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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 18, 1999
APACHE CORPORATION
(Exact name of registrant as specified in Charter)
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DELAWARE 1-4300 41-0747868
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
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2000 POST OAK BOULEVARD
SUITE 100
HOUSTON, TEXAS 77056-4400
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (713) 296-6000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 29, 1999, Apache Corporation ("Apache") signed an asset purchase
agreement and a stock purchase agreement with Shell Offshore Inc. and affiliated
Shell entities ("Shell") to purchase Shell's interest in 22 producing fields and
16 undeveloped blocks located in the Gulf of Mexico. Apache will operate 18 of
the 22 producing fields and also acquire certain production-related assets and
proprietary 3-D seismic data covering over 1,000 blocks in the Gulf of Mexico.
The transaction has an effective date of March 1, 1999, and a purchase price of
$715 million in cash (subject to reduction for production since March 1, 1999
and other adjustments) and one million shares of Apache's common stock, par
value $1.25 per share ("Apache Common Stock").
The properties included in the transaction had estimated proved reserves of
127.3 million barrels of oil equivalent at March 1, 1999, and were approximately
54 percent oil and 46 percent natural gas. The $715 million cash portion of the
purchase price assumes that the other owners of working interests in the Shell
properties will not exercise any of their preferential rights to purchase
portions of the interests Apache has agreed to purchase from Shell. The asset
purchase agreement and the stock purchase agreement are listed under Item 7 as
Exhibits 2.1 and 2.2 and are incorporated herein by reference.
The transaction was closed on May 18, 1999, effective as of March 1, 1999, and
is subject to customary post-closing adjustments and the preferential rights to
purchase noted above. Apache issued a press release, dated May 18, 1999, which
is listed under Item 7 as Exhibit 99.1 and incorporated herein by reference.
The cash portion of the purchase price was funded through a combination of debt
and equity. In separate offerings underwritten by Goldman, Sachs & Co., Apache
raised net proceeds of approximately $655 million through the issuance of (i)
14,950,000 shares of Apache Common Stock and (ii) seven million $2.015
Depositary Shares (the "Depositary Shares") representing Automatically
Convertible Equity Securities, Conversion Preferred Stock, Series C. The balance
of the cash portion of the purchase price was funded under Apache's existing
lines of credit. The final prospectus supplements for the shares of Apache
Common Stock and the Depositary Shares are listed under Item 7 as Exhibits 99.2
and 99.3 and are incorporated herein by reference.
The one million shares of Apache Common Stock issued to Shell pursuant to the
above-referenced stock purchase agreement were not a part of the underwritten
offerings discussed above. Such shares were issued under Apache's Registration
Statement on Form S-4 (Registration No. 33-61669) filed on August 8, 1995 and
amended on September 21, 1995, with the Securities Exchange Commission under the
Securities Act of 1933, as amended.
Other than Apache's negotiations and discussions with representatives of Shell
concerning the transaction described above, there are no material relationships
between Shell and Apache or any of Apache's affiliates, officers or directors,
or any associate of any officer or director of Apache.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
It is impractical to file financial statements and pro forma financial
information at this time. The Registrant will file such statements and
information as soon as practicable. It is expected that such statements and
information will be filed by amendment to this Form 8-K on or before July 30,
1999.
(c) EXHIBITS.
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EXHIBIT NO. DESCRIPTION
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2.1* Asset Purchase Agreement, dated effective March 1, 1999, between Shell Offshore Inc. and certain
affiliated Shell entities, as Seller, and Apache Corporation, as Buyer.
2.2* Stock Purchase Agreement, dated April 29, 1999, between Shell Offshore Inc. and Apache Corporation.
99.1 Press Release, dated May 18, 1999, "Apache Closes on Purchase of Shell Assets in Gulf of Mexico"
(incorporated by reference to Amendment No. 2 on Form 8-K/A to Apache's Form 8-K dated April 29, 1999,
filed on May 24, 1999, SEC File No. 1-4300).
99.2 Final Prospectus Supplement (Common Stock), dated May 12, 1999 (incorporated by reference to Apache's
filing pursuant to Rule 424(B)(2) on May 13, 1999, Registration No. 333-75633).
99.3 Final Prospectus Supplement (Depositary Shares), dated May 12, 1999 (incorporated by reference to
Apache's filing pursuant to Rule 424(B)(2) on May 13, 1999, Registration No. 333-75633).
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* filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APACHE CORPORATION
Date: May 25, 1999 /s/ Z. S. KOBIASHVILI
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Z. S. Kobiashvili
Vice President and General Counsel
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION
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2.1* Asset Purchase Agreement, dated effective March 1, 1999, between Shell Offshore Inc. and certain
affiliated Shell entities, as Seller, and Apache Corporation, as Buyer.
2.2* Stock Purchase Agreement, dated April 29, 1999, between Shell Offshore Inc. and Apache Corporation.
99.1 Press Release, dated May 18, 1999, "Apache Closes on Purchase of Shell Assets in Gulf of Mexico"
(incorporated by reference to Amendment No. 2 on Form 8-K/A to Apache's Form 8-K dated April 29, 1999,
filed on May 24, 1999, SEC File No. 1-4300).
99.2 Final Prospectus Supplement (Common Stock), dated May 12, 1999 (incorporated by reference to Apache's
filing pursuant to Rule 424(B)(2) on May 13, 1999, Registration No. 333-75633).
99.3 Final Prospectus Supplement (Depositary Shares), dated May 12, 1999 (incorporated by reference to
Apache's filing pursuant to Rule 424(B)(2) on May 13, 1999, Registration No. 333-75633).
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* filed herewith
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
SHELL OFFSHORE INC. ("SOI")
MIDSTREAM CAPITAL CORPORATION ("MCC")
SHELL OIL & GAS INVESTMENT LIMITED PARTNERSHIP ("SOGI")
SHELL ONSHORE VENTURES INC. ("SOVI")
SHELL DEEPWATER DEVELOPMENT HOLDINGS INC. ("SDDHI")
SHELL FRONTIER OIL & GAS INC. ("SFOGI")
SOI FINANCE INC. ("SOIFI")
ORLANDO-SOI PARTNERSHIP ("OSP")
SHELL CONSOLIDATED ENERGY RESOURCES INC. ("SCERI")
(COLLECTIVELY, "SELLER")
AND
APACHE CORPORATION
("PURCHASER")
DATED EFFECTIVE
MARCH 1, 1999
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SECTION 1 - DEFINITIONS / EXHIBITS .............................................................2
1.1 ACCOUNTING CLOSING DATE ..........................................................2
1.2 AGREEMENT ........................................................................2
1.3 AFFILIATE ........................................................................2
1.4 BUSINESS RECORDS .................................................................3
1.5 EFFECTIVE TIME ...................................................................3
1.6 EXHIBITS .........................................................................3
1.7 SCHEDULE .........................................................................4
1.8 CLOSING ..........................................................................4
1.9 CONTRACT RIGHTS ..................................................................5
1.10 EASEMENTS ........................................................................5
1.11 GOVERNMENTAL BODY ................................................................5
1.12 KNOWN/KNOWLEDGE ..................................................................5
1.13 LEASE ............................................................................5
1.14 MMS ..............................................................................6
1.15 NET REVENUE INTEREST..............................................................6
1.16 OIL & GAS INTERESTS...............................................................6
1.17 OPERATOR .........................................................................6
1.18 PLATFORMS & FACILITIES............................................................6
1.19 PROPRIETARY DATA .................................................................6
1.20 TERMINATION DATE .................................................................7
1.21 PARTY ............................................................................7
1.22 WORKING INTEREST .................................................................7
1.23 STOCK PURCHASE AGREEMENT..........................................................7
1.24 HSR ACT ..........................................................................7
SECTION 2 - PURCHASE AND SALE ..................................................................7
2.1 PURCHASE AND SALE OF ASSETS...................................................7
2.1.1 LEASES.........................................................7
2.1.2 ASSOCIATED INTERESTS...........................................8
2.1.3 WELLS..........................................................8
2.1.4 PLATFORMS & FACILITIES.........................................8
2.1.5 EASEMENTS......................................................9
2.1.6 CONTRACT RIGHTS................................................9
2.1.7 PROPRIETARY DATA...............................................9
2.1.8 BUSINESS RECORDS..............................................10
2.2 EXCLUDED ASSETS .............................................................10
2.2.1 LICENSED DATA.................................................10
2.2.2 TRADE ACCOUNTS AND CAUSES OF ACTION...........................10
2.2.3 AFFILIATE AND THIRD PARTY ASSETS..............................11
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2.2.4 OTHER EXCLUDED ASSETS.......................................11
2.3 ASSETS SUBJECT TO EXISTING AGREEMENTS.........................................11
2.3.1 EXCLUSIONS..................................................12
2.4 PURCHASE PRICE ...............................................................12
2.5 ADDITIONAL CONSIDERATION......................................................13
2.5.3 EXCLUSIONS..................................................14
2.6 TITLE AND RISK OF LOSS........................................................15
2.7 SPECIFIC PERFORMANCE..........................................................15
2.8 INSURANCE ....................................................................15
SECTION 3 - TITLE/GENERAL.................................................................15
3.1 TITLE MATTERS.................................................................15
3.2 PHYSICAL CONDITION OF THE ASSETS..............................................16
3.3 NORM .........................................................................16
3.4 AVAILABILITY OF DATA..........................................................17
3.5 PREFERENTIAL RIGHTS AND CONSENTS..............................................17
SECTION 4 - COVENANTS AND AGREEMENTS .....................................................19
4.1 COVENANTS AND AGREEMENTS OF SELLER............................................19
4.2 EMPLOYEE MATTERS .............................................................20
4.3 REGULATION S-X FINANCIAL DATA.................................................20
4.4 HSR ACT ......................................................................21
4.5 GREEN CANYON 89 PRODUCTION PROCESSING.........................................21
SECTION 5 - CLOSING ......................................................................23
5.1 CONDITIONS PRECEDENT..........................................................23
5.1.1. HSR APPROVAL................................................23
5.1.2. MAIN PASS 290 FIELD AGREEMENT...............................23
5.1.3. PURCHASER'S CERTIFICATION...................................23
5.1.4. FAILURE OF CONDITION.......................................23
5.1.5. INTEREST ON PURCHASE PRICE..................................24
5.2 CLOSING ............................................................24
5.3 POST CLOSING OBLIGATIONS......................................................26
5.3.1 RECORDING & FILING..........................................26
5.3.2 CHANGE OF OPERATOR..........................................26
5.3.3 NOTICES TO THIRD PARTIES....................................27
5.3.4 DELIVERY OF BUSINESS RECORDS................................27
5.3.5 USE OF NAME.................................................28
5.4 GOVERNMENTAL APPROVALS........................................................28
5.5 OPERATIONS AFTER THE CLOSING..................................................29
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SECTION 6 - GENERAL REPRESENTATIONS AND WARRANTIES.................................................33
6.1 RECIPROCAL REPRESENTATIONS AND WARRANTIES........................................33
(a) CORPORATE ORGANIZATION.........................................33
(b) REQUISITE APPROVALS............................................33
(c) IMPEDIMENTS TO CONSUMMATION OF AGREEMENT.......................34
(d) BANKRUPTCY.....................................................34
6.2 SELLER'S REPRESENTATIONS & WARRANTIES............................................34
(a) CONTRACTS & PERMITS............................................35
(b) COMPLIANCE WITH APPLICABLE LAWS................................35
(c) PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGNMENT........35
(d) LITIGATION.....................................................35
(e) TAXES..........................................................36
(f) LEASES AND WELLS...............................................36
(g) MARKETING......................................................36
(h) CONTRACT RIGHTS................................................37
(i) OPERATIONS AND OPEN AFES.......................................38
(j) ENVIRONMENTAL MATTERS..........................................38
(k) WORKING INTEREST/NET REVENUE INTEREST..........................39
(l) AFFILIATE CONTRACTS............................................39
(m) BROKER'S FEES..................................................39
(n) NO ENCUMBRANCES................................................40
(o) NO TAX PARTNERSHIP.............................................40
(p) SECTION 754 ELECTION...........................................40
(q) PLUGGING OBLIGATIONS...........................................40
(r) EXCHANGE/REMOVAL OF EQUIPMENT..................................41
(s) MMS AND STATE OF LOUISIANA APPROVAL............................41
(t) REVERSIONARY RIGHTS............................................41
(u) INSPECTION REPORTS.............................................41
(v) PRODUCER, FIELD AND PIPELINE IMBALANCES........................42
(w) PAY-OUT REPORTS................................................42
6.3 PURCHASER'S REPRESENTATIONS & WARRANTIES.........................................42
(a) RECEIPT OF DATA................................................42
(b) INDEPENDENT EVALUATION.........................................42
(c) NO SECURITIES DISTRIBUTION.....................................43
(d) BROKER'S FEES..................................................43
(e) GOVERNMENTAL BODY APPROVAL.....................................44
(f) TRANSPORTATION AGREEMENTS......................................44
6.4 RELIANCE ...............................................................44
(a) BY SELLER......................................................44
(b) BY PURCHASER...................................................44
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6.5 SURVIVAL OF REPRESENTATIONS & WARRANTIES.........................................44
SECTION 7 - ACCOUNTING FOR REVENUE & EXPENSES......................................................45
7.1 ADJUSTMENTS .....................................................................45
7.1.1 FINAL ACCOUNTING..................................................45
7.1.2 NOTICE TO REMITTERS OF PROCEEDS...................................47
7.2 ALLOCATION OF TAX LIABILITIES....................................................48
SECTION 8 - PURCHASER'S OBLIGATIONS ...............................................................48
8.1 PURCHASER'S ASSUMED OBLIGATIONS..................................................48
8.2 PLUGGING AND ABANDONMENT OF WELLS, REMOVAL OF PLATFORMS & FACILITIES.............49
SECTION 9 - DISCLAIMER OF WARRANTY / INDEMNIFICATION...............................................50
9.1 SALE ............................................................................50
9.2 DISCLAIMER REGARDING OIL & GAS INTERESTS.........................................51
9.3 DISCLAIMER REGARDING INFORMATION.................................................52
9.4 INDEMNIFICATION .................................................................53
SECTION 10 - ADMINISTRATIVE PROVISIONS.............................................................58
10.1 EXPENSES OF SALE ................................................................58
10.2 THIRD PARTY RIGHTS...............................................................58
10.3 FURTHER ACTIONS .................................................................58
10.4 NOTICES .........................................................................60
10.5 PUBLIC ANNOUNCEMENTS.............................................................61
10.6 TIME LIMITS .....................................................................62
10.7 COMPLIANCE WITH LAWS & REGULATIONS...............................................62
10.8 APPLICABLE LAW ..................................................................62
10.8.1 DTPA WAIVER....................................................63
10.9 ARBITRATION .....................................................................64
10.10 SEVERANCE OF INVALID PROVISIONS..................................................67
10.11 CONSTRUCTION & INTERPRETATION....................................................67
10.11.1 HEADINGS FOR CONVENIENCE.......................................67
10.11.2 GENDER & NUMBER................................................68
10.11.3 INDEPENDENT REPRESENTATION.....................................68
10.12 INTEGRATED AGREEMENT.............................................................68
10.13 BINDING EFFECT ..................................................................69
10.14 MULTIPLE COUNTERPARTS............................................................69
10.15 FAIR NOTICE DISCLOSURE STATEMENT.................................................69
10.16 GAS BALANCING ...................................................................69
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of April 29, 1999, (but is
effective as of the Effective Time for accounting purposes) by and between
ORLANDO-SOI PARTNERSHIP ("OSP"), SHELL OIL & GAS INVESTMENT LIMITED PARTNERSHIP
("SOGI"), both Delaware partnerships, SHELL OFFSHORE INC., SHELL DEEPWATER
DEVELOPMENT HOLDINGS INC. ("SDDHI"), MIDSTREAM CAPITAL CORPORATION ("MCC"),
SHELL CONSOLIDATED ENERGY RESOURCES INC. ("SCERI"), SHELL ONSHORE VENTURES INC.
