EXHIBIT 10.P
Execution Version
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PURCHASE AND SALE AGREEMENT
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By and Between
EL PASO ENERGY PARTNERS, L.P.
(Seller)
and
EL PASO PRODUCTION GOM INC.
(Buyer)
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Covering the Acquisition of
ALL OF THE ASSETS OF
(the Assets)
ARGO, L.L.C.
(Argo)
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April 1, 2002
TABLE OF CONTENTS
1. Definitions..............................................................................................1
2. The Transactions.........................................................................................8
(a) Sale of Assets..................................................................................8
(b) Consideration...................................................................................8
(c) The Closing.....................................................................................8
(d) Deliveries at the Closing.......................................................................8
(e) Assumed Obligations.............................................................................8
(f) Proposed Closing Statement and Post-Closing Adjustment..........................................9
3. Representations and Warranties Concerning the Transaction...............................................10
(a) Representations and Warranties of the Seller...................................................10
(b) Representations and Warranties of the Buyer....................................................11
4. Representations and Warranties Concerning the Assets and/or Argo........................................13
(a) Organization, Qualification and Company Power..................................................13
(b) Noncontravention...............................................................................13
(c) Title to and Condition of Assets...............................................................13
(d) Material Change................................................................................14
(e) Legal Compliance...............................................................................15
(f) Tax Matters....................................................................................15
(g) Contracts and Commitments......................................................................15
(h) Litigation.....................................................................................15
(i) Environmental Matters..........................................................................16
(j) Preferential Purchase Rights...................................................................17
(k) Financial Statements...........................................................................17
(l) Employee Matters...............................................................................18
(m) Prohibited Events..............................................................................18
(n) Regulatory Matters.............................................................................18
(o) Intercompany Transactions......................................................................18
(p) Disclaimer of Representations and Warranties Concerning Personal Property,
Equipment and Fixtures.........................................................................18
5. Pre-Closing Covenants...................................................................................19
(a) General........................................................................................19
(b) Notices and Consents...........................................................................19
(c) Operation of Business..........................................................................19
(d) Intercompany Transactions......................................................................20
(e) Full Access....................................................................................20
(f) Liens and Encumbrances.........................................................................20
6. Post-Closing Covenants..................................................................................21
(a) General........................................................................................21
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(b) Litigation Support.............................................................................21
(c) Surety Bonds; Guarantees.......................................................................21
(d) Delivery and Retention of Records..............................................................22
7. Conditions to Obligation to Close.......................................................................22
(a) Conditions to Obligation of the Buyer..........................................................22
(b) Conditions to Obligation of the Seller.........................................................23
8. Remedies for Breaches of this Agreement.................................................................24
(a) Survival of Representations and Warranties.....................................................24
(b) Indemnification Provisions for Benefit of the Buyer............................................24
(c) Indemnification Provisions for Benefit of the Seller...........................................26
(d) Matters Involving Third Parties................................................................27
(e) Determination of Amount of Adverse Consequences................................................28
(f) Tax Treatment of Indemnity Payments............................................................28
9. Tax Matters.............................................................................................28
(a) Tax Returns....................................................................................28
(b) Straddle Periods...............................................................................29
(c) Straddle Returns...............................................................................29
(d) Tax Indemnification............................................................................29
(e) Certain Taxes..................................................................................29
(f) Tax Refunds....................................................................................30
(g) Purchase Price Allocation......................................................................30
(h) Closing Tax Certificate........................................................................30
(i) Like Kind Exchanges............................................................................30
10. Termination.............................................................................................30
(a) Termination of Agreement.......................................................................30
(b) Effect of Termination..........................................................................31
11. Miscellaneous...........................................................................................31
(a) Public Announcements...........................................................................31
(b) Insurance......................................................................................32
(c) No Third Party Beneficiaries...................................................................32
(d) Succession and Assignment......................................................................32
(e) Counterparts...................................................................................32
(f) Headings.......................................................................................32
(g) Notices........................................................................................33
(h) Governing Law..................................................................................33
(i) Amendments and Waivers.........................................................................33
(j) Severability...................................................................................33
(k) Transaction Expenses...........................................................................34
(l) Construction...................................................................................34
(m) Incorporation of Exhibits and Schedules........................................................34
(n) Entire Agreement...............................................................................34
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EXHIBITS AND SCHEDULES
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Exhibit A: Description of Assets
Exhibit B-1: Form of Prince ORI Assignment
Exhibit B-2: Form of Prince TLP Assets Assignment
Exhibit C: Form of Parent Guaranty
Exhibit D: Form of Certification of Non-Foreign Status
Exhibit E: [Intentionally omitted.]
Exhibit F: Form of Exchange Agreement
Exhibit G: Form of Termination Agreement
Exhibit H: Form of Platform Agreement
Exhibit I: Form of Sublease
Schedule 1(a) Subject Insurance Policies
Schedule 1(b) Permitted Encumbrances
Schedule 3(a)(ii) Consents (Seller)
Schedule 3(a)(iii) Noncontravention (Seller)
Schedule 3(b)(ii) Consents (Buyer)
Schedule 3(b)(iii) Noncontravention (Buyer)
Schedule 4(b) Noncontravention (the Assets)
Schedule 4(c)(i) Encumbrances
Schedule 4(c)(ii) Condition of Assets
Schedule 4(c)(v) Encumbrances for Borrowed Money
Schedule 4(d) Material Changes
Schedule 4(f) Tax Matters
Schedule 4(g)(i) Subject Contracts
Schedule 4(g)(ii) Rights of Way
Schedule 4(h) Litigation
Schedule 4(i) Environmental Matters
Schedule 4(i)(ii) Environmental Permits
Schedule 4(j) Preferential Purchase Rights
Schedule 4(k) Financial Statements
Schedule 4(k)(ii) Assumed Obligations
Schedule 4(n): Regulatory Matters
Schedule 4(o): Intercompany Transactions
Schedule 5(c) Operation of Business
Schedule 5(c)(v) Capital Expenditures Budget
Schedule 6(c) Surety Bonds
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of April
1, 2002 is by and between El Paso Energy Partners, L.P., a Delaware limited
partnership (the "Seller"), and El Paso Production GOM Inc., a Delaware
corporation (the "Buyer"). The Seller and the Buyer are sometimes referred to
collectively herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, the Seller owns indirectly all of the issued and outstanding
membership interest in Argo, L.L.C., a Delaware limited liability company
("Argo"), which owns (or will own at Closing) the Prince ORI (defined herein)
and the Prince tension leg platform and all related contracts (including the
Farmout Agreement (defined herein) and all reversionary rights thereunder),
facilities, and other assets and pipelines as described on Exhibit A
(collectively, excluding the Prince ORI, the "Prince TLP Assets");
WHEREAS, the Seller desires to cause the sale, assignment and transfer
of the Assets (defined herein) to the Buyer, and the Buyer desires to purchase
the Assets, subject to the terms set forth below; and
WHEREAS, at the Closing (defined herein), among other things, Argo and
the Buyer shall enter into a Platform Use Agreement in the form of Exhibit H
(the "Platform Agreement") setting forth the rights and obligations of such
parties with respect to the Prince TLP, and the Processing Agreement dated as of
August 23, 2000 (the "Processing Agreement") between Argo and the Buyer shall be
terminated.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, but excluding
punitive (except as provided in Section 8), exemplary, special or consequential
damages.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act; provided, however, that (i) with
respect to the Seller, the term "Affiliate" shall exclude each member of the El
Paso Group and (ii) with respect to the Buyer, the term "Affiliate" shall
exclude each member of the Seller Group.
"Agreement" has the meaning set forth in the preface.
"Argo" has the meaning set forth in the recitals.
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"Argo Credit Agreement" means that certain Credit Agreement dated as of
August 23, 2000 among Argo, the lenders party thereto, the Chase Manhattan Bank,
as administrative agent and Chase Securities Inc., as arranger, as amended,
restated, supplemented or otherwise modified from time to time
"Assets" means all of the assets of Argo, including the Prince TLP
Assets, the Prince ORI and any positive working capital.
"Assignments" means the Prince TLP Assets Assignment and the Prince ORI
Assignment.
"Assumed Obligations" has the meaning set forth in Section 2(e).
"Audited Financial Statements" has the meaning set forth in Section
4(k).
"Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
"Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have an adverse effect on such
Person and would require an expense of such Person in excess of $1,000,000.
"Buyer" has the meaning set forth in the preface.
"Buyer Indemnitees" means, collectively, the Buyer and its Affiliates
and each of their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents and
representatives to the extent acting in such capacity.
"Buyer Party" means each of (i) the Buyer, (ii) El Paso Corporation,
and (iii) each Affiliate of the Buyer in which El Paso Corporation owns
(directly or indirectly) an Equity Interest and which is a party to any
Transaction Agreement.
"CERCLA" has the meaning set forth in Section 4(i)(i).
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Closing Statement" has the meaning set forth in Section 2(f)(i).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange rights
or other contracts that could
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require a Person to issue any of its Equity Interests or to sell any Equity
Interest it owns in another Person; (b) any other securities convertible into,
exchangeable or exercisable for, or representing the right to subscribe for any
Equity Interest of a Person or owned by a Person; (c) statutory pre-emptive
rights or pre-emptive rights granted under a Person's Organizational Documents;
and (d) stock appreciation rights, phantom stock, profit participation, or other
similar rights with respect to a Person.
