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EXHIBIT 10.22
BAY MARCHAND 2
ASSET PURCHASE AGREEMENT
Between
SHELL OFFSHORE INC.,
SHELL OIL & GAS INVESTMENT LIMITED PARTNERSHIP,
SHELL CONSOLIDATED ENERGY RESOURCES INC.,
AND
SHELL FRONTIER OIL & GAS INC.
(COLLECTIVELY AS "SELLER")
and
ENERGY PARTNERS, LTD.
AND
UNION OIL COMPANY OF CALIFORNIA
(COLLECTIVELY AS "PURCHASER")
Dated June 23, 1998
Effective April 1, 1998
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TABLE OF CONTENTS
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Page
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SECTION 1 - DEFINITIONS/EXHIBITS.......................................... 2
1.1 Agreement..................................................... 2
1.2 Affiliate..................................................... 3
1.3 Exhibits...................................................... 4
1.4 Closing....................................................... 4
1.5 Effective Time................................................ 4
1.6 Known/Knowledge............................................... 5
1.7 Lease......................................................... 5
1.8 MMS........................................................... 5
1.9 Net Revenue Interest.......................................... 6
1.10 Leasehold Interests........................................... 6
1.11 Oil & Gas Interests........................................... 6
1.12 Operator...................................................... 6
1.13 Party......................................................... 7
1.14 Working Interest.............................................. 7
SECTION 2 - PURCHASE AND SALE............................................. 7
2.1 Purchase and Sale of Assets................................... 7
2.1.1 Lease(s)............................................ 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 Business Records.................................... 9
2.2 Excluded Assets............................................... 10
2.2.1 Licensed Data....................................... 10
2.2.2 Trade Accounts and Causes of Action................. 10
2.2.3 Third Party Equipment............................... 11
2.2.4 Other Excluded Assets............................... 11
2.3 Assets Subject to Existing Agreements......................... 11
2.4 Purchase Price................................................ 13
2.5 Additional Consideration...................................... 14
2.6 Title and Risk of Loss........................................ 17
2.7 Specific Performance.......................................... 18
SECTION 3 - TITLE AND ENVIRONMENTAL....................................... 18
3.1 Title Matters................................................. 18
3.2 Physical Condition of the Assets.............................. 18
3.3 NORM.......................................................... 19
3.4 Availability of Data.......................................... 20
SECTION 4 - CLOSING....................................................... 20
4.1 Time.......................................................... 20
4.2 Closing....................................................... 21
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4.3 Post Closing Obligations...................................... 23
4.3.1 Recording & Filing.................................... 23
4.3.2 Change of Operator.................................... 23
4.3.3 Notices to Third Parties.............................. 24
4.3.4 Property Records...................................... 24
4.3.5 Use of Name........................................... 25
4.4 Governmental Approvals........................................ 26
4.5 Operations After the Effective Time........................... 26
SECTION 5 - GENERAL REPRESENTATIONS AND WARRANTIES........................ 28
5.1 Reciprocal Representations and Warranties..................... 28
(a) Corporate Organization................................ 28
(b) Requisite Approvals................................... 28
(c) Impediments to Consummation of Agreement.............. 29
(d) Bankruptcy............................................ 29
(e) MMS Approval.......................................... 30
5.2 SELLER's Representations & Warranties......................... 30
(a) Permits............................................... 30
(b) Compliance with Laws.................................. 30
(c) Preferential Purchase Rights and Consents to
Assignment............................................ 31
(d) Litigation............................................ 31
(e) Taxes................................................. 31
(f) Leases and Wells...................................... 32
(g) Marketing ............................................ 32
(h) Contract Rights ...................................... 33
(i) Environmental Matters ................................ 34
5.3 PURCHASER's Representations & Warranties ..................... 37
(a) Receipt of Data ...................................... 37
(b) Independent Evaluation ............................... 37
(c) No Securities Distribution ........................... 38
5.4 Survival of Representations & Warranties ..................... 39
SECTION 6 - ACCOUNTING FOR REVENUE & EXPENSES ............................ 39
6.1 Adjustments .................................................. 39
6.1.1 Final Accounting ..................................... 40
6.1.2 Notice to Remitters of Proceeds ...................... 43
6.2 Allocation of Tax Liabilities ................................ 43
6.3 Purchaser's Representation ................................... 44
SECTION 7 - SELLER'S AND PURCHASER'S OBLIGATIONS ......................... 44
7.1 PURCHASER's Assumed Obligations .............................. 44
7.2 Plugging and Abandonment of Wells, Removal of Facilities...... 45
SECTION 8 - DISCLAIMER OF WARRANTY/INDEMNIFICATION ....................... 46
8.1 Sale "As Is" "Where Is" ...................................... 46
8.2 Disclaimer Regarding Oil & Gas Interests...................... 48
8.3 DISCLAIMER REGARDING INFORMATION ............................. 50
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8.4 Indemnification............................................... 50
8.5 Limitation of Liability ...................................... 58
SECTION 9 - ADMINISTRATIVE PROVISIONS .................................... 58
9.1 Expenses of Sale ............................................. 58
9.2 Third Party Rights ........................................... 59
9.3 Further Actions .............................................. 59
9.4 Assignment ................................................... 60
9.5 Notices ...................................................... 60
9.6 Public Announcements ......................................... 62
9.7 Time Limits .................................................. 62
9.8 Compliance with Laws & Regulations ........................... 63
9.9 Applicable Law ............................................... 63
9.10 Arbitration .................................................. 64
9.11 Severance of Invalid Provisions .............................. 67
9.12 Construction & Interpretation................................. 67
9.12.1 Headings for Convenience ........................... 67
9.12.2 Gender & Number .................................... 68
9.12.3 Independent Representation ......................... 68
9.13 Integrated Agreement ......................................... 68
9.14 Binding Effect ............................................... 69
9.15 Multiple Counterparts ........................................ 70
9.16 Fair Notice Disclosure Statement ............................. 70
9.17 Call on Production ........................................... 70
</TABLE>
SCHEDULES
Schedule 2.1.3 Wells
Schedule 2.1.6 Contract Rights
Schedule 5.2(g) Marketing
Schedule 5.2(h) Contract Rights
Schedule 5.2(h)(a)
Schedule 5.2(i) Environmental Matters
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated June 23, 1998, (but is
effective as of the Effective Time) by and between SHELL OFFSHORE INC. ("SOI"),
a Delaware corporation, having a post office address of P.O. Box 61933, New
Orleans, Louisiana 70161, SHELL OIL & GAS INVESTMENT LIMITED PARTNERSHIP, a
Delaware limited partnership, having an address of P.O. Box 61933, New Orleans,
Louisiana 70161, SHELL CONSOLIDATED ENERGY RESOURCES INC., a Delaware
corporation, having an address of P.O. Box 61933, New Orleans, Louisiana 70161,
and SHELL FRONTIER OIL & GAS INC., A Delaware corporation, having an address of
P.O. Box 61933, New Orleans, Louisiana 70161 (herein all four companies are
collectively referred to as "SELLER"), and ENERGY PARTNERS, LTD. ("EPL"), a
Delaware corporation, the address for which is 1100 Poydras Street, Suite 1850,
New Orleans, Louisiana 70163-1850 and UNION OIL COMPANY OF CALIFORNIA ("UNION"),
a California corporation, the address for which is 14141 Southwest Freeway,
Sugar Land, Texas 77478 (herein both companies are collectively referred to as
"PURCHASER"). For all purposes of this Agreement, including but not limited to
ownership, liabilities, obligations, and indemnities assumed or conveyed
hereunder, and rights, title and interests to be acquired hereunder, PURCHASER
shall mean EPL in the proportion of Twenty Percent (20%) and Union in the
proportion of Eighty Percent (80%). SELLER and PURCHASER (and each of their
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respective entities) 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, SELLER's interests in certain oil and gas properties located in the
Outer Continental Shelf of the Gulf of Mexico.