("SOVI"), SHELL FRONTIER OIL & GAS INC. ("SFOGI") AND SOI FINANCE INC. ("SOIFI")
all Delaware corporations, each of the foregoing having a post office address of
P. O. Box 61933, New Orleans, Louisiana 70161, except that OSP and MCC have a
post office address of P. O. Box 4749, Houston, Texas 77210 (collectively herein
referred to as "SELLER"), and APACHE CORPORATION, a Delaware corporation,
("PURCHASER") the address for which is 2000 Post Oak Boulevard, Suite 100,
Houston, Texas 77056-4400. SELLER and PURCHASER are sometimes separately
referred to as a "Party" and are sometimes collectively referred to as
"Parties".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, PURCHASER desires to purchase from SELLER, and SELLER desires to sell
to PURCHASER, all of SELLER's interests in certain oil and gas properties
located in the Outer Continental Shelf of the Gulf of Mexico and the State of
Louisiana.
NOW THEREFORE, in consideration of the mutual promises contained
herein, the benefits to be derived by each Party hereunder, and other good and
valuable consideration, PURCHASER and SELLER agree as follows:
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SECTION 1 - DEFINITIONS / EXHIBITS
The following terms as used in this Agreement shall have the
definitions set forth below:
1.1 ACCOUNTING CLOSING DATE: shall mean that certain date upon which
PURCHASER assumes responsibility for accounting functions as set forth
in Section 5.5(a).
1.2 AGREEMENT: shall mean this "Asset Purchase Agreement" together with its
attached Exhibits and Schedules, all of which are incorporated into
this Agreement for all purposes and as fully as if set forth in the
text of this Agreement.
1.3 AFFILIATE: shall mean
(a) any corporation, limited liability company, partnership
(including a limited partnership), or other entity owned or
controlled by a Party to this Agreement. Ownership or control by
a Party is deemed to exist if a Party to this Agreement directly
or indirectly owns or controls fifty percent (50%) or more of the
outstanding stock of the corporation having the right to vote for
directors of the corporation (or fifty percent (50%) or more of
the interests in the partnership or other entity). The stock (or
interests in a partnership or other entity) owned or controlled
by a Party shall include all stock (or other interests) directly
or indirectly owned or controlled by any other corporation,
partnership or other entity owned or controlled by a Party to
this Agreement. Affiliate shall include Equilon Pipeline Company
LLC and Tejas Holdings, LLC; and
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(b) any "parent" corporation, partnership or other entity that
directly or indirectly owns or controls fifty percent (50%) or
more of the outstanding stock (or other interests) having the
right to vote for directors of a Party to this Agreement, and
also includes any "sister" corporation, partnership or other
entity in which the parent corporation directly or indirectly
owns or controls fifty percent (50%) of the voting stock (or
other interests) in such sister corporation.
1.4 BUSINESS RECORDS: as defined in Section 2.1.8.
1.5 EFFECTIVE TIME: shall mean 12:00 a.m. local time where the Oil & Gas
Interests are located on March 1, 1999.
1.6 EXHIBITS: Attached hereto and forming an integral part of this
Agreement are Exhibits "1" through "8" which are individually described
as follows:
Exhibit "1a" Description of Leases, Rights-of-Way, and other
mineral rights
Exhibit "1b" List of Wells and Well Status
Exhibit "1c" List of Platforms
Exhibit "2a" Form of Assignment of Record Title
Exhibit "2b" Form of Assignment of Operating Rights
Exhibit "2c" Form of Assignment of Overriding Royalty Interest
Exhibit "2d" Form of Bill of Sale
Exhibit "2e" Form of Assignment of State of Louisiana Leases
Exhibit "3a" Form of Seismic License of Proprietary Surveys
Exhibit "3b" Form of Seismic License of Reprocessed Data
Exhibit "3c" TGS Form of Seismic License
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Exhibit "4" Excluded Property
Exhibit "5" Form of Assignment of Pipeline Rights-of-Way
Exhibit "6" Form of SOSCO Lease of Platform Space
Exhibit "7" Form of Stock Purchase Agreement
Exhibit "8" Non-Foreign Affidavits
1.7 SCHEDULE: Attached hereto and forming an integral part of this Agreement are
the following Schedules:
Schedule 2.1.6 Contract Rights
Schedule 2.1.7 Proprietary Data
Schedule 2.3.1 Liability Exclusions
Schedule 3.5(d) Purchase Price Allocations for Rights
Schedule 6.2(b) Compliance with Applicable Laws
Schedule 6.2(c) Preferential Rights and Consents to Assignment
Schedule 6.2(g) Marketing
Schedule 6.2(h) Status of Contract Rights
Schedule 6.2(i) Operations and Open AFEs
Schedule 6.2(j) Environmental Matters
Schedule 6.2(l) Affiliate Contracts
Schedule 6.2(n) Encumbrances
Schedule 6.2(o) Tax Partnership
Schedule 6.2(q) Plugging Obligations
Schedule 6.2(r) Exchange/Removal of Equipment
Schedule 6.2(s) MMS and State of Louisiana Approval
Schedule 6.2(v) Wellhead Balancing
Schedule 6.2(w) Pay-out Reports
Schedule 6.3(e) Governmental Body Approval
1.8 CLOSING: shall mean the date of (i) the execution and delivery of the
operative conveyances and other closing documents evidencing the
consummation of this transaction, and (ii) the payment of the Purchase
Price to SELLER, and any other amounts to be paid at Closing pursuant
to the terms of this Agreement but excluding any amounts escrowed in
accordance with Section 3.5.
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1.9 CONTRACT RIGHTS: as described in Section 2.1.6.
1.10 EASEMENTS: as described in Section 2.1.5.
1.11 GOVERNMENTAL BODY: means any federal, state, county, municipal, or
other federal, state or local governmental authority or judicial or
regulatory agency, board, body, department, bureau, commission,
instrumentality, or court having jurisdiction over any of the Oil & Gas
Interests or any Party to this transaction, or any of the transactions
or matters contemplated by this Agreement.
1.12 KNOWN/KNOWLEDGE: Whenever a statement regarding the existence (or
absence) of any fact in this Agreement is qualified by a phrase such as
"to such Party's Knowledge" or "Known to such Party," the Parties
intend that the only information to be attributed to such Party is
information actually known to (a) the person in the case of an
individual or (b) in the case of a corporation (or other business
entity), and of its affiliates and subsidiaries, a current officer or
employee who devotes substantial attention to matters of such nature
during the ordinary course of his employment. Unless otherwise
specifically provided in this Agreement, no Party is represented or
obligated to have undertaken a separate investigation in connection
with the transaction contemplated in this Agreement to determine the
existence (or absence) of any statement or representation qualified by
a phrase such as "to such Party's Knowledge or "Known to such Party".
1.13 LEASE: shall mean the oil and gas lease(s) (or portion(s) thereof)
identified in Exhibit "1a" attached hereto and the lands affected by
each such Lease.
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1.14 MMS: shall mean the U.S. Department of the Interior, Minerals
Management Service, or any successor agency, and the records maintained
at the New Orleans, La. Regional Office of that agency, or any
successor agency.
1.15 NET REVENUE INTEREST: shall mean the aggregate fractional or percentage
ownership of SELLER, as of the Effective Time, of the right to receive
hydrocarbon production (either in-kind or the share of proceeds from
sales of hydrocarbon production) from the applicable Leases (excluding
non-consent operations), after the deduction of all burdens upon a
Lease such as lessor's royalty on production (other than taxes) as that
share is set out in Exhibit "1a," subject to any exclusions noted in
Exhibit "1a."
1.16 OIL & GAS INTERESTS: shall mean all of SELLER's interest in those
certain Lease(s) and other oil and gas leasehold estates or interests,
as such interests are set forth in Exhibit "1a", together with SELLER's
ownership interest in the well(s), platforms, facilities, gathering
systems, pipelines and pipeline laterals located on the Leases, and the
contract rights, associated rights, easements, proprietary data, and
business records, located on or associated with the Leases, all as
described in Section 2.1 below.
1.17 OPERATOR: shall mean the person, designated or approved as Operator of
the Oil & Gas Interests under the terms of the applicable joint
operating agreement, if any, or by the appropriate Governmental Body.
1.18 PLATFORMS & FACILITIES: as defined in Section 2.1.4.
1.19 PROPRIETARY DATA: as defined in Section 2.1.7.
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1.20 TERMINATION DATE: shall mean that date specified in Section 5.5(a).
1.21 PARTY: shall mean any of the named SELLER and PURCHASER.
1.22 WORKING INTEREST: shall mean the aggregate fractional or percentage
record title interest and/or operating rights of SELLER in and to each
Lease as of the Effective Time by virtue of which SELLER has the right
to conduct the operations contemplated by a Lease and this Agreement.
1.23 STOCK PURCHASE AGREEMENT: shall mean that certain Stock Purchase
Agreement dated the date hereof, between PURCHASER and SELLER under the
terms of which PURCHASER will issue to SOI at Closing one million
(1,000,000) shares of common stock, par value $1.25 per share, of
PURCHASER.
1.24 HSR ACT: shall mean the Hart Scott Rodino Antitrust Improvement Act of
1976, as amended.
SECTION 2 - PURCHASE AND SALE
2.1 PURCHASE AND SALE OF ASSETS: SELLER agrees to sell and PURCHASER agrees
to purchase, for the consideration recited and upon the terms and
conditions contained in this Agreement, the Oil & Gas Interests. Except
for the Excluded Assets listed in Section 2.2 below, upon Closing,
SELLER shall sell, assign and deliver to PURCHASER the Oil & Gas
Interests, further described as follows:
2.1.1 LEASES: All of SELLER's record title interest (or operating
rights), overriding royalty, or other mineral interests
comprising the Working
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Interest and Net Revenue Interest in each Lease, or portion
thereof, and other interests in oil and gas, as described in
Exhibit "1a" and all rights, privileges and obligations
appurtenant to each Lease; and
2.1.2 ASSOCIATED INTERESTS: All of SELLER's rights in any unit in
which a Lease is included, to the extent that these rights
arise from and are associated with a Lease, including
without limitation, all rights derived from any pooling
order, operating agreement, communitization or other
agreement or from any declaration or order of any
Governmental Body; and
2.1.3 WELLS: All of SELLER's right, title and interest in all oil,
gas or condensate wells and wellbore(s) (whether producing,
not producing, plugged, unplugged or permanently or
temporarily abandoned), water source, water injection and
other injection and disposal wells and systems located on a
Lease (or lands pooled with a Lease) ("WELLS"); to SELLER's
Knowledge, Exhibit "1b" lists all Wells and the status of
each as of the indicated dates, which list is provided to
PURCHASER strictly as an accommodation, for informational
purposes, and without any representation or warranty of
completeness or accuracy or any other sort of representation
or warranty; and
2.1.4 PLATFORMS & FACILITIES: All of SELLER's right, title and
interest in all platforms, facilities, pipelines, pipeline
laterals, gathering systems, equipment, fixtures, inventory,
spare parts, tools and other personal property located on,
or charged to and to be located on, a Lease or lands
unitized therewith; to SELLER's Knowledge, Exhibit "1c"
lists all platforms located on or charged to a Lease or
lands unitized therewith, which list is provided to
PURCHASER strictly as an accommodation, for informational
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purposes, without any representation or warranty of
completeness or accuracy, or any other sort of
representation or warranty; and
2.1.5 EASEMENTS: All of SELLER's right, title and interest in all
easements, rights of way, licenses, permits, servitudes,
surface leases and similar interests applicable or used in
operating a Lease, Wells, Platforms & Facilities and
pipelines described above, to the extent assignable or
transferable; to SELLER's Knowledge, Exhibit "1a" lists all
Easements (excluding permits and licenses) applicable to or
used in operating a Lease, Wells, Platforms & Facilities or
pipelines described above, to the extent assignable or
transferrable; and
2.1.6 CONTRACT RIGHTS: All of SELLER's right, title and interest
in the contracts and contractual rights, obligations and
interests (to the extent assignable or transferable) insofar
as same relate to, or are associated with, any Oil & Gas
Interest, and are identified on Schedule 2.1.6 hereto; and
2.1.7 PROPRIETARY DATA: To the extent assignable or transferable,
(i) a copy of all of SELLER's geophysical and geological
data owned by SELLER as of Closing relating to a Lease,
including shallow hazard surveys and geological maps, but
excluding any data that in SELLER's sole and unfettered
discretion might result in the disclosure of proprietary
seismic methodologies, (ii) as to seismic data, a
non-exclusive license to the seismic data, in the form set
forth as Exhibits A3a", "3b", or "3c", as applicable (the
surveys being more particularly described on Schedule
2.1.7); (iii) a copy of all logs (including those in digital
format) covering the Oil & Gas Interests, and (iv) a copy of
Bob Brown's data base to the extent applicable to the Oil &
Gas Interests; and
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2.1.8 BUSINESS RECORDS: All other tangibles, miscellaneous
interests or other assets on or used in connection with a
Lease, including without limitation, originals (or
photocopies if in SELLER's discretion originals must be
retained for a Governmental Body audit, reporting or related
purposes) of all Lease files, files with Governmental
Bodies, land files, Well files, engineering files,
production records, gas and/or oil imbalance files, Well
pay-out files, Lease operating statements, division order
files, abstracts, title opinions and contract files insofar
as they directly relate to a Lease or lands unitized
therewith (but excluding any internal valuations, price
forecasts or interpretive data or interpretive
documentation).
2.2 EXCLUDED ASSETS: The assets to be assigned and conveyed under this
Agreement do not include (collectively, the "Excluded Assets"):
2.2.1 LICENSED DATA: Seismic, geophysical, or geological data
owned by or licensed from third parties or subject to a
confidentiality obligation in favor of a third party or any
of SELLER's intellectual property, software, patents,
trademarks, logos or service marks used in exploring,
developing or operating a Lease; and
2.2.2 TRADE ACCOUNTS AND CAUSES OF ACTION: Accounts and
receivables or refunds, income or revenue, deposits,
insurance or condemnation proceeds or awards, rights with
respect to operations or claims and causes of action in
favor of SELLER (excluding field and producer imbalances)
which are attributable to SELLER's ownership of the Oil &
Gas Interests as of the Effective Time, particularly such
claims regarding the accounting for any overriding royalty
interest(s) owned by SELLER or its Affiliates; and
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2.2.3 AFFILIATE AND THIRD PARTY ASSETS: Any leased equipment for
which PURCHASER does not specifically assume the lease or
third party equipment and property that may be located on a
Lease, and pipelines, fixtures, equipment, and processing
rights which belong to third parties such as Affiliates,
lessors, purchasers, and transporters of hydrocarbons; and
2.2.4 OTHER EXCLUDED ASSETS: Those assets listed on Exhibit 4
hereof, entitled "Excluded Property".
2.3 ASSETS SUBJECT TO EXISTING AGREEMENTS: Subject to Section 6.2 (k),
PURCHASER and SELLER agree that the sale of the Oil & Gas Interests
will be made subject to (and PURCHASER accepts the Oil & Gas Interests
subject to) any and all reservations, exceptions, and limitations which
are included in the files made available to PURCHASER for review, or
are referred to therein, and all contracts, assignments, subleases,
farmout agreements, joint operating agreements, letter agreements,
pooling or unitization agreements, easements, rights-of-way and all
other agreements or instruments (i) which are of record with the MMS or
in the appropriate parish/county records or the Governmental Bodies of
the State of Louisiana, or (ii) which are listed on Schedule 2.1.6. In
addition, as a part of the consideration hereunder, PURCHASER, as set
forth in this Agreement, shall assume, pay for, and perform SELLER's
duties, liabilities and obligations as lessee of each Lease and all
duties imposed by governmental laws and regulations. PURCHASER further
agrees to expressly assume SELLER's obligations and liabilities under
the contracts described in this Section 2.3 insofar as such obligations
or liabilities relate to the Oil & Gas Interests after the Effective
Time, and to execute any documents necessary to effectuate such
assumption by PURCHASER.
