by any Governmental
Authority, whether arising in law (statutory, common, admiralty, civil,
judicial, administrative or otherwise), equity or otherwise.
"Leasehold Interests" has the meaning set forth in the definition of
"Assets".
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"Leasehold Lands" has the meaning set forth in the definition of "Assets".
"Leases" has the meaning set forth in the definition of "Assets".
"Material Adverse Effect" means any actual or prospective change,
development, or effect (individually or in the aggregate), which has or could
reasonably be expected to have (as the context requires) a material and adverse
effect on the condition or operation of the Real Property Interests, and has the
effect of reducing the value of the Real Property Interests by an amount that is
equal to or greater than five percent (5%) of the Purchase Price.
"Negative Balance" has the meaning set forth in the definition of "Assets".
"Negative Balance Suspense Accounts" has the meaning set forth in the
definition of "Assets".
"Non-Environmental Claims" means all Claims other than Environmental
Claims.
"NORM" means naturally occurring radioactive materials.
"Objection Notice" has the meaning set forth in Section 1.6(b).
"Objection Period" has the meaning set forth in Section 4.6.
"Permits" means the permits, licenses, authorizations, certificates,
registrations, or other approvals granted by any Governmental Authority that
pertain or relate in any way to the Assets.
"Permitted Encumbrance" means
(a) those liens, mortgages, security interests and
encumbrances listed on Exhibit "J" hereto to the extent released prior
to or at Closing;
(b) all liens, privileges, Claims and encumbrances for or in
respect of Taxes not yet delinquent or being contested in good faith;
(c) all mechanic's, materialman's, repairman's, employee's,
contractor's, operator's, non-operator's or similar liens or privileges
the payment for which they secure is not delinquent, is being properly
withheld under applicable contract or Law or is being contested in good
faith;
(d) the existence of any security interest created against any
or all portions of the Subject Interests insofar as they have arisen by
virtue of one or more operating agreements, to the extent that they are
for charges not yet delinquent or being contested in good faith;
(e) all unit, pooling, communitization and spacing
designations, declarations and agreements in effect or pending as of
the date of this Agreement;
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(f) all Title Defects and other liens, mortgages, security
interests, Claims, encumbrances, burdens and defects (1) that Buyer
does not set forth in a timely and proper Title Defect Notice (except
for Title Defects arising by, through or under Seller), (2) to the
extent that they do not relate to a Scheduled Interest, (3) that have
either expired or been released or waived at or before Closing or (4)
for which Seller delivers a recordable release or cures at or before
Closing;
(g) Lessor's or landowner's royalties, mineral royalties or
servitudes, overriding royalties, reversionary interests and other
burdens on the Real Property Interests if the net cumulative effect of
such burdens does not operate to reduce the net revenue interest set
forth in Exhibit "H" or increase the working interest above that shown
in Exhibit "H" without a corresponding increase in the net revenue
interest;
(h) all Preferential Rights in connection with any Transfer or
proposed Transfer of any Subject Interest (1) that Buyer does not set
forth in a timely and proper Preferential Right Notice, (2) to the
extent that they do not relate to a Scheduled Interest, (3) for which
waivers or consents have been obtained from the appropriate parties at
or before Closing, (4) under this Agreement or otherwise from Seller to
Buyer or (5) for which the time for asserting such Preferential Rights
has expired without exercise at or before Closing;
(i) all necessary consents, permissions and approvals and
other actions by any Governmental Authority or other Third Person in
connection with any Transfer or proposed Transfer of any Subject
Interest (1) with respect to which waivers or consents are obtained at
or before the Closing, (2) to the extent that they do not relate to a
Scheduled Interest, (3) that are not required to be obtained until
after the Closing, (4) that are customarily received after the closing
of a sale or other Transfer of title, operatorship or control or (5)
that are waived by Buyer;
(j) all necessary notices to or filings with any Governmental
Authority or other Third Person in connection with any Transfer or
proposed Transfer of any Subject Interest (1) that have been made at or
before the Closing, (2) to the extent that they do not relate to a
Scheduled Interest, (3) that are not required to be made until after
the Closing or (4) that are customarily made after the closing of a
sale or other Transfer of title, operatorship or control;
(k) irrespective of clause (k) or (l), all necessary consents
and approvals by and notices to (1) the State of Louisiana or any
political subdivision thereof (through the State Mineral Board or
otherwise) with respect to the transfer to Buyer of interests in a
right of way, servitude or mineral lease issued by or on behalf of the
State of Louisiana or a political subdivision thereof (through the
State Mineral Board or otherwise) or (2) any federal Governmental
Authority with respect to the transfer to Buyer of interests in a right
of way, servitude or mineral lease issued by or on behalf of the United
States of America;
(l) all contractual rights of reassignment arising upon a
decision or election to surrender or abandon all or any portion of the
Subject Interests;