"El Paso Corporation" means El Paso Corporation, a Delaware
corporation.
"El Paso Group" means, other than members of the Seller Group, (i) each
Affiliate of El Paso Corporation in which El Paso Corporation owns (directly or
indirectly) an Equity Interest and (ii) each natural person that is an Affiliate
of any Person described in (i) above solely because of such natural person's
position as an officer (or person performing similar functions), director (or
person performing similar functions) or other representative of any Person
described in (i) above, but only to the extent that such natural person is
acting in such capacity.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, purchase or preferential right, right of first refusal,
option or other defect in title.
"Environmental Law" and "Environmental Laws" have the meanings set
forth in Section 4(i).
"EPN PSA" means the Purchase, Sale and Merger Agreement dated the date
of this Agreement between El Paso Tennessee Pipeline Co. and the Seller.
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership, limited liability company,
trust or similar interests, and any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.
"Exchange Agreement" has the meaning set forth in Section 9(i).
"Farmout Agreement" means the Farmout Agreement dated October 25, 1999
between Flextrend Development Company, L.L.C., as Farmor, and the Buyer, as
Farmee.
"Financial Statements" has the meaning set forth in Section 4(k).
"FTC" has the meaning set forth in Section 3(a)(ii).
"GAAP" means accounting principles generally accepted in the United
States consistently applied.
"Governmental Authority" means the United States or any agency thereof
and any state, county, city or other political subdivision, agency, court or
instrumentality.
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"Hazardous Substances" means all materials, substances, chemicals, gas
and wastes which are regulated under any Environmental Law or which may form the
basis for liability under any Environmental Law.
"Indebtedness" means, with respect to any Person, to the extent not
classified as a current liability, on a consolidated basis, all Obligations of
the Person to other Persons for (a) borrowed money, (b) any capital lease
Obligation, (c) any Obligation (whether fixed or contingent) to reimburse any
bank or other Person in respect of amounts paid or payable under a standby
letter of credit, (d) any guarantee with respect to indebtedness (of the kind
otherwise described in this definition) of any Person and (e) any liability,
indebtedness or other Obligation of the Person.
"Indemnified Party" has the meaning set forth in Section 8(d).
"Indemnifying Party" has the meaning set forth in Section 8(d).
"Knowledge": an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of determination. A Person other than a natural
person shall be deemed to have "Knowledge" of a particular fact or other matter
if (i) any natural person who is serving as a director, executive officer,
partner, member, executor, or trustee of such Person (or in any similar
capacity) or (ii) any employee (or any natural person serving in a similar
capacity) who is charged with the ultimate responsibility for a particular area
of such Person's operations (e.g., the manager of the environmental section with
respect to knowledge of environmental matters), at the time of determination
had, Knowledge of such fact or other matter.
"Law" or "Laws" means any statute, code, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any applicable
Governmental Authority.
"Leases" means OCS leases OCS G-6922, OCS G-6921 and OCS G-13091.
"Material Adverse Effect" means any change or effect relating to the
business and operations relating to the Assets taken as a whole, that,
individually or in the aggregate with other changes or effects, materially and
adversely effects the value of the Assets taken as a whole, provided that in
determining whether a Material Adverse Effect has occurred, changes or effects
relating to (i) the natural gas pipeline, treating and processing industry
generally (including the price of natural gas and the costs associated with the
drilling and/or production of natural gas), (ii) United States or global
economic conditions or financial markets in general, or (iii) the transactions
contemplated by this Agreement, shall not be considered.
"MODEC Dispute" means the Seller's current dispute regarding additional
costs related to Amfels' work for MODEC on the Prince tension leg platform hull.
"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
"Oil & Gas" means oil and gas and associated hydrocarbons.
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"Ordinary Course of Business" means the ordinary course of business
consistent with the applicable Person's past custom and practice (including with
respect to quantity and frequency).
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Parent Guaranty" means the performance guaranty in the form of
Exhibit C.
"Party" and "Parties" have the meanings set forth in the preface.
"Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course of Business, provided that
adequate reserve accounts have been established in accordance with GAAP; (ii)
inchoate, mechanic's, materialmen's, and similar liens; (iii) any inchoate liens
or other Encumbrances created pursuant to any operating, farmout, construction,
operation and maintenance, co-owners, cotenancy, lease or similar agreements
listed on Schedule 1(b) for which amounts are not due; (iv) easements,
rights-of-way, restrictions and other similar Encumbrances incurred in the
Ordinary Course of Business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from the value of the
property subject thereto as it is currently being used or materially interfere
with the ordinary conduct of the business; and (v) Title Defects waived pursuant
to Section 5(f)(ii).
"Person" means an individual or entity, including any partnership,
corporation, association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, or Governmental Authority (or
any department, agency or political subdivision thereof).
"Platform Agreement" has the meaning set forth in the recitals.
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.
"Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Assets with respect to a Post-Closing Tax Period.
"Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Assets with respect to a Pre-Closing Tax Period.
"Preferential Rights" has the meaning set forth in Section 4(j).
"Prime Rate" means the prime rate reported in the Wall Street Journal
at the time such rate must be determined under the terms of this Agreement.
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"Prince ORI" means, to the extent arising, accruing or otherwise
related to the period on, including and after the Purchase Price Adjustment
Date, all of Argo's rights, title and interests in and to the overriding royalty
interest in the Leases, excluding Argo's contractual rights contained in the
Farmout Agreement.
"Prince ORI Assignment" means the assignment and assumption agreement
in the form of Exhibit B-1.
"Prince TLP Assets" has the meaning set forth in the recitals.
"Prince TLP Assets Assignment" means the assignment and assumption
agreement in the form of Exhibit B-2 pursuant to which all of the Assets other
than the Prince ORI will be assigned.
"Processing Agreement" has the meaning set forth in the recitals.
"Proposed Closing Statement" has the meaning set forth in Section
2(f)(i).
"Purchase Price" means (i) $190 million, plus (ii) the amount, if any,
by which the total of the Purchase Price Increases exceeds the total of the
Purchase Price Decreases, or minus (iii) the amount, if any, by which the total
of the Purchase Price Decreases exceeds the total of the Purchase Price
Increases.
"Purchase Price Adjustment Date" means immediately after the close of
business on March 31, 2002.
"Purchase Price Decreases" means, without duplication, the following:
(i) 100% of the amount, if any, of negative Working Capital of Argo as of the
Purchase Price Adjustment Date, as determined and calculated in accordance with
GAAP; (ii) 100% of the amount, if any, of all of the consolidated Indebtedness
(other than Indebtedness otherwise included in the Working Capital) of Argo as
of the Purchase Price Adjustment Date; (iii) 100% of the amount, if any, of all
dividends and/or distributions made by Argo, if any, between the Purchase Price
Adjustment Date and the Closing Date; and (iv) 100% of the collective amount of
any Title Failure Values.
"Purchase Price Increases" means, without duplication, 100% of the
amount, if any, of positive Working Capital of Argo as of the Purchase Price
Adjustment Date, as determined and calculated in accordance with GAAP.
"Records" has the meaning set forth in Section 6(d).
"Retained Obligations" means any and all obligations related to,
arising under, or in connection with (i) any outstanding injunction, judgment,
order, decree, ruling, or charge, or any pending or threatened action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction, relating to the Assets on the Closing Date, including the matters
listed on Schedule 4(h) or (ii) the Argo Credit Agreement.
"Rights of Way" has the meaning set forth in Section 4(g).
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"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Seller" has the meaning set forth in the preface.
"Seller Group" means (i) the Seller, (ii) each Affiliate of the Seller
in which the Seller owns (directly or indirectly) an Equity Interest and (iii)
each natural person that is an Affiliate of the Seller solely because of such
person's position as an officer (or person performing similar functions),
director (or person performing similar functions) or other representative of any
Person described in (i) - (ii) above, but only to the extent that such natural
person is in its capacity as an officer, director or representative of such
Person.
"Seller Indemnitees" means, collectively, the Seller and its Affiliates
and each of their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents, and
representatives.
"Seller Party" means each of (i) the Seller, (ii) Argo and (iii) each
Affiliate of the Seller which is a party to any Transaction Agreement.
"Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.
"Straddle Return" means a Tax Return for a Straddle Period.
"Subject Contracts" has the meaning set forth in Section 4(g).
"Subject Insurance Policies" means those material policies of
insurance, the current policies of which are listed on Schedule 1(a), which the
Seller or any of its Affiliates maintain covering any Assets.
"Sublease" means the platform space agreement in the form of Exhibit I.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), custom duties, capital stock, franchise, profits, withholding,
social security (or similar excises), unemployment, disability, ad valorem, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Records" means all Tax Returns and Tax-related work papers
relating to the Assets.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Termination Agreement" means an agreement in the form of Exhibit G.
"Third Party Claim" has the meaning set forth in Section 8(d).
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"Title Defect Notice" has the meaning set forth in Section 5(f)(ii).
"Title Defect" has the meaning set forth in Section 5(f)(ii).
"Title Failure" has the meaning set forth in Section 5(f)(ii).
"Title Failure Value" means the value of any Title Failure, as
determined in accordance with Section 5(f)(iii).
"Transaction Agreements" means this Agreement, the Assignments, the
Parent Guaranty, the Platform Agreement, the Termination Agreement, the Exchange
Agreement (if applicable), the Sublease and all other agreements, documents,
certificates or instruments executed and delivered in connection with the
transactions contemplated herein.