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2.3.1 EXCLUSIONS: PURCHASER shall not assume or be responsible for
and SELLER retains responsibility for (i) contractual
performance by SELLER, due and owing prior to or relating to
time periods prior to or as of the Effective Time, (ii)
underpayments or failure to pay royalties, overriding
royalties, and other lease burdens due by SELLER on or under
the Leases prior to the Effective Time, (iii) property
damage sustained by third parties, or personal injury or
death, occurring prior to the Closing, (iv) any regulatory
fines or penalties attributable to the ownership or
operation of the Leases prior to the Closing, (v) any
accounting or payments due to SELLER's Affiliates,
subsidiaries or third parties for hydrocarbon production (or
the proceeds from the sale thereof) or processing or
transportation attributable to the period of time prior to
the Effective Time, and (vi) any existing litigation or
demands made as of the Closing arising out of the ownership
and operation of the Oil & Gas Interests prior to the
Effective Time, including without limitation, those matters
identified on Schedule 2.3.1.
2.4 PURCHASE PRICE: PURCHASER agrees that the total purchase price for the
Oil & Gas Interests shall be (i) Seven Hundred Fifteen Million and
no/hundredths ($715,000,000) Dollars payable at Closing and subject to
adjustments as provided for in Section 7 hereof, and (ii) one million
(1,000,000) shares of common stock, $1.25 par value, of PURCHASER to be
issued to SOI at Closing in accordance with the terms of the Stock
Purchase Agreement (collectively, the "PURCHASE PRICE"). The payment of
the cash component of the Purchase Price shall be made by electronic
transfer of immediately available funds (EFT) to the credit of SOI's
bank account at Chase New York, Account Number 322018773 (ABA Number
021000021).
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At and after Closing, the cash component of the Purchase Price shall be
subject to adjustment pursuant to Section 7; however, there shall not
be any adjustment to the stock component of the Purchase Price.
2.5 ADDITIONAL CONSIDERATION:
2.5.1 As additional consideration, PURCHASER shall assume all of
SELLER's responsibility and liability for the proper
plugging and abandonment of all Wells and wellbores, and the
removal of any Platforms & Facilities and pipelines located
on each Lease.
2.5.2 In addition, except as provided in Section 2.5.3, PURCHASER
assumes responsibility and liability for claims arising out
of the following occurrences, events and activities on or
related to the Oil & Gas Interests ("Environmental
Obligations"), regardless of whether resulting from any acts
or omissions of SELLER prior to the Closing or the condition
of the Oil & Gas Interests when acquired:
(a) Environmental pollution or contamination, including
pollution or contamination of the soil, sea,
groundwater or air by hydrocarbons, brine, NORM or
otherwise;
(b) Underground injection activities and waste disposal
onsite;
(c) Clean-up responses, and the cost of remediation,
control, assessment or compliance with respect to
surface, sea floor, and subsurface pollution;
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(d) Disposal on the Oil & Gas Interests of any hazardous
substances, wastes, materials, and products generated
by or used in connection with the ownership or
operation of the Oil & Gas Interests.
2.5.3 EXCLUSIONS: PURCHASER's Environmental Obligations do not
include and SELLER hereby retains responsibility for the
following:
(a) Any civil or criminal fines or penalties that may be
levied against SELLER by any court or regulatory
authority for any violation of any laws, rules or
regulations in connection with the ownership or
operation of the Oil & Gas Interests before the
Closing;
(b) Transportation and disposal offsite from the Oil & Gas
Interests before Closing of any hazardous substances,
wastes, NORM, materials, and products generated by or
used in connection with the ownership or operation of
the Oil & Gas Interests before the Closing; and
(c) Claims against PURCHASER by third parties, including
Governmental Bodies, resulting from the Environmental
Obligations, which arose, accrued, and are
attributable to the ownership or operation of the Oil
& Gas Interests prior to the Closing, and are asserted
within eighteen (18) months of the Effective Time,
based upon laws enacted as of the Effective Time. It
is agreed and understood, moreover, that this
exclusion and SELLER's indemnity
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obligations with respect to the same under this
Agreement shall be limited only to Claims against
PURCHASER by third parties, including Governmental
Bodies.
2.6 TITLE AND RISK OF LOSS: SELLER shall deliver possession of the Oil &
Gas Interests to PURCHASER at the Closing. Title to and risk of loss
with respect to the Oil & Gas Interests (and all associated property)
shall pass to PURCHASER as of the Closing.
2.7 SPECIFIC PERFORMANCE: Each Party shall have the right of specific
performance.
2.8 INSURANCE: SELLER and PURCHASER agree that all liability insurance
obtained by PURCHASER during its term of ownership of the Oil & Gas
Interests to cover environmental damages or for third party property
damage, personal injury or death shall name SELLER as additional
insured to the extent of PURCHASER's liability and indemnification
obligations assumed hereunder, and shall contain a waiver of
subrogation against SELLER, to the extent such may be obtained without
PURCHASER incurring significant additional expense.
SECTION 3 - TITLE/GENERAL
3.1 TITLE MATTERS: SELLER WILL CONVEY THE OIL & GAS INTERESTS TO PURCHASER
WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY OR IMPLIED, except that
SELLER will specially warrant and agree to defend title to the Oil &
Gas Interests conveyed against any claims and demands of all persons
claiming title to the Oil & Gas Interests by, through and under SELLER
or any Affiliate or subsidiary of SELLER, but not otherwise. PURCHASER
shall have the right of full substitution and subrogation in and to any
and all rights and actions of
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warranty which SELLER or SELLER's Affiliates or subsidiaries may have
against any and all preceding owners or vendors of the Oil & Gas
Interests.
3.2 PHYSICAL CONDITION OF THE ASSETS: PURCHASER acknowledges that the Oil &
Gas Interests have been used by SELLER for oil and gas drilling and
production operations and related oilfield operations and physical
changes in the Oil & Gas Interests (or adjacent lands) may have
occurred as a result of such uses. In this regard, the Oil & Gas
Interests may also contain unplugged wells, wellbores or buried
pipelines or other equipment, whether or not of a similar nature, the
locations of which may not now be Known by SELLER or be readily
apparent by a physical inspection of the property. PURCHASER and SELLER
understand that neither SELLER nor PURCHASER has the requisite
information with which to determine the exact condition of the Oil &
Gas Interests nor the effect any such use has had on the physical
condition of the Oil & Gas Interests.
3.3 NORM: PURCHASER acknowledges that some oilfield production equipment
comprising the Oil & Gas Interests may contain asbestos and/or
naturally occurring radioactive material ("NORM"). In this regard,
PURCHASER specifically acknowledges that NORM may affix or attach
itself to the inside of wellbores, materials and equipment as scale or
in other forms, and that wells, materials and equipment comprising the
Oil & Gas Interests and being located on a Lease may contain NORM and
that NORM containing materials may have been disposed of on a Lease.
PURCHASER expressly understands that special procedures may be required
for the removal and disposal of asbestos and NORM from the Oil & Gas
Interests if and where they may be found, and PURCHASER assumes
SELLER's liability for or in connection with the assessment,
remediation, removal, transportation or disposal of any such materials
present on the Oil & Gas Interests
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at or after the Closing in accordance with all requirements of any
Governmental Body.
3.4 AVAILABILITY OF DATA: PURCHASER acknowledges that historical file
information of SELLER regarding hydrocarbon production and produced
water that may have been spilled or disposed of on-site and the
locations thereof, together with all underground injection and solid
waste disposal sites have been made available to PURCHASER for
inspection prior to the Closing except for interpretive or predictive
reservoir data or information which SELLER considers confidential or
proprietary. SELLER has not caused any environmental assessment of the
Oil & Gas Interests to be performed or (except as noted above)
attempted to gather information necessary to determine the exact nature
of the environmental condition of the Oil & Gas Interests for the
purposes of this sale.
3.5 PREFERENTIAL RIGHTS AND CONSENTS:
(a) Prior to the date of the execution of this Agreement, SELLER
has consulted with PURCHASER on the forms of notice and
request for waivers to be sent to all holders of preferential
purchase rights ("RIGHTS") in the Leases (and for purposes of
this Section 3.5, the term "Leases" shall include any
rights-of-way subject to a preferential right). As soon as
practicable after the date hereof, SELLER shall transmit, or
cause PURCHASER to transmit, to the respective holders of the
Rights the notices and request for waivers. The Parties shall
keep each other informed on a current basis as receipt of
responses from the holders of the Rights are received or
applicable exercise periods expired without exercise or
response from the holders.
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(b) To the extent that any Rights are exercised by any third party
entitled to exercise such Rights, then the Leases subject to
such Rights shall not be sold to PURCHASER and shall be
excluded from the Agreement. Subject to the terms of the
Rights, if any third party initially elects to exercise a
Right, but subsequently refuses or elects not to consummate
the purchase under such Right and such refusal occurs within
180 days following Closing, PURCHASER shall purchase such
interests covered by the Right for its allocated value as of
the Effective Time and the closing of such transaction shall
take place on a date mutually acceptable to PURCHASER and
SELLER, but not more than 30 days following such failure or
refusal.
(c) SELLER shall not object to PURCHASER discussing with the
holder of any Right the possible exercise, waiver or
expiration of such Rights, without any liability on the part
of SELLER.
(d) At Closing, SELLER (i) shall deposit into an escrow to be
created, multiple originals of documents of assignment,
transfer and conveyance (the "RIGHT ASSIGNMENTS") relating to
the Leases for which the time for the exercise of the Right
has not expired or been waived and (ii) PURCHASER shall
deposit into escrow, the portion of the Purchase Price
allocated to the applicable Leases subject to the unexpired
Right, as set forth on Schedule 3.5(d). Promptly after the
expiration or waiver of any Right, SELLER and PURCHASER, by
joint notice, shall instruct the escrow agent (i) to deliver
the applicable Right Assignment to PURCHASER, and (ii) to
release to SELLER with interest, if any, the allocable portion
of the Purchase Price attributable to the applicable Lease
subject to the expired or waived Right.
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(e) If a Right is exercised after Closing, PURCHASER and SELLER
agree as follows: (1) the escrow agent, upon receipt of the
joint instructions of PURCHASER and SELLER, shall destroy the
applicable Right Assignment; (2) SELLER shall execute and
deliver to the holder of the applicable Right an appropriate
instrument of assignment, transfer and conveyance in
accordance with the applicable Contract Right, and (3) the
escrow agent shall release to PURCHASER, with interest, if
any, the allocable portion of the Purchase Price attributable
to the applicable Lease subject to the exercised Right.
(f) SELLER and PURCHASER agree to cooperate in the attempt to
obtain any consents required to be obtained from third parties
under any Contract Right as a condition to the assignment of
any of the Leases from SELLER to PURCHASER. In the event any
such third party elects not to grant such requested consent,
the Parties shall meet to determine what action should be
jointly taken.
SECTION 4 - COVENANTS AND AGREEMENTS
4.1 COVENANTS AND AGREEMENTS OF SELLER: SELLER represents, covenants and
agrees with PURCHASER as follows:
(a) During the period from the Effective Time of this Agreement to
the Closing, SELLER agrees, unless specifically waived by
PURCHASER in writing, to:
(1) operate the Oil & Gas Interests, to the extent SELLER
is the Operator thereof, in substantially the same
manner as heretofore operated; and
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maintain books of account and records with regard to
the Oil & Gas Interests in accordance with SELLER's
past practices;
(2) pay timely its share of all costs and expenses
attributable to the Oil & Gas Interests; and
(3) not cancel or waive any debt, claim or right of
material value relating to the Oil & Gas Interests of
which PURCHASER has not requested or been advised
prior to Closing.
4.2 EMPLOYEE MATTERS: PURCHASER shall have the right, upon SELLER's written
approval, to solicit the employees of SELLER who are specified on
Schedule B of that certain letter from PURCHASER to SELLER dated April
5, 1999, and any other employee of SELLER (that SELLER approves in
writing), and shall have the right, at PURCHASER's election, to offer
employment to and hire any such employees. If PURCHASER hires any such
employee, the terms of employment shall be at PURCHASER's discretion,
provided, however, that PURCHASER shall provide such employees the same
benefits that are provided to other current employees of PURCHASER of
comparable seniority, experience/qualifications and job description.
4.3 REGULATION S-X FINANCIAL DATA: SELLER shall provide PURCHASER financial
data for the calendar years 1996, 1997 and 1998, and any portion of
1999 prior to Closing. The financial data provided by SELLER shall
establish the direct lease operating costs with respect to each of the
Oil & Gas Interests and the gross revenues from such Oil & Gas
Interests and other such information as may be required by Rule 3.05 of
Regulation S-X of the United States Securities and Exchange Commission.
The cost incurred by SELLER in providing the financial
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data to PURCHASER shall be borne solely by PURCHASER and shall be
independent of the amount set forth in Section 5.5 (b). The foregoing
financial data to be provided by SELLER shall be without representation
or warranty of any kind and SELLER and PURCHASER agree that SELLER
assumes no liability with regard to any financial data so provided.
4.4 HSR ACT: PURCHASER and SELLER covenant and agree with each other that
each will file, or cause to be filed on its behalf, all necessary
filings and notifications under the HSR Act.
4.5 GREEN CANYON 89 PRODUCTION PROCESSING: PURCHASER and SELLER understand
and agree that SELLER's production from Leases covering Green Canyon
Blocks 45 and 89 (the "Cinnamon Block") is currently being processed at
the facilities located on the Garden Banks Block 128 "A" platform (the
"Enchilada Facilities") pursuant to that certain letter agreement dated
November 20, 1998 and the production handling agreement attached
thereto (collectively the "Enchilada Agreement"), between SOI, as the
GB128 "A" operator, SOI, as the Cinnamon Block operator, and the other
working interest owner in the Cinnamon Block. PURCHASER and SELLER
further understand and agree that after Closing, PURCHASER's production
from the Cinnamon Block will continue to be processed at the Enchilada
Facilities under the Enchilada Agreement.
In order to provide PURCHASER with further assurances with
respect to PURCHASER's ability to continue to process its production
from the Cinnamon Block, SELLER hereby agrees as follows:
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(a) SELLER hereby represents, warrants and covenants to
PURCHASER that (i) the Enchilada Agreement is a legally binding and
enforceable agreement for the processing of production from the
Cinnamon Block, and SELLER agrees to continue to process PURCHASER's
production under the same terms and conditions as set forth in the
Enchilada Agreement, notwithstanding any action brought by or any
election made by a party other than PURCHASER or SELLER to terminate or
invalidate said agreement, and (ii) SELLER hereby agrees not to take
any action to terminate or amend the Enchilada Agreement without the
prior written consent or joinder of PURCHASER; provided, however, such
shall not prevent SELLER from exercising its remedies in the event of a
default by PURCHASER of the terms and conditions set forth in the
Enchilada Agreement.
(b) SELLER hereby further agrees to defend, indemnify and hold
PURCHASER harmless against any and all claims, liabilities, losses,
causes of actions, damages, costs and expenses arising out of any
action brought by any Enchilada Facilities owner or other Cinnamon
Block owner against PURCHASER and/or SELLER which may result in the
interruption, discontinuance, or rate increase of production handling
services at the Enchilada Facilities by reason of any breach of Section
4.5(a) above. Notwithstanding the foregoing or any other terms and
conditions contained in this Agreement, SELLER's aggregate liability
under this Section 4.5(b) shall not exceed the sum of five million
seven hundred thousand dollars ($5,700,000.00). SELLER's liability
under this Section 4.5(b) shall not be subject to the two million
dollar ($2,000,000.00) deductible provided for in Section 9.4(c)(iii).