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(m) all rights reserved to or vested in any Governmental
Authority to control or regulate any of the Subject Interests in any
manner, and all applicable Laws;
(n) all calls on or preferential rights to purchase production
from any of the Subject Interests so long as (1) the price to be paid
therefor is not less than the average posted price in the field for
Hydrocarbons of similar quantity and quality or (2) such call or right
is terminable, without penalty, upon Sixty (60) Days' notice or less;
(o) all subsidence, erosion, dereliction or accretion of, or
tidal influences on, the Real Property Interests;
(p) the navigability or non-navigability of any waters;
(q) all Claims (whether currently asserted or unasserted,
accrued or unaccrued, known or unknown or foreseen or unforeseen and
whether direct, indirect, contingent or otherwise) based on, related to
or arising out of (in whole or in part in any way) any Assumed
Obligation;
(r) all agreements, instruments, obligations, burdens, rights,
defects and irregularities (including without limitation contracts for
sale, purchase, exchange or processing of Hydrocarbons, unitization,
communitization and pooling designations, declarations, agreements and
orders, operating agreements, pipeline, gathering and transportation
agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, division orders, lessor's or landowner's royalties, mineral
royalties, mineral servitudes, overriding royalties, net profits
interests, carried interests, reversionary interests, non-consent
penalties, liens, charges, encumbrances, easements, rights of way,
servitudes, surface leases and permits) that (1) do not operate to
increase the gross working interest (without a corresponding increase
in the net revenue interest), or decrease the net revenue interest, of
Seller in any of the Scheduled Interests from that set forth on Exhibit
"H" hereto and (2) are not such as will interfere materially with the
ability to operate the Scheduled Interests in the manner they were
operated at the Effective Time;
(s) non-consent penalties under non-consent elections made
prior to the date of Seller's execution of this Agreement, which are
applicable to the interest of Seller arising under applicable operating
agreements and are listed on Exhibit "N";
(t) easements, rights-of-way, servitudes, permits, surface
leases and other rights relating to or restricting surface operations
and/or use on, over or in respect to an Asset, provided they do not
materially and adversely affect the ability to produce the Wells, to
transport Hydrocarbons, or to otherwise operate the Assets in the
manner in which such Assets were operated as of the Effective Time;
(u) the failure of Seller to have record title to the Real
Property Interests set forth on Exhibit "G-1" under the heading
"Assignments, Leases and Other Instruments Due to Seller" that have
been earned or acquired by Seller but have not yet been assigned of
record to Seller;
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(v) the obligations of Seller to convey title to interests in
the Lands and leasehold interests and leases as set forth on Exhibit
"G-2" under the heading "Assignments, Leases and Other Instruments Owed
by Seller" that are owed by Seller to third parties but have not yet
been assigned or conveyed by Seller;
(w) the matters addressed in Section 4.5;
(x) the failure of Seller and/or Third Persons to have
executed the agreements and other instruments identified on Exhibits
"G-1" and "G-2"; and
(y) the Apache Agreement.
"Person" means any natural person, corporation, partnership, limited
partnership, limited liability partnership, joint venture, limited liability
company, joint stock company, organization, association, trust, estate or
succession, any Governmental Authority or any other legal or juridical entity or
person in any capacity.
"Plugging and Abandonment," "Plug and Abandon" and "Plugged and Abandoned:"
refer (a) with respect to a well, the plugging (and as necessary replugging) and
abandonment of the well, the salvage and removal of all associated well collars,
well structures, platforms, tank batteries, compressors, injectors, equipment
and other movable property (whether placed before or after the Effective Time),
the removal, flushing and capping of all associated flowlines, gathering lines
and field transmission lines, the salvage and removal of platforms, equipment
and underwater or underground obstructions, the closure and remediation of all
associated wellsites, pits and canals, the disposal of all related waste
materials (including without limitation any salt residue, NORM, asbestos and
hazardous or toxic materials) and the restoration of the associated surface,
subsurface, wetlands, marshes and water bottoms and (b) with respect to any land
(including without limitation water bottoms), unit or other property, the
Plugging and Abandonment (within the meaning of clause (a) above) of all wells
on, under or associated with such land, unit or other property, the removal,
flushing and capping of all flowlines, gathering lines and field transmission
lines across or associated with such land, unit or other property, the salvage
and removal of platforms, equipment and underwater or underground obstructions,
the closure and remediation of all wellsites, pits and canals on, under or
associated with such land, unit or other property, the disposal of all waste
materials (including without limitation any salt residue, NORM, asbestos and
hazardous or toxic materials) on, under or associated with such land, unit or
other property and the restoration of all surface, subsurface, wetlands, marshes
and water bottoms on, under or associated with such land, unit or other property
"Preferential Right" has the meaning set forth in Section 4.11.