"Unaudited Financial Statements" has the meaning set forth in Section
4(k).
"Working Capital" means current assets less current liabilities.
2. The Transactions.
(a) Sale of Assets. Subject to the terms and conditions of this
Agreement, the Seller agrees to cause Argo to sell to the Buyer, and the Buyer
agrees to purchase from Argo, all of the rights, title and interest in and to
the Assets, free and clear of any Encumbrances.
(b) Consideration. In consideration for the assignment of the Assets,
the Buyer agrees to pay the Purchase Price to the Seller (or its designee) in
cash by wire transfer of immediately available funds.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Seller,
commencing at 10:00 a.m., local time, on the last business day of the month in
which the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby has occurred (other
than conditions with respect to actions each Party shall take at the Closing
itself) or such other date as the Parties may mutually determine (the "Closing
Date").
(d) Deliveries at the Closing. At the Closing, (a) the Seller shall
deliver to the Buyer the various certificates, instruments, and documents
referred to in Sections 7(a) and 9(h); (b) the Buyer shall deliver to the Seller
the various certificates, instruments, and documents referred to in Section
7(b); (c) the Parties shall execute and deliver the Assignments; (d) the Parties
shall execute and deliver the Termination Agreement; (e) the Parties shall
execute and deliver the Platform Agreement; (f) the Buyer shall cause El Paso
Corporation to execute and deliver the Parent Guaranty; (g) the Buyer shall
deliver to the Seller or its designee the estimated Purchase Price as set forth
on the Proposed Closing Statement; and (i) the Parties shall execute and/or
deliver, or cause to be executed and/or delivered, each other Transaction
Agreement.
(e) Assumed Obligations. On the Closing Date, the Buyer will assume and
will be obligated to fully and timely pay, perform, and discharge in accordance
with their terms, any
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and all Obligations of Argo other than the Retained Obligations (the "Assumed
Obligations"), including:
(i) any and all Obligations of Argo under the Subject
Contracts;
(ii) any and all Obligations of Argo constituting accounts
payable relating to, arising out of or connected with the ownership or
operation of the Prince TLP Assets, including any negative Oil and Gas
imbalances;
(iii) any and all negative working capital of Argo;
(iv) any and all Obligations of Argo relating to environmental
and Tax matters; and.
(v) any and all Obligations in any way relating to the
abandoning, decommissioning, or removing of any Assets or restoring or
reconditioning the lands affected thereby.
(f) Proposed Closing Statement and Post-Closing Adjustment.
(i) At least three business days prior to the Closing Date,
the Seller shall cause to be prepared and delivered to the Buyer a
statement (the "Proposed Closing Statement"), as prepared and
determined in accordance with GAAP to the extent applicable, setting
forth the Seller's good faith estimate, including reasonable detail, of
the Purchase Price. As soon as practicable, but in any event no later
than 60 days following the Closing Date, the Seller shall cause to be
prepared and delivered to the Buyer a statement, including reasonable
detail, of the actual Purchase Price (such statement, as it may be
adjusted pursuant to Section 2(f)(ii), the "Closing Statement").
(ii) Upon receipt of the Closing Statement, the Buyer and the
Buyer's independent accountants shall be permitted during the
succeeding 30-day period to examine the work papers used or generated
in connection with the preparation of the Closing Statement and such
other documents as the Buyer may reasonably request in connection with
its review of the Closing Statement. Within 30 days of receipt of the
Closing Statement, the Buyer shall deliver to the Seller a written
statement describing in reasonable detail its objections (if any) to
any amounts or items set forth on the Closing Statement. If the Buyer
does not raise objections within such period, then, the Closing
Statement shall become final and binding upon all Parties at the end of
such period. If the Buyer raises objections, the Parties shall
negotiate in good faith to resolve any such objections. If the Parties
are unable to resolve any disputed item within 60 days after the
Buyer's receipt of the Closing Statement, any such disputed item shall
be submitted to a nationally recognized independent accounting firm
mutually agreeable to the Parties who shall be instructed to resolve
such disputed item within 30 days. The resolution of disputes by the
accounting firm so selected shall be set forth in writing and shall be
conclusive, binding and non-appealable upon the Parties and the Closing
Statement shall become final and binding upon the date of such
resolution. The
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fees and expenses of such accounting firm shall be paid one-half by the
Buyer and one-half by the Seller.
(iii) If the Purchase Price as set forth on the Closing
Statement exceeds the estimated Purchase Price as set forth on the
Proposed Closing Statement, the Buyer shall pay the Seller the amount
of such excess. If the estimated Purchase Price as set forth on the
Proposed Closing Statement exceeds the Purchase Price as set forth on
the Closing Statement, the Seller shall pay to the Buyer (or its
designee) the amount of such excess. After giving effect to the
foregoing adjustments, any amount to be paid by the Buyer to the
Seller, or to be paid by the Seller to the Buyer, as the case may be,
shall be paid in the manner and with interest as provided in Section
2(f)(iv)at a mutually convenient time and place within five business
days after the later of acceptance of the Closing Statement or the
resolution of the Buyer's objections thereto pursuant to Section
2(f)(ii).
(iv) Any payments pursuant to this Section 2(f) shall be made
by causing such payments to be credited in immediately available funds
to such account or accounts of the Buyer or the Seller, as the case may
be, as may be designated by the Buyer or the Seller, as the case may
be. If payment is being made after the fifth business day referred to
in Section 2(f)(iii), the amount of the payment to be made pursuant to
this Section 2(f) shall bear interest from and including such fifth
business day to, but excluding, the date of payment at a rate per annum
equal to the Prime Rate plus two percent. Such interest shall be
payable at the same time as the payment to which it relates and shall
be calculated on the basis of a year of 365 days and the actual number
of days for which due.
(v) The Buyer shall cooperate in the preparation of the
Closing Statement, including providing customary certifications to the
Seller, and, if requested, to the Seller's independent accountants or
the accounting firm selected by mutual agreement of the Parties
pursuant to Section 2(f)(ii).
(vi) Except as set forth in Section 2(f)(ii), each Party shall
bear its own expenses incurred in connection with the preparation and
review of the Closing Statement.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Buyer as follows:
(i) Organization and Good Standing. The Seller is an entity
duly organized, validly existing, and in good standing under the Laws
of the state of Delaware. The Seller is in good standing under the Laws
of the state of Texas and each other jurisdiction which requires such
qualification, except where the lack of such qualification would not
have a Material Adverse Effect.
10
(ii) Authorization of Transaction. Each Seller Party has full
power and authority (including full entity power and authority) to
execute and deliver each Transaction Agreement to which such Seller
Party is a party and to perform its obligations thereunder. Each
Transaction Agreement to which any Seller Party is a party constitutes
the valid and legally binding obligation of such Seller Party,
enforceable against such Seller Party in accordance with its terms and
conditions, subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors' rights
generally, and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
Except as set forth on Schedule 3(a)(ii), no Seller Party need give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority or any other Person in order
to consummate the transactions contemplated by this Agreement or any
other Transaction Agreement to which such Seller Party is a party,
except for the prior approval of the Federal Trade Commission ("FTC"),
if applicable.
(iii) Noncontravention. Except for prior approval of the FTC
(if applicable) and filings specified in Schedule 3(a)(ii) or as set
forth in Schedule 3(a)(iii), neither the execution and delivery of any
Transaction Agreement, nor the consummation of any of the transactions
contemplated thereby, shall (A) violate any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any Governmental Authority to which any Seller Party is
subject or any provision of its Organizational Documents or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which any Seller Party is a party or by which it is
bound or to which any of its assets or any of the Assets are subject,
except for such violations, defaults, breaches, or other occurrences
that do not, individually or in the aggregate, have a material adverse
effect on the ability of the Seller or any other Seller Party to
consummate the transactions contemplated by such Transaction Agreement.
(iv) Brokers' Fees. No Seller Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
(b) Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Seller as follows:
(i) Organization of the Buyer. Each Buyer Party is a limited
liability company, limited partnership or corporation duly organized,
validly existing, and in good standing under the Laws of the state of
Delaware. Each Buyer Party is in good standing under the Laws of the
state of Texas and each other jurisdiction which requires such
qualification, except where the lack of such qualification would not
have a Material Adverse Effect.
11
(ii) Authorization of Transaction. Each Buyer Party has full
power and authority (including full entity power and authority) to
execute and deliver each Transaction Agreement to which it is a party
and to perform its obligations thereunder. Each Transaction Agreement
to which such Buyer Party is a party constitutes the valid and legally
binding obligation of such Buyer Party, enforceable against such Buyer
Party in accordance with its terms and conditions, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Except as set forth on
Schedule 3(b)(ii), no Buyer Party needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
Governmental Authority or any other Person in order to consummate the
transactions contemplated by this Agreement or any other Transaction
Agreement, except for the prior approval of the FTC, if applicable.
(iii) Noncontravention. Except for the prior approval of the
FTC (if applicable) and filings specified in Schedule 3(b)(ii) or as
set forth in Schedule 3(b)(iii), neither the execution and delivery of
any Transaction Agreement to which any Buyer Party is a party, nor the
consummation of any of the transactions contemplated thereby, shall (A)
violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental
Authority to which such Buyer Party is subject or any provision of its
Organizational Documents or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify, or cancel, or
require any notice, approval or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which any Buyer
Party is a party or by which it is bound or to which any of its assets
is subject, except for such violations, defaults, breaches, or other
occurrences that do not, individually or in the aggregate, have a
material adverse effect on the ability of any Buyer Party to consummate
the transactions contemplated by such Transaction Agreement.