Nothing herein shall be deemed a representation or warranty as to the
existence of transportation arrangements from the Cinnamon Block.
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SECTION 5 - CLOSING
5.1 CONDITIONS PRECEDENT: The Parties' obligations to proceed to Closing is
subject to the satisfaction of all of the following conditions:
5.1.1. HSR APPROVAL: All necessary approvals or consents under the
Hart Scott Rodino Antitrust Improvement Act of 1976, as
amended, will have been obtained.
5.1.2. MAIN PASS 290 FIELD AGREEMENT: On or before May 12, 1999, the
Parties will have executed a formal written Main Pass 290
Field agreement with regard to the operation of Main Pass 290
Field in form and content acceptable to both Parties.
5.1.3. PURCHASER'S CERTIFICATION: On or before May 12, 1999,
PURCHASER will have certified in writing to SELLER that the
Exhibits and Schedules identified in the Agreement are
acceptable in form and content, which will not be unreasonably
withheld.
5.1.4. FAILURE OF CONDITION: The Parties hereby agree to use their
best efforts to satisfy or cause to be satisfied each of the
foregoing conditions contemplated by Sections 5.1.1 through
5.1.3 as soon as practicable. In the event that the Parties
are still working in good faith on May 12 to satisfy one or
more of the foregoing conditions, the Parties agree to extend,
up to seven (7) business days, the period for the satisfaction
of such condition(s).
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Subject to the foregoing, unless mutually agreed otherwise by
the Parties, this Agreement shall be null and void, and be of
no further force and effect, upon the failure of one or more
of the conditions in Section 5.1 to be timely satisfied, and
following such failure neither Party shall have any liability
whatsoever to the other.
5.1.5. INTEREST ON PURCHASE PRICE: Absent the fault of SELLER,
interest shall accrue on the cash component of the Purchase
Price from the later of the day following (i) the date of the
satisfaction of the condition set forth in Section 5.1.1 and
(ii) May 12, 1999, until the date of Closing, at the published
or quoted prime or base rate of Citibank N.A., plus one
percent (1%), such interest to constitute part of the adjusted
Purchase Price as provided for in Section 7.
5.2 CLOSING: Subject to Section 3.5, the Closing shall take place promptly
upon satisfaction of the conditions set forth in Section 5.1 and shall
be held at the offices of SELLER at 701 Poydras Street, New Orleans,
Louisiana. The following shall take place at Closing:
(a) SELLER and PURCHASER shall execute and deliver assignments
and bills of sale on the forms which are attached as
Exhibits hereto, conveying all of SELLER's interest in the
Oil & Gas Interests to PURCHASER, or to a designated
subsidiary of PURCHASER with respect to certain Easements
and the pipelines associated therewith.
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(b) PURCHASER shall pay to SOI, as agent for SELLER, by wire
transfer an amount equal to the cash component of the
Purchase Price as adjusted in accordance with the terms
hereof and reduced by the amount placed into escrow in
accordance with Section 3.5.
(c) PURCHASER shall issue to SOI one million (1,000,000) shares
of common stock, $1.25 par value, of PURCHASER in accordance
with the Stock Purchase Agreement.
(d) PURCHASER and SELLER shall execute and deliver the remaining
documents contemplated by the transaction described herein
in the Stock Purchase Agreement and any other agreements
relative hereto deemed necessary or appropriate by the
Parties.
The Parties shall execute other appropriate instruments necessary to
effect or support the transaction contemplated in this Agreement,
including without limitation, any ratification or joinder documents
prepared by SELLER consistent with the terms of this Agreement required
to transfer any Contract Rights and any lease assignment forms, and
Designations of Operator or other forms required by any Governmental
Body to transfer operatorship, where applicable, of the Oil & Gas
Interests to PURCHASER.
Upon PURCHASER's completion of its Closing obligations, SELLER shall
deliver to PURCHASER, exclusive possession of the Oil & Gas Interests
as of the Closing. Notwithstanding any other provision of this
Agreement, the failure of PURCHASER
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to deliver all of the Purchase Price, as adjusted as contemplated
above, at Closing shall entitle SELLER to withhold all conveyancing
documents until such time as it has received the full consideration for
the conveyance. This right shall be in addition to all other rights and
remedies that SELLER may have under this Agreement or at law or in
equity.
No agreement to be executed and delivered at the Closing, or action to
be taken at the Closing, shall be effective until all such agreements
have been executed and delivered or actions have been taken, and all
such agreements and actions shall be deemed to be effective
concurrently.
5.3 POST CLOSING OBLIGATIONS: Upon condition that the Closing shall have
occurred, SELLER and PURCHASER agree to perform the following
"Post-Closing Obligations":
5.3.1 RECORDING & FILING: Within ninety (90) days of Closing,
PURCHASER shall (i) file or record the conveyancing
documents in the appropriate governmental records and (ii)
file for approval with the applicable Governmental Bodies
all state and federal transfer and assignment documents for
the Oil & Gas Interests. PURCHASER shall provide a copy of
same, including recording date, to the SELLER.
5.3.2 CHANGE OF OPERATOR: Where SELLER is the designated Operator
of a Lease, PURCHASER shall promptly file all appropriate
forms, declarations or bonds with Governmental Bodies
relative to PURCHASER's assumption
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of operations from SELLER. PURCHASER, with SELLER's
assistance, shall also take all actions routinely taken to
qualify as a successor Operator to SELLER under any
applicable joint operating agreement (subject to the terms
of that operating agreement).
5.3.3 NOTICES TO THIRD PARTIES: SELLER and PURCHASER shall notify
all lessors, royalty owners, operators, non-operators,
purchasers of production and Governmental Bodies that
PURCHASER has purchased the Oil & Gas Interests and has
assumed liability for their continued operation from and
after the Closing. PURCHASER and SELLER shall execute all
transfer orders/division orders or letters in lieu of
transfer orders necessary to transfer payment of the
proceeds from the sale of production from the Oil & Gas
Interests as of the Effective Time to PURCHASER.
5.3.4 DELIVERY OF BUSINESS RECORDS: Within seven (7) days after
Closing, SELLER shall commence to deliver to PURCHASER the
Business Records specified in this Agreement (subject to the
limitations contained in this Agreement). SELLER shall
deliver such Business Records on a mutually agreed priority
basis and shall complete delivery of all such records within
sixty (60) days hereof. If SELLER retains any original
Business Records, PURCHASER shall have the right to review
(and copy at PURCHASER's expense) such original records
during SELLER's normal business hours. PURCHASER shall
retain any original records delivered, and SELLER shall
retain any such original records not delivered to PURCHASER
for a period of seven (7) years from the Effective Time.
SELLER reserves the right to access (and copy at SELLER's
expense) all original records
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delivered for a period of seven (7) years from the Effective
Time (and PURCHASER agrees to grant SELLER access to the
records during PURCHASER's normal business hours). In the
event that SELLER or PURCHASER wishes to destroy any
original books or records in its possession or in the
possession of any of its Affiliates prior to such date, such
party shall give not less than sixty (60) days notice to the
other party and such other party shall have the right, at
its own expense, during reasonable business hours, to remove
such books and records and to keep possession of same. After
the seventh anniversary of the Effective Time, each party
will retain (and may destroy) such books and records in
accordance with such party's customary record retention
practices. If PURCHASER transfers any portion of Oil & Gas
Interests, PURCHASER shall advise its assignee that this
records retention obligation shall continue as its
assignee's obligation.
5.3.5 USE OF NAME: On or before ninety (90) days after Closing,
PURCHASER will remove, or cause to be removed, from the
Platforms & Facilities pertaining to the Oil & Gas
Interests, the name, logo and service mark of SELLER and all
variations and derivations thereof, and will not thereafter
make use thereof.
5.4 GOVERNMENTAL APPROVALS: PURCHASER and SELLER shall execute and file all
forms (and PURCHASER shall perform all acts) required by the MMS and/or
the State of Louisiana (and other appropriate Governmental Bodies) to
transfer ownership and operatorship of the Oil & Gas Interests from
SELLER to PURCHASER, as applicable, effective as of the Effective Time,
subject to the terms and provisions of applicable joint operating
agreements. The conveyances (along
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with any change in operatorship) involved in this transaction are
subject to approval by the MMS and/or the State of Louisiana (and
possibly other Governmental Bodies).
5.5 OPERATIONS AFTER THE CLOSING:
(a) As an accommodation to PURCHASER, SELLER agrees to operate the
Oil & Gas Interests for the account of the PURCHASER for a period
not to extend past the end of the month following the month of
Closing, or such earlier date as may be mutually agreed to by
SELLER and PURCHASER coincident with the end of a month. The date
when SELLER ceases to assist in the operation of the Oil & Gas
Interests shall be referred to hereafter as the "Termination
Date". SELLER further agrees to perform all accounting functions
for the Oil & Gas Interests for a thirty (30) day period
following the Termination Date at which date the PURCHASER shall
assume all accounting functions (the "Accounting Closing Date").
(b) From the Closing Date to the Termination Date, as PURCHASER's
designee, SELLER shall make good faith efforts to operate the Oil
& Gas Interests as a prudent operator in the ordinary course of
business and in material compliance with all applicable laws,
ordinances, rules and regulations, orders, terms of permits and
authorizations by any Governmental Body which may have
jurisdiction over the Oil & Gas Interests. SELLER's duties as
operator for PURCHASER during this period shall include marketing
(and production reporting to the Governmental Bodies for the
subject period) of produced oil and gas
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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 Oil & Gas Interests,
and PURCHASER shall reimburse SELLER for any such expenditures.
The parties hereby further agree that SELLER, its direct and
indirect shareholders, Affiliates and parents, and its officers,
directors, employees and agents, shall have no liability to
PURCHASER, or any third party or Governmental Body and PURCHASER
shall release, defend, and indemnify SELLER from any loss, costs,
expenses, liability, property or environmental damage, or other
damages to or incurred by PURCHASER or SELLER which are
attributable to SELLER's operations of the Oil & Gas Interests
from the Closing to the Termination Date, or other activities
conducted by SELLER as set forth in this Section 5.5, despite the
negligence or fault (ordinary or gross, sole or partial), except
to the degree caused by the willful misconduct of SELLER. If
Closing occurs, PURCHASER as of the Effective Time assumes
responsibility for all costs and expenses associated with
ownership and operation of the Oil & Gas Interests, including but
not limited to operations, maintenance, repairs, recompletions
and reconditioning, modifications, capital expenditures,
abandonments and salvage. PURCHASER agrees to pay SELLER a fee of
$300,000.00 per month for SELLER's general and administrative
overhead hereunder from the Effective Time to the Accounting
Closing Date. Except as provided in the preceding sentence,
SELLER shall not be entitled to any compensation for its
operation of the Oil & Gas Interests pursuant to this Section
5.5(b). Such fee does not include the salaries and wages and
associated burdens and benefits of SELLER's field employees
directly employed in the operation of the Oil & Gas Interests,
SELLER's employees directly employed on Shore Base Facilities or
other Offshore Facilities serving the Oil and Gas Interests,
first level supervisors of the
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aforementioned field employees located at or near the Oil & Gas
Interests, and technical employees directly employed on the Oil &
Gas Interests.
(c) Pending MMS and/or the State of Louisiana approval of the
assignment to PURCHASER of the Oil & Gas Interests, SELLER,
effective as of the Closing, and subject to applicable joint
operating agreements, will designate PURCHASER as Operator of the
Oil & Gas Interests, where SELLER is Operator, and will seek all
necessary third party approvals of that designation. Until
PURCHASER is the designated operator with the MMS or such
applicable Governmental Body, SELLER agrees that PURCHASER may
act as SELLER's agent in performing the duties of Operator and
PURCHASER shall be entitled to operate as though it is the
approved owner of the Oil & Gas Interests, all at PURCHASER's
sole cost, risk and expense.
(d) From the date of Closing to the Termination Date, SELLER shall
endeavor to (i) assist PURCHASER in the training of personnel in
the operations of the Oil & Gas Interests, (ii) attempt to retain
existing contract staff familiar with the operation of the Oil &
Gas Interests and (iii) provide PURCHASER telecommunication
equipment and services under existing agreements with Shell
Offshore Services Company ("SOSCO").
(e) 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, on the Oil & Gas Interests. For purposes of this
section, revenue accounting functions shall
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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 one hundred twenty (120) days after such date,
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 PURCHASER's interest in the Oil & Gas Interests,
SELLER shall prepare and deliver to PURCHASER 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 PURCHASER the Net Cash Flow from the Oil & Gas 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.
(f) SELLER upon PURCHASER's written request will provide 30 days
written notice of cancellation for crude oil sales contracts and
gas sales contracts to Affiliates or third parties that are
cancelable.
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It is understood that SELLER shall not be obligated to provide any
transportation for personnel and/or equipment to and from the Oil & Gas
Interests. SELLER's expenses for such transportation related to the Oil
& Gas Interests incurred from Closing to the Accounting Closing Date
shall be billed to PURCHASER and included in the Final Accounting.
SECTION 6 - GENERAL REPRESENTATIONS AND WARRANTIES
6.1 RECIPROCAL REPRESENTATIONS AND WARRANTIES: SELLER and PURCHASER each
represent and warrant to the other, that as of the date of this
Agreement and as of the Effective Time:
(a) CORPORATE ORGANIZATION: The Party making the representation is a
corporation or a partnership, as applicable, validly existing and
in good standing under the laws of that corporation's or
partnership's state of incorporation or formation with the power
and authority to own property and assets such as the Oil & Gas
Interests and to carry on its business as now being conducted.
(b) REQUISITE APPROVALS: The Party making the representation has the
corporate or partnership power and authority to execute and
deliver this Agreement and to consummate the transaction
contemplated in this Agreement. This Agreement constitutes a
valid and binding obligation of the Party making the
representation, enforceable against it in accordance
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with the terms hereof, and no other corporate or partnership act,
approval or proceeding on its part is required to authorize the
execution and delivery of this Agreement or the consummation of
the transaction contemplated hereunder. This Agreement (and all
closing documents) are executed by appropriate officials having
full authority to execute and deliver such documents on behalf of
the Party making the representation.
(c) IMPEDIMENTS TO CONSUMMATION OF AGREEMENT: This Agreement, and the
execution and delivery hereof by the representing and warranting
Party, do not, and the consummation of the transaction
contemplated hereunder will not, violate any provision of, or
constitute a default under, the charter or by-laws of such Party
or any law or regulation to which it is subject, or any provision
of any agreement, indenture, mortgage, lien, lease, instrument,
order, arbitration award, judgment, or decree to which it is a
Party or by which it or any of its assets or properties is bound.
(d) BANKRUPTCY: There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated or
threatened against the Party making the representation.
6.2 SELLER'S REPRESENTATIONS & WARRANTIES: Each SELLER separately
represents and warrants to PURCHASER, to the extent of its interest in
the Oil & Gas Interests, that as of the date of this Agreement, subject
to Section 10.3, and the Effective Time:
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(a) CONTRACTS & PERMITS: All material leases, contracts and Easements
(except permits and licenses) affecting the Oil & Gas Interests
have been made available to PURCHASER and are identified in
Exhibit "1a" and/or Schedule 2.1.6 and, except to the extent of
restrictions or prohibitions on transfer, are being transferred
to PURCHASER in this transaction.
(b) COMPLIANCE WITH APPLICABLE LAWS: Except as set forth on Schedule
6.2(b), where SELLER is the Operator, and to SELLER's Knowledge
as respects Leases operated by others, operation of the Oil & Gas
Interests is in compliance with all applicable laws or statutes,
or any applicable regulations, rules or orders, judgments or
decrees of all Governmental Bodies, the violation of which might
materially and adversely affect the value to PURCHASER of any one
or more of the Leases, or the Oil and Gas Interests, or the
production therefrom.