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:
SECTION 1 - DEFINITIONS/EXHIBITS
The following terms as used in this Agreement shall have the definitions
set forth below:
1.1 AGREEMENT: shall mean this "Asset Purchase Agreement," together with its
attached Exhibits and the operative conveyances and Closing documents,
all of which are incorporated into this Agreement for all purposes and as
fully as if set forth in the text of this Agreement.
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1.2 AFFILIATE: shall mean:
(a) Any corporation, limited liability company or 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 of 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; and
(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
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controls fifty percent (50%) of the voting stock (or other
interests) in such sister corporation.
1.3 EXHIBITS: Attached hereto and forming an integral part of this Agreement
are Exhibits "1" through "7" which are individually described as follows:
Exhibit "1" Description of Property
Exhibit "2a-d" Assignments
Exhibit "2e" Bill of Sale
Exhibit "3" Excluded Property
Exhibit "4" Financial Closing Document
Exhibit "5" Lease of Platform Space Agreement
Exhibit "6" Geophysical Data Non-Exclusive License Agreement
Exhibit "7a-d" Non-Foreign Affidavits
1.4 CLOSING: shall mean (i) the execution and delivery of the operative
conveyances and other closing documents evidencing 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.
1.5 EFFECTIVE TIME: shall mean April 1, 1998.
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1.6 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), a current officer
or employee who devotes attention to matters of such nature during the
course of his employment by such corporation or its Affiliates. 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."
l.7 LEASE: shall mean the oil and gas lease(s) (or portion(s) thereof)
identified in Exhibit "1" attached hereto and the lands affected by each
such Lease.
1.8 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.
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1.9 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, after the
deduction of all burdens upon a Lease such as the lessor's royalty on
production (other than taxes) as that ownership is set out in Exhibit
"1", subject to any exclusions noted in Exhibit "1."
1.10 LEASEHOLD INTERESTS: shall mean all of SELLER's right, title and interest
in those certain Lease(s), including working interests, overriding
royalty interests, and other oil and gas leasehold estates or interests,
as set forth in Exhibit "1".
1.11 OIL & GAS INTERESTS: shall mean Leasehold Interests, together with
SELLER's right, title and interest in the well(s), platforms, pipeline
laterals and all related equipment, contract rights, assets, etc., all as
described in Section 2.1 below.
1.12 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 agency.
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1.13 PARTY: shall mean any of the named SELLER and PURCHASER (and each of
their respective entities).
1.14 WORKING INTEREST: shall mean the aggregate fractional or percentage
record title interests and 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.
SECTION 2 - PURCHASE AND SALE
2.1 PURCHASE AND SALE OF ASSETS: Except for the excluded assets listed in
Section 2.2 below, upon Closing 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,
including without limitation the following:
2.1.1 LEASE(S): SELLER's record title interests (or operating rights),
overriding royalty interests, and other mineral interests
comprising the Working Interest and Net Revenue Interest in each
Lease, or portion thereof, and other interests in oil and gas
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described in Exhibit "1" and all rights, privileges and
obligations appurtenant to each Lease; and
2.1.2 ASSOCIATED INTERESTS: 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: SELLER's right, title and interest in all oil, gas or
condensate wellbore(s) (whether producing, not producing or
abandoned), water source, water injection and other injection and
disposal wells and systems located on a Lease (or lands pooled
with a Lease); and
2.1.4 PLATFORMS & FACILITIES: SELLER's right, title and interest in all
platforms, facilities, pipelines, gathering systems, equipment,
fixtures, inventory, spare parts, tools and other personal
property located on a Lease or lands unitized therewith or
acquired for use on a Lease (but excepting any excluded assets
listed in Section 2.2 below); and
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2.l.5 EASEMENTS: SELLER's right, title and interest in all easements,
rights of way, licenses, permits, including, but not limited to
any and all EPA discharge permits, servitudes, surface leases and
similar interests applicable or used in operating a Lease, wells,
platforms or pipelines described above, to the extent assignable
or transferable; and
2.1.6 CONTRACT RIGHTS: SELLER's right, title and interest in the
contracts and contractual rights, obligations and interests
relating to any Lease, as identified on Schedule 2.1.6 hereto to
the extent assignable or transferable; and
2.1.7 BUSINESS RECORDS: All other tangibles, miscellaneous interests or
other assets on or used in connection with a Lease, including
without limitation, proprietary geophysical, seismic, geological,
and geochemical data, photocopies of all (except originals of all
well logs, geological, well and production data and engineering
drawings, photographs and surveys,) the contents of the Data Room,
as well as electronic digital transmittal of geological well, and
production data, lease files, land files, well files, production
records, accounting records, division order files,
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abstracts, title opinions and contract files, insofar as they
exist and directly relate to the Oil & Gas Interests or lands
unitized therewith (but excluding any internal valuations, price
forecasts or interpretive data or 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, geological or geochemical
data 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 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 which are attributable to
SELLER's ownership of the Oil & Gas Interests prior to the
Effective Time, particularly such claims regarding
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the accounting for any SELLER's or Affiliate's overriding royalty
interest(s); and
2.2.3 THIRD PARTY EQUIPMENT: 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 (including without
limitation, contractor equipment, compression facilities, and oil
spill response equipment), certain pipelines and applicable
right-of-way grant(s), fixtures, and equipment which belong to
third parties such as lessors, purchasers and transporters of
hydrocarbons, and other pipelines and applicable right-of-way
grant(s), belonging to Affiliates of SELLER; and
2.2.4 OTHER EXCLUDED ASSETS: Those assets listed on Exhibit "3" hereof,
entitled "Excluded Property".