(iv) Brokers' Fees. No Buyer Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Seller could become liable or obligated.
(v) Investment. The Buyer is familiar with investments of the
nature of the Assets, understands that this investment involves
substantial risks, has adequately investigated the Assets, and has
substantial knowledge and experience in financial and business matters
such that it is capable of evaluating, and has evaluated, the merits
and risks inherent in purchasing the Assets, and is able to bear the
economic risks of such investment. The Buyer has had the opportunity to
visit with the Seller and its applicable Affiliates and meet with their
representative officers and other representatives to discuss the
business, assets, liabilities, financial condition, and operations of
the Assets, has received all materials,
12
documents and other information that the Buyer deems necessary or
advisable to evaluate the Assets, and has made its own independent
examination, investigation, analysis and evaluation of the Assets,
including its own estimate of the value of the Assets. The Buyer has
undertaken such due diligence (including a review of the assets,
properties, liabilities, books, records and contracts constituting part
of the Assets) as the Buyer deems adequate.
4. Representations and Warranties Concerning the Assets and/or Argo.
The Seller hereby represents and warrants to the Buyer as follows:
(a) Organization, Qualification and Company Power. Each of the Seller
Parties (x) is a limited liability company, partnership (limited or general) or
corporation duly organized, validly existing, and in good standing under the
Laws of the state of Delaware; (y) is in good standing under the Laws of the
state of Texas and each other jurisdiction which requires qualification, except
where the lack of such qualification would not have a Material Adverse Effect;
and (z) has full power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) Noncontravention. Except for the need to obtain prior approval of
the FTC or as set forth in Schedule 4(b), neither the execution and delivery of
any Transaction Agreement to which any Seller Party is a party, nor the
consummation of any of the transactions contemplated thereby, shall (i) violate
any statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any Governmental Authority to which any of the
Assets is subject or any provision of the Organizational Documents of any Seller
Party or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, require any notice or trigger any rights to
payment or other compensation, or result in the imposition of any Encumbrance on
any of the Assets under, any agreement, contract, lease, license, instrument, or
other arrangement to which any of the Assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, right to payment or other compensation, or
Encumbrance would not have a Material Adverse Effect, or would not materially
adversely affect the ability of any Seller Party to consummate the transactions
contemplated by such Transaction Agreement.
(c) Title to and Condition of Assets.
(i) The Seller has good, marketable and indefeasible title to
all of the Assets in each case free and clear of all Encumbrances,
except for (a) Permitted Encumbrances and (b) Encumbrances disclosed in
Schedule 4(c)(i). For the purposes of this Section 4(c)(i), "good,
marketable and indefeasible title" with respect to the Prince ORI means
a that record title (constituting a general warranty) which entitles
the Seller to receive not less than the net overriding royalty
interest(s) set forth on Exhibit A and attributable to the Oil & Gas
produced, saved and marketed from each of the Leases and of all Oil &
Gas produced, saved and marketed from any unit of which any Lease is a
part and allocated to such Lease, all without reduction, suspension or
termination of the interests in each Lease throughout the duration of
such Lease. The Assets are
13
described on Exhibit A. The operations of the Assets are the only
operations reflected in the Financial Statements.
(ii) To the Seller's Knowledge, except as disclosed in
Schedule 4(c)(ii), the Prince TLP Assets are in good operating
condition and repair (normal wear and tear excepted), are free from
defects (patent and latent), are suitable for the purposes for which
they are currently used and are not in need of maintenance or repairs
except for ordinary routine maintenance and repairs.
(iii) [Intentionally omitted.]
(iv) [Intentionally omitted.]
(v) Encumbrances for Borrowed Money. Except as set forth on
Schedule 4(c)(v), there are no borrowings, loan agreements, promissory
notes, pledges, mortgages, guaranties, liens and similar liabilities
(direct and indirect), or Encumbrances which are secured by or
constitute an Encumbrance on the Assets and/or Argo.
(d) Material Change. Except as set forth in Schedule 4(d), since
December 31, 2001:
(i) there has not been any Material Adverse Effect with
respect to the Assets and/or Argo;
(ii) the Prince TLP Assets have been operated and maintained
in the Ordinary Course of Business;
(iii) to the Seller's Knowledge, there has not been any
material damage, destruction or loss to any material portion of the
Assets, whether or not covered by insurance;
(iv) there has been no purchase, sale or lease of any material
asset included in the Assets other than the acquisition of the Prince
ORI by Argo;
(v) there has been no actual, pending, or to the Seller's
Knowledge, threatened change affecting any of the Assets with any
customers, licensors, suppliers, distributors or sales representatives
of the Seller, except for changes that do not have a Material Adverse
Effect;
(vi) there has been no (x) amendment or modification in any
material respect to any Subject Contract or any other contract or
agreement material to the Assets, or (y) termination of any Subject
Contract or any other contract or agreement material to the Assets
before the expiration of the term thereof other than to the extent any
such material contract or agreement terminated pursuant to its terms in
the Ordinary Course of Business; and
14
(vii) there is no contract, commitment or agreement to do any
of the foregoing, except as expressly permitted hereby.
(e) Legal Compliance. Each Seller Party, with respect to the Assets
and/or Argo, has complied with all applicable Laws of all Governmental
Authorities, except where the failure to comply would not have a Material
Adverse Effect. The Seller makes no representations or warranties in this
Section 4(e) with respect to Taxes or Environmental Laws, for which the sole
representations and warranties of the Seller are set forth in Sections 4(f) and
4(i), respectively.
(f) Tax Matters. Except as set forth in Schedule 4(f) or as would not
have a Material Adverse Effect:
(i) the Seller, Argo and their Affiliates have filed, or
caused to be filed, all Tax Returns with respect to the Assets that
they were required to file and such Tax Returns are accurate in all
material respects;
(ii) All Taxes shown as due by the Seller, Argo or their
Affiliates on any such Tax Returns have been paid; and
(iii) There is no dispute or claim concerning any Tax
liability of Seller, Argo or any of their Affiliates related to the
Assets claimed or raised in writing by any Governmental Authority.
(g) Contracts and Commitments. Schedule 4(g)(i) contains a list of all
the material contracts, agreements, licenses, permits and other documents and
instruments constituting part of the Assets (the "Subject Contracts"), and each
such Subject Contract is in full force and effect, except where the failure to
be in full force and effect would not have a Material Adverse Effect. Schedule
4(g)(ii) contains a list of all rights-of-way constituting part of the Assets
(the "Rights of Way"). The Subject Contracts, together with the Rights of Way,
constitute all of the contracts, agreements, rights of way, licenses, permits,
and other documents and instruments necessary for the operation and business of
the Prince TLP Assets consistent with applicable Laws and prior operation. The
Seller Parties have performed all material obligations required to be performed
by them to date under the Subject Contracts and the Rights of Way, and are not
in default under any material obligation of any such contract or right-of-way,
except when such default would not have a Material Adverse Effect. To the
Seller's Knowledge, no other party to any Subject Contract is in default
thereunder.
(h) Litigation.
(i) Schedule 4(h) sets forth each instance in which the Seller
or any of the Assets and/or Argo (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is the
subject of any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction, or is the subject
of any pending or, to the Seller's Knowledge, threatened claim, demand,
or notice of violation or liability from any Person, except where any
of the foregoing would not have a Material Adverse Effect.
15
(ii) No Seller Party has Knowledge of any Basis for any
present or future injunction, judgment, order, decree, ruling, or
charge or action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, against any of them
giving rise to any Obligation to which any of the Assets and/or Argo
would be subject.
(i) Environmental Matters. Except as set forth in Schedule 4(i):
(i) The Seller, with respect to the Assets, has been in
compliance with all applicable local, state, and federal laws, rules,
regulations, and orders regulating or otherwise pertaining to (a) the
use, generation, migration, storage, removal, treatment, remedy,
discharge, release, transportation, disposal, or cleanup of pollutants,
contamination, hazardous wastes, hazardous substances, hazardous
materials, toxic substances or toxic pollutants, (b) surface waters,
ground waters, ambient air and any other environmental medium on or off
any Lease or (c) the environment or health and safety-related matters;
including the following as from time to time amended and all others
whether similar or dissimilar: the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (as amended by the
Superfund Amendments and Reauthorization Act of 1986 "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used
Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
1980, and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Toxic Substance
Control Act, as amended, the Clean Air Act, as amended, the Clean Water
Act, as amended, and all regulations promulgated pursuant thereto
(collectively, the "Environmental Laws" and individually an
"Environmental Law"), except for such instances of noncompliance that
individually or in the aggregate do not have a Material Adverse Effect.
(ii) The Seller has obtained all permits, licenses,
franchises, authorities, consents, registrations, orders, certificates,
waivers, exceptions, variances and approvals, and have made all
filings, paid all fees, and maintained all material information,
documentation, and records, as necessary under applicable Environmental
Laws for operating the Assets as they are presently operated, and all
such permits, licenses, franchises, authorities, consents, approvals,
and filings remain in full force and effect, except for such matters
that individually or in the aggregate do not have a Material Adverse
Effect. Schedule 4(i)(ii) sets forth a complete list of all permits,
licenses, franchises, authorities, consents, and approvals, as
necessary under applicable Environmental Laws for operating the Assets
as they are presently operated, each of which is held in the name of
the appropriate Seller Party as indicated on such schedule.