(c) PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGNMENT: Except
as set forth on Schedule 6.2(c), the Leases are not subject to
any agreements containing preferential purchase rights or consent
to assignment provisions in favor of parties other than SELLER.
(d) LITIGATION: Except as set forth on Schedule 2.3.1, there are no
pending suits, actions, arbitrations or proceedings directly
relating to the Oil & Gas Interests as to which SELLER has been
served process or received notice before any court or
Governmental Body which would adversely affect the Oil & Gas
Interests, or hinder, impede or prevent SELLER from
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consummating the transactions contemplated by the Agreement. To
SELLER's Knowledge, there are no pending suits, actions,
arbitrations, mediations or proceedings directly relating to the
Oil & Gas Interests as to which SELLER has not been served
process or received notice, or that are threatened before any
court or Governmental Body which would adversely affect the Oil &
Gas Interests, or hinder, impede or prevent SELLER from
consummating the transactions contemplated by the Agreement.
(e) TAXES: All ad valorem, property, production, excise, severance,
windfall profit and similar taxes and assessments payable with
respect to the Oil & Gas Interests and based on or measured by
the ownership of property or the production or removal of
hydrocarbons or the receipt of proceeds therefrom have been and
will be timely paid in all respects.
(f) LEASES AND WELLS: To SELLER's Knowledge (i) SELLER is not in
material default under any of the material terms and provisions
of any of the Leases or under any agreement to which the same are
subject; (ii) all royalties, rentals, and other payments due
thereunder by SELLER have been timely and properly paid in full
on or before the due dates thereof; and (iii) all of the Wells
have been drilled, completed, and operated within the boundaries
of the Leases or Oil & Gas Interests or within the limits
otherwise permitted by contract, pooling, or unit agreement, and
by law and in compliance with all applicable rules, regulations,
permits, judgments, orders and decrees of any court or the
federal and state regulatory authorities having jurisdiction
thereof.
(g) MARKETING: Except as disclosed on Schedule 6.2(g), no amounts of
hydrocarbons produced from the Oil & Gas Interests and marketed
by SELLER and, to SELLER's Knowledge, no amount of SELLER's
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hydrocarbons produced from the Oil & Gas Interests and marketed
by others are subject to a sales or processing contract (except
for contracts terminable without penalty by SELLER on not more
than 30 days notice), and, no person has any call upon, option to
purchase or similar rights under any agreement with respect to
the Oil & Gas Interests or to the production therefrom. SELLER
has not in any respect collected, nor will SELLER in any respect
collect, any proceeds from the sale of hydrocarbons produced from
the Oil & Gas Interests that are subject to refund by PURCHASER.
As of the Effective Time, except as set forth in Schedule 6.2(g),
proceeds from the sale of oil, condensate, and gas from the Oil &
Gas Interests were being received in all respects by SELLER in a
timely manner and were not being held in suspense for any reason.
SELLER has not been nor will SELLER be obligated by virtue of any
prepayment made under any gas transportation, production sales
contract or any other contract containing a "take or pay" clause,
or under any gas balancing, deferred production or similar
arrangement, to deliver oil, gas or other minerals produced from
or allocated to any of the Oil & Gas Interests at some future
time without receiving full payment therefor at the time of
delivery.
(h) CONTRACT RIGHTS: To SELLER's Knowledge, except as disclosed on
Schedule 6.2(h), with respect to the Contract Rights: (i) as to
SELLER, all Contract Rights which have not previously expired or
been terminated by mutual agreement are in full force and effect
and are the valid and legally binding obligations of the parties
thereto and are enforceable in accordance with their respective
terms, except to the extent that such enforcement may be limited
by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and by general equitable
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principles; (ii) SELLER is not in material breach or default with
respect to any of their obligations under any material Contract
Right; and (iii) neither SELLER nor any other party to any
Contract Right has given or threatened to give notice of any
action to terminate, cancel, rescind, or procure a judicial
reformation of any Contract Right or any provision thereof.
(i) OPERATIONS AND OPEN AFES: To SELLER's Knowledge, except as
disclosed on Schedule 6.2(i), with respect to the joint, unit, or
other operating agreements relating to the Oil & Gas Interests:
(i) there are no individual outstanding calls or payments under
authorities for expenditures ("AFE's") in excess of $100,000.00
for which PURCHASER would be liable; and (ii) there are no
material operations under the operating agreements relating to
the Oil & Gas Interests with respect to which SELLER has become a
non-consenting party.
(j) ENVIRONMENTAL MATTERS: To SELLER's Knowledge, and only as to
those Oil & Gas Interests where SELLER is the Operator, except as
disclosed on Schedule 6.2(j): (i) SELLER has obtained all
permits, licenses, and other authorizations that are required
under federal, state, and local laws with respect to pollution or
protection of the environment relating to the Oil & Gas
Interests, including laws relating to actual or threatened
emissions, discharges, or releases of pollutants, contaminants,
or hazardous substances, or other toxic materials or wastes into
ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of
pollutants, contaminants of hazardous substances, or other toxic
materials or wastes ("Environmental Laws"); and (ii) SELLER and
the Oil & Gas Interests are in compliance in all material
respects with all
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Environmental Laws and all material terms and conditions of such
permits, licenses and authorizations. SELLER has not received
written notice of any conditions, circumstances, activities,
practices, incidents, actions, or plans that are reasonably
likely to interfere or prevent continued compliance, or that are
reasonably likely to give rise to any material liability, or
otherwise form the basis of any material claim, action, suit,
proceeding, hearing or investigation, based on or related to the
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, or hazardous substance or other toxic material or
waste from or attributable to any Oil & Gas Interest.
(k) WORKING INTEREST/NET REVENUE INTEREST: SELLER's Working Interest
and Net Revenue Interest in each of the Leases are as shown on
Exhibit "1a" and for purposes of SELLER's by, through and under
warranty as defined in Section 3.1, SELLER warrants that SELLER
is delivering the Working Interest and Net Revenue Interest
reflected on Exhibit "1a".
(l) AFFILIATE CONTRACTS: Except as described on Schedule 6.2(l),
there are no existing contracts between SELLER and any of its
Affiliates affecting or providing services or support to any of
the Oil & Gas Interests or operations on the Oil & Gas Interests
that will be binding on PURCHASER.
(m) BROKER'S FEES: SELLER has not incurred any liability, contingent
or otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which PURCHASER
shall have any responsibility whatsoever.
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(n) NO ENCUMBRANCES: Except as described on Schedule 6.2(n), and
subject to Section 3.1, SELLER has title to the Oil & Gas
Interests free and clear of all liens, pledges, encumbrances and
adverse claims created by, through or under SELLER, its
subsidiaries or Affiliates. Except as set forth on Schedule
6.2(n), there are no overriding royalties, production payments,
net profit interests or other revenue burdens on the Leases,
other than the Affiliate overrides which are being conveyed
hereunder to PURCHASER, and the royalty due the MMS or the State
of Louisiana under each of the Leases.
(o) NO TAX PARTNERSHIP: Except as set forth under Schedule 6.2(o),
none of the Oil & Gas Interests are subject to, or considered to
be held by, any partnership for federal income tax purposes not
including tax partnerships contained in joint operating
agreements identified on Schedule 2.1.6.
(p) SECTION 754 ELECTION: For each partnership, joint venture or tax
partnership to which any of the Oil & Gas Interests are subject,
SELLER shall, at PURCHASER's election assist PURCHASER to cause
each partnership, joint venture or tax partnership to elect under
Section 754 of the Code to adjust the basis of its Oil & Gas
Interests with respect to the transfer of the partnership
interest, effective for the taxable year of the transfer. With
respect to each such partnership, joint venture or tax
partnership of SELLER, SELLER shall exercise its reasonable
efforts in making available to PURCHASER all financial and tax
data necessary or reasonably helpful to determine whether a
Section 754 election would be advantageous to PURCHASER for the
taxable year of the Closing.
(q) PLUGGING OBLIGATIONS: Except as disclosed on Schedule 6.2(q) and
except as required by Governmental Body regulations, there are no
Wells, platforms
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or pipelines located on the Leases that SELLER is currently
obligated by order of any Governmental Body to remove or plug and
abandon within twelve (12) months of Closing.
(r) EXCHANGE/REMOVAL OF EQUIPMENT: Except as disclosed on Schedule
6.2(r), between April 9, 1999 and the Termination Date, with
respect to each of the Oil & Gas Interests, (i) SELLER has not
exchanged any equipment, fixtures, inventory, spare parts, tools
and other personal property for property of lesser value and (ii)
has not removed any idle or other equipment or inventory from the
Oil & Gas Interests except with the prior approval of PURCHASER.
(s) MMS AND STATE OF LOUISIANA APPROVAL: Except as set forth on
Schedule 6.2(s), SELLER is not aware of the existence of any fact
or condition with respect to the Oil & Gas Interests that may
cause the MMS or the State of Louisiana to withhold its
unconditional approval of the assignments contemplated herein
that require approval of the applicable Governmental Body.
(t) REVERSIONARY RIGHTS: SELLER has not made any assignments,
transfers or conveyances or created any reversionary rights or
similar rights in favor of third parties that would operate to
reduce SELLER's rights in the Leases or Platforms & Facilities
included in the Oil & Gas Interests to less than the Working
Interest set forth with respect to the applicable Lease listed in
Exhibit "1a".
(u) INSPECTION REPORTS: To SELLER's Knowledge, PURCHASER has been
furnished all MMS or other regulatory inspection reports and
findings conducted during SELLER's ownership of the Oil & Gas
Interests, subject to
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the destruction of documents pursuant to SELLER's standard record
retention policies.
(v) PRODUCER, FIELD AND PIPELINE IMBALANCES: To SELLER's Knowledge,
Schedule 6.2(v) is a complete and accurate description of all
producer, field and pipeline imbalances as of the Effective Time
between (i) the amount of hydrocarbons produced from the Oil &
Gas Interests and allocated to SELLER and (ii) the share of
production to which SELLER was entitled, and there are no other
imbalances.
(w) PAY-OUT REPORTS: To SELLER's Knowledge, Schedule 6.2(w) reflects
the pay-out status of any non-consent or other penalties relating
to or affecting the Oil & Gas Interests as of the Effective Time.
6.3 PURCHASER'S REPRESENTATIONS & WARRANTIES: PURCHASER represents and
warrants to SELLER, that as of the date of this Agreement, the
Effective Time and the Closing:
(a) RECEIPT OF DATA: PURCHASER represents that it has had the
opportunity to perform due diligence on the Oil & Gas Interests
that PURCHASER wishes to purchase, which includes physical
inspection(s), environmental assessment(s), reviewing well data
and other files, and performing all necessary tasks involved in
evaluating the Oil & Gas Interests.
(b) INDEPENDENT EVALUATION: PURCHASER represents and acknowledges
that it is knowledgeable of the oil and gas business and of the
usual and customary practices of producers such as SELLER and
that it has had
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access to the Oil & Gas Interests, the officers and employees of
SELLER, and the books, records and files of SELLER relating to
the Oil & Gas Interests. In making the decision to enter into
this Agreement and consummate the transactions contemplated
hereby, PURCHASER, subject to Section 6.4(b), has relied solely
on the basis of its own independent due diligence investigation
of the Oil & Gas Interests. ACCORDINGLY, PURCHASER ACKNOWLEDGES
THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS
AND NEGATES ANY REPRESENTATION OR WARRANTY (OTHER THAN THOSE
EXPRESS LIMITED REPRESENTATIONS AND WARRANTIES MADE IN SECTION 6
OF THIS AGREEMENT), EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE
OR OTHERWISE, RELATING TO THE OIL & GAS INTERESTS.
(c) NO SECURITIES DISTRIBUTION: PURCHASER represents to SELLER that
PURCHASER intends to acquire the Oil & Gas Interests for
PURCHASER's own benefit and account and that PURCHASER is not
acquiring such interests with the intent to make a sale or
distribution thereof in violation of applicable federal or state
securities laws and regulations. If, in the future, PURCHASER
should sell or otherwise dispose of the Oil & Gas Interests in
any manner that would be subject to securities regulation,
PURCHASER will fully comply with all federal and state securities
laws.
(d) BROKER'S FEES: PURCHASER has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees relating
to the transactions contemplated by this Agreement for which
SELLER shall have any responsibility whatsoever.
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(e) GOVERNMENTAL BODY APPROVAL: To PURCHASER's Knowledge, except as
set forth on Schedule 6.3(e), PURCHASER is not aware of the
existence of any fact or condition with respect to the Oil & Gas
Interests that may cause the MMS or the State of Louisiana to
withhold its unconditional approval of the assignments
contemplated herein that require approval of the applicable
Governmental Body.
(f) TRANSPORTATION AGREEMENTS: PURCHASER acknowledges that SELLER has
not warranted or represented to PURCHASER that any transportation
agreements with respect to the Oil & Gas Interests will be
assigned to PURCHASER pursuant to the transaction contemplated by
the Agreement, except as to those transportation agreements
identified on Exhibit "1a".
6.4 RELIANCE:
(a) BY SELLER: PURCHASER acknowledges that SELLER is entering this
transaction relying upon PURCHASER's representations and
warranties, upon PURCHASER's assumption of obligations and
liabilities pertaining to the Oil & Gas Interests and upon the
agreements and undertakings of PURCHASER provided for herein.
(b) BY PURCHASER: SELLER acknowledges that PURCHASER is entering this
transaction relying upon SELLER's representations and warranties
and upon the agreements and undertakings of SELLER provided for
herein.
6.5 SURVIVAL OF REPRESENTATIONS & WARRANTIES: Subject to Section 9 hereof,
all of the representations, warranties, indemnities and agreements of
or by the Parties to this
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Agreement shall survive the Closing of this transaction as provided
herein and shall not merge into the conveyancing documents.
SECTION 7 - ACCOUNTING FOR REVENUE & EXPENSES
7.1 ADJUSTMENTS: Anything herein to the contrary notwithstanding, all
hydrocarbon production revenues and expenses (including without
limitation, Lease rental or maintenance expenses, capital expenditures
or prepaid charges and royalties, overriding royalties, and other
payments out of production, but excluding all non-cash charges
attributable to depletion, depreciation, bad debt losses, lease
abandonment, etc.), pertaining to production from or attributable to
any part of the Oil & Gas Interests and relating to the period prior to
the Effective Time, shall be owned by and borne by SELLER ("SELLER
Amounts") and all similar hydrocarbon production revenues and expenses,
produced from or attributable to the Oil & Gas Interests conveyed by
SELLER to PURCHASER pursuant to this Agreement, which relate to the
period after the Effective Time, shall be owned by and borne by
PURCHASER ("PURCHASER Amounts"). The Purchase Price shall be adjusted
based on the PURCHASER Amounts and SELLER Amounts specified in the
financial closing document submitted by SELLER and reasonably agreed to
by PURCHASER at or prior to Closing. All other SELLER Amounts or
PURCHASER Amounts not specifically set forth on the financial closing
document shall be handled in accordance with Section 7.1.1.
7.1.1 FINAL ACCOUNTING:
(a) SELLER and PURCHASER shall use their best efforts to accomplish a
single final accounting and cash adjustment for the period
between the
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Effective Time and the Closing no later than one-hundred and
twenty (120) days after Closing to accomplish the purposes of
Section 7.1 and of this Agreement ("Final Accounting"). SELLER
shall prepare the Final Accounting and submit same to PURCHASER
for acceptance. To the extent reasonably required by SELLER,
PURCHASER shall assist in the preparation of the Final
Accounting. PURCHASER shall have the right to audit the Final
Accounting. The Parties' failure to complete the Final Accounting
shall not constitute a waiver of the right to receive any amount
otherwise due. The Final Accounting shall become final and
binding upon the Parties and payable ninety (90) days after
receipt thereof by PURCHASER (the "Final Accounting Date") unless
PURCHASER gives written notice of its desire to audit or of its
disagreement (an "Accounting Notice") to SELLER prior to such
date. Time is of the essence with respect to the Accounting
Notice. Any Accounting Notice which sets out a disagreement shall
specify in detail the dollar amount, nature and basis of any
disagreement so asserted. If an Accounting Notice is received by
SELLER in a timely manner, then, following any requested audit,
the Final Accounting (as revised in accordance with clause (i) or
(ii) below) shall become final and binding on the Parties and any
amounts due shall be payable by the earlier of thirty (30) days
after (i) the date SELLER and PURCHASER agree in writing with
respect to all matters as to which there is a disagreement or
(ii) the date on which the Arbitrator (as hereinafter defined)
issues its decision.