2.3 ASSETS SUBJECT TO EXISTING AGREEMENTS: Unless specifically excepted or
reserved, and to the extent that they are binding on SELLER, PURCHASER
and SELLER agree that the sale of the Oil & Gas Interests will be made
subject to (and PURCHASER upon Closing accepts the Oil & Gas Interests
subject to) any and all reservations, exceptions, limitations, contracts,
assignments, subleases, farmout agreements, calls on
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production as set forth in Paragraph 9.17, 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 (ii) which have been made available to PURCHASER
for its review prior to Closing, or (iii) which are listed on Schedule
2.1.6 or (iv) are referred to in the contracts listed on Schedule 2.1.6.
Upon Closing, PURCHASER further agrees to expressly assume SELLER's
obligations and liabilities under the above-referenced contracts which
are assigned to PURCHASER at Closing or after and are identified on
Schedule 2.1.6 insofar as such obligations or liabilities relate to the
Oil & Gas Interests and are attributable to the period of time after the
Effective Time, and to execute any documents necessary to effectuate such
assumption by PURCHASER.
2.3.1 However, under no circumstance shall PURCHASER assume or be
responsible for (i) contractual performance or nonperformance by
SELLER due and owing prior to 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 (other than those injuries or
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damages sustained by Purchaser's employees and/or contractors),
(iv) any fines or penalties attributable to ownership or
operations prior to the Closing; or (v) any accounting or payments
due to third parties for hydrocarbon production (or the proceeds
from the sale thereof) or transportation or processing,
attributable to the period of time prior to the Effective Time,
all of which shall remain the responsibility of SELLER.
2.4 PURCHASE PRICE: PURCHASER agrees that the total purchase price for the
Oil & Gas Interests shall be Forty-five Million, Eight Hundred Thousand
and no/hundredths ($45,800,000) Dollars (the "Purchase Price") payable at
Closing and subject to adjustments as provided for in Section 6.0 hereof.
The payment of the Purchase Price shall be made by electronic transfer of
immediately available funds (EFT) to the credit of SELLER's bank accounts
at Chase Manhattan Bank, as set forth below:
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<TABLE>
<CAPTION>
Purchase
Seller Account No. Price
------ ----------- --------
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SOI 322018773 Chase Manhattan $ 200,000
Bank N.Y. a/k/a Chase MB
- ABA #021000128
Shell Frontier Oil & Gas Inc. 144815663 Chase New York $10,300,000
- ABA #021000021
Shell Consolidated Energy 323060595 Chase Manhattan $15,500,000
Resources Inc. Bank - ABA #021000021
Shell Oil & Gas 6301222778500 Chase $19,800,000
Investment Limited Manhattan Bank Delaware -
Partnership ABA #031100267
</TABLE>
At and after Closing, the Purchase Price shall be subject to adjustment
pursuant to Section 6.0.
2.5 ADDITIONAL CONSIDERATION:
2.5.4 As additional consideration, PURCHASER shall assume SELLER's
responsibility and liability for the proper plugging and
abandonment of all wellbores and the removal of any platforms,
facilities and pipelines located on each Lease including those
wellbores identified on Schedule 2.1.3.
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2.5.2 In addition, except as provided in Section 2.5.3, PURCHASER
assumes responsibility and liability for the following
occurrences, events and activities on or related to the Leasehold
Interests ("Environmental Obligations"), after the Effective Time;
provided, however, that with regard to Sections 2.5.2(a), (b) and
(c), PURCHASER assumes such Environmental Obligations, regardless
of whether resulting from any acts or omissions of SELLER prior to
the Effective Time 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) PURCHASER's failure to comply with applicable land use,
surface disturbance, licensing or notification
requirements;
(e) PURCHASER's 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 after the Effective
Time; and
(f) PURCHASER's non-compliance with environmental or land use
rules, regulations, demands, or orders of appropriate state
or federal regulatory agencies.
2.5.3 PURCHASER'S Environmental Obligations do not include the
following, all of which shall remain the responsibility of SELLER:
(a) Any civil or criminal fines or penalties that may be levied
against SELLER or PURCHASER 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 Effective Time;
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(b) Transportation and disposal offsite from the Oil & Gas
Interests before the Effective Time 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 Effective Time; and
(c) Claims against PURCHASER by third parties, including
governmental agencies and based upon laws, regulations,
orders and/or rules enacted prior to Closing, resulting
from the Environmental Obligations, which arose or accrued
prior to the Closing and are asserted within eighteen (18)
months of Closing and are attributable to the ownership or
operation of the Oil & Gas Interests prior to the Closing.
It is agreed and understood, moreover, that this exclusion
and SELLER's indemnity obligations with respect to the same
under this Agreement shall be limited only to Claims
against PURCHASER and/or the Oil & Gas Interests by third
parties, including governmental agencies.
2.6 TITLE AND RISK OF LOSS: SELLER shall deliver possession of the Oil
& Gas Interests to PURCHASER at the Closing. Title to
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and risk of loss with respect to the Oil & Gas Interests shall
pass to PURCHASER as of the Closing.
2.7 SPECIFIC PERFORMANCE: Each Party shall have the right of specific
performance with respect to the obligations set forth in this
Agreement.
SECTION 3 - TITLE AND ENVIRONMENTAL
3.1 TITLE MATTERS: SELLER WILL CONVEY ALL OF ITS RIGHT, TITLE AND
INTEREST IN AND TO 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
interests in the Oil & Gas Interests conveyed, as set forth in
Exhibit "1", against any claims and demands of all persons
claiming an interest (including an encumbrance) in the Oil & Gas
Interests by, through and under SELLER, but not otherwise.