(iii) Except as would not have a Material Adverse Effect, (x)
there are no pending or threatened claims, demands, actions,
administrative proceedings or lawsuits against the Seller with respect
to the Assets and/or Argo and the Seller has not received notice of any
of the foregoing and (y)
16
none of the Assets and/or Argo is, subject to any outstanding
injunction, judgment, order, decree or ruling under any Environmental
Laws.
(iv) The Seller has not received any written notice that the
Seller, with respect to the Assets, is or may be a potentially
responsible party under CERCLA or any analogous state law in connection
with any site actually or allegedly containing or used for the
treatment, storage or disposal of Hazardous Substances.
(v) All Hazardous Substances or solid wastes generated,
transported, handled, stored, treated or disposed by, in connection
with or as a result of the operation or possession of the Seller or the
conduct of the Seller, have been transported only by carriers
maintaining valid authorizations under applicable Environmental Laws
and treated, stored, disposed of or otherwise handled only at
facilities maintaining valid authorizations under applicable
Environmental Laws and such carriers and facilities have been and are
operating in compliance with such authorizations and are not the
subject of any existing, pending or threatened action, investigation or
inquiry by any Governmental Authority or other Person in connection
with any of the Environmental Laws.
The Seller makes no representation or warranty regarding any compliance or
failure to comply with, or any actual or contingent liability under, any
Environmental Law, except as expressly set forth in this Section 4(i). For
purposes of this Section 4(i), each reference to the Seller or Seller Parties
shall be deemed to include the Seller Parties and their Affiliates.
(j) Preferential Purchase Rights. Except as set forth on Schedule 4(j),
there are no preferential purchase rights, options or other rights held by any
Person not a party to this Agreement to purchase or acquire any or all of the
Assets, in whole or in part, that would be triggered or otherwise affected as a
result of the transactions contemplated by this Agreement ("Preferential
Rights").
(k) Financial Statements.
(i) Schedule 4(k) sets forth (A) audited financial statements
covering the ownership and operation of the Assets and/or Argo as of,
and for the twelve month period ended, December 31, 2000 (the "Audited
Financial Statements") and (B) unaudited financial statements covering
the ownership and operations of the Prince TLP Assets as of, and for
the twelve month period ended, December 31, 2001 (the "Unaudited
Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements").
(ii) (A) The Financial Statements were prepared in accordance
with GAAP (except as expressly set forth therein, except (with respect
to the Unaudited Financial Statements) for the absence of footnotes
(other than to the extent footnotes are included in Schedule 4(k)), and
fairly present, in all material respects, the financial position,
income and cash flows associated with the ownership and operation of
the Assets and/or Argo as of the dates and for the periods indicated;
(B) the Financial Statements do not omit to state any liability
17
required to be stated therein in accordance with GAAP (except as
expressly set forth therein, except (with respect to the Unaudited
Financial Statements) for the absence of footnotes (other than to the
extent footnotes are included in Schedule 4(k)), and except (with
respect to the Unaudited Financial Statements) for normal year-end
adjustments); and (C) except with respect to Obligations under the
Farmout Agreement or set forth on Schedule 4(k)(ii), all Assumed
Obligations are reflected in the Financial Statements.
(iii) With respect to the Prince ORI, prior to and through the
Closing Date the Seller Parties have properly made all payments and
disbursements owing to each overriding royalty owner for whom a Seller
Party was responsible to make any such payments and/or disbursements.
(l) Employee Matters. Argo has no employees.
(m) Prohibited Events. None of the matters described in Section 5(c)
have occurred since June 30, 2001.
(n) Regulatory Matters. No Seller Party is (i) a "holding company," a
"subsidiary company" of a "holding company," an "affiliate" of a "holding
company," or a "public utility," as each such term is defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder. Except as set forth on Schedule 4(n), none of the Assets
are subject to regulation by the Federal Energy Regulatory Commission or rate
regulation or comprehensive nondiscriminatory access regulation under any
federal laws or the laws of any state or other local jurisdiction.
(o) Intercompany Transactions. Each outstanding receivable, payable and
other intercompany transaction and arrangement between the Seller and any of its
Affiliates, on the one hand, and Argo, on the other hand, is listed on Schedule
4(o).
(p) Disclaimer of Representations and Warranties Concerning Personal
Property, Equipment and Fixtures. The Buyer acknowledges that (i) it has had and
pursuant to this Agreement shall have before Closing access to the Assets and
the officers and employees of the Seller and (ii) in making the decision to
enter into this Agreement and consummate the transactions contemplated hereby,
the Buyer has relied solely on the basis of its own independent investigation
and upon the express representations, warranties, covenants, and agreements set
forth in this Agreement and the other Transaction Agreements. Accordingly, the
Buyer acknowledges that, except as expressly set forth in this Agreement, the
Seller has not made, and THE SELLER MAKES NO AND DISCLAIMS ANY, REPRESENTATIONS
OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE,
OR OTHERWISE, REGARDING (i) THE QUALITY, CONDITION, OR OPERABILITY OF ANY
PERSONAL PROPERTY, EQUIPMENT, OR FIXTURES, (ii) THEIR MERCHANTABILITY, (iii)
THEIR FITNESS FOR ANY PARTICULAR PURPOSE, (iv) THEIR CONFORMITY TO MODELS,
SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, OR (v) AS TO WHETHER ANY ASSETS ARE
YEAR 2000
18
COMPLIANT, AND ALL PERSONAL PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE
IS" IN THE CONDITION IN WHICH THE SAME EXISTS.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:
(a) General. The Buyer shall use its Best Efforts to take all action
and to do all things necessary, proper, or advisable in order to consummate and
make effective the transactions contemplated by this Agreement, including the
Seller's conditions to closing in Section 7(b). The Seller shall, and shall
cause Argo to, use its Best Efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement, including the Buyer's conditions to
closing in Section 7(a).
(b) Notices and Consents. Each of the Parties shall give any notices
to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the matters referred to in
Sections 3(a)(ii), 3(a)(iii), 3(b)(ii), and 3(b)(iii) including the
corresponding Schedules, so as to permit the Closing to occur not later than
9:00 a.m. (Houston time) on April 1, 2002. Without limiting the generality of
the foregoing, the Parties agree to work in good faith with the FTC in order to
consummate the transactions contemplated hereby as soon as reasonably
practicable, but in no event later than 9:00 a.m. (Houston time) on April 1,
2002; provided, that, notwithstanding anything to the contrary contained herein,
this sentence shall not obligate the Buyer to divest or hold separate any assets
or enter into any agreement not contemplated by this Agreement or modify this
Agreement.
(c) Operation of Business. The Seller shall not permit Argo to, without
the consent of the Buyer (which consent shall not be unreasonably withheld or
delayed), except as expressly contemplated by this Agreement or as contemplated
by Schedule 5(c), engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, without the consent of the Buyer (which consent
shall not be unreasonably withheld or delayed), except as expressly contemplated
by this Agreement or Schedule 5(c), the Seller shall not permit Argo to do any
of the following:
(i) [intentionally omitted];
(ii) cause or allow any part of the Assets to become subject
to an Encumbrance, except for Permitted Encumbrances and other
Encumbrances identified in Section 4(c);
(iii) amend in any material respect any Subject Contract
material to the Assets or terminate any such material contract or
agreement before the expiration of the term thereof other than to the
extent any such material contract or agreement expires in accordance
with its terms in the Ordinary Course of Business;
19
(iv) except as required by Law, make, change or revoke any Tax
election relevant to any Asset;
(v) (A) acquire (including by merger, consolidation or
acquisition of Equity Interest or assets) any corporation, partnership,
limited liability company or other business organization or any
division thereof or any material amount of assets other than the Prince
ORI; (B) incur any Indebtedness for borrowed money or issue any debt
securities or assume, guarantee, endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or
make any loans or advances; (C) sell, lease or otherwise dispose of any
property or assets, other than sales of goods or services in the
Ordinary Course of Business; or (D) enter into or amend a contract,
agreement, commitment, or arrangement with respect to any matter set
forth in this Section 5(c)(v) or (except for contracts with aggregate
Obligations not in excess of $10,000) otherwise not in the Ordinary
Course of Business; provided that notwithstanding any provision of this
Agreement, if the Buyer expressly consents in writing (x) Argo shall be
entitled to dividend and/or distribute to its Equity Interest holders,
at any time, and from time to time, such cash generated by Argo's
business to which such Equity Interest holder would otherwise be
entitled (other than cash arising from borrowings by such company or
sales of assets by such company outside of the Ordinary Course of
Business) so long as such dividends and/or distributions are reflected
as a Purchase Price Decrease, where appropriate, and (y) Argo may make
or incur capital expenditures in accordance with the terms of its
Organizational Documents and the capital expenditures budget set forth
on Schedule 5(c)(v); or
(vi) [Intentionally omitted.]
(vii) initiate or settle any litigation, complaint, rate
filing or administration proceeding relating to the Assets.
(d) Intercompany Transactions. All outstanding receivables, payables
and other intercompany transactions and arrangements between the Seller and any
of its Affiliates, on the one hand, and Argo, on the other hand, shall remain in
full force and effect as Assumed Obligations through and after the Closing.