(b) During the ninety (90) days following the date of receipt by
SELLER of an Accounting Notice which requests an audit, SELLER
shall make available the necessary records to permit the audit
and SELLER and PURCHASER shall attempt (in good faith) to resolve
in writing any differences that they may have with respect to all
matters specified in the Accounting Notice or
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discovered in the audit. If, at the end of the sixty (60) day
period, SELLER and PURCHASER have not reached agreement on such
matters, pursuant to the arbitration provision of this Agreement
and this Section, the matters that remain in dispute shall be
submitted to an arbitrator (the "Arbitrator") for review and
final binding resolution. The Arbitrator shall be a member of a
recognized independent public accounting firm and shall be agreed
upon by SELLER and PURCHASER in writing. All determinations and
adjustments with respect to allocating items to the period before
or after the Effective Time shall be in accordance with generally
accepted accounting principles, consistently applied. The
Arbitrator shall render a decision resolving the matters in
dispute within fifteen (15) days following their submission to
the Arbitrator. The Arbitrator's decision reached in accordance
with the above paragraphs shall be final, and shall not be
subject to further arbitration under Section 10.9.
(c) If SELLER or PURCHASER at any time after the Final Accounting
receives any proceeds or pay any additional expenses for or on
behalf of the other Party (in the case of PURCHASER, SELLER
Amounts, and in the case of SELLER, PURCHASER Amounts), they
shall promptly invoice the other Party for such expenses (who
shall promptly pay such invoice) or remit to the other Party the
proceeds received (to the extent such amounts had not been
previously accounted for in the Final Accounting).
7.1.2 NOTICE TO REMITTERS OF PROCEEDS: After the Accounting Closing
Date, the SELLER shall inform the remitters to pay PURCHASER to
the extent practical the revenues after the Effective Time. To
the extent that any remitter pays revenues to the incorrect
Party, that Party shall promptly remit such revenues (without
interest) to the correct Party.
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7.2 ALLOCATION OF TAX LIABILITIES: All taxes (except state or federal
income taxes and franchise taxes) pertaining to the Oil & Gas Interests
or production from the Oil & Gas Interests and similar obligations
("Taxes") are SELLER's responsibility where attributable to the period
prior to the Effective Time and PURCHASER's responsibility where
attributable to the period after the Effective Time (regardless of when
assessed on the Oil & Gas Interests). To the extent possible, amounts
relating to Taxes shall be included in the Final Accounting. Each Party
shall be responsible for its own state or federal income taxes or
franchise taxes. After the Effective Time, each Party shall supply the
other Party all information and documents reasonably necessary to
comply with tax and financial reporting requirements and audits.
SECTION 8 - PURCHASER'S OBLIGATIONS
8.1 PURCHASER'S ASSUMED OBLIGATIONS: After the Closing, PURCHASER, subject
to Sections 2.3.1 and 2.5.3, shall assume and perform all of the
rights, duties, obligations and liabilities of ownership of the Oil &
Gas Interests, as follows:
(a) The express and implied obligations, conditions and covenants
under the terms of each Lease or the contracts referenced in
Section 2.3 to which the Oil & Gas Interests are subject; and
(b) Responsibility for compliance with all applicable laws,
regulations, ordinances, rules and orders and the procurement and
maintenance of all
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permits and bonds required by Governmental Bodies relating to the
Oil & Gas Interests and which accrue after the Closing; and
(c) Subject to Section 5.5(e), responsibility for the payment of
royalties, overriding royalties, net profits interests, rentals,
shut-in payments (if any) to which the Oil & Gas Interests are
subject and which are attributable to the period after the
Closing; and
(d) All other obligations assumed by PURCHASER under the terms of
this Agreement.
8.2 PLUGGING AND ABANDONMENT OF WELLS, REMOVAL OF PLATFORMS & FACILITIES:
Regardless of whether listed on Exhibits "1b" or "1c", PURCHASER
recognizes and specifically assumes SELLER's obligation to:
(i) properly plug and abandon any and all oil, gas or condensate
Wells; and
(ii) properly remove and dispose of all Platforms & Facilities,
including but not limited to, platforms, templates, pipelines,
gathering systems and all flowlines; and
(iii) restore each Lease and wellsite(s) associated with the Oil & Gas
Interests; all in accordance with the rules, regulations, and
requirements of any Governmental Body, and in accordance with all
obligations, express or implied, in any contract assumed by
PURCHASER, whether or not any such obligations arise prior to or
after the Effective Time. PURCHASER agrees to pay all costs and
expenses associated with any such plugging and abandoning,
removal, or restoration.
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SECTION 9 - DISCLAIMER OF WARRANTY / INDEMNIFICATION
9.1 SALE "AS IS" "WHERE IS": PURCHASER REPRESENTS THAT IT HAS INSPECTED, OR
HAS HAD THE OPPORTUNITY TO INSPECT, THE OIL & GAS INTERESTS AND
ACCEPTED THE PHYSICAL AND ENVIRONMENTAL CONDITION OF SAME ON AN "AS
IS-WHERE IS" BASIS SUBJECT TO THE TERMS OF THIS AGREEMENT. PURCHASER
RELEASES SELLER FROM ANY LIABILITY WITH RESPECT TO THE PHYSICAL AND
ENVIRONMENTAL CONDITION OF THE OIL & GAS INTERESTS AT THE CLOSING
(OTHER THAN AS MAY BE PROVIDED FOR UNDER THIS AGREEMENT) WHETHER OR NOT
CAUSED BY OR ATTRIBUTABLE TO SELLER'S NEGLIGENCE, FAULT, OR STRICT
LIABILITY, AND WHETHER OR NOT ARISING DURING THE PERIOD OF, OR FROM, OR
IN CONNECTION WITH SELLER'S OWNERSHIP OF THE OIL & GAS INTERESTS OR USE
OF THE PROPERTY DESCRIBED IN THE LEASES BEFORE OR AT THE CLOSING.
WITHOUT LIMITING THE ABOVE, PURCHASER WAIVES ANY RIGHT, EXCEPT TO THE
EXTENT OTHERWISE PROVIDED FOR IN THIS AGREEMENT, TO RECOVER FROM SELLER
AND FOREVER RELEASES AND DISCHARGES SELLER AND SUBJECT TO, AND AS
PROVIDED IN, THIS AGREEMENT, AGREES TO RELEASE, INDEMNIFY, DEFEND AND
HOLD SELLER HARMLESS FROM ANY AND ALL DAMAGES, CLAIMS, LOSSES,
LIABILITIES, PENALTIES, FINES, LIENS, JUDGMENTS, COSTS AND EXPENSES
WHATSOEVER, (INCLUDING WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS),
WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN,
THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE
PHYSICAL AND ENVIRONMENTAL CONDITION OF THE OIL & GAS INTERESTS AT THE
CLOSING OR ANY LAW OR REGULATION APPLICABLE THERETO, INCLUDING WITHOUT
LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, AS AMENDED (42
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U.S.C. SECTION 9601 ET. SEQ.), THE RESOURCE CONSERVATION AND RECOVERY
ACT OF 1976 (42 U.S.C. SECTION 6901 ET. SEQ.), THE CLEAN WATER ACT (33
U.S.C. SECTIONS 466 ET. SEQ.), THE SAFE DRINKING WATER ACT (14 U.S.C.
SECTION 1401-1450), THE HAZARDOUS MATERIALS TRANSPORTATION ACT (49
U.S.C. SECTION 7401 ET. SEQ.), AS AMENDED, THE CLEAN AIR ACT AMENDMENTS
OF 1990, AND ANY OTHER APPLICABLE FEDERAL, STATE OR LOCAL LAW, WHETHER
OR NOT ARISING DURING THE PERIOD OF, OR FROM, OR IN CONNECTION WITH,
SELLER'S OWNERSHIP OF THE OIL & GAS INTERESTS OR USE OF THE PROPERTY
DESCRIBED IN THE LEASES AT OR PRIOR TO THE CLOSING, AND WHETHER OR NOT
ATTRIBUTABLE TO THE STRICT LIABILITY OF SELLER OR TO THE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE, NEGLIGENCE OF SELLER, EVEN IF CAUSED BY
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER PRIOR TO CLOSING.
9.2 DISCLAIMER REGARDING OIL & GAS INTERESTS: PURCHASER ACKNOWLEDGES THAT,
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, SELLER HAS NOT MADE,
AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY COVENANT,
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE
CONDITION OF ANY IMMOVABLE PROPERTY, MOVABLE PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY CONSTITUTING PART
OF THE OIL & GAS INTERESTS (INCLUDING, WITHOUT LIMITATION, (a) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY (b) ANY IMPLIED OR
EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (c) ANY IMPLIED
OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(d) ANY RIGHTS OF PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (e) ANY
IMPLIED OR EXPRESS
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WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, (f) ANY
IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM REDHIBITORY VICES OR
DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, (g) ANY
AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW NOW OR
HEREAFTER IN EFFECT AND (h) ANY IMPLIED OR EXPRESS WARRANTY REGARDING
ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR
PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS INTENTION
OF SELLER AND PURCHASER THAT THE IMMOVABLE PROPERTY, MOVABLE PROPERTY,
EQUIPMENT, INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY SHALL
BE CONVEYED TO PURCHASER AS IS AND IN THEIR PRESENT CONDITION AND STATE
OF REPAIR AND PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS MADE OR
CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO THE IMMOVABLE
PROPERTY, MOVABLE PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES
AND PERSONAL PROPERTY AS PURCHASER DEEMS APPROPRIATE AND PURCHASER WILL
ACCEPT THE IMMOVABLE PROPERTY, MOVABLE PROPERTY, EQUIPMENT, INVENTORY,
MACHINERY, FIXTURES AND PERSONAL PROPERTY AS IS, IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
9.3 DISCLAIMER REGARDING INFORMATION: SELLER HEREBY EXPRESSLY NEGATES AND
DISCLAIMS, AND PURCHASER HEREBY WAIVES, AND ACKNOWLEDGES THAT SELLER
HAS NOT MADE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
RELATING TO (a) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR VERBAL) NOW,
HERETOFORE, OR HEREAFTER FURNISHED TO PURCHASER BY OR ON BEHALF OF
SELLER OR (b)
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PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GEOLOGICAL
OR GEOPHYSICAL DATA OR INTERPRETATIONS, THE QUALITY, QUANTITY,
RECOVERABILITY OR COST OF RECOVERY OF ANY HYDROCARBON RESERVES, ANY
PRODUCT PRICING ASSUMPTIONS, OR THE ABILITY TO SELL OR MARKET ANY
HYDROCARBONS AFTER CLOSING.
9.4 INDEMNIFICATION:
(a) PURCHASER shall release, indemnify, defend and hold harmless
SELLER and its respective Affiliates, and each SELLER's and each
such Affiliate's directors, officers, employees, stockholders and
agents ("SELLER GROUP"), from and against any and all claims,
liabilities, losses, causes of actions, damages, costs and
expenses (including, without limitation, those involving theories
of negligence or strict liability and including court costs and
attorneys' fees) ("Losses") asserted against, resulting from,
imposed upon or incurred by SELLER GROUP (i) as a result of, or
arising out of, the breach of any of the representations or
warranties of PURCHASER contained in this Agreement, or (ii) as a
result of, or arising out of, PURCHASER's ownership or operation
of the Oil & Gas Interests, including, but not limited to, the
obligation to properly plug and abandon all Wells and remove all
Platforms & Facilities now or hereafter located on any of the Oil
& Gas Interests as set forth in Sections 8.1 and 8.2, or (iii) as
a result of, or arising out of, any matter or circumstance
relating to the Environmental Obligations assumed by PURCHASER
pursuant to Section 2.5.2, or (iv) as a result of, or arising out
of the matters described in Sections 2.3 (except as provided for
in Section 2.3.1), 9.2, and 9.3
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(except as provided for in Section 2.5.3), regardless in each
case whether known or unknown, whether attributable to periods of
time before or after the Effective Time or Closing, and
REGARDLESS OF THE STRICT LIABILITY OF SELLER GROUP OR WHETHER
SELLER GROUP WAS OR WAS ALLEGED TO HAVE BEEN NEGLIGENT, INCLUDING
WITHOUT LIMITATION, THE SOLE, JOINT OR CONCURRENT, ACTIVE OR
PASSIVE NEGLIGENCE OF SELLER GROUP, EVEN IF SELLER GROUP WAS OR
WAS ALLEGED TO HAVE BEEN GROSSLY NEGLIGENT OR GUILTY OF WILLFUL
MISCONDUCT.
(b) SELLER shall release, indemnify, defend and hold harmless
PURCHASER and its Affiliates, and its and their respective
directors, officers, employees, stockholders and agents
("PURCHASER GROUP") from and against all Losses asserted against,
resulting from, imposed upon or incurred by PURCHASER GROUP as a
result of, or arising out of (i) the breach of any of the
representations or warranties of SELLER contained in this
Agreement (except with respect to any error in Schedules 6.2 (i),
6.2 (v), 6.2 (w) and 6.2 (x), for which SELLER assumes no
liability), (ii) liabilities attributable to the Excluded Assets,
(iii) any matter or circumstance described in Sections 2.3.1 or
2.5.3, or (iv) the breach of the limited title warranty in
Section 3.1.
(c) The liability of SELLER and PURCHASER under this Agreement and
any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
(i) In no event shall any amounts be recovered from SELLER
under Subsection 9.4(b)(i) for any breach of any
representation or warranty
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of SELLER set forth in the Agreement for which a written
notice of claim specifying in reasonable detail the
specific nature of the Losses and the estimated amount of
such Losses ("Claim Notice") is not delivered to SELLER
prior to the close of business on November 1, 2000 at 5:00
p.m., local time, and the indemnity obligation of SELLER in
Subsections 9.4(b)(i) with respect to such representations
and warranties shall terminate on said date.
(ii) The representations and warranties of the Parties set forth
in Section 6 of this Agreement shall survive the Closing
for a period of eighteen (18) months and shall terminate at
5:00 p.m., local time in New Orleans, Louisiana, on
November 1, 2000; provided, however, that any such
representation or warranty that is the subject of a Claim
Notice delivered in good faith in compliance with the
requirements of Section 9.4(d) shall survive with respect
only to the specific matter described in such Claim Notice
until the earlier to occur of (A) the date on which a final
nonappealable resolution of the matter described in such
Claim Notice has been reached or (B) the date on which the
matter described in such Claim Notice has otherwise reached
final resolution. Other than as set forth in Section
2.5.3(c), this eighteen (18) month period shall have no
applicability to the respective obligations of PURCHASER
and SELLER under Sections 9.1 through 9.4(b) (but excluding
Section 9.4(b)(i)) and Section 4.5.
(iii) Notwithstanding anything to the contrary herein, in no
event shall (i) SELLER GROUP or PURCHASER GROUP be liable
to the other for punitive, exemplary, consequential, or
special damages; (ii) SELLER GROUP indemnify PURCHASER
GROUP or any other
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person, or be otherwise liable in any way whatsoever to
PURCHASER GROUP or any other person, for any Losses arising
from the breach of a representation or warranty of SELLER
GROUP in excess of an amount equal to $80,000,000; and
(iii) SELLER GROUP indemnify PURCHASER GROUP, or be
otherwise liable to PURCHASER GROUP, for any losses until
PURCHASER GROUP has suffered losses in the aggregate in
excess of a deductible in an amount equal to $2,000,000.00,
after which point SELLER GROUP will be obligated only to
indemnify PURCHASER GROUP from and against further losses
in excess of such deductible.