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 may have occurred
as a result of such uses. In this regard, the Oil & Gas Interests
may also contain unplugged (or improperly
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plugged) 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 of 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 that pursuant to, and
subject to the terms of Section 2.5, PURCHASER assumes all of SELLER'S
liability for or in connection with the assessment, remediation,
removal, transportation or disposal of any such
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materials present on a Lease at or after the Effective Time in
accordance with all requirements of governmental agencies.
3.4 AVAILABILITY OF DATA: SELLER represents that all 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 would reasonably be considered
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 determine the exact nature of the
environmental condition of the Oil & Gas Interests for the purposes of
this sale.
SECTION 4 - CLOSING
4.1 TIME: The Closing shall be held on or before June 23, 1998, (unless
otherwise mutually delayed as provided in this Section), at the offices
of SELLER at 701 Poydras Street, New Orleans, Louisiana. The time and
place for Closing may be changed to an earlier or later time and place
by mutual
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written agreement of the Parties, but any acceleration or delay in the
Closing shall not change the Effective Time.
4.2 CLOSING: The following shall take place at Closing:
(a) SELLER and PURCHASER shall execute and deliver the assignments
and bill of sale on the forms which are attached as Exhibits
"2a" through "2e", conveying the Oil & Gas Interests to
PURCHASER.
(b) PURCHASER shall pay to SELLER by wire transfer an amount equal
to the Purchase Price ($45,800,000.00), subject to adjustments
pursuant to Section 6.1 and the Financial Closing Document,
which is attached hereto as Exhibit "4."
(c) PURCHASER and SELLER shall execute and deliver the remaining
exhibits, including the Lease of Platform Space Agreement,
Exhibit "5" hereto; the Geophysical Data Non-Exclusive License
Agreement, Exhibit "6" hereto; and the Non-Foreign Affidavits,
which are attached hereto as Exhibit "7," and documents
contemplated by the transaction described herein and any other
agreements relative hereto deemed necessary or appropriate by
the Parties.
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In addition, 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 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 federal or state
agencies to transfer operatorship 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 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
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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.
4.3 POST CLOSING OBLIGATIONS: Upon condition that the Closing shall have
occurred, SELLER and PURCHASER agree to perform the following
"post-Closing obligations":
4.3.1 RECORDING & FILING: Within fifteen (15) 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 agencies all state
and federal transfer and assignment documents for the Oil &
Gas Interests. The recording Party shall provide a copy of
same, including recording date, to the non-recording Party.
4.3.2 CHANGE OF OPERATOR: Where SOI is the designated Operator of a
Lease, PURCHASER shall promptly file all appropriate forms,
declarations or bonds with federal and state governmental
agencies relative to EPL's assumption of operations from SOI.
EPL shall also take all actions necessary to qualify as a
successor Operator to SOI under any applicable joint operating
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agreement (subject to the terms of any such operating
agreement).
4.3.3 NOTICES TO THIRD PARTIES: PURCHASER shall notify all lessors,
royalty owners, operators, non-operators, purchasers of
production and governmental agencies 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 and
division 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.
4.3.4 PROPERTY RECORDS: Within thirty (30) days after Closing,
SELLER shall deliver to PURCHASER legible photocopies (or as
agreed to by the parties, original records) of the property,
business, and accounting records in this Agreement (subject to
the limitations contained in this Agreement). If SELLER
retains any original 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
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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 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
ensure that this records retention obligation shall continue
as its Assignee's obligation.
4.3.5 USE OF NAME: On or before ninety (90) days after Closing,
PURCHASER will remove, or cause to be
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removed, from the platforms and 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.
4.4 GOVERNMENTAL APPROVALS: PURCHASER and SELLER shall execute and file all
forms (and PURCHASER shall perform all acts) required by the MMS (and
other appropriate governmental agencies) to transfer operatorship of
the Oil & Gas Interests from SELLER to PURCHASER, as applicable,
effective as of the Effective Time. The conveyances (along with any
change in operatorship) involved in this transaction are subject to
approval by the MMS (and possibly other governmental agencies).
4.5 OPERATIONS AFTER THE EFFECTIVE TIME: Because Closing occurs subsequent
to the Effective Time, SELLER'S operation of the Oil & Gas Interests
from the Effective Time to Closing has been for the account of
PURCHASER. Further, SELLER agrees to assist in the operation of the
Oil & Gas Interests for a period not to exceed thirty (30) days
following the actual date of Closing, or such earlier date as is
mutually agreed to by SELLER and PURCHASER. The date when SELLER ceases
to assist in the operation of the Oil & Gas Interests shall be referred
to hereafter as the "Termination Date".
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From Closing to the Termination Date, as an accommodation to PURCHASER,
SELLER shall make good faith efforts to assist in the operation of the
Oil & Gas Interests 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. During this
period SELLER shall endeavor to (i) assist PURCHASER in the training of
personnel in the operations of the Oil & Gas Interests and (ii) make
royalty payments due, and handle revenue accounting, on the Oil & Gas
Interests for a period of 30 days subsequent to the date of Closing.
Under no circumstances shall SELLER be liable to PURCHASER from Closing
to the Termination Date, in the course of its endeavors under this
Paragraph 4.5, other than and only to the extent of its willful
misconduct.
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 actual expenses from Closing to the Termination
Date shall be paid for by PURCHASER and included in the Final
Accounting.
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SECTION 5 - GENERAL REPRESENTATIONS AND WARRANTIES
5.1 RECIPROCAL REPRESENTATIONS AND WARRANTIES: SELLER and PURCHASER each
represent and warrant to the other, that as of the date of this
Agreement, as of the Effective Time and as of the Closing:
(a) CORPORATE ORGANIZATION: The Party making the representation is
a corporation or partnership validly existing and in good
standing under the laws of its state of incorporation or
formation and duly qualified with the MMS, 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 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 with the terms hereof, and no other
act, approval or proceeding on its part is required to
authorize the execution and delivery of this Agreement or the
consummation of the transaction
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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,
articles, 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.
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(e) MMS APPROVAL: The Party making this representation is not
aware of the existence of any fact or condition that may cause
the MMS to withhold unconditional approval, to the extent MMS
approval is required under applicable law, of the transfer of
the Oil & Gas Interests from SELLER to PURCHASER.