(e) Full Access. The Seller shall permit, and shall cause its
Affiliates to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Seller and its Affiliates, to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of Argo or pertaining to any of the Assets.
(f) Liens and Encumbrances.
(i) Prior to the Closing, the Seller shall obtain releases of
all liens and other Encumbrances disclosed in Schedule 4(c)(i), without
any post-Closing
20
liability or expense to any Asset or any Buyer Party, and shall provide
proof of such releases to the Buyer at the Closing.
(ii) Prior to the Closing, the Buyer may from time to time
notify Seller in writing (a "Title Defect Notice") of any liens or
other Encumbrances or defects or irregularities of title which would
cause a breach of a representation or warranty of Seller set forth in
Section 4(c)(i) with respect to the Prince ORI ("Title Defect"). Any
Title Defect as described in a Title Defect Notice delivered to the
Seller prior to Closing and not cured to the Buyer's satisfaction on or
before the Closing, unless the time for cure is extended in writing by
the Buyer, shall be a "Title Failure" unless waived by Buyer. Any Title
Defect waived by Buyer shall become a Permitted Encumbrance.
(iii) In the event of a Title Failure, then the Title Failure
Value associated with such Title Failure shall be the product of (A)
the allocated value attributed to the Prince ORI pursuant to Section
9(g) multiplied by (B) the actual overriding royalty interest
attributable to the Prince ORI, divided by (C) the overriding royalty
interest attributable to the Prince ORI stated in Exhibit A:
6. Post-Closing Covenants. The Parties agree as follows:
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
shall take such further action (including the execution and delivery of such
further instruments and documents) as the other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 8).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date involving the Assets, the other Party shall cooperate with the
contesting or defending Party and its counsel in the defense or contest, make
available its personnel, and provide such testimony and access to its books and
records (other than books and records which are subject to privilege or to
confidentiality restrictions) as shall be necessary in connection with the
defense or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8). The Seller shall have sole control
over all litigation, arbitration, settlement and other dispute resolution
proceedings with respect to the MODEC Dispute; provided that Seller shall keep
Buyer promptly informed as to the progress and resolution of the MODEC Dispute.
(c) Surety Bonds; Guarantees. The Buyer agrees to be substituted as the
surety or guarantor of any surety bonds or guarantees issued by the Seller or
any of its Affiliates in connection with the Assets, including the surety bonds
and guarantees listed on Schedule 6(c). The Buyer and the Seller shall cooperate
to effect all such substitutions and the Buyer shall indemnify and hold the
Seller harmless from and against any Adverse Consequences arising
21
from the failure of the Buyer to be so substituted. The Buyer shall use
commercially reasonable efforts to obtain a release of the Seller from any
surety or guaranty obligations with respect to the Assets.
(d) Delivery and Retention of Records. On the Closing Date, the Seller
shall deliver or cause to be delivered to the Buyer, copies of Tax Records which
are relevant to Post-Closing Tax Periods and all other files, books, records,
information and data relating to the Assets (other than Tax Records) that are in
the possession or control of the Seller (the "Records"). The Buyer agrees to (i)
hold the Records and not to destroy or dispose of any thereof for a period of
ten years from the Closing Date or such longer time as may be required by Law,
provided that, if it desires to destroy or dispose of such Records during such
period, it shall first offer in writing at least 60 days before such destruction
or disposition to surrender them to the Seller and if the Seller does not accept
such offer within 20 days after receipt of such offer, the Buyer may take such
action and (ii) afford the Seller, its accountants, and counsel, during normal
business hours, upon reasonable request, at any time, full access to the Records
and to the Buyer's employees to the extent that such access may be requested for
any legitimate purpose at no cost to the Seller (other than for reasonable
out-of-pocket expenses); provided that such access shall not be construed to
require the disclosure of Records that would cause the waiver of any
attorney-client, work product, or like privilege; provided, further that in the
event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Seller contained
in Sections 3(a) and 4 must be true and correct in all material
respects (without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value, except with respect to (A)
the representations and warranties in Section 4(c)(ii) and (B) the
representations and warranties in Section 4(d)(iii) with respect to
latent defects, for which in each such case qualifications as to
Knowledge shall be given effect) as of the date of this Agreement and
at Closing (except for those which refer to a specific date, which must
be true and correct as of such date);
(ii) the Seller must have performed and complied in all
material respects with its covenants hereunder through the Closing
(without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value);
(iii) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental
22
Authority to enjoin the consummation of any of the transactions,
contemplated by this Agreement;
(iv) the Seller must have obtained all material Governmental
Authority and third party consents, including any material consents
specified in Sections 3(a)(ii), 3(a)(iii) and 4(b) and including the
corresponding Schedules;
(v) the Seller must have delivered to the Buyer a certificate
to the effect that each of the conditions specified in Sections 7(a)(i)
- (iv) is satisfied in all respects;
(vi) the FTC must have approved the transactions contemplated
hereunder;
(vii) the Closing Date shall be no earlier than March 28,
2002;
(viii) El Paso Tennessee Pipeline Co. (an Affiliate of the
Buyer) and the Seller must have executed and delivered the EPN PSA and
the closing of the transactions contemplated therein must have
occurred; and
(ix) the Seller shall have caused any and all amounts
outstanding under the Argo Credit Agreement to be paid in full.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or before the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Buyer contained
in Section 3(b) must be true and correct in all material respects
(without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value) as of the date of this
Agreement and at Closing (except for those which refer to a specific
date, which must be true and correct as of such date);
(ii) the Buyer must have performed and complied in all
material respects with each of its covenants hereunder through the
Closing (without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value);
(iii) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental
23
Authority to enjoin the consummation of any of the transactions,
contemplated by this Agreement;
(iv) the Seller must have obtained all material Governmental
Authority and third party consents, including material consents
specified in Sections 3(a)(ii), 3(a)(iii) and 4(b) and including the
corresponding Schedules;
(v) the Buyer must have delivered to the Seller a certificate
to the effect that each of the conditions specified in Sections 7(b)(i)
- (iv) is satisfied in all respects;
(vi) the FTC must have approved the transactions contemplated
hereunder;
(vii) El Paso Tennessee Pipeline Co. (an Affiliate of the
Buyer) and the Seller must have executed and delivered the EPN PSA and
the closing of the transactions contemplated therein must have
occurred; and
(viii) the Seller shall have caused any and all amounts
outstanding under the Argo Credit Agreement to be paid in full.
The Seller may waive any condition specified in this Section 7(b) if it
executes a writing so stating at or before the Closing.
8. Remedies for Breaches of this Agreement
(a) Survival of Representations and Warranties. (i) All of the
representations and warranties of the Seller contained in Sections 3(a) and 4
(other than Sections 4(f) and 4(h)(ii)) shall survive the Closing hereunder for
a period of three years after the Closing Date; (ii) the representations and
warranties of the Seller contained in Section 4(f) shall survive the Closing
with respect to any given claim that would constitute a breach of such
representation or warranty until 90 days after the expiration of the statute of
limitations applicable to the underlying Tax matter giving rise to that claim,
and (iii) the representations and warranties of the Seller contained in Section
4(h)(ii) shall survive the Closing for a period of one year after the Closing
Date. The representations and warranties of the Buyer contained in Section 3(b)
shall survive the Closing for a period of three years after the Closing Date.
The covenants and obligations contained in Sections 2 and 6 and all other
covenants and obligations contained in this Agreement (other than Section
8(b)(iv)) shall survive the Closing forever. The covenants and obligations
contained in Section 8(b)(iv) shall survive the Closing for a period of three
years after the Closing Date
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event: (x) the Seller breaches any of its
representations or warranties (without giving effect to any supplement
to the Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, awareness or concepts of similar import, or any
qualification or limitation as to monetary
24
amount or value, except with respect to (A) the representations and
warranties in Section 4(c)(ii) and (B) the representations and
warranties in Section 4(d)(iii) with respect to latent defects, for
which in each such case qualifications as to Knowledge shall be given
effect) contained herein (other than a representation or warranty
contained in Section 4(f)); (y) there is an applicable survival period
pursuant to Section 8(a); and (z) the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 11(g) within
such survival period, then the Seller agrees to release and indemnify
the Buyer Indemnitees from and against any Adverse Consequences
suffered by the Buyer Indemnitees; provided, that the Seller shall not
have any obligation to release and indemnify the Buyer Indemnitees from
and against any such Adverse Consequences (A) until the Buyer
Indemnitees, in the aggregate, have suffered Adverse Consequences by
reason of all such breaches in excess of an aggregate deductible amount
equal to 1% of the Purchase Price (after which point the Seller shall
be obligated only to release and indemnify the Buyer Indemnitees from
and against further such Adverse Consequences) or thereafter (B) to the
extent the Adverse Consequences the Buyer Indemnitees, in the
aggregate, have suffered by reason of all Adverse Events exceeds an
aggregate ceiling amount equal to 50% of the Purchase Price (after
which point the Seller shall have no obligation to release and
indemnify the Buyer Indemnitees from and against further such Adverse
Consequences); provided, however, that the deductible amount with
respect to breaches of Section 4(c)(i) shall be $190,000.
(ii) In the event: (x) the Seller breaches any of its
covenants or obligations in Sections 2 or 6 or any other covenants or
obligations in this Agreement or any representation or warranty
contained in Section 4(f) (in each case above without giving effect to
any supplement to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary amount or
value); (y) there is an applicable survival period pursuant to Section
8(a); and (z) the Buyer makes a written claim for indemnification
against the Seller pursuant to Section 11(g) within such survival
period, then the Seller agrees to release and indemnify the Buyer
Indemnitees from and against the entirety of any Adverse Consequences
suffered by the Buyer Indemnitees.