(iv) No amount shall be recovered from any Party for the breach
or untruth of any representations or warranties, of the
other Party, or for any other matter, to the extent that
the Party claiming a Loss as a result thereof had actual
knowledge of such breach, untruth or other matter at or
prior to the Closing, nor, in such event, shall PURCHASER
be entitled to rescission with respect to any such matter.
(d) All claims for indemnification under this Agreement shall be
asserted and resolved pursuant to this Section 9.4(d). Any person
claiming indemnification hereunder is hereinafter referred to as
the "Indemnified Party" and any person against whom such claims
are asserted hereunder is hereinafter referred to as the "
Indemnifying Party." In the event that any Losses are asserted
against or sought to be collected from an Indemnified Party by a
third party, said Indemnified Party shall with reasonable
promptness provide to the Indemnifying Party a Claim Notice. The
Indemnifying Party shall not be obligated to indemnify the
Indemnified
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Party with respect to any such Losses if the Indemnified Party
fails to notify the Indemnifying Party thereof in accordance with
the provisions of this Agreement in reasonably sufficient time so
that the Indemnifying Party's ability to defend against the
Losses is not materially prejudiced. The Indemnifying Party shall
have thirty (30) days from the personal delivery or receipt of
the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with
respect to such Losses and/or (ii) whether or not it desires, at
the sole cost and expense of the Indemnifying Party, to defend
the Indemnified Party against such Losses; provided, however,
that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other
pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party (and of which it
shall have given notice and opportunity to comment to the
Indemnifying Party). In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it
desires to defend the Indemnified Party against such Losses, the
Indemnifying Party shall have the right to defend all appropriate
proceedings, and with counsel of its own choosing, which
proceedings shall be promptly settled or prosecuted by them to a
final conclusion. If the Indemnified Party desires to participate
in, but not control, any such defense or settlement it may do so
at its sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that
the Indemnifying Party elects to contest or, if appropriate and
related to the claim in question, in making any counterclaim
against the person asserting the third party Losses, or any
cross-complaint against any person. No claim may be settled or
otherwise compromised without the prior written consent of the
Indemnifying Party and no claim may be settled or compromised by
the Indemnifying Party without the prior written consent
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of the Indemnified Party unless such settlement or compromise
entails a full and unconditional release of the Indemnified Party
(and any other members of the Indemnified Party's group, i.e.,
SELLER GROUP or PURCHASER GROUP) without any admission or finding
of fault or liability.
SECTION 10 - ADMINISTRATIVE PROVISIONS
10.1 EXPENSES OF SALE: Except as otherwise specifically provided herein,
each Party to this Agreement shall pay its own expenses (including
without limitation, the fees and expenses of their respective agents,
representatives, counsel and accountants) with respect to the
negotiation, execution and the delivery of this Agreement and the
consummation of the transactions under this Agreement.
10.2 THIRD PARTY RIGHTS: Except as to those indemnity obligations owed to
the indemnified entities or persons listed in Section 9 hereof,
notwithstanding any other provision of this Agreement, this Agreement
shall not create benefits on behalf of any person who is not a Party to
this Agreement (including without limitation, any broker or finder,
creditor or other person), and this Agreement shall be effective only
as between the Parties hereto, their successors and permitted assigns.
10.3 FURTHER ACTIONS: PURCHASER and SELLER agree that each will, from time
to time and upon reasonable request, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered by its Affiliates,
such instruments, and take such other action as may be necessary, or
advisable, to carry out
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PURCHASER's and SELLER's obligations under this Agreement. Further,
PURCHASER and SELLER agree as follows:
(i) Except for the assets of SOSCO to be addressed by
Exhibit "6" hereof, to the extent that there are
assets of SELLER's Affiliates located on the Oil &
Gas Interests, the locations of which will be
disclosed in writing to PURCHASER, but for which a
lease of platform space is not currently in place, or
has not been negotiated, PURCHASER and such
Affiliates shall negotiate in good faith such leases
as are appropriate containing provisions consistent
with industry customs and rental fees of $150.00 per
square foot per year for equipment and facilities,
and $25.00 per square foot per year for platform
risers. For the period between the Effective Time and
the execution of any such leases, PURCHASER agrees
that such Affiliates shall have, and PURCHASER hereby
grants, a lease of platform space with respect to the
applicable Oil & Gas Interests limited to such areas
as are necessary for the maintenance, repair and
operation of the Affiliates' equipment, the rentals
due under such leases being as specified above; and
(ii) The Parties acknowledge that the Exhibits and
Schedules are subject to modification, revision,
deletion and addition by SELLER up to and including
May 12, 1999, at which time SELLER shall present a
complete set of the Exhibits and Schedules to
PURCHASER, and that upon PURCHASER's certification
pursuant to Section 5.1.3, SELLER's representations
and warranties in Section 6.2 shall be effective as
of the date of such certification of such modified
Exhibits and Schedules; and
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(iii) To the extent that either PURCHASER or SELLER
requires a production handling agreement contract as
a result of the assignment from SELLER to PURCHASER
of an interest in a Lease pursuant to this Agreement,
the parties shall negotiate in good faith such
production handling agreements as are appropriate
containing provisions consistent with industry custom
and provides for a maximum rate of $.10 per mcf,
$1.00 per bbl of oil and $.50 per bbl of water.
10.4 NOTICES: Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be sent by personal delivery,
facsimile machine or by depositing same in the United States Mail,
addressed to the Party to be notified, postage prepaid, and registered
or certified with a return receipt requested. Notices deposited in the
mail in the manner hereinabove described shall be deemed to have been
given and received upon the date of delivery as shown on the return
receipt (or upon the date of attempted delivery where delivery is
refused). Notice served in any other manner shall be deemed to have
been given and received only if and when actually received by the
addressee (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or
other facsimile means), and when delivered and receipted for, if
hand-delivered, sent by express courier or delivery service. For
purposes of notice, the addresses of the Parties shall be as follows:
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EXPRESS MAIL REGULAR MAIL
------------ ------------
SELLER
------
Shell Offshore Inc. Shell Offshore Inc.
ATTN: Contracts Manager ATTN: Contracts Manager
701 Poydras Street P. O. Box 61933
New Orleans, LA 70139 New Orleans, LA 70161
Telephone - (504) 728-6704
Facsimile - (504) 728-0678
PURCHASER
---------
Apache Corporation
ATTN: Lisa A. Floyd
Vice President - Business Development
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Telephone - (713) 296-6569
Facsimile - (713) 296-6459
or at such other address and number as either Party shall have
previously designated by written notice given to the other Party in the
manner hereinabove set forth.
10.5 PUBLIC ANNOUNCEMENTS: The Parties agree that prior to making any public
announcement or statement with respect to the transaction contemplated
by this Agreement, the Party desiring to make such public announcement
or statement shall obtain the written approval of the other Party to
the text of such announcement or statement, which approval may not be
unreasonably withheld. Nothing contained
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in this Section shall be construed to require either Party to obtain
approval of the other Party to disclose information with respect to the
transaction contemplated by this Agreement to any state or federal
Governmental Body, to the extent required by applicable law or by any
applicable rules, regulations or orders of any Governmental Body having
jurisdiction, or necessary to comply with disclosure requirements of
applicable securities laws or any applicable stock exchanges.
10.6 TIME LIMITS: Time is of the essence in this Agreement and all time
limits shall be strictly construed and enforced. The failure or delay
of any Party in the enforcement of the rights granted under this
Agreement shall not constitute a waiver of said rights nor shall it be
considered as a basis for estoppel. Except as otherwise limited by the
time limits contained in this Agreement, such Party may exercise its
rights under this Agreement despite any delay or failure to enforce the
rights when the right or obligation arose.
10.7 COMPLIANCE WITH LAWS & REGULATIONS: This Agreement, and all operations
conducted by the Parties pursuant to this Agreement, are expressly
subject to and shall comply with all laws, orders, rules and
regulations of any federal, state or local Governmental Body having
jurisdiction. No Party shall suffer a forfeiture or be liable in
damages for failure to comply with any of the provisions of this
Agreement if such compliance is prevented or if such failure results
from compliance with any applicable law, order, rule or regulation.
10.8 APPLICABLE LAW: The provisions of this Agreement and the relationship
of the Parties shall be governed and interpreted according to the laws
of the State of Louisiana without giving effect to principles of
conflicts of laws.
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10.8.1 DTPA WAIVER:
(i) PURCHASER HEREBY REPRESENTS AND ACKNOWLEDGES THAT IT IS
A "BUSINESS CONSUMER" FOR THE PURPOSES OF THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT
(SUBCHAPTER E OF CHAPTER 17 OF THE TEXAS BUSINESS AND
COMMERCE CODE (THE "TEXAS DTPA")), THAT IT HAS ASSETS OF
$5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, THAT IS HAS KNOWLEDGE AND EXPERIENCE
IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE
THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, THAT IT HAS BEEN REPRESENTED BY LEGAL
COUNSEL OF ITS CHOICE IN ENTERING INTO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND THAT
IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION
WITH RESPECT TO THE PARTIES TO AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. PURCHASER HEREBY WAIVES THE
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT (OTHER THAN SECTION 17.555 THEREOF), AS FROM
TIME TO TIME AMENDED.
(ii) PURCHASER expressly recognizes that the price for which
SELLER has agreed to perform its obligations under this
Agreement has been predicated upon the inapplicability of
the Texas DTPA and this waiver thereof. PURCHASER further
recognizes that SELLER, in determining to proceed with the
entering into of this Agreement, has expressly relied on
this waiver and the inapplicability of the Texas DTPA.
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10.9 ARBITRATION: Any controversy or claim ("Claim"), whether based on
contract, tort, statute or other legal or equitable theory arising out
of or related to the breach of one or more of the warranties and
representations made in this Agreement, or as a result of any other
matters which may give rise to a liability with respect to this
Agreement, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
(the "Rules"), and this provision. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C 1-16, to the exclusion of
any provision of state law inconsistent therewith or which would
produce a different result, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction.
Either SELLER or PURCHASER may initiate arbitration by giving written
notice to the other. Arbitration will be deemed to be initiated when
written notice, properly addressed and stamped, is deposited with the
United States Postal Service. The party initiating arbitration shall
nominate one (1) arbitrator at the same time it initiates arbitration.
The other party shall nominate one (1) arbitrator within thirty (30)
calendar days of receiving the notice of arbitration, failing which the
initiating party, on behalf of and on written notice to the other
party, may request appointment of the second arbitrator by the American
Arbitration Association ("AAA") office in Houston, Texas in accordance
with the Rules. The two arbitrators shall appoint a third, neutral
arbitrator. The third, neutral arbitrator shall be competent and
experienced in matters involving the oil and gas business in the Gulf
of Mexico and shall be unaffiliated and without prior financial
alliances with either party, or either of the other arbitrators.
If the two arbitrators are unable to agree on a third arbitrator within
sixty (60) calendar days from initiation of arbitration, then a third
arbitrator shall be selected by the AAA office in Houston, Texas, with
due regard given to the selection criteria above and input from the
parties and other arbitrators. The AAA shall select the
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<PAGE> 70
third arbitrator not later than ninety (90) calendar days from
initiation of arbitration. Costs charged by AAA for selecting the third
arbitrator shall be borne equally by SELLER and PURCHASER.
In the event AAA should fail to select the third arbitrator within
ninety (90) calendar days from initiation of arbitration, then either
party may petition the Chief United States District Judge for the
Eastern District of Louisiana to select the third arbitrator. Due
regard shall be given to the selection criteria above and input from
the parties and other arbitrators.
The arbitrators shall determine the Claims of the Parties and render a
final award in accordance with the substantive law of the State of
Louisiana, excluding the conflicts provisions of such law. The
arbitrators shall set forth the reasons for the award in writing. All
statutes of limitations and defenses based upon passage of time
applicable to any Claim (including any counterclaim or setoff) shall be
interrupted by the filing of the arbitration and suspended while the
arbitration is pending.
The obligation to arbitrate any Claim shall extend to the successors,
assigns and third party beneficiaries of the Parties. The Parties shall
use their best efforts to cause the obligation to arbitrate any Claim
to extend to any officer, director, employee, shareholder, agent,
trustee, affiliate, or subsidiary. The terms hereof shall not limit any
obligations of a Party to defend, indemnify, or hold harmless another
Party against court proceedings or other Claims, losses, damages or
expenses.
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<PAGE> 71
The arbitrators shall order the Parties to promptly exchange copies of
all exhibits and witness lists, and, if requested by a Party, to
produce other relevant documents, to answer interrogatories, to respond
to requests for admissions (which shall be deemed admitted if not
denied) and to produce for deposition and, if requested, at the hearing
all witnesses that such Party has listed and all other persons within
such Party's control. Any additional discovery shall only occur by
agreement of the Parties or as ordered by the arbitrator upon finding
good cause.
The three arbitrators so selected shall conduct a hearing in New
Orleans, Louisiana not later than ninety (90) days following the date
the third arbitrator is selected, at which the parties shall present
such evidence and witnesses as they may choose, with or without
counsel. Adherence to formal rules of evidence shall not be required,
but the arbitrators shall consider any evidence and testimony that they
determine to be relevant, in accordance with procedures that they
determine to be appropriate. The arbitrators shall render a written
decision within twenty (20) days following conclusion of the hearing.
Each Party shall bear its own costs, expenses and attorney's fees;
provided that if court proceedings to stay litigation or compel
arbitration are necessary, the Party who unsuccessfully opposes such
proceedings shall pay all reasonable associated costs, expenses, and
attorney's fees in connection with such court proceeding; provided
further, that any costs incurred by a party in seeking judicial
enforcement of any decision rendered in writing by the arbitrators, or
a majority of the arbitrators, shall be chargeable to and borne
exclusively by the Party against whom such court order is obtained.
In order to prevent irreparable harm, the arbitrator shall have the
power to grant temporary or permanent injunctive or other equitable
relief. Prior to the
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<PAGE> 72
appointment of an arbitrator a Party may, notwithstanding any other
provision of this Agreement, seek temporary injunctive relief from any
court of competent jurisdiction; provided that the Party seeking such
relief shall (if arbitration has not already been commenced)
simultaneously commence arbitration. Such court ordered relief shall
not continue more than 10 days after the appointment of the arbitrator
and in no event for longer than 60 days.
Each Party shall bear the cost of the arbitrator selected by the party
and the cost of the third arbitrator shall be shared equally by both
PURCHASER and SELLER.
10.10 SEVERANCE OF INVALID PROVISIONS: In case of a conflict between the
provisions of this Agreement and the provisions of any applicable laws
or regulations, the provisions of the laws or regulations shall govern
over the provisions of this Agreement. If, for any reason and for so
long as, any clause or provision of this Agreement is held by a court
of competent jurisdiction to be illegal, invalid, unenforceable or
unconscionable under any present or future law (or interpretation
thereof), the remainder of this Agreement shall not be affected by such
illegality or invalidity. Any such invalid provision shall be deemed
severed from this Agreement as if this Agreement had been executed with
the invalid provision eliminated.
10.11 CONSTRUCTION & INTERPRETATION: The interpretation and construction of
the terms of this Agreement will be governed by the following
conventions:
10.11.1 HEADINGS FOR CONVENIENCE: Except for the definition
headings, all the table of contents, captions, numbering
sequences, paragraph headings and punctuation used in this
Agreement are inserted for convenience only and shall in no
way define, limit or describe the scope or intent of this
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<PAGE> 73
Agreement or any part thereof, nor have any legal effect
other than to aid a reasonable interpretation of this
Agreement.