5.2 SELLER'S REPRESENTATIONS & WARRANTIES: SELLER represents and warrants
to PURCHASER, that as of the date of this Agreement, the Effective Time
and the Closing:
(a) PERMITS: All material permits affecting the Oil & Gas
Interests have been made available to PURCHASER and are being
transferred to PURCHASER in this transaction, but only to the
extent transferable.
(b) COMPLIANCE WITH LAWS: To SELLER's Knowledge, SELLER has not
violated any applicable laws or statutes, or any applicable
regulations, rules or orders promulgated by the Federal Energy
Regulatory Commission, the MMS or any other federal or state
regulatory agency, or any of their predecessor agencies, which
might materially and adversely affect the value to PURCHASER
of the Oil & Gas Interests, or the production therefrom.
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(c) PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGNMENT: The
Oil & Gas Interests are not subject to any agreements
containing preferential purchase rights or consent to
assignment provisions that must be complied with prior to the
assignment of the Oil & Gas Interests to PURCHASER.
(d) LITIGATION: Except for suits claiming monetary damages for
personal injury for which Seller is retaining liability, there
is neither any claim, suit, action, or other proceeding
pending before any court or governmental agency nor, to
SELLER's Knowledge, any claim, dispute, suit, action,
investigation or other proceeding threatened against the Oil &
Gas Interests or against SELLER or any Affiliate of SELLER
relating to the Oil & Gas Interests.
(e) TAXES: To SELLER's Knowledge, 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
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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 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; (iii) all of the
wells on Schedule 2.1.3 have been drilled, completed, and
operated (some of which have been plugged and abandoned)
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; and (iv) to SELLER'S
Knowledge, the wells listed on Schedule 2.1.3 are the only
wells drilled on the Leases by SELLER, Shell Oil Company or
their Affiliates.
(g) MARKETING: Except as set forth on Schedule 5.2(g), no amount
of SELLER's hydrocarbons produced from the Oil
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& Gas Interests and marketed by others is 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.
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 5.2(h), with respect to the Contract Rights: (i) all
Contract Rights which have not previously expired or been
terminated by mutual
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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
principles; (ii) SELLER is not in material breach or default
with respect to any of its obligations under any 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 and
(iv) except as set forth on Schedule 5.2(h)(a) and the
Excluded Property shown on Exhibit "3," SELLER owns all
material assets dedicated to or utilized by SELLER on the
Leases and will transfer same to PURCHASER. All Contract
Rights are identified in Schedule 2.1.6.
(i) ENVIRONMENTAL MATTERS: To SELLER's Knowledge, except as
disclosed on Schedule 5.2(i): (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
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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) no
written notice has been received addressed to SELLER from a
third party or governmental agency of any past, present, or
future events, conditions, circumstances, activities,
practices, incidents, actions, or plans that may interfere or
prevent continued compliance, or that may 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
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material or waste from or attributable to any Oil & Gas
Interest.
(j) SELLER'S Working Interest and Net Revenue Interest in each of
the Leases are as shown on Exhibit "1" and for purposes of
SELLER'S warranty, as set forth above in Section 3.1, SELLER
warrants that SELLER is delivering the Working Interest and
Net Revenue Interest reflected on Exhibit "1".
(k) There are no overriding royalty, production payments, net
profit interests or other revenue burdens on the Leases other
than the royalty due the MMS under each of the Leases.
(1) SELLER has provided to PURCHASER all daily production reports
and daily down time reports for the time period from Effective
Time to Closing covering the Oil & Gas Interests.
(m) Except for personal employee files and other information that
would reasonably be considered as confidential or proprietary,
to SELLER'S Knowledge, all technical, contract, legal, land,
production, well and other files specific to the Oil & Gas
Interests,
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necessary and material for a proper evaluation of the Oil &
Gas Interests, and currently in the possession of SELLER or
its Affiliates, has been made available to PURCHASER for their
review.
5.3 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: Based upon SELLER's representation made
herein in Section 5.2(m) above, PURCHASER represents that it
has had the opportunity to perform due diligence on the Oil &
Gas Interests that PURCHASER wishes to purchase, which include
physical inspection(s), environmental assessment(s),
reviewing well data and other files and performing all of
PURCHASER's necessary tasks involved in evaluating the Oil &
Gas Interests.
(b) INDEPENDENT EVALUATION: Based upon SELLER's representation
made herein in Section 5.2(m) above, 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 access to the Oil & Gas
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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
has relied solely on its own independent due diligence
investigation of the Oil & Gas Interests and upon the
representations and warranties made in Section 5 of this
Agreement. ACCORDINGLY, PURCHASER ACKNOWLEDGES THAT SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES
ANY REPRESENTATIONS OR WARRANTY (OTHER THAN THOSE EXPRESS
REPRESENTATIONS AND WARRANTIES MADE IN SECTION 5 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 of distributing
fractional undivided interests in the Oil & Gas Interests that
would be subject to regulation by federal or state securities
law, and that if, in the future, PURCHASER should sell or
otherwise dispose of the Oil & Gas Interests in any
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manner that would be subject to securities regulation,
PURCHASER will fully comply with all federal and state
securities laws.
5.4 SURVIVAL OF REPRESENTATIONS & WARRANTIES: All of the representations,
warranties, indemnities and agreements of or by the Parties to this
Agreement shall survive the Closing of this transaction as provided
herein and shall not merge into the conveyancing documents.
SECTION 6 - ACCOUNTING FOR REVENUE & EXPENSES
6.1 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 noncash charges
attributable to depletion, depreciation, bad debt losses, lease
abandonment, etc.), produced from or attributable to any part of 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
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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 at Closing, which
is attached hereto as Exhibit "4." All other SELLER Amounts or
PURCHASER Amounts not specifically set forth on the Financial Closing
Document shall be handled in accordance with Section 6.1.1.
6.1.1 FINAL ACCOUNTING:
(a) SELLER and PURCHASER shall use their best efforts to
accomplish a single final accounting and cash adjustment for
the period before and after the Effective Time no later than
one hundred twenty (120) days after Closing to accomplish the
purposes of Section 6.1 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
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due. The Final Accounting shall become final and binding upon
the Parties and payable one hundred twenty (120) 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 are disagreements or (ii) the
date on which the Arbitrator (as hereinafter defined) issues
its decision.