(iii) The Seller shall release, indemnify and hold harmless
the Buyer Indemnitees against any and all Adverse Consequences
resulting by reason of joint and several liability with the Seller
arising by reason of having been required to be aggregated with the
Seller under section 414(o) of the Code, or having been under "common
control" with the Seller, within the meaning of Section 4001(a)(14) of
ERISA.
(iv) In the event: (x) there is an applicable survival period
pursuant to Section 8(a) and (y) the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 11(g) within
such survival period, then the Seller agrees to release and indemnify
the Buyer Indemnitees from and against the entirety of any Adverse
Consequences suffered by the Buyer Indemnitees with
25
respect to any environmental condition, claim or loss with respect to
any of the Assets and/or Argo arising as a result of events occurring
or conditions existing on or prior to the Purchase Price Adjustment
Date, including the matters disclosed in Schedule 4(i).
(v) The Seller agrees to indemnify the Buyer Indemnitees from
and against the entirely of any Adverse Consequences arising before or
after the Closing Date and suffered by the Buyer Indemnities with
respect to, the MODEC Dispute.
(vi) [Intentionally omitted.]
(vii) [Intentionally omitted.]
(viii) The Seller shall release, indemnify and hold harmless
the Buyer Indemnitees against any and all Adverse Consequences suffered
by the Buyer Indemnitees with respect to, any outstanding injunction,
judgment, order, decree, ruling, or charge, or any pending or
threatened action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, relating to the Assets
and/or Argo on the Closing Date, including the matters listed on
Schedule 4(h).
(ix) [Intentionally omitted.]
(x) Notwithstanding anything to the contrary contained in
Sections 8(b)(i), (iii) and (iv), the Seller shall not have any
obligation to indemnify any Buyer Indemnified Party to the extent that
the payment thereof would cause the Seller's aggregate indemnity
payments under all of Sections 8(b)(i), (iii) and (iv), (but excluding
Sections 8(b)(v) and (viii)) to exceed 100% of the Purchase Price.
(xi) To the extent any Buyer Indemnitee becomes liable to, and
is ordered to and does pay to any third party, punitive, exemplary,
special or consequential damages caused by a breach by the Seller of
any representation, warranty or covenant contained in this Agreement,
then such punitive, exemplary, special or consequential damages shall
be deemed actual damages to such Buyer Indemnitee and included within
the definition of Adverse Consequences for purposes of this Section 8.
(xii) Except for the rights of indemnification provided in
this Section 8, the Buyer hereby waives any claim or cause of action
pursuant to common or statutory law or otherwise against the Seller
arising from any breach by the Seller of any of its representations,
warranties or covenants under this Agreement or the transactions
contemplated hereby.
(c) Indemnification Provisions for Benefit of the Seller.
(i) In the event: (x) the Buyer breaches any of its
representations, warranties or covenants contained herein (without
giving effect to any supplement
26
to the Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, awareness or concepts of similar import, or any
qualification or limitation as to monetary amount or value); (y) there
is an applicable survival period pursuant to Section 8(a); and (z) the
Seller makes a written claim for indemnification against the Buyer
pursuant to Section 11(g) within such survival period, then the Buyer
agrees to release and indemnify the Seller Indemnitees from and against
the entirety of any Adverse Consequences suffered by such Seller
Indemnitees.
(ii) Subject to the proviso at the end of this Section
8(c)(ii), the Buyer agrees to release and indemnify the Seller
Indemnitees from and against the entirety of Adverse Consequences
suffered by the Seller Indemnitees the Basis for which is attributable
to the period prior to the Closing Date, relating to, arising out of,
or connected with the ownership or operation of the Assets; provided,
that this release and indemnity shall not be effective (A) with respect
to any matter for which the Seller has indemnified the Buyer
Indemnitees (other than with respect to any deductible or cap
applicable to such indemnity and set forth in Section 8(b)) unless and
until, pursuant to Section 8(a), the survival period for such indemnity
has expired and then only with respect to matters for which written
notice of such Adverse Consequences has not been given to Seller prior
to the expiration of such survival period, or (B) with respect to
matters for which Seller is responsible pursuant to Section 9.
(iii) To the extent any Seller Indemnitee becomes liable to,
and is ordered to and does pay to any third party, punitive, exemplary,
special or consequential damages caused by a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement, then
such punitive, exemplary, special or consequential damages shall be
deemed actual damages to such Seller Indemnitee and included within the
definition of Adverse Consequences for purposes of this Section 8.
(iv) Except for the rights of indemnification provided in this
Section 8, the Seller hereby waives any claim or cause of action
pursuant to common or statutory law or otherwise against the Buyer
arising from any breach by the Buyer of any of its representations,
warranties or covenants under this Agreement or the transactions
contemplated hereby.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly (and in any event within five business
days after receiving notice of the Third Party Claim) notify the
Indemnifying Party thereof in writing.
27
(ii) The Indemnifying Party shall have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; provided,
however, that the Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages and does not
impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 8(d)(ii), the
Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) In no event shall the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying
Party which consent shall not be withheld unreasonably.
(e) Determination of Amount of Adverse Consequences. The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the actual loss suffered by the Indemnified Party (i.e. reduced by
any insurance proceeds or other payment or recoupment received, realized or
retained by the Indemnified Party as a result of the events giving rise to the
claim for indemnification net of any expenses related to the receipt of such
proceeds, payment or recoupment, including retrospective premium adjustments, if
any), but not any reduction in Taxes of the Indemnified Party (or the affiliated
group of which it is a member) occasioned by such loss or damage. The amount of
the actual loss and the amount of the indemnity payment shall be computed by
taking into account the timing of the loss or payment, as applicable, using a
Prime Rate plus 2% interest or discount rate, as appropriate. Upon the request
of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying
Party with information sufficient to allow the Indemnifying Party to calculate
the amount of the indemnity payment in accordance with this Section 8(e). An
Indemnified Party shall take all reasonable steps to mitigate damages in respect
of any claim for which it is seeking indemnification and shall use reasonable
efforts to avoid any costs or expenses associated with such claim and, if such
costs and expenses cannot be avoided, to minimize the amount thereof.
(f) Tax Treatment of Indemnity Payments. All indemnification payments
made under this Agreement, including any payment made under Section 9, shall be
treated as purchase price adjustments for Tax purposes.
9. Tax Matters.
(a) Tax Returns. The Buyer shall prepare or cause to be prepared and
file or cause to be filed any Post-Closing Tax Returns with respect to the
Assets. The Buyer shall pay (or cause to be paid) any Taxes due with respect to
such Tax Returns. The Seller shall prepare or
28
cause to be prepared and file or cause to be filed all Pre-Closing Tax Returns
with respect to the Assets. The Seller shall pay or cause to be paid any Taxes
due with respect to such Tax Returns.
(b) Straddle Periods. The Buyer shall be responsible for Taxes with
respect to the Assets related to the portion of any Straddle Period occurring
after the Closing Date. The Seller shall be responsible for such Taxes relating
to the portion of any Straddle Period occurring before and on the Closing Date.
If applicable Law shall not permit the Closing Date to be the last day of a
period, then (i) real or personal property Taxes with respect to the Assets
shall be allocated based on the number of days in the partial period before and
after the Closing Date and (ii) all other Taxes shall be allocated on the basis
of the actual activities or attributes of the Assets for each partial period as
determined from the books and records of Seller, Argo and their Affiliates.
(c) Straddle Returns. The Buyer shall prepare any Straddle Returns and
deliver same to the Seller for review and comment at least 45 days prior to the
due date (including any extension) for filing each such Straddle Return,
together with a statement setting forth the allocation of taxable income and
Taxes under Section 9(b) and the amount of Tax that the Seller owes. The Seller
and the Buyer agree to consult with each other to attempt to resolve in good
faith any issue arising as a result of Seller's review of such Straddle Return
and mutually to consent to the filing thereof as promptly as possible. Not later
than five days before the due date for the payment of Taxes with respect to any
such Straddle Return, the Seller shall pay or cause to be paid to the Buyer
either (i) if Buyer and Seller are in agreement as to the amount of Taxes owed
by Seller, that amount, or (ii) if Buyer and Seller cannot agree on the amount
of Taxes owed by the Seller, the maximum amount of Taxes reasonably determined
by the Seller to be owed by it, in which case (A) the Seller and the Buyer shall
refer the dispute to an independent "Big-Five" accounting firm agreed to by the
Buyer and the Seller to arbitrate the dispute within ten days following the
payment of the undisputed amount, (B) the determination of such accounting firm
as to the amount of Taxes owing by the Seller with respect to a Straddle Return
shall be binding on both the Seller and the Buyer, (C) the Seller and the Buyer
shall equally share the fees and expenses of the accounting firm, and (D) within
five days after the determination by such accounting firm, if necessary, the
appropriate Party shall pay the other Party any amount which is determined by
such accounting firm to be owed. The Seller shall be entitled to reduce its
obligation to pay Taxes with respect to a Straddle Return by the amount of any
estimated Taxes paid with respect to such Taxes on or before the Closing Date.