10.11.2 GENDER & NUMBER: The use of pronouns in whatever gender or
number shall be deemed to be a proper reference to the
Parties to this Agreement though the Parties may be
individuals, business entities or groups thereof. Any
necessary grammatical changes required to make the
provisions of this Agreement refer to the correct gender or
number shall in all instances be assumed as though each case
was fully expressed.
10.11.3 INDEPENDENT REPRESENTATION: Each Party has had the benefit
of independent representation with respect to the subject
matter of this Agreement. This Agreement, though drawn by
one Party, shall be construed fairly and reasonably and not
more strictly against one Party than another.
10.12 INTEGRATED AGREEMENT: This Agreement, and the Exhibits and Schedules
attached and incorporated herein, and the instruments delivered at or
in connection with the Closing hereunder ("Closing Documents") contains
the final and entire agreement of the Parties with respect to the
subject matter of this contract. There are no representations,
warranties or promises, oral or written, between the Parties other than
those included in this Agreement or in any Closing Document. Upon
execution of this Agreement by all Parties, this Agreement shall
supersede and replace all previous negotiations, understandings or
promises, whether written or oral, relative to the subject of this
Agreement. Each of the Parties acknowledges that no other Party has
made any promise, representation or warranty that is not expressly
stated in this Agreement or in any Closing Document. This Agreement
shall not be
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<PAGE> 74
modified or changed (nor any provision of this Agreement waived) except
by a written amendment signed by all the Parties. This Agreement is
entire as to all the performances to be rendered under it, and breach
of any provision shall constitute a breach of the entire Agreement. A
waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or
waive a Party's rights under this Agreement at any time to enforce
strict compliance thereafter with every term or condition of this
Agreement.
10.13 BINDING EFFECT: This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns.
10.14 MULTIPLE COUNTERPARTS: This Agreement may be executed by signing the
original or a counterpart hereof. If this Agreement is executed in
multiple counterparts, each counterpart shall be deemed an original,
and all of which when taken together shall constitute but one and the
same agreement with the same effect as if all Parties had signed the
same instrument.
10.15 FAIR NOTICE DISCLOSURE STATEMENT: PURCHASER'S ATTENTION IS DIRECTED TO
CERTAIN PROVISIONS OF THIS AGREEMENT WHICH REQUIRE PURCHASER TO DEFEND,
INDEMNIFY AND HOLD SELLER HARMLESS IRRESPECTIVE OF THE STRICT LIABILITY
OF SELLER OR THE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE,
NEGLIGENCE OF SELLER, AND IN SOME CASES THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLER.
10.16 GAS BALANCING: Producer and field imbalances will be addressed in the
closing statement and the Final Accounting as set forth in Sections 7.1
et seq. Specifically, PURCHASER and SELLER agree that the producer and
field imbalances will be settled between the Parties pursuant to the
aforementioned sections on the basis of $1.95 per mcf of gas and $14.00
per barrel of oil. As to producer and field
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<PAGE> 75
imbalances, PURCHASER shall assume the rights and obligations of SELLER
in and to such imbalances as of the Effective Time, and release,
indemnify, and hold harmless SELLER in connection therewith.
IN WITNESS WHEREOF, the Parties have executed the Agreement as of the
date first above written.
WITNESSES (AS TO ALL OF SELLER'S SIGNATURES):
SHELL OFFSHORE INC.
/s/ John J. Christmann, IV By: /s/ K. R. Sissell
- ---------------------------- -----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
/s/ Marjorie Lofthouse
- ----------------------------
MIDSTREAM CAPITAL CORPORATION
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Attorney-in-Fact
for Shell Exploration & Production
Company, as Agent for Midstream
Capital Corporation
SHELL OIL & GAS INVESTMENT
LIMITED PARTNERSHIP
By: SHELL OFFSHORE INC.,
Its General Partner
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
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<PAGE> 76
SHELL ONSHORE VENTURES INC.
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
SHELL DEEPWATER DEVELOPMENT
HOLDINGS INC.
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
SHELL FRONTIER OIL & GAS INC.
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
SOI FINANCE INC.
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
ORLANDO-SOI PARTNERSHIP
By: SHELL OFFSHORE INC.,
Its General Partner
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
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<PAGE> 77
SHELL CONSOLIDATED ENERGY
RESOURCES INC.
By: /s/ K. R. Sissell
-----------------------------------
K. R. Sissell
Agent & Attorney-in-Fact
WITNESSES:
APACHE CORPORATION
/s/ John J. Christmann, IV By: /s/ Lisa A. Floyd
- ------------------------------ -----------------------------------
Lisa A. Floyd
Vice President - Business Development
/s/ Marjorie Lofthouse
- ------------------------------
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<PAGE> 78
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Offshore Inc., a Delaware corporation, on the day and year therein
mentioned and as the act and deed of said corporation, for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Attorney-in-Fact for Shell
Exploration & Production Company, as Agent for Midstream Capital Corporation, a
Delaware corporation, on the day and year therein mentioned and as the act and
deed of said corporation, for the purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
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<PAGE> 79
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Offshore Inc., the General Partner of Shell Oil & Gas Investment Limited
Partnership, a Delaware partnership, on the day and year therein mentioned and
as the act and deed of said partnership, for the purpose and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Onshore Ventures Inc., a Delaware corporation, on the day and year therein
mentioned and as the act and deed of said corporation, for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
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<PAGE> 80
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Deepwater Development Holdings Inc., a Delaware corporation, on the day
and year therein mentioned and as the act and deed of said corporation, for the
purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Frontier Oil & Gas Inc., a Delaware corporation, on the day and year
therein mentioned and as the act and deed of said corporation, for the purpose
and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
Page 75
<PAGE> 81
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for SOI
Finance Inc., a Delaware corporation, on the day and year therein mentioned and
as the act and deed of said corporation, for the purpose and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Offshore Inc., the General Partner of Orlando-SOI Partnership, a Delaware
partnership, on the day and year therein mentioned and as the act and deed of
said partnership, for the purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
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<PAGE> 82
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared K. R. SISSELL, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Agent and Attorney-in-Fact for
Shell Consolidated Energy Resources Inc., a Delaware corporation, on the day and
year therein mentioned and as the act and deed of said corporation, for the
purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally
appeared Lisa A. Floyd, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he, being fully authorized
to do so, executed and delivered the same as Vice President-Business Development
for Apache Corporation, a Delaware corporation, on the day and year therein
mentioned and as the act and deed of said corporation, for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 29th day of April, 1999.
/s/ Jonathan Hunter
-----------------------------
Notary Public
My Commission is for life.
Page 77
<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated April 29, 1999 by
and between SHELL OFFSHORE INC., a Delaware corporation ("Shell") having a post
office address of P.O. Box 61933, New Orleans, Louisiana 70161, and APACHE
CORPORATION, a Delaware corporation ("Apache"), the address for which is 2000
Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. Shell and Apache are
sometimes separately referred to as a "Party" and are sometimes collectively
referred to as "Parties."
WHEREAS, the Parties and certain affiliates of Shell (collectively, the
"Shall Entities") have entered into an Asset Purchase Agreement dated even
herewith for the sale by the Shell Entities and purchase by Apache of certain
oil and gas properties (the "Asset Purchase Agreement"); and
WHEREAS, as a portion of the consideration to be paid by Apache
pursuant to the Asset Purchase Agreement, Shell has agreed to acquire and Apache
has agreed to issue shares of common stock of Apache;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Asset Purchase Agreement, the benefits to be derived by each
Party hereunder and thereunder, and other good and valuable consideration, the
Parties agree as follows:
SECTION 1 - DEFINITIONS
All capitalized terms used herein and not otherwise defined have the meanings
set forth in the Asset Purchase Agreement.
SECTION 2 - PURCHASE AND SALE OF THE SHARES
2.1 PURCHASE AND SALE OF THE SHARES: On the terms and subject to the
conditions of the Asset Purchase Agreement and this Agreement, at the
Closing, Apache shall issue and sell to Shell 1,000,000 shares (the
"Shares") of the common stock, par value $1.25 per share, of Apache
("Apache Common Stock") and Shell shall acquire and purchase the Shares
from Apache.
2.2 CONSIDERATION FOR THE SHARES: The Shares are being issued in connection
with and as part of the consideration for the acquisition by Apache of
certain oil and gas properties from Shell pursuant to the Asset
Purchase Agreement.
2.3 SHARE CERTIFICATE: Apache shall deliver to Shell at the Closing a stock
certificate representing the Shares in appropriate form.
<PAGE> 2
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF SHELL
Shell hereby represents and warrants to Apache as of the date hereof and as of
the Closing that:
3.1 Shell is acquiring the Shares for its own account and not as a nominee
or agent or otherwise for any other person.
3.2 Shell is acquiring the Shares for investment purposes and not with a
view to, or for resale in connection with, any distribution any of the
Shares in violation of the Securities Act of 1933, as amended.
3.3 Shell has such knowledge, sophistication and experience in business,
tax and financial matters that Shell is capable of evaluating and is
familiar with the merits and risks of an investment in the Shares, can
bear substantial economic risk of an investment in the Shares for an
indefinite period of time and can afford a complete loss of such
investment.
3.4 Shell has received from Apache, and has had the opportunity to review,
the following documents concerning Apache:
(i) Prospectus dated September 21, 1995 relating to 1,350,000
shares of Apache Common Stock registered pursuant to a
registration statement described in Section 4.1 below,
(ii) Prospectus supplement dated April 26, 1999,
(iii) Annual Report on Form 10-K for the year ended December 31,
1998,
(iv) Current Report on Form 8-K dated March 2, 1999 (as amended by
Amendment No. 1 on Form 8-K/A filed on March 5, 1999), and
(v) Proxy Statement for annual meeting of stockholders to be held
on May 6, 1999.
Shell acknowledges that certain information conveyed to it under item
(ii) above contains material nonpublic information concerning Apache
and that the federal securities laws prohibit trading in securities
while in possession of material nonpublic information, and Shell agrees
to maintain the confidentiality of such information.
3.5 Shell acknowledges that (i) none of Apache, any affiliate thereof or
any person representing Apache or any affiliate thereof has made any
representation to it with respect to Apache or the offering or sale of
the Shares, other than the information concerning Apache and the
offering contained in the documents set forth in Section 3.4 or the
Asset Purchase Agreement, (ii) in making its investment decision Shell
is not relying upon any information given by Apache or any affiliate
thereof or any person representing Apache or any affiliate thereof
other than the information concerning Apache and the offering contained
in the documents set forth in Section 3.4 and the Asset Purchase
Agreement and (iii) no representation has been made, and no information
has been furnished, to Shell in connection with the offering or sale of
the Shares that was in any way inconsistent with any other information
with which Shell has been provided.
2
<PAGE> 3
3.6 Shell understands the Apache is relying upon the representations and
warranties contained in this Agreement for purposes of determining
whether it is appropriate to issue the Shares to Shell.
3.7 Shell is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Shell has full power
and authority to enter into this Agreement and consummate the
transactions contemplated by this Agreement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of Shell
and is a valid and binding agreement of Shell enforceable in accordance
with its terms, subject as to enforceability to general principles of
equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally.
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF APACHE
Apache hereby represents and warrants to Shell as of the date hereof and as of
the Closing that:
4.1 Apache has prepared and filed with the Securities and Exchange
Commission ("Commission") a registration statement on Form S-4 (No.
33-61669) that covers the registration of the Shares under the
Securities Act of 1933, as amended ("Securities Act"), and the sale of
the Shares pursuant to the Asset Purchase Agreement and this Agreement
in accordance with Rule 415 of the rules and regulations of the
Commission under the Securities Act, and has prepared and filed such
amendments thereto as may have been required to the date hereof. Such
registration statement, as amended, has been declared effective by the
Commission, and no stop order suspending the effectiveness of the
registration statement has been issued by the Commission.
4.2 The Shares have been duly and validly authorized for issuance, offer
and sale pursuant to this Agreement. The Shares, when issued and
delivered against payment of the consideration therefor in accordance
with this Agreement and the Asset Purchase Agreement, will be validly
issued, fully paid and non-assessable shares of Apache Common Stock.
4.3 On or prior to the date of the Closing, the Shares will have been
listed for trading on the New York Stock Exchange and the Chicago Stock
Exchange.
4.4 Apache is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Apache has full power
and authority to enter into this Agreement and consummate the
transactions contemplated by this Agreement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of Apache
and is a valid and binding agreement of Apache enforceable in
accordance with its terms, subject as to enforceability to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
3
<PAGE> 4
SECTION 5 - TRANSFER RESTRICTIONS AND RESALES
5.1 NINETY DAY HOLDING PERIOD: In addition to any restrictions that might
apply as set forth in other subsections of this Section, Shell agrees
that during a period of ninety days from the date of this Agreement it
will not, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant for the sale of,
or otherwise dispose of or transfer any of the Shares or (ii) enter
into any swap or any other agreement or transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of
ownership of the Shares, whether any such swap or other transaction is
to be settled by delivery of the Shares or other securities, in cash or
otherwise (collectively, the "lock-up"); provided, however, that Apache
agrees that (x) Apache will, after the date of this Agreement, consult
with Goldman, Sachs & Co. ("Goldman") on an on-going basis concerning
the continued need for the lock-up provided for in this subsection and
(y) promptly following Apache's receipt of advice from Goldman that
such lock-up is no longer required in connection with Apache's planned
underwritten public offering of equity securities, Apache will give
Shell notice that the restrictions set forth in this subsection are
terminated and such restrictions shall cease.
5.2 RESALES: Shell acknowledges that since it and its affiliates may be
deemed to be "affiliates" for purposes of Rule 145 promulgated under
the Securities Act at the time the Shares are issued, such Shares can
be sold only (i) pursuant to an effective registration statement under
the Securities Act, (ii) in conformity with the volume, manner of sale
and other limitations of Rule 145(d) promulgated under the Securities
Act, or (iii) in reliance upon an exemption from registration that is
available under the Securities Act.
Shell also acknowledges and agrees that stop-transfer instructions will
be given to Apache's transfer agent with respect to the Shares and that
there will be placed on the certificates representing such Shares, or
any substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145
promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), applies. These shares may only be
transferred in accordance with the terms of such Rule or as
otherwise provided under the Securities Act."
It is understood and agreed that the legend set forth above shall be
removed, upon surrender of certificates bearing such legend, by
delivery of substitute certificates without such legend if Shell shall
have satisfied Apache that the sale or disposition of the shares
represented by the surrendered certificates may be effected without
registration of the offering, sale and delivery of such shares under
the Securities Act.
SECTION 6 - CONDITIONS PRECEDENT
The Parties' obligations pursuant to this Agreement shall be subject to the
occurrence of the Closing pursuant to the Asset Purchase Agreement, and if the
Asset Purchase Agreement is terminated without the Closing being consummated,
then this Agreement shall terminate simultaneously therewith and be void and of
no further force or effect.
4
<PAGE> 5
SECTION 7 - ADMINISTRATIVE PROVISIONS
7.1 PROVISIONS INCORPORATED BY REFERENCE: The following provisions of the
Asset Purchase Agreement are incorporated by reference into this
Agreement and shall apply to this Agreement as if set forth in full
herein; provided that each reference to "PURCHASER" and "SELLER"
therein shall become a reference to "Apache" and "Shell," respectively,
herein: Sections 10.1 through 10.7, Sections 10.9, 10.10, 10.11, 10.13
and 10.14.
7.2 GOVERNING LAW: This Agreement shall be governed and interpreted
according to the laws of the State of Texas without giving effect to
principles of conflicts of laws.
[signature page follows]
5
<PAGE> 6
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
APACHE CORPORATION
By: /s/ Lisa A. Floyd
-------------------------------
Name: Lisa A. Floyd
Title: VP Business Development
Shell Offshore Inc.
By: /s/ K. R. Sissell
-------------------------------
Name: K. R. Sissell
Title: Attorney-in-Fact
6