(b) During the one hundred twenty (120) days following the date of
receipt by SELLER of an Accounting Notice which requests an
audit, SELLER shall make available
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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 discovered in the audit.
If, at the end of the one hundred twenty (120) 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.
(c) If SELLER or PURCHASER receive any proceeds or pay any
additional expenses for or on behalf of the other Party (in
the case of PURCHASER, SELLER Amounts, and
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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).
6.1.2 NOTICE TO REMITTERS OF PROCEEDS: After the Closing, PURCHASER
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.
6.2 ALLOCATION OF TAX LIABILITIES: All taxes (except state or federal
income 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
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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.
6.3 PURCHASER'S REPRESENTATION: For the purposes of this Section 6, EPL
shall be the sole designated representative of Purchaser and all
communications to or by the Purchaser shall be through such designated
representative.
SECTION 7 - SELLER'S AND PURCHASER'S OBLIGATIONS
7.1 PURCHASER'S ASSUMED OBLIGATIONS: After the Closing, but subject to
Section 2.3.1 and Section 2.5, PURCHASER shall assume and perform all
of the rights, duties, obligations and liabilities of ownership and
operation 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 described in
Schedule 2.1.6 to which the Oil & Gas Interests are subject;
and
(b) Responsibility for compliance with all applicable laws,
regulations, ordinances, rules and orders and
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the procurement and maintenance of all permits and bonds
required by governmental authorities relating to the Oil & Gas
Interests and which accrue after the Closing; and
(c) Subject to Section 4.3 hereof, responsibility for royalties,
rentals, shut-in payments (if any) to which the Oil & Gas
Interests are subject and which are attributable to the period
after the Effective Time; and
(d) All other obligations assumed by PURCHASER under the terms of
this Agreement or otherwise as lessee and operator of the
Lease(s).
7.2 PLUGGING AND ABANDONMENT OF WELLS, REMOVAL OF FACILITIES: PURCHASER
recognizes and specifically assumes SELLER's obligations with respect
to the Oil & Gas Interests to:
(i) properly plug and abandon (or replug) any and all
oil, gas or condensate wellbore(s) (whether producing
or abandoned or plugged prior to or after the
Effective Time), water source, water injection and
other injection
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and disposal wells and systems located on each Lease
(or lands pooled with a Lease); and
(ii) properly remove and dispose of all structures,
equipment and facilities, including but not limited
to, platforms, templates, pipelines, 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 authority having jurisdiction thereof, 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.
SECTION 8 - DISCLAIMER OF WARRANTY/INDEMNIFICATION
8.1 SALE "AS IS" "WHERE IS": PURCHASER REPRESENTS THAT IT HAS INSPECTED THE
OIL & GAS INTERESTS AND ACCEPTED THE PHYSICAL AND ENVIRONMENTAL
CONDITION OF SAME ON AN "AS IS-WHERE IS"
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<PAGE> 51
BASIS SUBJECT TO THE TERMS OF THIS AGREEMENT. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER RELEASES SELLER FROM
ANY LIABILITY WITH RESPECT TO THE PHYSICAL AND ENVIRONMENTAL CONDITION
OF THE OIL & GAS INTERESTS AT THE EFFECTIVE TIME 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 EFFECTIVE TIME.
WITHOUT LIMITING THE ABOVE, AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
IN THIS AGREEMENT, PURCHASER WAIVES ANY RIGHT 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 CONDITION OF THE OIL & GAS INTERESTS AT THE EFFECTIVE TIME OR
ANY LAW OR REGULATION APPLICABLE THERETO, INCLUDING WITHOUT LIMITATION,
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY
ACT OF 1980, AS AMENDED (42 U.S.C. SECTION 9601 et. seq.), THE
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 (42 U.S.C.
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SECTION 6901. et. seq.), THE CLEAN WATER ACT (33 U.S.C. SECTIONS 466
et. seq.) THE SAFE DRINKING NG WATER ACT (14 U.S.C. SECTIONS
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 EFFECTIVE TIME, AND WHETHER
OR NOT ATTRIBUTABLE TO THE STRICT LIABILITY OF SELLER OR 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.
8.2 DISCLAIMER REGARDING OIL & GAS INTERESTS: EXCEPT AS MAY BE OTHERWISE
PROVIDED FOR IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES THAT SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
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
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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 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 OR THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE ENVIRONMENT OR
HEALTH, IT BEING THE EXPRESS INTENTION OF SELLER AND PURCHASER THAT
(EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS AGREEMENT) 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.
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8.3 DISCLAIMER REGARDING INFORMATION: EXCEPT AS MAY BE OTHERWISE SET FORTH
IN THIS AGREEMENT, 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) 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.
8.4 INDEMNIFICATION:
(a) PURCHASER shall indemnify, defend and hold harmless SELLER and
its respective Affiliates, and SELLER's and each such
Affiliate's directors, officers, employees, stockholders and
agents, from and against any and all claims, liabilities,
losses, causes of actions, 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
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upon or incurred by SELLER as a result of, or arising out of,
the breach of any of the representations, warranties,
covenants or agreements of PURCHASER contained in this
Agreement or as a result of, or arising out of, PURCHASER'S
ownership or operation after the Closing of the Oil & Gas
Interests, including, but not limited to, the obligation to
properly plug and abandon all wells now or hereafter located
on any of the Oil & Gas Interests, or 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, 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 or whether SELLER was or was
alleged to have been negligent, including without limitation,
the sole, joint or concurrent, active or passive negligence of
SELLER, even if SELLER was or was alleged to have been grossly
negligent or guilty of willful misconduct; provided, however,
that PURCHASER shall have no obligation to indemnify SELLER
and the other persons entitled to indemnification under this
Section 8.4(a) with respect to any matter to the extent SELLER
is expressly indemnifying
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PURCHASER for such matter pursuant to Section 8.4(b) of this
Agreement.
(b) SELLER shall indemnify, defend and hold harmless PURCHASER and
its Affiliates, and each PURCHASER and their respective
Affiliates, directors, officers, employees, stockholders and
agents, from and against all Losses asserted against,
resulting from, imposed upon or incurred by each PURCHASER or
such other persons entitled to indemnification under this
Section 8.4(b), as a result of, or arising out of, (i) the
breach of any of the representations, warranties, covenants or
agreements of SELLER contained in this Agreement, (ii) the
Excluded Assets, (iii) any matter or circumstance described in
Sections 2.3.1 or in 2.5.3 and (iv) the breach of the limited
title warranty in Section 3.1.