"Preferential Right Notice" has the meaning set forth in Section 4.11.
"Preliminary Accounting Statement" has the meaning set forth in Section
1.5.
"Purchase Price" has the meaning set forth in Section 1.2.
"Real Property Interests" has the meaning set forth in the definition of
"Assets".
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"Records" has the meaning set forth in the definition of "Assets".
"Referee" means Price Waterhouse.
"Related Person" with respect to the Person specified means (a) any Person
that, directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified or a Person
described in clause (b); and (b) any director, officer, employee, trustee,
member, shareholder, partner, representative, insurer, agent, attorney,
consultant, subcontractor, contractor, invitee, nominee, successor or assignee
(or, only with respect to Seller as the Person specified, any
predecessor-in-interest) of the Person specified or of a Person described in
clause (a). For purposes of this definition, the term "controls or is controlled
by or is under common control with" refers to the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of another Person, whether through the ownership of voting securities,
by contract or otherwise.
"Respondent" has the meaning set forth in Section 9.4.
"Retained Liabilities" means any and all past, existing or future
obligations, duties, liabilities, costs and expenses (including without
limitation those of Seller or any prior owner of any Subject Interest) and all
Claims (including without limitation those against Seller, any prior owner of
any Subject Interest or any of their Related Persons), based on, related to or
arising out of (in whole or in part in any way) any or all of the following
(whether or not any clause below may overlap with any one or more other clauses
below and whether any such obligation, duty, liability, cost, expense or Claim
is currently asserted or unasserted, accrued or unaccrued, known or unknown or
foreseen or unforeseen or is direct, indirect, contingent or otherwise):
(a) relating to any Excluded Assets; and
(b) the Claims and litigation described on Exhibit "I".
"Review Period" has the meaning set forth in Section 4.1.
"Scheduled Interest" means a Subject Interest that is attributable to a
Well, Leasehold Interest or other property interest specifically identified on
Exhibit "H" hereto as having an Allocated Amount greater than $0.00.
"Seller" has the meaning set forth in the preamble hereof.
"Subject Interest" means any portion (and "Subject Interests" means any or
all) of Seller's right, title and interest in, to and under, or derived from,
the Assets. The terms "Subject Interest" and "Subject Interests" do not include
any right, title or interest in, to, under or derived from any Excluded Asset.
"Suspense Accounts" has the meaning set forth in the definition of
"Assets".
"Taxes" means all taxes and assessments of any kind (including without
limitation excise taxes, severance taxes, windfall profit taxes, ad valorem
taxes, franchise taxes, income taxes, transfer, sales, use and similar taxes and
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any other federal, state or local taxes and assessments) as well as all
interest, penalties and additional amounts that may be imposed with respect
thereto.
"Third Person" means any Person other than Seller and Buyer.
"Third Person Claim" has the meaning set forth in Section 9.4(a).
"Title Defect" with respect to a Scheduled Interest means a defect (not
qualifying as a Permitted Encumbrance) by reason of which, based on
circumstances in effect at the time of Closing (without considering any
Assignment hereunder), (a) such Scheduled Interest is subject to liens and
encumbrances, (b) Seller owns less than the undivided interests set forth in
Exhibit "H" hereto as net revenue interests in all Hydrocarbons produced, saved
and marketed from such Scheduled Interest or (c) Seller's obligation to bear
costs and expenses for developing and operating the oil and gas wells comprised
by such Scheduled Interest will be greater than the undivided interests set
forth in Exhibit "H" hereto as gross working interests (without a proportionate
increase in the net revenue interests). No Defect shall exist as to any Subject
Interest that (i) is not a Scheduled Interest or (ii) does not have an Allocated
Amount greater than $0.00.
"Title Defect Notice" has the meaning set forth in Section 4.6(a).