(d) Tax Indemnification. The Buyer agrees to indemnify the Seller
against (i) all Taxes with respect to the Assets, and (ii) all Taxes of Argo
assumed by the Buyer pursuant to Section 2(e)(iv) for any Post-Closing Tax
Period and the portion of any Straddle Period occurring after the Closing Date.
The Seller agrees to indemnify the Buyer against (i) all Taxes with respect to
the Assets, and (ii) all Taxes of Argo assumed by the Buyer pursuant to Section
2(e)(iv) for any Pre-Closing Tax Period and the portion of any Straddle Period
occurring on or before the Closing Date.
(e) Certain Taxes. The Seller shall file all necessary Tax Returns and
other documentation with respect to all transfer, documentary, sales, use,
stamp, registration and other similar Taxes and fees, pay the related Tax, and,
if required by applicable Law, the Buyer shall,
29
and shall cause its Affiliates to, join in the execution of any such Tax Returns
and other documentation.
(f) Tax Refunds. If the Buyer or any Affiliate of the Buyer receives a
refund of any Taxes that the Seller is responsible for hereunder, or if the
Seller or any Affiliate of the Seller receives a refund of any Taxes that the
Buyer is responsible for hereunder, the party receiving such refund shall,
within 30 days after receipt of such refund, remit it to the party who has
responsibility for such Taxes hereunder. For the purpose of this Section 9(f),
the term "refund" shall include a reduction in Tax and the use of an overpayment
as a credit or other tax offset, and receipt of a refund in respect thereof
shall be deemed to occur upon the filing of a return or an adjustment thereto
claiming the benefit of such reduction, overpayment or offset.
(g) Purchase Price Allocation. The Seller and the Buyer shall, within
ninety (90) days after the Closing Date, agree to allocate the Purchase Price
(as adjusted pursuant to this Agreement) and any Assumed Obligations among the
Assets. Seller and Buyer agree (i) to report the federal, state and local income
and other Tax consequences of the transactions contemplated herein, and in
particular to report the information required by Section 1060(b) of the Code,
and to jointly prepare Form 8594 (Asset Acquisition Statement under Section
1060) in a manner consistent with such allocation and (ii) without the consent
of the other Party, not to take any position inconsistent therewith upon
examination of any Tax return, in any refund claim, in any litigation,
investigation or otherwise. Seller and Buyer agree that each will furnish the
other a copy of Form 8594 (Asset Acquisition Statement under Section 1060)
proposed to be filed with the Internal Revenue Service by such Party or any
Affiliate thereof within 10 days prior to the filing of such form with the
Internal Revenue Service.
(h) Closing Tax Certificate. On the Closing Date, the Seller shall
deliver to the Buyer a certificate (in the form attached hereto as Exhibit D)
signed under penalties of perjury (i) stating it is not a foreign corporation,
foreign partnership, foreign trust or foreign estate, (ii) providing its U.S.
Employer Identification Number, and (iii) providing its address, all pursuant to
Section 1445 of the Code.
(i) Like Kind Exchanges. Each Party shall cooperate fully, as and to
the extent reasonably requested by the other Party, in connection with enabling
the transactions contemplated herein to qualify in whole or in part as a "like
kind" exchange pursuant to Section 1031 of the Code. Each of the Buyer and
Seller agree to indemnify the other Party against any and all costs and expenses
incurred with respect to furnishing such cooperation. Each Party may assign its
rights under this Agreement to a "qualified intermediary" to facilitate a
like-kind exchange. The agreement between the applicable Party and the qualified
intermediary ("Exchange Agreement") shall be set forth as Exhibit F.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement,
as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time before the Closing;
30
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time before Closing (A) in the event the
Seller has breached any representation, warranty or covenant contained
in this Agreement in any material respect, the Buyer has notified the
Seller of the breach, the breach has continued without cure for a
period of 10 days after the notice of breach and such breach would
result in a failure to satisfy a condition to the Buyer's obligation to
consummate the transactions contemplated hereby; (B) if the Closing
shall not have occurred on or before 9:00 a.m. (Houston time) on April
1, 2002 (unless the failure results primarily from the Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement); or (C) if the transactions contemplated hereby do not
receive all required approvals of the FTC;
(iii) the Seller may terminate this Agreement by giving
written notice to the Buyer at any time before the Closing (A) in the
event the Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material respect, the Seller has
notified the Buyer of the breach, the breach has continued without cure
for a period of 10 days after the notice of breach and such breach
would result in a failure to satisfy a condition to the Seller's
obligation to consummate the transactions contemplated hereby; (B) if
the Closing shall not have occurred on or before 9:00 a.m. (Houston
time) on April 1, 2002 (unless the failure results primarily from the
Seller breaching any representation, warranty or covenant contained in
this Agreement); or (C) if the transactions contemplated hereby do not
receive all required approvals of the FTC;
(iv) the Buyer or the Seller may terminate this Agreement if
any court of competent jurisdiction or any governmental, administrative
or regulatory authority, agency or body shall have issued an order,
decree or ruling or shall have taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action
shall have become final and nonappealable; and
(i) the Buyer or the Seller may terminate this Agreement if
the EPN PSA is terminated for any reason.
(b) Effect of Termination. Except for the obligations under Sections 8,
10 and 11, if any Party terminates this Agreement pursuant to Section 10(a), all
rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any Party
then in breach).
11. Miscellaneous.
(a) Public Announcements. Any Party is permitted to issue a press
release or make a public announcement concerning this Agreement without the
other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
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separate and simultaneous press releases within twenty-four (24) hours following
the execution of this Agreement by all Parties.
(b) Insurance. The Buyer acknowledges and agrees that, following the
Closing, any Subject Insurance Policies shall be terminated or modified to
exclude coverage of all or any portion of the Assets by the Seller or any of its
Affiliates, and, as a result, the Buyer shall be obligated at or before Closing
to obtain at its sole cost and expense replacement insurance, including
insurance required by any third party to be maintained for or by the Assets. The
Buyer further acknowledges and agrees that the Buyer may need to provide to
certain Governmental Authorities and third parties evidence of such replacement
or substitute insurance coverage for the continued operations of the Assets. If
any claims are made or losses occur prior to the Closing Date that relate solely
to the Assets and such claims, or the claims associated with such losses,
properly may be made against the policies retained by the Seller or its
Affiliates after the Closing, then the Seller shall use its Best Efforts so that
the Buyer can file, notice, and otherwise continue to pursue these claims
pursuant to the terms of such policies; provided, however, nothing in this
Agreement shall require the Seller to maintain or to refrain from asserting
claims against or exhausting any retained policies.
(c) No Third Party Beneficiaries. Except for the indemnification
provisions, this Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Prior to the Closing the Buyer may not assign this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the Seller; provided, however, without the prior
written approval of the Seller, the Buyer and its permitted successors and
assigns may assign any or all of its rights, interests or obligations under this
Agreement (i) to an Affiliate of the Buyer, including designating one or more
Affiliates of the Buyer to be the assignee of some or any portion of the Assets,
(ii) in connection with granting a lien, pledge, mortgage or other security
interest pursuant to a bona fide lending transaction, or (iii) pursuant to the
foreclosure or settlement of any assignment made pursuant to (ii) above;
provided the Seller is not released from any of its obligations or liabilities
hereunder. Each Party may assign either this Agreement or any of its rights,
interests or obligations hereunder, without the prior written approval of the
other Party, to a qualified intermediary in connection with any transaction
described in Section 9(i); provided, however, that no such assignment shall
relieve any Party from any of its Obligations under this Agreement.
(e) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but which together shall constitute one and
the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: El Paso Energy Partners, L.P.
Attn: President
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
(000) 000-0000
If to the Buyer: El Paso Production GOM, Inc.
Attn: President
Xx Xxxx Xxxxxxxx
Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the addresses set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(h) Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. VENUE FOR ANY ACTION
ARISING UNDER THIS AGREEMENT SHALL LIE EXCLUSIVELY IN ANY STATE OR FEDERAL COURT
IN XXXXXX COUNTY, TEXAS.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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(k) Transaction Expenses. Each of the Buyer and the Seller shall bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include the plural,
and vice versa. All references herein to Exhibits, Schedules, Articles, Sections
or subdivisions thereof shall refer to the corresponding Exhibits, Schedules,
Article, Section or subdivision thereof of this Agreement unless specific
reference is made to such exhibits, articles, sections or subdivisions of
another document or instrument. The terms "herein," "hereby," "hereunder,"
"hereof," "hereinafter," and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or covenant given in the correlated Section hereof on the date of such
certificate. Additionally, any representation, warranty or covenant made in any
such certificate shall be deemed to be made herein.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Entire Agreement. THIS AGREEMENT (INCLUDING THE DOCUMENTS REFERRED
TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES AND SUPERSEDES ANY
PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG THE PARTIES,
WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE SUBJECT
MATTER HEREOF. The rights and obligations created by this Agreement are separate
and independent from any rights and obligations created by any Assignment.
Accordingly, none of the representations, warranties, covenants or indemnities
included in any Assignment shall be merged into this Agreement or otherwise
restrict or limit the effect of this Agreement, but each shall survive as
provided in each such agreement. To the extent that there is a conflict between
the express terms of this Agreement and any Assignment, this Agreement shall
control.
*****
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the preamble.
EL PASO ENERGY PARTNERS, L.P.
By: /s/: Xxxxx Xxxxx
--------------------------
President
EL PASO PRODUCTION GOM INC.
By: /s/: X.X. Xxxxxxx
-------------------------
President