(c) Notwithstanding anything to the contrary in this Agreement,
the liability of SELLER and PURCHASER under this Agreement and
any documents delivered in connection herewith or contemplated
hereby shall be limited as follows:
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(i) In no event shall any amounts be recovered from
SELLER under Section 8.4(b) or otherwise for any
breach of any representation or warranty of SELLER
set forth in Section 5 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 December 23, 1999
at 5:00 p.m., local time, and the indemnity
obligation of SELLER in Section 8.4(b) with respect
to such representations and warranties shall
terminate on said date; provided however, that the
indemnity obligation of SELLER with respect to the
Excluded Assets, the matters identified in Section
2.3.1, Sections 2.5.3 and 5.2 and the special title
warranty in Section 3.1, shall survive in each case
without limitation as to time.
(ii) Except as set forth above, the representations and
warranties of the Parties set forth in this Agreement
shall survive the Closing for a period of 18 months
and all representations
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and warranties of the Parties under this Agreement
shall terminate at 5:00 p.m., local time in New
Orleans, Louisiana, on December 23, 1999; 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 8.4(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.
(iii) Notwithstanding anything to the contrary herein, in
no event shall SELLER indemnify PURCHASER or any
other person, or be otherwise liable in any way
whatsoever to PURCHASER or any other person, for any
Losses arising from the breach of a representation or
warranty of SELLER in excess of an amount equal to
the Purchase Price; provided further that in the
event of an arbitrator's award equal to fifty
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percent or more of the Purchase Price (excluding
interest), SELLER shall have the option to satisfy
said award by electing to return the Purchase Price
in full (including interest, and as adjusted for all
[proceeds of productions received by Purchaser and
attributable to the Oil & Gas Interests and all
operating and capital costs and other expenses and
costs associated with the operation of the Oil & Gas
Interests] between the Effective Time and the date of
such rescission) in exchange for a reassignment by
PURCHASER to SELLER of the Oil & Gas Interests.
Except as set forth hereinbelow, 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 shall PURCHASER be entitled to rescission or
reduction of price with respect to any such matter. The Parties specifically
agree that this provision does not apply to the representations and warranties
contained in Paragraphs 5.2(j) and (k).
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(d) All claims for indemnification under this Agreement
shall be asserted and resolved pursuant to this
Section 8.4(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 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 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
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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
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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
of the Indemnified Party, unless such settlement or
compromise entails a full and unconditional release
of the Indemnified Party without any admission or
finding of fault or liability.
8.5 LIMITATION OF LIABILITY: Neither party shall be liable to the other
under any circumstances for consequential, exemplary, punitive, or
indirect damage of any kind or nature, under any theory of tort,
contract, or equity or indemnity, and each party expressly releases the
other therefrom.
SECTION 9 - ADMINISTRATIVE PROVISIONS
9.1 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,
brokers, representatives, counsel and accountants) with respect to the
negotiation, execution
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and the delivery of this Agreement and the consummation of the
transactions under this Agreement.
9.2 THIRD PARTY RIGHTS: Except as to those indemnity obligations owed to
the indemnified entities or persons listed in Section 8 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.
9.3 FURTHER ACTIONS: PURCHASER and SELLER further agree that each will,
from time to time and upon reasonable request, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such
instruments, and take such other action as may be necessary, or
advisable, to carry out their obligations under this Agreement.
Furthermore, SELLER agrees to take such other actions as may be
necessary to reacquire any and all overriding royalty interests it may
have created so that same may be conveyed to PURCHASER hereunder and
furthermore agrees to obtain a release of or a bond covering any lien
or encumbrance created by SELLER or placed against the Oil & Gas
Interests.
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9.4 ASSIGNMENT: Prior to Closing, neither Party shall assign the Asset
Purchase Agreement or any of its rights or obligations under said
agreement without obtaining the prior written consent of the other
Party, and any purported assignment by any Party without the prior
written consent of the other Party shall be void. The Asset Purchase
Agreement and its respective covenants shall be referenced in any
assignment affecting the Oil & Gas Interests.
9.5 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.
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For purposes of notice, the addresses of the Parties shall be as follows:
<TABLE>
<S> <C>
EXPRESS MAIL REGULAR MAIL
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) 728-0399
Shell Oil & Gas Investment Shell Oil & Gas Investment
Limited Partnership Limited Partnership
c/o Shell Offshore Inc. c/o Shell Offshore Inc.
ATTN: Contracts Manager P.O. Box 61933
701 Poydras Street New Orleans, LA 70161
New Orleans, LA 70139
Telephone - (504) 728-6704
Facsimile - (504) 728-0399
Shell Consolidated Energy Shell Consolidated Energy
Resources Inc. Resources Inc.
c/o Shell Offshore Inc. c/o Shell Offshore Inc.
ATTN: Contracts Manager P.O. Box 61933
701 Poydras Street New Orleans, LA 70161
New Orleans, LA 70139
Telephone - (504) 728-6704
Facsimile - (504) 728-0399
Shell Frontier Oil & Gas Inc. Shell Frontier Oil & Gas Inc.
c/o Shell Offshore Inc. c/o Shell Offshore Inc.
ATTN: Contracts Manager P.O. Box 61933
701 Poydras Street New Orleans, LA 70161
New Orleans, LA 70139
Telephone - (504) 728-6704
Facsimile - (504) 728-0399
EXPRESS MAIL and REGULAR MAIL
PURCHASER
Energy Partners, Ltd.
ATTN: Richard A. Bachmann
1100 Poydras Street
Suite 1850
New Orleans, LA 70163-1850
Telephone - (504) 569-1875
Facsimile - (504) 569-1874
</TABLE>
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Union Oil Company of
California
ATTN: Land Manager
14141 Southwest Freeway
Sugar Land, TX 77478
Telephone - (281) 491-7600
Facsimile - (281) 287-7388
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.
9.6 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 be
withheld for any reason. To the extent required by applicable law or by
any applicable rules, regulations or orders of any governmental
authority or agency having jurisdiction, or necessary to comply with
disclosure requirements of applicable securities laws or any applicable
stock exchanges, a Party may disclose pertinent information; however,
it shall not do so until giving the other Party at least forty eight
(48) hours notice to comment on the content thereof.
9.7 TIME LIMITS: Time is of the essence in this Agreement and all time
limits shall be strictly construed and enforced. The
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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.