"Transfer" means assign, sell, alienate, lease, sublease, farmout, convey,
mortgage, encumber or otherwise voluntarily or involuntarily transfer or dispose
of in any manner in whole or in part (whether in the form of a fee interest, a
leasehold interest, a working interest, a carried interest, a royalty or
overriding royalty interest, a net profits interest, a mortgage, lien, privilege
or other security interest or otherwise) or commit to do any of the foregoing.
"Units" has the meaning set forth in the definition of "Assets".
"Upward Adjustment" has the meaning set forth in Section 4.9.
"Wastes" has the meaning set forth in Section 5.4.
"Wells" has the meaning set forth in the definitions of "Assets".
"Working Interest" is as set forth on Exhibit "H".
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives hereunto duly authorized as of the
date first above written in the presence of the undersigned witnesses.
Witnesses to all signatures: SELLER:
Castex Energy 1995, L.P.
By: Castex Energy, Inc., its general partner
/s/ Kevin J. Ikel By: /s/ John R. Stoika
- -------------------------------- --------------------------------
Name Kevin J. Ikel Name: John R. Stoika
--------------------------- --------------------------------
/s/ Laura Holeman Title: President
- -------------------------------- --------------------------------
Name Laura Holeman
Castex Energy, Inc.
/s/ Kevin J. Ikel By: /s/ John R. Stoika
- -------------------------------- --------------------------------
Name Kevin J. Ikel Name: John R. Stoika
--------------------------- --------------------------------
/s/ Laura Holeman Title: President
- -------------------------------- --------------------------------
Name Laura Holeman
BUYER:
Energy Partners, Ltd.
/s/ Kevin J. Ikel By: /s/ L. Keith Vincent
- -------------------------------- --------------------------------
Name Kevin J. Ikel Name: L. Keith Vincent
--------------------------- --------------------------------
/s/ Laura Holeman Title: Vice-President - Land
- -------------------------------- --------------------------------
Name Laura Holeman
EPL of Louisiana, L.L.C.
By: Energy Partners, Ltd., its sole member
/s/ Kevin J. Ikel By: /s/ L. Keith Vincent
- -------------------------------- --------------------------------
Name Kevin J. Ikel Name: L. Keith Vincent
--------------------------- --------------------------------
/s/ Laura Holeman Title: Vice-President - Land
- -------------------------------- --------------------------------
Name Laura Holeman
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Acknowledgments
STATE OF Texas
------------------------------------------
COUNTY OF Harris
------------------------------------------
BEFORE ME, the undersigned Notary Public in and for the jurisdiction listed
above, on this day personally appeared John R. Stoika ("Seller's Appearer"),
who, together with the two competent witnesses whose names appear on the
foregoing instrument, signed the foregoing instrument on this date in my
presence and who acknowledged to me, these same two witnesses and Seller's
Appearer, being fully authorized to do so, that Seller's Appearer executed and
delivered the foregoing instrument on this day as the President of Castex
Energy, Inc. on behalf of Castex Energy, Inc., a Texas corporation and on behalf
of Castex Energy, Inc. in its capacity as general partner of Castex Energy 1995,
L.P, Texas limited partnership, and as the free act and deed of such corporation
and such limited partnership for the purpose and consideration therein expressed
and was duly authorized to do so by the _______ board of directors of Castex
Energy, Inc.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 16th day of December 2004, in
the jurisdiction listed above in the presence of Seller's Appearer and the two
competent witnesses.
/s/ Robbie Van
--------------------------------
NOTARY PUBLIC
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STATE OF Texas
------------------------------------------
COUNTY OF Harris
------------------------------------------
BEFORE ME, the undersigned Notary Public in and for the jurisdiction listed
above, on this day personally also appeared Keith Vincent ("Buyer's Appearer"),
who, together with these same two competent witnesses, signed the foregoing
instrument on this date in my presence and who acknowledged to me, these same
two witnesses and Energy's Appearer, being fully authorized to do so, executed
and delivered the foregoing instrument on this day as the Vice President of
Energy Partners, Ltd. ("Energy"), a Delaware corporation on behalf of Energy and
on behalf of Energy as the sole member of EPL of Louisiana, L.L.C., a Louisiana
limited liability company, and as the free act and deed of Energy and such
limited liability company for the purpose and consideration therein expressed
and was duly authorized to do so by the Board of Directors of Energy.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 16th day of December 2004, in
the jurisdiction listed above in the presence of Energy's Appearer and these
same two competent witnesses.
/s/ Robbie Van
--------------------------------
NOTARY PUBLIC
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