9.8 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 authority
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.
9.9 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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9.10 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 (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.
The arbitration shall be held in New Orleans, Louisiana.
There shall three arbitrators, one selected by SELLER, one by PURCHASER
and the third mutually agreeable to the Parties. In the event, the
Parties cannot agree on an arbitrator, the arbitrator shall be selected
in accordance with the Rules.
The arbitrator 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
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such law. The arbitrator 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 set off)
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.
The arbitrator 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
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agreement of the Parties or as ordered by the arbitrator upon finding
good cause.
Each Party shall bear its own costs, expenses and attorney's fees;
provided that if court proceedings to stay litigation or compel
arbitration are necessary, the Party who unsuccessfully opposes such
proceedings shall pay all reasonable associated costs, expenses, and
attorney's fees in connection with such court proceeding.
In order to prevent irreparable harm, the arbitrator shall have the
power to grant temporary or permanent injunctive or other equitable
relief. Prior to the appointment of an arbitrator a Party may,
notwithstanding any other provision of this Agreement, seek temporary
injunctive relief from any court of competent jurisdiction; provided
that the Party seeking such relief shall (if arbitration has not
already been commenced) simultaneously commence arbitration. Such court
ordered relief shall not continue more than 10 days after the
appointment of the arbitrator and in no event for longer than 60 days.
The cost of the arbitrator shall be shared equally by all parties.
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9.11 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.
9.12 CONSTRUCTION & INTERPRETATION: The interpretation and construction of
the terms of this Agreement will be governed by the following
conventions:
9.12.1 HEADINGS FOR CONVENIENCE: Except for the definition headings,
all the table of contents, captions, numbering sequences, and
paragraph headings used in this Agreement are inserted for
convenience only and shall in no way define, limit or describe
the scope or intent of this Agreement or any part thereof, nor
have
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any legal effect other than to aid a reasonable interpretation
of this Agreement.
9.12.2 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.
9.12.3 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.
9.13 INTEGRATED AGREEMENT: This Agreement, the Exhibits and Schedules
attached and incorporated herein, and the instruments delivered at or
in connection with the Closing hereunder ("Closing Documents") contain
the final and entire agreement of the Parties with respect to the
subject matter of
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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 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.
9.14 BINDING EFFECT: This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns.
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9.15 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.
9.16 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.
9.17 CALL ON PRODUCTION: If PURCHASER elects to sell oil or other
hydrocarbons produced from the Leases, SELLER reserves and shall have
the ongoing right and option, but not the obligation for a period of
five (5) years from the Effective Time, to purchase same at the
wellhead. SELLER will be responsible for all costs to move the oil
onshore. Payment shall be based on the delivery gravity and average
daily quantities produced during the month. The price will be the
highest of the following daily postings in effect each day during the
calendar month of delivery:
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- Mobil La. Gulf Coast (onshore)
- EXXON's Louisiana - South Louisiana Sweet
- Amoco's Louisiana - South Louisiana Sweet
- Koch's South Louisiana Sweet
- Chevron's South Louisiana Sweet (onshore)
- Equiline's Bay Marchand
In the event that less than two of the above companies post a reference
Louisiana posting price for crude oil of like quality and gravity,
SELLER shall pay PURCHASER a mutually agreed upon price which
represents the reasonable value of the crude oil at the well.
If PURCHASER receives from a responsible third party a bona fide offer
to purchase oil, PURCHASER shall furnish SELLER a copy of this offer as
written on letterhead of the third party offeror, SELLER shall then
have five (5) business days from receipt thereof to either waive its
right to or elect to purchase, as applicable, on terms equivalent to
those offered to PURCHASER. Failure to timely reply to such notice
shall be construed as a waiver. Once waived, the preferential right
provided herein shall not be enforceable for the term of the
PURCHASER-third party contract if PURCHASER accepts said third party
offer. However, the term of any such PURCHASER-third party contract
shall be no longer than twelve months in
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<PAGE> 76
duration. At the end of each twelve month term, SELLER shall have the
option to purchase the oil on terms equivalent to those offered to
PURCHASER. This Call on Production option will terminate upon the
SELLER's second waiver to purchase such oil under the terms and
conditions of a responsible third party bona fide offer.
IN WITNESS WHEREOF, the Parties have executed the Agreement as of the
date first above written.
<TABLE>
<S> <C>
WITNESSES SHELL OFFSHORE INC.
By: /s/ K. R. SISSELL
------------------------------------ --------------------------------
K. R. Sissell
Attorney-in-Fact
------------------------------------
SHELL OIL & GAS INVESTMENT LIMITED
PARTNERSHIP
By: /s/ K. R. SISSELL
------------------------------------ --------------------------------
K. R. Sissell
Attorney-in-Fact for
Shell Offshore Inc., as
Managing General Partner
------------------------------------
SHELL CONSOLIDATED ENERGY RESOURCES
INC.
By: /s/ K. R. SISSELL
------------------------------------ --------------------------------
K. R. Sissell
Attorney-in-Fact
------------------------------------
</TABLE>
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<PAGE> 77
<TABLE>
<S> <C>
SHELL FRONTIER OIL & GAS INC.
By: /s/ K. R. SISSELL
------------------------------------ --------------------------------
K. R. Sissell
Attorney-in-Fact
------------------------------------
ENERGY PARTNERS, LTD.
By: /s/ RICHARD A. BACHMANN
------------------------------------ --------------------------------
Richard A. Bachmann
President
------------------------------------
UNION OIL COMPANY OF CALIFORNIA
By: /s/ ROBERT C. GNAGY
------------------------------------ --------------------------------
Robert C. Gnagy
Attorney-in-Fact
------------------------------------
</TABLE>
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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 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 OFFICE, this 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
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 Offshore
Inc., as Managing General Partner of Shell Oil & Gas Investment Limited
Partnership, a Delaware limited 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 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
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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 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 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
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 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 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
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<PAGE> 80
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally appeared
RICHARD A. BACHMANN, 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 the President of Energy Partners,
Ltd., 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 OFFICE, this 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, on this day personally appeared
ROBERT C. GNAGY, 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 the Attorney-in-Fact of Union Oil
Company of California, a California 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 23rd day of June, 1998.
/s/ CYNTHIA A. NICHOLSON
----------------------------------
Notary Public
My Commission is for life. [STAMP]
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